Telenav, Inc. (Form: 10-Q, Received: 02/09/2016 17:08:31)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the three months ended December 31, 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: 001-34720

TELENAV, INC.

(Exact name of registrant as specified in its charter)



Delaware		77-0521800
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

950 De Guigne Drive

Sunnyvale, California 94085

(Address of principal executive offices, including zip code)

(408) 245-3800

(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 ý 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

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

As of December 31, 2015 , there were approximately 41,375,226 shares of the Registrant’s Common Stock outstanding.

Table of Contents

TELENAV, INC.

TABLE OF CONTENTS



		Page No.
PART I. FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets	1

	Condensed Consolidated Statements of Operations	2

	Condensed Consolidated Statements of Comprehensive Loss	3

	Condensed Consolidated Statements of Cash Flows	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38

Item 4.	Controls and Procedures	38

PART II. OTHER INFORMATION		40

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62

Item 6.	Exhibits	63

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PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements.

TELENAV, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)



	December 31, 2015			June 30, 2015*
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	12,093		$	18,721
Short-term investments	98,201			101,195
Accounts receivable, net of allowances of $85 and $211 at December 31, 2015 and June 30, 2015, respectively	37,449			36,493
Deferred income taxes, net	—			327
Restricted cash	4,679			4,878
Income taxes receivable	5,466			6,080
Deferred costs	1,157			432
Prepaid expenses and other current assets	4,095			3,856
Total current assets	163,140			171,982
Property and equipment, net	4,680			7,126
Deferred income taxes, non-current	649			443
Goodwill and intangible assets, net	36,513			37,528
Deferred costs, non-current	6,286			2,709
Other assets	2,741			4,134
Total assets	$	214,009		$	223,922
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	910		$	830
Accrued compensation	8,105			9,628
Accrued royalties	11,395			9,358
Other accrued expenses	13,371			10,918
Deferred revenue	3,109			2,109
Income taxes payable	886			724
Total current liabilities	37,776			33,567
Deferred rent, non-current	81			4,858
Deferred revenue, non-current	10,742			4,719
Other long-term liabilities	2,696			4,595
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value: 50,000 shares authorized; no shares issued or outstanding	—			—
Common stock, $0.001 par value: 600,000 shares authorized; 41,375 and 40,537 shares issued and outstanding at December 31, 2015 and June 30, 2015, respectively	41			41
Additional paid-in capital	145,546			140,406
Accumulated other comprehensive loss	(2,344		)	(1,540		)
Retained earnings	19,471			37,276
Total stockholders’ equity	162,714			176,183
Total liabilities and stockholders’ equity	$	214,009		$	223,922

* Derived from audited consolidated financial statements as of and for the year ended June 30, 2015

See accompanying Notes to Condensed Consolidated Financial Statements.

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TELENAV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)



	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2015			2014			2015			2014
Revenue:
Product	$	31,160		$	23,461		$	62,269		$	42,377
Services	14,093			16,319			27,045			32,390
Total revenue	45,253			39,780			89,314			74,767
Cost of revenue:
Product	18,364			12,824			36,447			23,002
Services	6,168			6,709			11,472			12,491
Total cost of revenue	24,532			19,533			47,919			35,493
Gross profit	20,721			20,247			41,395			39,274
Operating expenses:
Research and development	16,653			16,620			34,640			33,618
Sales and marketing	6,524			6,710			13,522			12,906
General and administrative	5,844			5,697			12,079			11,910
Restructuring	(1,468		)	565			(1,468		)	565
Total operating expenses	27,553			29,592			58,773			58,999
Loss from operations	(6,832		)	(9,345		)	(17,378		)	(19,725		)
Other income (expense), net	520			870			333			2,173
Loss before provision (benefit) for income taxes	(6,312		)	(8,475		)	(17,045		)	(17,552		)
Provision (benefit) for income taxes	327			(5,752		)	440			(6,892		)
Net loss	$	(6,639	)	$	(2,723	)	$	(17,485	)	$	(10,660	)

Net loss per share:
Basic	$	(0.16	)	$	(0.07	)	$	(0.43	)	$	(0.27	)
Diluted	$	(0.16	)	$	(0.07	)	$	(0.43	)	$	(0.27	)
Weighted average shares used in computing net loss per share:
Basic	41,038			39,916			40,820			39,727
Diluted	41,038			39,916			40,820			39,727

Stock-based compensation expense included above:
Cost of revenue	$	39		$	27		$	71		$	51
Research and development	1,771			1,125			3,229			2,625
Sales and marketing	835			730			1,675			1,494
General and administrative	535			657			1,292			1,757
Total stock-based compensation expense	$	3,180		$	2,539		$	6,267		$	5,927

See accompanying Notes to Condensed Consolidated Financial Statements.

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TELENAV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)



	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2015			2014			2015			2014

Net loss	$	(6,639	)	$	(2,723	)	$	(17,485	)	$	(10,660	)
Other comprehensive loss, net of tax:
Foreign currency translation adjustment, net of tax	(392		)	(360		)	(577		)	(1,005		)
Available-for-sale securities:
Unrealized loss on available-for-sale securities, net of tax	(239		)	(115		)	(233		)	(304		)
Reclassification adjustments for gain (loss) on available-for-sale securities recognized, net of tax	4			(11		)	6			(256		)
Net decrease from available-for-sale securities, net of tax	(235		)	(126		)	(227		)	(560		)
Other comprehensive loss, net of tax:	(627		)	(486		)	(804		)	(1,565		)
Comprehensive loss	$	(7,266	)	$	(3,209	)	$	(18,289	)	$	(12,225	)

See accompanying Notes to Condensed Consolidated Financial Statements.

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TELENAV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



	Six Months Ended
	December 31,
	2015			2014
Operating activities
Net loss	$	(17,485	)	$	(10,660	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,916			2,876
Amortization of net premium on short-term investments	381			850
Stock-based compensation expense	6,267			5,927
Write-off of long-term investments	477			—
(Gain) loss on disposal of property and equipment	(4		)	8
Bad debt expense	51			14
Changes in operating assets and liabilities:
Accounts receivable	(1,007		)	(5,524		)
Deferred income taxes	121			673
Restricted cash	199			898
Income taxes receivable	614			(7,243		)
Deferred costs	(4,302		)	(723		)
Prepaid expenses and other current assets	(239		)	3,775
Other assets	908			42
Accounts payable	80			647
Accrued compensation	(1,523		)	(3,956		)
Accrued royalties	2,037			6,156
Accrued expenses and other liabilities	(1,524		)	(953		)
Income taxes payable	162			64
Deferred rent	(814		)	(1,104		)
Deferred revenue	7,023			2,807
Net cash used in operating activities	(6,662		)	(5,426		)
Investing activities
Purchases of property and equipment	(332		)	(512		)
Purchases of short-term investments	(20,622		)	(87,803		)
Purchase of long-term investments	—			(200		)
Proceeds from sales and maturities of short-term investments	23,009			95,611
Net cash provided by investing activities	2,055			7,096
Financing activities
Proceeds from exercise of stock options	921			1,781
Repurchase of common stock	(570		)	(1,139		)
Tax withholdings related to net share settlements of restricted stock units	(1,796		)	(854		)
Net cash used in financing activities	(1,445		)	(212		)
Effect of exchange rate changes on cash and cash equivalents	(576		)	(1,005		)
Net increase (decrease) in cash and cash equivalents	(6,628		)	453
Cash and cash equivalents, at beginning of period	18,721			14,534
Cash and cash equivalents, at end of period	$	12,093		$	14,987
Supplemental disclosure of cash flow information
Income taxes paid (received), net	$	(528	)	$	97

See accompanying Notes to Condensed Consolidated Financial Statements.

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TELENAV, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)


1.	Summary of business and significant accounting policies

Description of business

Telenav, Inc., also referred to in this report as “we,” “our” or “us,” was incorporated in September 1999 in the State of Delaware. We are a leader in personalized mobile navigation. We help on the go people by creating products that (1) provide easily-accessed, relevant, and personalized information for discovery, traffic, local search, and navigation and (2) are available across multiple platforms and devices, including mobile phones, tablets, computers and cars. We operate in three segments - automotive, advertising and mobile navigation. Our fiscal year ends on June 30 and in this report we refer to the fiscal year ended June 30, 2015 as “fiscal 2015 ” and the fiscal year ending June 30, 2016 as “fiscal 2016 .”

Basis of presentation

The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The condensed consolidated financial statements include the accounts of Telenav, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The financial statements include all adjustments (consisting only of normal recurring adjustments) that our management believes are necessary for a fair presentation of the periods presented. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period. Certain prior period amounts in the consolidated financial statements have been reclassified to conform to current period presentation for comparative purposes.

Our condensed consolidated financial statements also include the financial results of Shanghai Jitu Software Development Ltd., or Jitu, located in China. Based on our contractual arrangements with the shareholders of Jitu, we have determined that Jitu is a variable interest entity, or VIE, for which we are the primary beneficiary and are required to consolidate in accordance with Accounting Standards Codification, or ASC, subtopic 810-10, or ASC 810-10, Consolidation: Overall . The results of Jitu did not have a material impact on our financial statements for the three and six months ended December 31, 2015 and 2014.

The condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for fiscal 2015 , included in our Annual Report on Form 10-K for fiscal 2015 filed with the U.S. Securities and Exchange Commission, or SEC on August 24, 2015.

There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Form 10-K for fiscal 2015.

Use of estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant estimates and assumptions made by us include the determination of revenue recognition and deferred revenue, the recoverability of accounts receivable, the determination of acquired intangibles and goodwill, the fair value of stock awards issued, the determination of income taxes and the recoverability of deferred tax assets. Actual results could differ from those estimates.

Concentrations of risk and significant customers

Revenue related to services provided through Ford Motor Company, or Ford, comprised 66% and 57% of revenue for the three months ended December 31, 2015 and 2014 , respectively, and 68% and 55% of revenue for the six months ended December 31, 2015 and 2014 , respectively. As of December 31, 2015 and June 30, 2015 , receivables due from Ford were 58% of total accounts receivable. Revenue related to services provided through AT&T Mobility LLC, or AT&T, comprised 10% and 18% of revenue for the three months ended December 31, 2015 and 2014 , respectively, and 10% and 19% of revenue for the six months ended December 31, 2015 and 2014 , respectively. Receivables due from AT&T were 9% and 14% of total accounts receivable at December 31, 2015 and June 30, 2015 , respectively.

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TELENAV, INC.

Notes to Condensed Consolidated Financial Statements—(Continued)

(unaudited)

Certain of our licensed map, points of interest, or POI, and traffic data have been provided principally by TomTom North America, Inc., or TomTom, and HERE North America, LLC, or HERE, in the three and six months ended December 31, 2015 and 2014 . To date, we are not aware of circumstances that may impair either party’s intent or ability to continue providing such services to us.

Restricted cash

As of December 31, 2015 and June 30, 2015 , we had restricted cash of $4.7 million and $4.9 million , respectively, on our consolidated balance sheets, comprised primarily of an overpayment from a customer that is expected to be refunded.

Accumulated other comprehensive loss, net of tax

The components of accumulated other comprehensive loss, net of related taxes, during the three months ended December 31, 2015 , were as follows (in thousands):



	Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Available-for-Sale Securities			Total
Balance, net of tax as of June 30, 2015	$	(1,377	)	$	(163	)	$	(1,540	)
Other comprehensive loss before reclassifications, net of tax	(577		)	(233		)	(810		)
Amount reclassified from accumulated other comprehensive loss, net of tax	—			6			6
Other comprehensive loss, net of tax	(577		)	(227		)	(804		)
Balance, net of tax as of December 31, 2015	$	(1,954	)	$	(390	)	$	(2,344	)

The amounts reclassified from accumulated other comprehensive loss, net of tax, were determined using the specific identification method and the amounts were included in other income (expense), net, for the six months ended December 31, 2015 , and 2014 .

The amount of income tax benefit allocated to each component of accumulated other comprehensive loss was not material for the six months ended December 31, 2015 , and 2014 .

Long-term investments

As of December 31, 2015 , the carrying value of our investments in privately-held companies totaled $1.5 million . These investments are accounted for as cost-basis investments, as we own less than 20% of the voting securities and do not have the ability to exercise significant influence over operating and financial policies of the entities. Our investments are in entities that are not publicly traded and, therefore, no established market for the securities exists. Our cost-basis investments are carried at historical cost in our condensed consolidated balance sheets and measured at fair value on a nonrecurring basis when indicators of impairment exist. If we believe that the carrying value of the cost-basis investments is in excess of estimated fair value, our policy is to record an impairment charge to adjust the carrying value to estimated fair value, when the impairment is deemed other-than-temporary. We regularly evaluate the carrying value of these cost-basis investments for impairment. We recorded a $250,000 impairment charge for cost-method investments during the six months ended December 31, 2015 .

In addition to these cost basis investments, in June 2015 we entered into an agreement to spin off a product line developed by our Xi'an, China team, including certain assets and technology as well as the transfer of 12 employees, and we agreed to invest $800,000 in the form of a convertible note. We are the primary investor; however, we do not have significant influence over the operations of the business. Accordingly, we recorded the monthly net change in operating results against the carrying value of the convertible note recorded in long-term investments on our consolidated balance sheet. The entity's success is contingent upon its ability to generate revenue and raise additional capital. Based upon the early stage of this entity, its lack of success to date in each of these endeavors, and China's recent unfavorable macroeconomic conditions making the raising of additional capital difficult, we recorded an impairment charge of $227,000 to write down the carrying value of the convertible note to zero during the three and six months ended December 31, 2015 .

Including the impairment in the Xi'an, China spin off above, we recorded impairment charges of $477,000 in the six months ended December 31, 2015 . We did no t record any impairment charges for the six months ended December 31, 2014 .

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TELENAV, INC.

Notes to Condensed Consolidated Financial Statements—(Continued)

(unaudited)

Warranty

We warrant our automotive navigation products to be free from defects in materials, workmanship and design for periods ranging from three months to seven years . We accrue costs related to warranty claims when they are probable and reasonably estimable. Our warranty costs have historically not been material. From time to time, we experience incidents where it may be necessary for us to expend resources to investigate and remedy a potential warranty claim.

Recent accounting pronouncements

In November 2015, the Financial Accounting Standards Board, or FASB, issued new guidance which simplifies the presentation of deferred income taxes. This new standard requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. We early adopted this standard effective October 1, 2015 on a prospective basis, which resulted in a reclassification of our net current deferred tax asset to the net non-current deferred tax asset in our consolidated balance sheet. No prior periods were retrospectively adjusted. Adoption of this standard resulted in a $327,000 decrease in current deferred tax assets and a corresponding $89,000 increase in non-current deferred tax assets and a $238,000 decrease in other long-term liabilities on our balance sheet.

In February 2015, the FASB issued new guidance related to consolidations. The new standard amends the guidelines for determining whether certain legal entities should be consolidated and reduces the number of consolidation models. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. We are evaluating the impact, if any, of adopting this new accounting guidance on our financial statements.

In May 2014, the FASB issued guidance related to revenue from contracts with customers, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition . Under this guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The updated standard will replace most existing revenue recognition guidance under GAAP when it becomes effective and permits the use of either the full retrospective or cumulative effect transition method. Early adoption is permitted. In August 2015, the FASB deferred by one year the effective date of this guidance. The updated standard will now be effective for us in the first quarter of our fiscal year ending June 30, 2019. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.


2.	Net income (loss) per share

Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of outstanding stock options, restricted stock units and restricted common stock using the treasury-stock method.

The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share amounts):



	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2015			2014			2015			2014
Net loss	$	(6,639	)	$	(2,723	)	$	(17,485	)	$	(10,660	)
Weighted average common shares used in computing net loss per share, basic and diluted	41,038			39,916			40,820			39,727
Net loss per share, basic and diluted	$	(0.16	)	$	(0.07	)	$	(0.43	)	$	(0.27	)

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TELENAV, INC.

Notes to Condensed Consolidated Financial Statements—(Continued)

(unaudited)

The following outstanding shares were excluded from the computation of diluted net loss per share for the periods presented because including them would have had an antidilutive effect (in thousands):



	Three Months Ended		Six Months Ended
	December 31,		December 31,
	2015	2014	2015	2014
Stock options	5,111	5,387	5,111	5,387
Restricted stock units	4,393	4,810	4,393	4,810
Total	9,504	10,197	9,504	10,197


3.	Cash, cash equivalents and short-term investments

Cash and cash equivalents consist of highly liquid fixed-income investments with original maturities of three months or less at the time of purchase, including money market funds. Short-term investments consist of readily marketable securities with a remaining maturity of more than three months from the date of purchase. Short-term investments are classified as current assets, even though maturities may extend beyond one year, because they represent investments of cash available for operations. We classify all of our cash equivalents and short-term investments as “available for sale,” as these investments are free of trading restrictions. These marketable securities are carried at fair value, with the unrealized gains and losses, net of tax, reported as accumulated other comprehensive income (loss) and included as a separate component of stockholders’ equity. Gains and losses are recognized when realized. When we have determined that an other-than-temporary decline in fair value has occurred, the amount of the decline that is related to a credit loss is recognized in earnings. Gains and losses are determined using the specific identification method. We had no material realized gains or losses in the three and six months ended December 31, 2015 and 2014 .

Cash, cash equivalents and short-term investments consisted of the following as of December 31, 2015 (in thousands):



	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash	$	10,973	$	—	$	—		$	10,973
Cash equivalents:
Money market mutual funds	420		—		—			420
Commercial paper	700		—		—			700
Total cash equivalents	1,120		—		—			1,120
Total cash and cash equivalents	12,093		—		—			12,093
Short-term securities:
U.S. treasury securities	1,199		—		(2		)	1,197
Asset-backed securities	13,863		—		(25		)	13,838
Municipal securities	8,260		3		(6		)	8,257
Commercial paper	3,991		—		—			3,991
Agency bonds	10,488		—		(30		)	10,458
Corporate bonds	60,653		9		(202		)	60,460
Total short-term investments	98,454		12		(265		)	98,201
Cash, cash equivalents and short-term investments	$	110,547	$	12	$	(265	)	$	110,294

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TELENAV, INC.

Notes to Condensed Consolidated Financial Statements—(Continued)

(unaudited)

Cash, cash equivalents and short-term investments consisted of the following as of June 30, 2015 (in thousands):



	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash	$	10,806	$	—	$	—		$	10,806
Cash equivalents:
Money market mutual funds	7,915		—		—			7,915
Total cash equivalents	7,915		—		—			7,915
Total cash and cash equivalents	18,721		—		—			18,721
Short-term investments:
Asset-backed securities	16,977		9		(3		)	16,983
Municipal securities	10,018		8		(9		)	10,017
Commercial paper	1,996		2		—			1,998
Agency bonds	7,642		6		(2		)	7,646
Corporate bonds	64,587		39		(75		)	64,551
Total short-term investments	101,220		64		(89		)	101,195
Cash, cash equivalents and short-term investments	$	119,941	$	64	$	(89	)	$	119,916

The following table summarizes the cost and estimated fair value of short-term fixed income securities classified as short-term investments based on stated maturities as of December 31, 2015 (in thousands):



	Amortized Cost		Estimated Fair Value
Due within one year	$	55,459	$	55,405
Due between one and two years	27,460		27,332
Due after two years	15,535		15,464
Total	$	98,454	$	98,201

Declines in fair value judged to be other-than-temporary on securities available for sale are included as a component of other income, net. In order to determine whether a decline in value is other-than-temporary, we evaluate, among other factors: the duration and extent to which the fair value has been less than the carrying value and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair market value. As of December 31, 2015 , we did not consider any of our investments to be other-than-temporarily impaired.


4.	Fair value of financial instruments

We measure certain financial instruments at fair value on a recurring basis. We have established a hierarchy, which consists of three levels, for disclosure of the inputs used to determine the fair value of our financial instruments.

Level 1 valuations are based on quoted prices in active markets for identical assets or liabilities.

Level 2 valuations are based on inputs that are observable, either directly or indirectly, other than quoted prices included within Level 1. Such inputs used in determining fair value for Level 2 valuations include quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Where applicable, we use quoted prices in active markets for similar assets to determine fair value of Level 2 short-term investments. If quoted prices in active markets for identical assets are not available to determine fair value, we use quoted prices for similar assets and liabilities or inputs that are observable either directly or indirectly. If quoted prices for identical or similar assets are not available, we use third party valuations utilizing underlying assets assumptions.

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TELENAV, INC.

Notes to Condensed Consolidated Financial Statements—(Continued)

(unaudited)

Level 3 valuations are based on information that is unobservable and significant to the overall fair value measurement. All of our cash equivalents and short-term investments are classified within Level 1 or Level 2. The fair values of these financial instruments were determined using the following inputs at December 31, 2015 (in thousands):



	Fair Value Measurements at December 31, 2015 Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Description
Cash equivalents:
Money market mutual funds	$	420	$	420	$	—	$	—
Commercial paper	700		—		700		—
Total cash equivalents	1,120		420		700		—
Short-term investments:
U.S. treasury securities	1,197		1,197		—		—
Asset-backed securities	13,838		—		13,838		—
Municipal securities	8,257		—		8,257		—
Commercial paper	3,991		—		3,991		—
Agency bonds	10,458		—		10,458		—
Corporate bonds	60,460		—		60,460		—
Total short-term investments	98,201		1,197		97,004		—
Cash equivalents and short-term investments	$	99,321	$	1,617	$	97,704	$	—

The fair values of our financial instruments were determined using the following inputs at June 30, 2015 (in thousands):



	Fair Value Measurements at June 30, 2015 Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Description
Cash equivalents:
Money market mutual funds	$	7,915	$	7,915	$	—	$	—
Total cash equivalents	7,915		7,915		—		—
Short-term investments:
Asset-backed securities	16,983		—		16,983		—
Municipal securities	10,017		—		10,017		—
Commercial paper	1,998		—		1,998		—
Agency bonds	7,646		—		7,646		—
Corporate bonds	64,551		—		64,551		—
Total short-term investments	101,195		—		101,195		—
Cash equivalents and short-term investments	$	109,110	$	7,915	$	101,195	$	—

Amortization of net premium on short-term investments totaled $381,000 and $850,000 in the six months ended December 31, 2015 and 2014 , respectively.

There were no transfers between Level 1 and Level 2 financial instruments in the six months ended December 31, 2015 and 2014 , respectively.

We did not have any financial liabilities measured at fair value on a recurring basis as of December 31, 2015 or June 30, 2015 .

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TELENAV, INC.

Notes to Condensed Consolidated Financial Statements—(Continued)

(unaudited)


5.	Commitments and contingencies

Operating lease and purchase obligations

On October 16, 2015, we entered into a lease termination agreement with our landlord for the termination of our office lease dated June 28, 2011 for our corporate facilities on De Guigne Drive in Sunnyvale, California. The lease termination will become effective on (a) March 31, 2016 with respect to 920 De Guigne Drive and 950 De Guigne Drive; and (b) June 30, 2016 with respect to 930 De Guigne Drive. On the same day, we also entered into a lease termination agreement with our sublease tenant for the termination of our sublease of 930 De Guigne Drive. The sublease termination is to become effective on June 30, 2016, and the sublease tenant has the right to advance the termination date to no earlier than March 31, 2016, subject to certain terms and conditions.

In connection with these lease termination agreements, we recorded the following amounts during the three months ended December 31, 2015: i) the reversal of a $1.5 million restructuring accrual related to 920 De Guigne Drive, as this amount represents the fair value of our lease obligation from April 2016 through November 2019 that is no longer payable; ii) the reversal of a $0.5 million loss accrual related to 930 De Guigne Drive, as this amount represents our loss from subleasing the building from July 2016 through November 2019 that we will no longer incur, partly offset by an accrual of $0.4 million related to the early lease termination fee payable to our sublease tenant; and iii) the reversal of $621,000 of the total $1.2 million of deferred rent related to 950 De Guigne Drive, as this amount represents our deferred rent liability that is no longer required. We reversed $621,000 as a credit to rent expense in the three months ended December 31, 2015. The remaining excess deferred rent balance of $621,000 as of December 31, 2015 will be reversed and credited to rent expense in the three months ending March 31, 2016.

On December 18, 2015, we entered into a sublease agreement dated November 11, 2015 (the “Lease”) with Avaya Inc. to lease approximately 55,000 square feet of office and research and development space located at 4655 Great America Parkway, 3rd Floor, in Santa Clara, California (the “Great America Facility”) for a period of five years and one month (the “Term”), which is expected to begin on April 1, 2016, subject to the completion of certain improvements to the facility prior to our occupancy. The Lease provides for average monthly base rent payments during the Term of approximately $99,000 as set forth in the Lease. The Lease also provides that we must also pay certain expenses and fees, including common area maintenance and property tax, in addition to the base rent. We plan to relocate our corporate headquarters, and all employees currently based at our De Guigne Drive facilities in Sunnyvale, California, to the Great America Facility.

As of December 31, 2015 , we had future minimum non-cancelable financial commitments primarily related to office space under non-cancelable operating leases and license fees due to certain of our third party content providers, regardless of usage level. The aggregate future minimum commitments, net of sublease income, were comprised of the following (in thousands):



	Payments Due by Period
	Total		Fiscal 2016		Fiscal 2017		Fiscal 2018		Fiscal 2019		Fiscal 2020		Thereafter
Operating lease obligations, net of sublease income	$	14,581	$	2,465	$	3,134	$	2,840	$	2,380	$	1,954	$	1,808
Purchase obligations	4,910		1,542		1,724		507		207		207		723
Total contractual obligations	$	19,491	$	4,007	$	4,858	$	3,347	$	2,587	$	2,161	$	2,531

Joint venture investment commitment

In September 2015, we entered into an agreement with Ningbo Huazhong Holdings Company Limited, or Huazhong, a subsidiary of a publicly traded automotive OEM supplier in China, whereby we and Huazhong agreed to form a joint venture limited liability company in China for the development, manufacture and sales of connected navigation systems for the China automotive aftermarket and local OEMs. We agreed to invest RMB 9.95 million (approximately $1.5 million as of December 31, 2015) in cash, which is expected to represent 19.9% of the equity interests of the joint venture. We and Huazhong also agreed to negotiate a Technology License Agreement, or TLA, whereby we will license our existing navigation platform technologies to the joint venture in exchange for a RMB 5.0 million (approximately $772,000 as of December 31, 2015) license fee.

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TELENAV, INC.

Notes to Condensed Consolidated Financial Statements—(Continued)

(unaudited)

We have not made any capital contributions to the joint venture, and the parties are currently renegotiating the nature, timing and amounts of capital to be contributed. Accordingly, the joint venture has not been formed. In December 2015, we and Huazhong completed the TLA with a term of ten years. In addition, we and Huazhong negotiated a Technology Development Service Agreement, whereby we will provide the joint venture with specified technical services in exchange for a non-refundable technical services fee, subject to the completion of a statement of work by the parties.

Contingencies

From time to time, we may become involved in legal proceedings, claims and litigation arising in the ordinary course of business. When we believe a loss or a cost of indemnification is probable and can be reasonably estimated, we accrue the estimated loss or cost of indemnification in our consolidated financial statements. Where the outcome of these matters is not determinable, we do not make a provision in our financial statements until the loss or cost of indemnification, if any, is probable and can be reasonably estimated or the outcome becomes known. We expense legal fees related to these matters as they are incurred.

On December 31, 2009, Vehicle IP, LLC, or Vehicle IP, filed a patent infringement lawsuit against us in the U.S. District Court for the District of Delaware, seeking monetary damages, fees and expenses and other relief. Verizon Wireless, or Verizon, was named as a co-defendant in the Vehicle IP litigation based on the VZ Navigator product and has demanded that we indemnify and defend Verizon against Vehicle IP. At this time, we have not agreed to defend or indemnify Verizon. AT&T was also named as a co-defendant in the Vehicle IP litigation based on the AT&T Navigator and Telenav Track products. AT&T has tendered the defense of the litigation to us and we are defending the case on behalf of AT&T. After the district court issued its claim construction ruling the parties agreed to focus on early summary judgment motions, the defendants filed motions for summary judgment of noninfringement. On April 10, 2013 the district court granted AT&T and our motion for summary judgment of noninfringement. Plaintiff appealed the district court's claim construction and summary judgment rulings to the U.S. Court of Appeals for the Federal Circuit. On November 18, 2014, the U.S. Court of Appeals for the Federal Circuit reversed the district court's claim construction and overturned the district court's grant of summary judgment of noninfringement. The case has been sent back to the U.S. District Court for the District of Delaware and trial is currently scheduled for February 2017. During the three months ended December 31, 2015, we accrued $750,000 related to this litigation. We believe that it is probable that we will incur a loss; however, beyond the amount accrued we cannot currently estimate a range of any possible losses we may experience in connection with this case. Accordingly, we are unable at this time to estimate the effects of this lawsuit on our financial condition, results of operations, or cash flows.

In addition, we have received, and expect to continue to receive, demands for indemnification from our customers, which demands can be very expensive to settle or defend, and we have in the past offered to contribute to settlement amounts and incurred legal fees in connection with certain of these indemnity demands. A number of these indemnity demands, including demands relating to pending litigation, remain outstanding and unresolved as of the date of this Form 10-Q. Furthermore, in response to these demands we may be required to assume control of and bear all costs associated with the defense of our customers in compliance with our contractual commitments. At this time, we are not a party to the following cases; however our customers have requested that we indemnify them in connection with such cases.

In 2008, Alltel, AT&T, Sprint and T-Mobile USA, or T-Mobile, each demanded that we indemnify and defend them against patent infringement lawsuits brought by patent holding companies EMSAT Advanced Geo-Location Technology LLC and Location Based Services LLC (collectively, EMSAT) in the U.S. District Court for the Northern District of Ohio. In March 2011, EMSAT and AT&T settled their claims. The PTO reexamined two of the patents in suit, confirming the validity of only two of the asserted claims from those patents. All patent claims that EMSAT alleged to be infringed by the Telenav GPS Navigator product were cancelled during reexamination. In the suits against T-Mobile, Alltel and Sprint, EMSAT amended its allegations to remove allegations of infringement of the patent claims that were cancelled during reexamination. EMSAT and T-Mobile stipulated to a dismissal and their case was dismissed on January 28, 2015. On March 20, 2015, the Court dismissed and closed the Alltel case and on April 10, 2015 the Court dismissed and closed the Sprint case. We have not yet determined the extent of our indemnification obligations to AT&T. We believe that it is reasonably possible that we will incur additional loss; however, we cannot currently estimate a range of other possible losses we may experience in connection with this case. Accordingly, we are unable at this time to estimate the overall effects of this matter on our financial condition, results of operations, or cash flows.

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TELENAV, INC.

Notes to Condensed Consolidated Financial Statements—(Continued)

(unaudited)

any additional amounts are owed to AT&T for legal fees and expenses related to the defense of the matter. We believe that it is reasonably possible that we will incur additional loss; however, we cannot currently estimate a range of other possible losses we may experience in connection with this case. Accordingly, we are unable at this time to estimate the overall effects on our financial condition, results of operations, or cash flows.

In connection with a software quality issue that was identified related to maps displayed in software deployed to certain vehicles released in North America in 2015, we have accrued a reserve of $50,000 as of December 31, 2015 . The software quality issue does not present a risk to driver safety. The actual costs are uncertain at this time and we are currently working with our customer to evaluate the appropriate solution. If the actual costs exceed our estimates, our results of operations and financial condition may be adversely affected.


6.	Guarantees and indemnifications

Our agreements with our customers generally include certain provisions for indemnifying them against liabilities if our products and services infringe a third party’s intellectual property rights or for other specified matters. We have in the past received indemnification requests or notices of their intent to seek indemnification in the future from our customers with respect to specific litigation claims in which our customers have been named as defendants. The maximum amount of potential future indemnification is unlimited.

We have agreed to indemnify our directors, officers and certain other employees for certain events or occurrences, subject to certain limits, while such persons are or were serving at our request in such capacity. We may terminate the indemnification agreements with these persons upon the termination of their services with us, but termination will not affect claims for indemnification related to events occurring prior to the effective date of termination. The maximum amount of potential future indemnification is unlimited. We have a directors and officers insurance policy that limits our potential exposure. We believe that any financial exposure related to these indemnification agreements is not material.


7.	Stock-based compensation

Under our 2002 Executive Stock Option Plan, 2009 Equity Incentive Plan and 2011 Stock Option and Grant Plan, eligible employees, directors and consultants are able to participate in our future performance through awards of nonqualified stock options, incentive stock options and restricted stock units through the receipt of such awards as authorized by our board of directors. In addition, we have granted restricted common stock in connection with certain acquisitions.

A summary of our stock option activity is as follows (in thousands except per share and contractual life amounts):



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
Options outstanding as of June 30, 2015	4,781		$	5.40
Granted	950
Exercised	(448	)
Canceled	(167	)
Options outstanding as of December 31, 2015	5,116		$	5.92	5.17	$	4,814
As of December 31, 2015:
Options vested and expected to vest	4,820		$	5.85	4.99	$	4,784
Options exercisable	3,508		$	5.45	3.99	$	4,617

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TELENAV, INC.

Notes to Condensed Consolidated Financial Statements—(Continued)

(unaudited)

A summary of our restricted stock unit, or RSU, activity is as follows (in thousands except contractual life amounts):



	Number of Shares		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
RSUs outstanding as of June 30, 2015	4,290
Granted	1,483
Vested	(726	)
Canceled	(531	)
RSUs outstanding as of December 31, 2015	4,516		1.52	$	25,698
As of December 31, 2015:
RSUs expected to vest	3,727		1.38	$	21,208

RSUs vested above includes 260,094 shares withheld for taxes related to net share settlements of RSUs.

During the six months ended December 31, 2015 , pursuant to the annual increase provisions of our 2009 Equity Incentive Plan, the number of shares available for grant under this plan increased by 1,621,476 shares. A summary of our shares available for grant activity is as follows (in thousands):



	Number of Shares
Shares available for grant as of June 30, 2015	1,947
Additional shares authorized	1,621
Granted	(2,433	)
RSUs withheld for taxes in net share settlements	260
Canceled	697
Shares available for grant as of December 31, 2015	2,092

The following table summarizes the stock-based compensation expense recorded for stock options, RSUs and restricted common stock issued to employees and nonemployees (in thousands):



	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2015		2014		2015		2014
Stock option awards	$	441	$	545	$	851	$	1,234
RSU awards	2,739		1,945		5,416		4,187
Restricted common stock	—		49		—		506
Total stock-based compensation expense	$	3,180	$	2,539	$	6,267	$	5,927

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TELENAV, INC.

Notes to Condensed Consolidated Financial Statements—(Continued)

(unaudited)

We use valuation pricing models to determine the fair value of stock-based awards. The determination of the fair value of stock-based payment awards on the date of grant is affected by the stock price as well as assumptions regarding a number of complex and subjective variables. These variables include expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rates and expected dividends. The weighted average assumptions used to value stock option awards granted were as follows:



	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2015		2014		2015		2014
Expected volatility	52	%	59	%	52	%	54	%
Expected term (in years)	4.48		4.42		4.46		4.38
Risk-free interest rate	1.52	%	1.49	%	1.54	%	1.62	%
Dividend yield	—		—		—		—

Performance-based RSUs

We established a 2015 Performance Share Program under our 2009 Equity Incentive Plan, under which RSUs and/or cash bonuses may be earned based on the achievement of specified performance conditions measured over periods ranging from approximately 15 to 21 months. Holders of performance-based awards generally have the ability to receive 0% to 100% of the target number of RSUs or cash bonus originally granted. The expense associated with performance-based RSU grants is recorded when the performance condition is determined to be probable. Fully vested restricted stock units and or cash bonuses will be awarded upon management’s certification of the level of achievement.

As of June 30, 2015, we had granted 106,000 performance-based RSUs to certain non-executive employees. No performance-based RSUs were vested or canceled during the six months ended December 31, 2015 .

In addition, in July 2015, our board of directors approved reserving an aggregate of approximately $1.2 million of shares for performance-based RSUs to be earned by certain non-executive employees based upon the achievement of specified performance milestones measured over approximately six months. Upon achievement and approval of each milestone RSU grant by our board of directors, 50% of the RSUs will vest immediately and the remaining 50% will vest one year following the vest date of the first grant. The size of each RSU grant will be determined by dividing the value of the reward for each milestone by the price of our common stock on the date of grant. As of December 31, 2015 , 29,246 shares had been granted under these milestones and are included as a component of shares granted in our summary table of RSU activity above.


8.	Stock repurchase program

In September 2014, we announced that our board of directors authorized a program for the repurchase of shares of our common stock up to an aggregate of $10.0 million through open market purchases. The timing and amount of repurchase transactions under this program depends on market conditions and other considerations. Under this program, we utilized $570,000 of cash to repurchase 75,943 shares of our common stock at an average purchase price of $7.50 per share during the six months ended December 31, 2015 . As of September 30, 2015, this repurchase program had expired.

Repurchased shares are retired and designated as authorized but unissued shares. We use the par value method of accounting for our stock repurchases. Under the par value method, common stock is first charged with the par value of the shares involved. The excess of the cost of shares acquired over the par value is allocated to additional paid-in capital, or APIC, based on an estimated average sales price per issued share with the excess amounts charged to retained earnings. As a result of our stock repurchases during the six months ended December 31, 2015 , we reduced common stock and APIC by an aggregate of $249,000 and charged $321,000 to retained earnings.

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TELENAV, INC.

Notes to Condensed Consolidated Financial Statements—(Continued)

(unaudited)


9.	Income taxes

The effective tax rate for the periods presented is the result of the mix of forecasted fiscal year income earned or loss incurred in various tax jurisdictions that apply a broad range of income tax rates. Our effective tax rate, which resulted in the recognition of a tax expense, was 3% in the six months ended December 31, 2015 compared to an effective tax rate, which resulted in the recognition of a tax benefit, of 39% in the six months ended December 31, 2014 . Our effective tax rate of 3% for the six months ended December 31, 2015 was less than the tax benefit computed at the U.S. federal statutory income tax rate due primarily to losses for which no benefit will be recognized since they are not more likely than not to be realized due to the lack of current and future income and the inability to carryback losses within the two year carryback period. Our effective tax rate of 39% for the six months ended December 31, 2014 was greater than the tax benefit computed at the U.S. federal statutory income tax rate due primarily to the recognition of a $3.0 million state income tax refund as a result of the filing and subsequent audit of our California amended returns for fiscal 2009 and 2010, as well as true up adjustments totaling $1.5 million in connection with the filing of our fiscal 2014 tax return, partially offset by an increase in the valuation allowance as a result of the limitations of benefit from the loss carryback.

We record liabilities related to unrecognized tax benefits in accordance with authoritative guidance on accounting for uncertain tax positions. As of December 31, 2015 and June 30, 2015 , our cumulative unrecognized tax benefits were $6.1 million . Included in the balance of unrecognized tax benefits at December 31, 2015 and June 30, 2015 was $1.7 million that, if recognized, would affect the effective tax rate.

We recognize interest and penalties related to unrecognized tax benefits as part of our provision for federal, state and foreign income taxes. We had accrued $541,000 and $493,000 for the payment of interest and penalties at December 31, 2015 and June 30, 2015 , respectively.

We file income tax returns with the Internal Revenue Service, or IRS, California and various states and foreign tax jurisdictions in which we have subsidiaries. The statute of limitations remains open for fiscal 2012 through fiscal 2015 in the U.S., for fiscal 2011 through fiscal 2015 in state jurisdictions, and for fiscal 2010 through fiscal 2015 in foreign jurisdictions. Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years which have been carried forward and may be audited in subsequent years when utilized.

Due to operating losses in previous years and continued earnings volatility, we maintain a valuation allowance on the majority of our deferred tax assets. Our valuation allowance at June 30, 2015 was $17.7 million . In evaluating our ability to recover our deferred tax assets each quarter, we consider all available positive and negative evidence, including current and previous operating results, ability to carryback losses for a tax refund, and forecasts of future operating results.

We have recorded a $5.4 million income tax receivable as of December 31, 2015 for a U.S. federal tax refund resulting from our ability to carry back fiscal 2015 losses and credits to previous years.

On December 18, 2015, the Protecting Americans from Tax Hikes Act of 2015 became effective, which made several tax extender provisions permanent as well as extending others. Most notable was the permanent extension of the research and development credit which has been temporary since its enactment in 1981. Due to the inability to utilize the research and development credits, we do not expect this legislation to have a material impact on our financial statements.

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TELENAV, INC.

Notes to Condensed Consolidated Financial Statements—(Continued)

(unaudited)


10.	Restructuring

During fiscal 2014, we recorded restructuring charges of $2.4 million related to severance and benefits for certain eliminated positions and $2.0 million related to the impairment of facility leases in connection with our consolidation of facilities. During the three months ended December 31, 2015, in connection with our office lease termination agreement described further in Note 5 Commitments and Contingencies, we reversed $1.5 million previously charged to our restructuring accrual as facility exit costs. As of December 31, 2015 , our remaining restructuring liabilities are associated with facility exit costs, including brokerage fees and rent through the date our office lease terminates. Activity related to our restructuring liabilities for the six months ended December 31, 2015 is presented in the following table (in thousands):




Balance at June 30, 2015	$	2,644
Restructuring expenses	28
Cash payments	(714		)
Other	(1,468		)
Balance at December 31, 2015	$	490

The $490,000 in total restructuring liabilities was recorded in other accrued expenses on our consolidated balance sheet as of December 31, 2015 .


11.	Segments

We report segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reportable segments.

Our CEO, the chief operating decision maker, reviews revenue and gross margin information for each of our reportable segments. In addition, with the exception of accounts receivable and goodwill and intangible assets, we do not identify or allocate our assets by the reportable segments.

Commencing July 1, 2014, we began to report results in three business segments:

Automotive - Our Automotive segment provides our map and navigation platform to auto manufacturers and original equipment manufacturers, or OEMs, for distribution with their vehicles. Our automotive solutions are typically a self-contained solution including software and related services and content within the car, or on-board, and are often enhanced through connection to data services for additional real time capabilities such as maps, POI, or traffic.

Advertising - Our Advertising segment provides interactive mobile advertisements on behalf of our advertising clients to consumers based specifically on the location of the user and other sophisticated targeting capabilities. Our customers include advertising agencies, direct advertisers and channel partners.

Mobile Navigation - Our Mobile Navigation segment provides our map and navigation platform to end users through mobile devices. We distribute our services through our wireless carrier partners, and directly to consumers through mobile application stores and marketplaces.

Prior to July 1, 2014, we operated in a single segment: location-based platform services.

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TELENAV, INC.

Notes to Condensed Consolidated Financial Statements—(Continued)

(unaudited)

Our segment results for the six months ended December 31, 2015 and 2014 were as follows (dollars in thousands):



	Three Months Ended December 31,						Six Months Ended December 31,
	2015			2014			2015			2014
Revenue
Automotive	$	31,846		$	24,077		$	63,589		$	43,579
Advertising	6,688			4,732			11,539			8,707
Mobile Navigation	6,719			10,971			14,186			22,481
Total revenue	45,253			39,780			89,314			74,767
Cost of revenue
Automotive	18,931			13,240			37,452			23,636
Advertising	3,755			3,298			6,750			5,838
Mobile Navigation	1,846			2,995			3,717			6,019
Total cost of revenue	24,532			19,533			47,919			35,493
Gross profit
Automotive	12,915			10,837			26,137			19,943
Advertising	2,933			1,434			4,789			2,869
Mobile Navigation	4,873			7,976			10,469			16,462
Total gross profit	$	20,721		$	20,247		$	41,395		$	39,274
Gross margin
Automotive	41		%	45		%	41		%	46		%
Advertising	44		%	30		%	42		%	33		%
Mobile Navigation	73		%	73		%	74		%	73		%
Total gross margin	46		%	51		%	46		%	53		%

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

The following discussion and analysis should be read together with our condensed consolidated financial statements and the notes to those statements included elsewhere in this Form 10-Q. This Form 10-Q contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally in the sections entitled “Risk Factors” and this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Forward-looking statements include information concerning our possible or assumed future results of operations, future sources of revenue, expectations of expenses, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of competition. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts, “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in “Risk factors” and elsewhere in this Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Form 10-Q.

Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. You should read this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect.

In this Form 10-Q, “we,” “us,” “our” and "Telenav" refer to Telenav, Inc. and its subsidiaries. We operate on a fiscal year ending June 30 and refer to the fiscal year ended June 30, 2015 as “fiscal 2015" and the fiscal year ending June 30, 2016 as "fiscal 2016.”

Overview

Telenav is a leading provider of location-based platform services. These services consist of our automotive and mobile navigation platform and our advertising delivery platform. Our automotive and mobile navigation platform allows Telenav to deliver enhanced location-based services to auto manufacturers, developers, and end users through various distribution channels, including wireless carriers. Our advertising delivery platform delivers highly targeted advertising services leveraging our location expertise. We report revenue, cost of revenue and gross profit results in three business segments: automotive, advertising and mobile navigation.

Our map and navigation platform was originally developed to target mobile devices with real-time directions and information about places near the user’s mobile device. More recently, we have evolved our platform so that it is primarily targeted to deliver solutions for automotive manufacturers and OEMs. We have also enhanced our solutions to make them better suited for the in-car experience.

We have developed proprietary technologies that enable us to provide location-based mapping and navigation services. These technologies include both client-based and cloud-based services. Our client-based technologies include a navigation and guidance engine and tools allowing us to efficiently develop and deploy new applications to mobile phones and in vehicles. Our back-end cloud-based services technologies allow us to deliver real-time location-based data for users and third party software developers that adopt our software development kit, or SDK, and application protocol interfaces, or APIs. We have developed a flexible platform that allows us to use multiple data providers for navigation, maps, points of interest, or POIs, traffic and other location-based content services. More recently, we have been expanding our offering of automotive solutions that utilize navigation to also enhance automotive OEM offerings of Advanced Driver Assistance Systems, or ADAS, and semi-autonomous capabilities. Such ADAS features use map attributes to tell the vehicle about upcoming road characteristics such as curvature and elevation. This information is used by the vehicle to improve fuel economy and safety.

For our automotive segment customers, we offer our auto and mobile navigation platform services to vehicle manufacturers and original equipment manufacturers, or OEMs, for distribution with their vehicles. Our primary automotive customer to date, Ford Motor Company, or Ford, currently distributes our on-board product as an optional feature with all of its models in the United States, Canada, Mexico, Europe and China, as well as offered in models in South America, Australia and New Zealand. In addition, in July 2015, Ford Australia and New Zealand adopted a map update program as part of its Sync 2 product distribution. Under this program, Ford owners with Sync 2 will be eligible to receive annual map updates at no additional cost through December 2023. Ford will pay us an annual fee and a per unit fee for these updates.

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In January 2014, we entered into an agreement with General Motors Corporation, or GM, for integration of our on-board and connected navigation solutions in its vehicles, which we expect to launch in model year 2017. Our relationship with GM also includes brought-in services for vehicles, and in January 2015 GM launched the new version of its OnStar RemoteLink® mobile application powered by our location-based services platform, which includes mapping and one-box search. In addition, in November 2015, the European equivalent of GM's OnStar RemoteLink® was launched in Europe for its Opel and Vauxhall brands. In July 2015, we and Toyota Motor Corporation, or Toyota, announced a partnership for brought-in navigation services where our Scout® GPS Link will be available in Entune™ Audio Plus equipped model year 2016 Toyota vehicles in the United States. In August 2015, Toyota began shipping vehicles enabled to connect with our Scout® GPS Link mobile application, and as of December 2015, the ability to connect to our mobile application is a standard feature or is available as an option on more than 75% of 2016 Toyota models in the United States. We believe our history as a supplier of cloud-based navigation services provides a unique advantage in the automotive navigation marketplace over our competitors.

For our advertising segment customers, we believe our advertising delivery platform offers significant audience reach, sophisticated targeting capabilities and the ability to deliver interactive and engaging ad experiences to consumers on their mobile devices. We are experts in location-based advertising and believe we offer unique value to brick-and-mortar and brand advertisers through our location targeting capabilities. Our technology focuses on managing the complexity and scale associated with mobile location data to deliver better mobile campaigns for our advertising partners. We deliver mobile advertisements by leveraging our proprietary in-house ad serving technology. Our inventory, or accessible market, is comprised of thousands of mobile applications and mobile websites that are accessed through programmatic real-time bidding, or RTB, tools.

We derive revenue from automobile manufacturers and OEMs, advertisers and advertising agencies, and wireless carriers. We receive revenue from automobile manufacturers whose vehicles contain our proprietary software and are able to access our personalized navigation services. These manufacturers have typically not provided us with any volume or revenue guarantees. In addition, we have a growing business in mobile advertising where our customers are primarily advertising agencies, which represent national and regional brands, and channel partners that work closely with local and small business advertisers. We also derive revenue from our partnerships with wireless carriers, who pay us to enable their subscribers to use our mobile navigation services. Some of these wireless carriers bill their subscribers on a monthly recurring basis and the number of those monthly recurring subscribers to which we provide services continues to decline, resulting in substantial declines in our revenue from wireless carriers.

We generate revenue from the delivery of customized software and royalties from the distribution of this customized software in automotive navigation applications. For example, Ford utilizes our on-board automotive navigation product in its Ford SYNC platform. Ford pays us a royalty fee on Sync 2 on-board solutions as the software is reproduced for installation in vehicles with our automotive navigation solutions and pays us a royalty fee on Sync 3 on-board solutions as the hardware that includes our software is received by Ford. In addition, we earn a one-time royalty for each new vehicle owner who downloads the GM OnStar RemoteLink® application, whereby we provide enhanced search capabilities for contracted service periods. We also earn a one-time royalty for each new Toyota vehicle enabled to connect with our Scout® GPS Link mobile application.

We generate revenue from advertising network services through the delivery of search and display advertising impressions based on the specific terms of the advertising contract.

We also generate revenue from subscriptions to our mobile navigation services. End users with subscriptions for our services are generally billed for our services through their wireless carrier or through mobile application stores and marketplaces. Our wireless carrier customers pay us based on several different revenue models, including (1) a revenue sharing arrangement that may include a minimum fee per end user, (2) a monthly or annual subscription fee per end user, or (3) based on usage.

Recent Developments

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On October 16, 2015, we entered into a lease termination agreement with our landlord for the termination of our office lease dated June 28, 2011 for our corporate facilities on De Guigne Drive in Sunnyvale, California. The lease termination is to become effective on (a) March 31, 2016 with respect to 920 De Guigne Drive and 950 De Guigne Drive; and (b) June 30, 2016 with respect to 930 De Guigne Drive. On the same day, we also entered into a lease termination agreement with our sublease tenant for the termination of our sublease of 930 De Guigne Drive. The sublease termination is to become effective on June 30, 2016, and the sublease tenant has the right to advance the termination date to no earlier than March 31, 2016, subject to certain terms and conditions.

In connection with these lease termination agreements, we recorded the following amounts during the three months ended December 31, 2015: i) the reversal of a $1.5 million restructuring accrual related to 920 De Guigne Drive, as this amount represents the fair value of our lease obligation from April 2016 through November 2019 that is no longer payable; ii) the reversal of a $0.5 million loss accrual related to 930 De Guigne Drive, as this amount represents our loss from subleasing the building from July 2016 through November 2019 that we will no longer incur, partly offset by an accrual of $0.4 million related to the early lease termination fee payable to our sublease tenant; and iii) the reversal of $0.6 million of the total $1.2 million of deferred rent related to 950 De Guigne Drive, as this amount represents our deferred rent liability that is no longer required. We reversed $0.6 million as a credit to rent expense in the three months ended December 31, 2015. The remaining excess deferred rent balance of $0.6 million as of December 31, 2015 will be reversed and credited to rent expense in the three months ending March 31, 2016.

On December 18, 2015, we entered into a sublease agreement dated November 11, 2015 (the “Lease”) with Avaya Inc. to lease approximately 55,000 square feet of office and research and development space located at 4655 Great America Parkway, 3rd Floor, in Santa Clara, California (the “Great America Facility”) for a period of five years and one month (the “Term”), which is expected to begin on April 1, 2016, subject to the completion of certain improvements to the facility prior to our occupancy. The Lease provides for average monthly base rent payments during the Term of approximately $0.1 million as set forth in the Lease. The Lease also provides that we must also pay certain expenses and fees, including common area maintenance and property tax, in addition to the base rent. We plan to relocate our corporate headquarters, and all employees currently based at the De Guigne Drive facilities in Sunnyvale, California, to the Great America Facility.

In January 2016, we decided to shift our focus in our advertising business from growth to profitability. We anticipate that our third quarter ending March 31, 2016, which is typically seasonally down in revenue from the December quarter, will be the peak quarter of losses for our advertising business. In the near-term, we are taking actions to reduce our operating costs and are targeting to achieve break-even on a cash basis for our advertising business by the end of calendar 2016. We use the adjusted EBITDA metric in measuring this performance. We expect that this shift in strategy from growth to profitability will require us to evaluate the carrying value of our goodwill and intangible assets for impairment during the three months ending March 31, 2016 rather than in the ordinary course of practice during the last quarter of our fiscal year.

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Key operating and financial performance metrics

We monitor the key operating and financial performance metrics set forth in the tables below to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess our operational efficiencies. Certain of these measures such as billings, change in deferred revenue, change in deferred costs, non-GAAP net income (loss), adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, and diluted non-GAAP net income (loss) per share are not measures calculated in accordance with U.S. generally accepted accounting principles, or GAAP, and should not be considered as an alternative to any measure of financial performance calculated and presented in accordance with GAAP. In addition, these non-GAAP measures may not be comparable to similarly titled measures of other companies because other companies may not calculate them in the same manner that we do (in thousands, except percentages and per share amounts):



	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2015			2014			2015			2014
Revenue	$	45,253		$	39,780		$	89,314		$	74,767
Billings (Non-GAAP)	$	48,435		$	42,665		$	96,337		$	77,574

Increase (decrease) in deferred revenue	$	3,182		$	2,885		$	7,023		$	2,807
Increase (decrease) in deferred costs	$	1,629		$	189		$	4,302		$	723

Gross margin	46		%	51		%	46		%	53		%
Non-GAAP gross margin	47		%	53		%	47		%	55		%

Net loss	$	(6,639	)	$	(2,723	)	$	(17,485	)	$	(10,660	)
Non-GAAP net loss	$	(4,491	)	$	(2,995	)	$	(11,542	)	$	(6,866	)
Adjusted EBITDA	$	(4,144	)	$	(4,842	)	$	(10,534	)	$	(10,357	)

Diluted net loss per share	$	(0.16	)	$	(0.07	)	$	(0.43	)	$	(0.27	)
Diluted non-GAAP net loss per share	$	(0.11	)	$	(0.08	)	$	(0.28	)	$	(0.17	)

Billings measures revenue recognized plus the change in deferred revenue from the beginning to the end of the period. We consider billings to be a useful metric for management and investors because billings drives deferred revenue, which is an important indicator of the health and viability of our business. While we believe a disproportionately high degree of costs and value in the product or service has been provided at the time of billing to the customer, we are required under GAAP to defer revenue recognition over much longer periods, currently up to ten years. There are a number of limitations related to the use of billings versus revenue calculated in accordance with GAAP. First, billings include amounts that have not yet been recognized as revenue and may require additional services to be provided over contracted service periods. For example, billings related to certain connected solutions cannot be fully recognized as revenue in a given period due to requirements for ongoing provisioning of services such as hosting, monitoring and customer support. Second, we may calculate billings in a manner that is different from peer companies that report similar financial measures. When we use these measures, we compensate for these limitations by providing specific information regarding revenue and evaluating billings together with revenue calculated in accordance with GAAP. We have also provided a breakdown of the calculation of the change in deferred revenue by segment, which is added to revenue in calculating our non-GAAP metric of billings. In connection with our presentation of the change in deferred revenue, we have provided a similar presentation of the change in the related deferred costs. Such deferred costs primarily include costs associated with third party content and in connection with certain customized software solutions, the costs incurred to develop those solutions. As deferred revenue and deferred costs become larger components of our operating results, we believe these metrics are useful in evaluating cash flow.

Gross margin is our gross profit, or total revenue less cost of revenue, expressed as a percentage of our total revenue. Our gross margin has been and will continue to be impacted by the increasing percentage of our revenue base derived from automotive navigation solutions and advertising network services, which generally have higher associated third party content costs and third party display ad inventory costs, respectively, than our mobile navigation offerings provided through wireless carriers.

Non-GAAP gross margin measures our gross margin, excluding the impact of stock-based compensation expense and capitalized software and developed technology amortization expenses. Non-GAAP net loss measures GAAP net loss, excluding the impact of stock-based compensation expense, capitalized software and developed technology amortization expenses, and other applicable items such as legal contingencies, certain unique tax matters, restructuring accruals and

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reversals, and deferred rent reversals due to lease termination, net of taxes or tax benefits. Stock-based compensation expense relates to equity incentive awards granted to our employees, directors, and consultants. Stock-based compensation expense has been and will continue to be a significant recurring non-cash expense for us that we exclude from non-GAAP net loss and non-GAAP net loss per share. Legal contingencies represent settlements and offers made to settle patent litigation cases in which we are defendants and royalty disputes. Deferred rent reversals represent the reversal of our deferred rent liability that is no longer required due to our facility lease termination. Capitalized software amortization expense represents internal software costs that were capitalized and are charged to expense as the software is used in our operations. Developed technology amortization expense relates to the amortization of acquired intangible assets. Our non-GAAP tax rate differs from the tax rate due to the elimination of any tax effect of the stock-based compensation expenses, capitalized software and developed technology amortization expense, and applicable legal contingencies, restructuring accruals and reversals, and other items, including unique tax matters, that are being eliminated to arrive at the non-GAAP net loss.

Adjusted EBITDA measures our GAAP net loss excluding the impact of stock-based compensation expense, depreciation, amortization, interest income, other income (expense), provision (benefit) for income taxes, and other applicable items such as legal contingencies, restructuring accruals and reversals and deferred rent reversals due to lease termination, net of tax. Adjusted EBITDA, while generally a measure of profitability, can also represent a loss. We consider Adjusted EBITDA to be a useful metric as a proxy for operating cash flow.

Non-GAAP gross margin, non-GAAP net loss and adjusted EBITDA are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, we believe that the exclusion of the expenses eliminated in calculating non-GAAP gross margin, non-GAAP net loss and adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. In addition, non-GAAP net loss and adjusted EBITDA are key financial measures used by the compensation committee of our board of directors in connection with the development of incentive-based compensation for our executive officers. Accordingly, we believe that non-GAAP gross margin, non-GAAP loss from continuing operations, net of tax, and adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Diluted non-GAAP net loss per share is calculated as non-GAAP net loss divided by the diluted weighted average number of shares outstanding during the period.

These non-GAAP measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP. Some of these limitations are:


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


•	non-GAAP gross margin, non-GAAP net loss and adjusted EBITDA do not reflect the potentially dilutive impact of equity-based compensation;


•	non-GAAP net loss and adjusted EBITDA do not reflect the use of cash for net share settlements of RSUs;


•	adjusted EBITDA does not reflect tax payments that historically have represented a reduction in cash available to us or tax benefits that may arise as a result of generating net losses; and


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

Because of these and other limitations, you should consider non-GAAP gross margin, non-GAAP net loss, adjusted EBITDA and diluted non-GAAP net loss per share alongside other GAAP-based financial performance measures, including various cash flow metrics, net loss and our other GAAP financial results.

The following tables present reconciliations of revenue to billings, deferred revenue to the change in deferred revenue, deferred costs to the change in deferred costs, gross margin to non-GAAP gross margin, net loss to non-GAAP net loss and net loss to adjusted EBITDA for each of the periods indicated (dollars in thousands):

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	Automotive				Advertising				Mobile Navigation						Total
	Three Months Ended December 31,				Three Months Ended December 31,				Three Months Ended December 31,						Three Months Ended December 31,
	2015		2014		2015		2014		2015			2014			2015		2014
Revenue	$	31,846	$	24,077	$	6,688	$	4,732	$	6,719		$	10,971		$	45,253	$	39,780
Adjustments: Change in deferred revenue	3,434		3,331		—		—		(252		)	(446		)	3,182		2,885
Billings (Non-GAAP)	$	35,280	$	27,408	$	6,688	$	4,732	$	6,467		$	10,525		$	48,435	$	42,665



	Automotive				Advertising				Mobile Navigation						Total
	Six Months Ended December 31,				Six Months Ended December 31,				Six Months Ended December 31,						Six Months Ended December 31,
	2015		2014		2015		2014		2015			2014			2015		2014
Revenue	$	63,589	$	43,579	$	11,539	$	8,707	$	14,186		$	22,481		$	89,314	$	74,767
Adjustments: Change in deferred revenue	7,251		3,353		—		—		(228		)	(546		)	7,023		2,807
Billings (Non-GAAP)	$	70,840	$	46,932	$	11,539	$	8,707	$	13,958		$	21,935		$	96,337	$	77,574



	Automotive				Advertising				Mobile Navigation						Total
	Three Months Ended December 31,				Three Months Ended December 31,				Three Months Ended December 31,						Three Months Ended December 31,
	2015		2014		2015		2014		2015			2014			2015		2014
Deferred revenue, December 31	$	12,443	$	3,483	$	—	$	—	$	1,408		$	1,760		$	13,851	$	5,243
Deferred revenue, September 30	9,009		152		—		—		1,660			2,206			10,669		2,358
Increase (decrease) in deferred revenue (Non-GAAP)	$	3,434	$	3,331	$	—	$	—	$	(252	)	$	(446	)	$	3,182	$	2,885

Deferred costs, December 31	$	7,443	$	1,223	$	—	$	—	$	—		$	—		$	7,443	$	1,223
Deferred costs, September 30	5,814		1,034		—		—		—			—			5,814		1,034
Increase (decrease) in deferred costs (Non-GAAP)	$	1,629	$	189	$	—	$	—	$	—		$	—		$	1,629	$	189



	Automotive				Advertising				Mobile Navigation						Total
	Six Months Ended December 31,				Six Months Ended December 31,				Six Months Ended December 31,						Six Months Ended December 31,
	2015		2014		2015		2014		2015			2014			2015		2014
Deferred revenue, December 31	$	12,443	$	3,483	$	—	$	—	$	1,408		$	1,760		$	13,851	$	5,243
Deferred revenue, June 30	5,192		130		—		—		1,636			2,306			6,828		2,436
Increase (decrease) in deferred revenue (Non-GAAP)	$	7,251	$	3,353	$	—	$	—	$	(228	)	$	(546	)	$	7,023	$	2,807

Deferred costs, December 31	$	7,443	$	1,223	$	—	$	—	$	—		$	—		$	7,443	$	1,223
Deferred costs, June 30	3,141		500		—		—		—			—			3,141		500
Increase (decrease) in deferred costs (Non-GAAP)	$	4,302	$	723	$	—	$	—	$	—		$	—		$	4,302	$	723

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	Automotive				Advertising				Mobile Navigation				Total
	Three Months Ended December 31,				Three Months Ended December 31,				Three Months Ended December 31,				Three Months Ended December 31,
	2015		2014		2015		2014		2015		2014		2015		2014
Gross margin	41	%	45	%	44	%	30	%	73	%	73	%	46	%	51	%
Adjustments:
Capitalized software and developed technology amortization	—	%	1	%	1	%	9	%	1	%	1	%	1	%	2	%
Non-GAAP gross margin	41	%	46	%	45	%	39	%	74	%	74	%	47	%	53	%



	Automotive				Advertising				Mobile Navigation				Total
	Six Months Ended December 31,				Six Months Ended December 31,				Six Months Ended December 31,				Six Months Ended December 31,
	2015		2014		2015		2014		2015		2014		2015		2014
Gross margin	41	%	46	%	42	%	33	%	74	%	73	%	46	%	53	%
Adjustments:
Capitalized software and developed technology amortization	1	%	1	%	4	%	10	%	1	%	2	%	1	%	2	%
Non-GAAP gross margin	42	%	47	%	46	%	43	%	75	%	75	%	47	%	55	%

The impact of adjusting for stock-based compensation in determining non-GAAP gross margin is less than 1% for all periods presented.



	Three Months Ended December 31,						Six Months Ended December 31,
	2015			2014			2015			2014
GAAP net loss	$	(6,639	)	$	(2,723	)	$	(17,485	)	$	(10,660	)
Adjustments:
Legal contingencies	750			—			750			—
Benefit for income taxes due to changes in tax accounting method and amended tax returns	—			(4,061		)	—			(4,061		)
Restructuring accrual (reversal)	(1,468		)	565			(1,468		)	565
Deferred rent reversal due to lease termination	(621		)	—			(621		)	—
Capitalized software and developed technology amortization	307			867			1,015			1,770
Stock-based compensation expense:
Cost of revenue	39			27			71			51
Research and development	1,771			1,125			3,229			2,625
Sales and marketing	835			730			1,675			1,494
General and administrative	535			657			1,292			1,757
Total stock-based compensation expense	3,180			2,539			6,267			5,927
Tax effect of adding back adjustments	—			(182		)	—			(407		)
Non-GAAP net loss	$	(4,491	)	$	(2,995	)	$	(11,542	)	$	(6,866	)

Non-GAAP net loss per share, basic and diluted	$	(0.11	)	$	(0.08	)	$	(0.28	)	$	(0.17	)
Weighted average shares used in computing non-GAAP net loss per share, basic and diluted	41,038			39,916			$	40,820		$	39,727

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	Three Months Ended December 31,						Six Months Ended December 31,
	2015			2014			2015			2014
GAAP net loss	$	(6,639	)	$	(2,723	)	$	(17,485	)	$	(10,660	)
Adjustments:
Legal contingencies	750			—			750			—
Restructuring accrual (reversal)	(1,468		)	565			(1,468		)	565
Deferred rent reversal due to lease termination	(621		)	—			(621		)	—
Stock-based compensation expense	3,180			2,539			6,267			5,927
Depreciation and amortization	847			1,399			1,916			2,876
Interest and other income (expense), net	(520		)	(870		)	(333		)	(2,173		)
Provision (benefit) for income taxes	327			(5,752		)	440			(6,892		)
Adjusted EBITDA	$	(4,144	)	$	(4,842	)	$	(10,534	)	$	(10,357	)

Key components of our results of operations

Sources of revenue

We classify our revenue as either product or services revenue. Product revenue consists primarily of revenue we receive from the delivery of customized software and royalties from the distribution of this customized software in certain automotive navigation applications. Services revenue consists primarily of revenue we derive from our brought-in automotive navigation services, advertising services and mobile navigation services.

We report revenue, cost of revenue and gross profit results in three business segments: Automotive, Advertising and Mobile Navigation. Our chief executive officer, or CEO, the chief operating decision maker, reviews revenue and gross margin information for each of our reportable segments. See " - Results of operations" and Note 11 to the financial statements in this Form 10-Q for more information about our business segments.

Revenue from our Automotive segment represented 71% and 58% of our revenue in the six months ended December 31, 2015 and 2014 , respectively. Ford represented 68% and 55% of our revenue in the six months ended December 31, 2015 and 2014 , respectively. Our contract with Ford expires in December 2017. The agreement may be renewed for successive 12-month periods if either party provides notice of renewal at least 45 days prior to the expiration of the applicable term, and the other party agrees to such renewal.

We provide both on-board and brought-in connected navigation solutions to Ford. Our on-board solution consists of software, map and POI data loaded in the vehicle that provides voice-guided turn by turn navigation displayed on the vehicle screen. Our brought-in connected solution enables a mobile device that is paired with the vehicle to activate in-vehicle text-based and voice-guided turn by turn navigation. We recognize revenue from our brought-in connected solutions monthly based on annual subscriptions, which are subject to a maximum annual fee with Ford. This revenue is classified as services revenue and represented less than 5% of overall automotive navigation solutions revenue.

Our product revenue is primarily derived from our automotive on-board solutions as the related customized software is delivered to, and accepted by our customers. In addition, we recognize royalties earned from our Ford Sync 2 on-board solutions as the software is reproduced for installation in vehicles; however, we currently recognize revenue from Ford Sync 3 as the hardware that includes our software is received by Ford. By December 2016, we anticipate that our Ford Sync 3 arrangement will transition to title transfer as our software is installed in the vehicle and, accordingly, the timing of our revenue recognition will change. As Ford Sync 3 completely replaces Sync 2, this transition could result in a period during which we have reduced revenue. The effect of this change in timing of revenue recognition may be greater for vehicles manufactured outside North America. We anticipate that we will continue to depend on Ford for a material portion of our revenue for the foreseeable future .

In January 2015, GM launched the new version of its OnStar RemoteLink® mobile application powered by our location-based services platform. We earn a one-time royalty for each new vehicle owner who downloads the RemoteLink® application. We record the royalty earned as deferred revenue and recognize this revenue over the estimated service period.

In July 2015, Ford Australia and New Zealand adopted a map update program as part of its Sync 2 product distribution. Under this program, Ford owners with Sync 2 will be eligible to receive annual map updates at no additional cost through December 2023. Ford has agreed to pay us an annual fee and a per unit fee for these updates. We record the amount billed for these map updates as deferred revenue and recognize this revenue over the estimated service period.

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In August 2015, Toyota began shipping vehicles enabled to connect with our Scout® GPS Link mobile application, and as of December 2015, the ability to connect to our mobile application is a standard feature or is available as an option on more than 75% of 2016 Toyota models in the United States. We earn a one-time royalty for each new Toyota sold and equipped with Entune™ Audio Plus, and we record the royalty earned as deferred revenue. Upon delivery of all elements of the contract, we will recognize this revenue over the estimated service period. Royalties earned and revenue recognized related to Toyota were not material in the six months ended December 31, 2015 .

Revenue from our Advertising segment, which includes the delivery of search and display, location-based ads, represented 13% and 12% of our revenue in the six months ended December 31, 2015 and 2014 . Our advertising revenue is derived from ad insertion orders contracted with advertising agencies, direct customers, and channel partners. Our ad search revenue is earned from the delivery of location-based ad impressions targeted to end users engaged in a specific search task utilizing our mobile navigation solutions. Ad search revenue represented less than 10% of our overall advertising revenue in the six months ended December 31, 2015 and 2014 . Our display revenue relates to the advertising business developed via our Thinknear acquisition that delivers targeted location-based impressions to end users of third party developer applications.

We also offer voice-guided, real-time, turn by turn, mobile navigation service under several brand names including Scout by Telenav and Telenav GPS as well as under wireless carrier brands (or “white label” brands). Revenue from our Mobile Navigation segment represented 16% and 30% of our revenue in the six months ended December 31, 2015 and 2014 , respectively. Subscription fee revenue from our mobile navigation service declined from the six months ended December 31, 2014 to 2015, primarily due to a substantial decrease in the number of paying subscribers for navigation services provided through AT&T, T-Mobile USA, or T-Mobile, U.S. Cellular Corporation, or USCC, and Comunicaciones Nextel de Mexico, S.A. de C.V., a subsidiary of NII Holdings, Inc., or NII Mexico.

AT&T represented 10% and 19% of our revenue in the six months ended December 31, 2015 and 2014 , respectively. In March 2015, our agreement with AT&T was automatically renewed, under its existing terms through March 2016, and provides that we will continue to be the exclusive provider of white label GPS navigation services to AT&T. AT&T is not required to offer our navigation services. During fiscal 2016, we anticipate that we will continue to depend on AT&T for a material portion of our revenue; however, we have seen substantial declines in the number of paying subscribers for our services through AT&T over the past few years and we expect the number of subscribers and related revenue to continue to decline substantially . In addition, as AT&T shifts the manner in which our applications are loaded on their devices to one where users are directed to an application store, the rate of decline in our revenue from AT&T may increase as those subscribers may then search for free alternatives.

We derive services revenue primarily from our wireless carrier customers for their end users' subscriptions to our mobile navigation services. Our wireless carrier customers pay us based on several different revenue models, including (1) a revenue sharing arrangement that may include a minimum fee per end user, (2) a monthly or annual subscription fee per end user, or (3) based on usage. Certain of our contracts provide our wireless carrier customers with discounts based on the number of end users paying for our services in a given month. In general, our wireless carrier customers pay us a lower monthly fee per end user if an end user subscribes to our mobile navigation services as part of a bundle of mobile data or voice services than if an end user subscribes to our mobile navigation services on a standalone basis. We also offer our applications directly to end users through application stores such as the Apple App Store and the Google Play marketplace. Finally, we provide free versions of our services which can generate revenue through advertising supported arrangements, and subscriber upgrades to premium versions for a fee. We also derive services revenue from advertising network services through the delivery of search and display advertising impressions based on the specific terms of the advertising contract. In the future, we may have other revenue models.

For services that our subscribers purchase through our wireless carriers, our wireless carrier customers are responsible for billing and collecting the fees they charge their subscribers for the right to use our navigation services. When we are paid on a revenue sharing basis with our wireless carrier customers, the amount we receive varies depending on several factors, including the revenue share rate negotiated with the wireless carrier customer, the price charged to the subscriber by the wireless carrier customer, the specific sales channel of the wireless carrier customer in which the service is offered and the features and capability of the service. As a result of these factors, the amount we receive for a subscriber may vary considerably and is subject to change over time.

In addition, the amount we are paid per end user in our revenue sharing arrangements may also vary depending upon the metric used to determine the amount of the payment, including the number of end users at any time during a month, the average monthly paying end users, the number and timing of end user billing cycles and end user activity. Although our wireless carrier customers generally have sole discretion about how to price our mobile navigation services to their subscribers, our revenue

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sharing arrangements generally include monthly minimum fees per end user. To a much lesser extent, we also sell our services directly to consumers through application stores and marketplaces.

For fiscal 2016, we expect automotive and advertising revenue to represent the growing components of our revenue but our expectations may not be realized. While we anticipate our revenue to increase in fiscal 2016, the lower gross margins generally experienced with automotive and advertising revenue are expected to result in an overall lower gross margin in fiscal 2016. We expect that services revenue from wireless carrier customers will continue to decline substantially in fiscal 2016 due to the continued decline in the number of monthly recurring subscribers.

In the six months ended December 31, 2015 and 2014 , we generated 97% and 95% of our revenue in the United States, respectively. With respect to revenue we receive from automobile manufacturers and OEMs for sales of vehicles in other countries, we classify the majority of that revenue as being generated in the United States, because we provide deliverables to and receive compensation from the manufacturer's or OEM's United States' entity. It is possible that this classification may change in the future, as existing and new customers may elect to contract through subsidiaries.

As we continue to increase our offering of various embedded and connected solutions for automotive customers, it is likely that the complexity of various accounting rules and required criteria may make revenue recognition more challenging in the years to come. Consequently, we believe that billings, a non-GAAP metric, in conjunction with revenue and deferred revenue will be important metrics to measure in assessing the growth and health of the business. See " - Key operating and financial performance metrics" for further discussion about billings.

Cost of revenue

We classify our cost of revenue as either cost of product revenue or cost of services revenue. Cost of product revenue consists primarily of the cost of third party content we incur in providing our on-board automotive navigation solutions and recognition of deferred development costs. Cost of services revenue consists primarily of the costs associated with third party content, third party exchange ad inventory, data center operations and outsourced hosting services, customer support, amortization of capitalized software, stock-based compensation and amortization of developed technology that we incur in providing our navigation and advertising network services.

We also capitalize and defer recognition of certain licensed map and POI content costs from third parties in a manner similar to deferred revenue for our connected and value-added automotive solutions. Such deferred costs are recognized over the requisite service period and amounted to $7.4 million as of December 31, 2015 . As the deferred revenue and related deferred costs are recognized as the underlying services are provided, we will also incur ongoing costs of revenue for network operations, hosting and data center, and customer service support over time.

We primarily provide mobile navigation service customer support through a third party provider to whom we provide training and assistance with problem resolution. In addition, we use outsourced, hosting services and industry standard hardware to provide our navigation services. We generally offer to our wireless carrier customers and generally maintain at least 99.9% uptime every month, excluding designated periods of maintenance. Our internal targets for service uptime are even higher. We have in the past, and may in the future, not achieve our targets for service availability and may incur penalties for failure to meet contractual service availability requirements, including loss of a portion of subscriber fees for the month or termination of our wireless carrier customer agreement.

The largest component of cost of revenue as it relates to our advertising business is the cost of location-based, third party advertising inventory which we acquire from advertising exchanges. Our search ad inventory is generated from our user base of paid and freemium users of our Scout and Telenav branded and carrier branded mobile navigation solutions. Other notable costs of our advertising business are the cost of ad delivery via contracted hosted relationships and the cost of our advertising operations.

While we expect that our services revenue from wireless carrier customers will continue to decline substantially in fiscal 2016, we do not expect to be able to reduce our cost of services revenue at the same rate, if at all, as the decline in services revenue. Although we successfully transitioned to utilizing Open Street Map, or OSM, content for the majority of our mobile user base resulting in notable cost savings, we expect to continue to incur significant costs, especially related to third party content as well as for outsourced hosting services. Cost of services revenue related to our advertising business will be impacted by our ability to grow advertising revenue, as well as the cost and availability of display ad inventory sourced from third party exchanges. While our product revenue is expected to increase in fiscal 2016 due to continued growth in automotive, much of this growth will be generated from increasing distribution of our automotive solution with Ford in North America and Europe. Consequently, we expect that our overall total cost of revenue will increase as a percentage of revenue as we increase the

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percentage of our revenue from automotive navigation solutions and advertising network services, which generally have higher associated third party content costs and third party display ad costs, respectively, than our mobile navigation offerings provided through wireless carriers.

Operating expenses

We classify our operating expenses into three categories: research and development, sales and marketing and general and administrative. Our operating expenses consist primarily of personnel costs, which include salaries, bonuses, advertising sales commissions, payroll taxes, employee benefit costs and stock-based compensation expense. Other expenses include marketing program costs, third party contractor and temporary staffing services, facilities-related costs including rent expense, legal, audit and tax consulting and other professional service fees. We allocate stock-based compensation expense resulting from the amortization of the fair value of stock-based awards granted, based on the department in which the award holder works. We allocate overhead, such as rent and depreciation, to each expense category based on headcount. We anticipate continued investment of resources, including the hiring of additional headcount in, or reallocation of employee personnel into, our growth areas, which include automotive and advertising.

Research and development . Research and development expenses consist primarily of personnel costs for our development and product management employees and costs of outside consultants and temporary staffing. We have focused our research and development efforts on improving the ease of use and functionality of our existing and developing products and services. In addition to our U.S. employee base, a significant number of our research and development employees are located in our development centers in China and, as a result, a portion of our research and development expense is subject to changes in foreign exchange rates, notably the Chinese Renminbi, or RMB. In addition, with our January 2014 acquisition of skobbler, we have a significant and growing number of employees in Romania and incur research and development expenses in the Romanian Leu.

Sales and marketing . Sales and marketing expenses consist primarily of personnel costs for our sales and marketing staff, commissions earned by our sales personnel and the cost of marketing programs, advertising and promotional activities. Historically, a majority of our revenue has been derived from wireless carriers, which bore much of the expense of marketing and promoting our services to their subscribers, as well as consumers acquired through open market application stores. More recently, automotive revenue has comprised the largest portion of our revenue and automotive and advertising revenue have represented the growing components of our revenue. Our sales and marketing activities supporting our automotive navigation services include the costs of our business development efforts. Our automotive manufacturer partners and OEMs also provide primary marketing for our on-board and brought-in navigation services.

General and administrative . General and administrative expenses consist primarily of personnel costs for our executive, finance, legal, human resources and administrative personnel, legal, audit and tax consulting and other professional services and corporate expenses.

Other income (expense), net . Other income (expense), net consists primarily of interest we earn on our cash and cash equivalents and short-term investments, gain or loss on investments and foreign currency transaction gains or losses.

Provision (benefit) for income taxes . Our provision (benefit) for income taxes primarily consists of corporate income taxes related to profits earned or losses incurred in the United States or corporate income tax refunds expected to be derived from losses incurred in the United States that may be carried back to prior fiscal years. Our effective tax rate could fluctuate significantly from period to period, particularly in those periods in which we incur losses, due to our ability to benefit from the carryback of net operating losses within the carryback period and the available amount therein, if any. Furthermore, on a quarterly basis our tax rates can fluctuate and could be adversely affected by increases in nondeductible stock-based compensation or other nondeductible expenses, as well as changes in our tax reserves. Our effective tax rate could also fluctuate due to a change in our earnings or loss projections, changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws, regulations, or accounting principles, as well as certain discrete items.

Critical accounting policies and estimates

We prepare our condensed consolidated financial statements in accordance with GAAP. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require our judgment in its application. In other cases, our judgment is required in selecting among available alternative accounting policies that allow different accounting treatment for similar transactions. The preparation of condensed consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and various other assumptions that we believe are reasonable under the circumstances. In many instances, we could reasonably use different accounting estimates, and in some instances changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ

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significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial condition, results of operations and cash flows will be affected.

There have been no material changes in our critical accounting policies and estimates during the six months ended December 31, 2015 as compared to the critical accounting policies and estimates disclosed in Part II, Item 7 of our Annual Report on Form 10-K for fiscal 2015.

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 1 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

Results of operations

The following tables set forth our results of operations for the three and six months ended December 31, 2015 and 2014 , as well as a percentage that each line item represents of our total revenue for those periods. The additional key metrics presented are used in addition to the financial measures reflected in the condensed consolidated statements of operations data to help us evaluate growth trends, establish budgets and measure the effectiveness of our sales and marketing efforts. The period to period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.



	Three Months Ended						Six Months Ended
	December 31,						December 31,
Consolidated Statements of Operations Data	2015			2014			2015			2014
	(in thousands)
Revenue:
Product	$	31,160		$	23,461		$	62,269		$	42,377
Services	14,093			16,319			27,045			32,390
Total revenue	45,253			39,780			89,314			74,767
Cost of revenue:
Product	18,364			12,824			36,447			23,002
Services	6,168			6,709			11,472			12,491
Total cost of revenue	24,532			19,533			47,919			35,493
Gross profit	20,721			20,247			41,395			39,274
Operating expenses:
Research and development	16,653			16,620			34,640			33,618
Sales and marketing	6,524			6,710			13,522			12,906
General and administrative	5,844			5,697			12,079			11,910
Restructuring	(1,468		)	565			(1,468		)	565
Total operating expenses	27,553			29,592			58,773			58,999
Loss from operations	(6,832		)	(9,345		)	(17,378		)	(19,725		)
Other income (expense), net	520			870			333			2,173
Loss before provision (benefit) for income taxes	(6,312		)	(8,475		)	(17,045		)	(17,552		)
Provision (benefit) for income taxes	327			(5,752		)	440			(6,892		)
Net loss	$	(6,639	)	$	(2,723	)	$	(17,485	)	$	(10,660	)

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	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2015		2014		2015		2014
Revenue:	(as a percentage of revenue)
Product	69	%	59	%	70	%	57	%
Services	31	%	41	%	30	%	43	%
Total revenue	100	%	100	%	100	%	100	%
Cost of revenue:
Product	40	%	32	%	41	%	31	%
Services	14	%	17	%	13	%	16	%
Total cost of revenue	54	%	49	%	54	%	47	%
Gross profit	46	%	51	%	46	%	53	%
Operating expenses:
Research and development	37	%	42	%	39	%	45	%
Sales and marketing	14	%	17	%	15	%	17	%
General and administrative	13	%	14	%	14	%	16	%
Restructuring	(3	)%	1	%	(2	)%	1	%
Total operating expenses	61	%	74	%	66	%	79	%
Loss from operations	(15	)%	(23	)%	(20	)%	(26	)%
Other income (expense), net	1	%	2	%	—	%	3	%
Loss before provision (benefit) for income taxes	(14	)%	(21	)%	(20	)%	(23	)%
Provision (benefit) for income taxes	1	%	(14	)%	—	%	(9	)%
Net loss	(15	)%	(7	)%	(20	)%	(14	)%

Comparison of the three and six months ended December 31, 2015 and 2014

Revenue, cost of revenue and gross profit .

Consolidated overview. Product revenue increased 33% to $31.2 million in the three months ended December 31, 2015 from $23.5 million in the three months ended December 31, 2014 . Product revenue increased 47% to $62.3 million in the six months ended December 31, 2015 from $42.4 million in the six months ended December 31, 2014 . The increase in product revenue for the comparable three and six month periods was due primarily to an increase in royalty revenue from automotive navigation solutions we provide for our automotive customers. Services revenue decreased 14% to $14.1 million in the three months ended December 31, 2015 from $16.3 million in the three months ended December 31, 2014 . Services revenue decreased 17% to $27.0 million in the six months ended December 31, 2015 from $32.4 million in the six months ended December 31, 2014 . The decrease in services revenue for the comparable three and six month periods was due primarily to lower subscription fees resulting from decreases in the number of paying subscribers for mobile navigation services, partially offset by an increase in advertising revenue.

Our cost of product revenue increased 43% to $18.4 million in the three months ended December 31, 2015 from $12.8 million in the three months ended December 31, 2014 . Our cost of product revenue increased 58% to $36.4 million in the six months ended December 31, 2015 from $23.0 million in the six months ended December 31, 2014 . The increase in the comparable three and six month periods was due primarily to an increase in third party content costs associated with automotive navigation solutions as our business shifts from deriving a majority of revenue from carrier-based revenue to automobile navigation-based revenue. Furthermore, cost of product revenue increased at a higher rate than product revenue due primarily to an increase in third party content costs associated with increased royalty revenue and mix of revenue from Ford on vehicles sold in Europe and China, which generally has higher associated content costs. Our cost of service revenue decreased 8% to $6.2 million in the three months ended December 31, 2015 from $6.7 million in the three months ended December 31, 2014 . Our cost of services revenue decreased 8% to $11.5 million in the six months ended December 31, 2015 from $12.5 million in the six months ended December 31, 2014 . The decrease in the comparable three and six month periods was due primarily to a decrease in cost of mobile navigation revenue associated with the decline in such revenue, partially offset by an increase in cost of advertising revenue resulting from increases in third party ad exchange inventory costs and hosting services associated with the increased impressions delivered.

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Our gross profit increased to $20.7 million in the three months ended December 31, 2015 from $20.2 million in the three months ended December 31, 2014 . Our gross profit increased to $41.4 million in the six months ended December 31, 2015 from $39.3 million in the six months ended December 31, 2014 . Our gross margin decreased to 46% in the three months ended December 31, 2015 from 51% in the three months ended December 31, 2014 , and decreased to 46% in the six months ended December 31, 2015 from 53% in the six months ended December 31, 2014 . The decrease in gross margin for the comparable three and six month periods was primarily due to lower services revenue and the increased proportion of product revenue contributed from our on-board automotive navigation solutions provided to our automotive customers, which generally has higher associated content costs and resulting lower gross margins than our mobile navigation services provided through our wireless carrier customers. We expect our overall gross margin to continue to decline as the percentage of our revenue from automotive offerings increases, and as a result of increased competition on our offering of mobile navigation services, especially from other freemium offerings. In addition, our gross margin will continue to be negatively impacted in the future by the amortization of developed technology acquired as part of our January 2014 acquisition of skobbler.

Revenue concentrations . In the three months ended December 31, 2015 and 2014 , revenue from Ford represented 66% and 57% of our total revenue, respectively, and revenue from AT&T represented 10% and 18% of our total revenue, respectively. In the six months ended December 31, 2015 and 2014 , revenue from Ford represented 68% and 55% of our total revenue, respectively, and revenue from AT&T represented 10% and 19% of our total revenue, respectively. No other customer represented more than 10% of our total revenue in such periods.

We primarily sell our services in the United States. In the three months ended December 31, 2015 and 2014, revenue derived from U.S. sources represented 97% and 95% of our total revenue, respectively. In the six months ended December 31, 2015 and 2014 , revenue derived from U.S. sources represented 97% and 95% of our total revenue, respectively.

Segments information. The information below is organized in accordance with our three reportable business segments (dollars in thousands):



	Three Months Ended December 31,						Six Months Ended December 31,
	2015			2014			2015			2014
Revenue
Automotive	$	31,846		$	24,077		$	63,589		$	43,579
Advertising	6,688			4,732			11,539			8,707
Mobile Navigation	6,719			10,971			14,186			22,481
Total revenue	45,253			39,780			89,314			74,767
Cost of revenue
Automotive	18,931			13,240			37,452			23,636
Advertising	3,755			3,298			6,750			5,838
Mobile Navigation	1,846			2,995			3,717			6,019
Total cost of revenue	24,532			19,533			47,919			35,493
Gross profit
Automotive	12,915			10,837			26,137			19,943
Advertising	2,933			1,434			4,789			2,869
Mobile Navigation	4,873			7,976			10,469			16,462
Total gross profit	$	20,721		$	20,247		$	41,395		$	39,274
Gross margin
Automotive	41		%	45		%	41		%	46		%
Advertising	44		%	30		%	42		%	33		%
Mobile Navigation	73		%	73		%	74		%	73		%
Total gross margin	46		%	51		%	46		%	53		%

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Automotive. Automotive revenue increased 32% to $31.8 million in the three months ended December 31, 2015 from $24.1 million in the three months ended December 31, 2014 . Automotive revenue increased 46% to $63.6 million in the six months ended December 31, 2015 from $43.6 million in the six months ended December 31, 2014 . The increase in the comparable three and six month periods was due primarily to an increase in production royalty revenue of $7.9 million and $19.9 million, respectively. Automotive revenue included customized software and map content revenue of $0.7 million and $0.8 million in the three months ended December 31, 2015 and 2014 , respectively, and $1.0 million and $0.8 million in the six months ended December 31, 2015 and 2014 , respectively. In addition, during the three and six months ended December 31, 2015 , our automotive deferred revenue increased $3.4 million and $7.3 million, respectively, primarily related to royalties earned from new vehicle owner downloads of GM's OnStar RemoteLink® mobile application powered by our location-based services platform, the new Ford Australia and New Zealand map update program and, to a lesser extent, our agreement with Toyota utilizing our Scout® GPS Link in select 2016 Toyota models. Automotive revenue represented 70% and 61% of total revenue in the three months ended December 31, 2015 and 2014 , respectively, and represented 71% and 58% of total revenue in the six months ended December 31, 2015 and 2014 , respectively.

Cost of automotive revenue increased 43% to $18.9 million in the three months ended December 31, 2015 from $13.2 million in the three months ended December 31, 2014 . Cost of automotive revenue increased 58% to $37.5 million in the six months ended December 31, 2015 from $23.6 million in the six months ended December 31, 2014 . The increase in the comparable three and six month periods was due primarily to an increase in third party content costs of $5.5 million and $13.4 million, respectively, associated with the increased royalty revenue and mix of revenue from Ford on vehicles sold in Europe and China, which generally has higher associated content costs.

Automotive gross profit increased 19% to $12.9 million in the three months ended December 31, 2015 from $10.8 million in the three months ended December 31, 2014 . Automotive gross profit increased 31% to $26.1 million in the six months ended December 31, 2015 from $19.9 million in the six months ended December 31, 2014 . Automotive gross margin decreased to 41% in the three months ended December 31, 2015 from 45% in the three months ended December 31, 2014 , and decreased to 41% in the six months ended December 31, 2015 from 46% in the six months ended December 31, 2014 . The decrease in gross margin in the comparable three and six month periods was due primarily to the higher proportion of revenue from vehicles sold in Europe and China, which generally has higher associated content costs.

Advertising . Advertising revenue increased 41% to $6.7 million in the three months ended December 31, 2015 from $4.7 million in the three months ended December 31, 2014 . Advertising revenue increased 33% to $11.5 million in the six months ended December 31, 2015 from $8.7 million in the six months ended December 31, 2014 . The increase in the comparable three and six month periods was due primarily to an increase in the value of contracted insertion orders along with the number of impressions delivered. Advertising revenue represented 15% and 12% of total revenue in the three months ended December 31, 2015 and 2014 , respectively, and represented 13% and 12% of total revenue in the six months ended December 31, 2015 and 2014 , respectively. Our second fiscal quarter ended December 31 is typically the strongest for our advertising business due to seasonality.

Cost of advertising revenue increased 14% to $3.8 million in the three months ended December 31, 2015 from $3.3 million in the three months ended December 31, 2014 . Cost of advertising revenue increased 16% to $6.8 million in the six months ended December 31, 2015 from $5.8 million in the six months ended December 31, 2014 . The increase in the comparable three and six month periods was due primarily to increased third party ad exchange inventory costs of $0.8 million and $1.2 million, respectively, partially offset by a decrease in amortization of intangibles of $0.4 million and $0.4 million, respectively, as our intangibles became fully amortized during the three months and six months ended December 31, 2015 .

Advertising gross profit increased 105% to $2.9 million in the three months ended December 31, 2015 from $1.4 million in the three months ended December 31, 2014 . Advertising gross profit increased 67% to $4.8 million in the six months ended December 31, 2015 from $2.9 million in the six months ended December 31, 2014 . Advertising gross margin increased to 44% in the three months ended December 31, 2015 from 30% in the three months ended December 31, 2014 , and increased to 42% in the six months ended December 31, 2015 from 33% in the six months ended December 31, 2014 .

Mobile Navigation . Mobile navigation revenue decreased 39% to $6.7 million in the three months ended December 31, 2015 from $11.0 million in the three months ended December 31, 2014 . Mobile navigation revenue decreased 37% to $14.2 million in the six months ended December 31, 2015 from $22.5 million in the six months ended December 31, 2014 . The decrease in the comparable three and six month periods was primarily due to lower subscription revenue resulting from decreases in the number of paying subscribers for mobile navigation services provided through AT&T, Sprint, T-Mobile and USCC and a decrease in mobile navigation revenue internationally. Accordingly, in the three months ended December 31, 2015 , services revenue from AT&T, Sprint, T-Mobile, USCC and international customers decreased by $4.0 million . In the six months ended December 31, 2015 , services revenue from AT&T, Sprint, T-Mobile, USCC and international customers decreased by $7.8 million . In the three and six months ended December 31, 2014, these decreases were partially offset by $0.8

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million in one-time catch-up revenue reporting from AT&T. Mobile navigation revenue represented 15% and 28% of total revenue in the three months ended December 31, 2015 and 2014 , respectively, and represented 16% and 30% of total revenue in the six months ended December 31, 2015 and 2014 , respectively.

Cost of mobile navigation revenue decreased 38% to $1.8 million in the three months ended December 31, 2015 from $3.0 million in the three months ended December 31, 2014 . Cost of mobile navigation revenue decreased 38% to $3.7 million in the six months ended December 31, 2015 from $6.0 million in the six months ended December 31, 2014 . The decrease in the comparable three month period was due primarily to decreases in data center and hosted services costs of $0.5 million and third party content costs of $0.5 million. The decrease in the comparable six month period was due primarily to decreases in data center and hosted services costs of $1.0 million, third party content costs of $0.8 million, amortization of intangibles of $0.2 million and compensation and benefits of $0.1 million.

Mobile navigation gross profit decreased 39% to $4.9 million in the three months ended December 31, 2015 from $8.0 million in the three months ended December 31, 2014 . Mobile navigation gross profit decreased 36% to $10.5 million in the six months ended December 31, 2015 from $16.5 million in the six months ended December 31, 2014 . Mobile navigation gross margin was comparable at 73% and 73% in the three months ended December 31, 2015 and 2014 , respectively, and 74% and 73% in the six months ended December 31, 2015 and 2014 , respectively. The relatively consistent margins reflect the net impact of lower revenue levels, offset by the lower cost from our successful transition to utilizing OSM maps for the majority of our mobile user base.

Operating expenses

Research and development . Our research and development expenses were comparable at $16.7 million in the three months ended December 31, 2015 and $16.6 million in the three months ended December 31, 2014 . Our research and development expenses increased 3% to $34.6 million in the six months ended December 31, 2015 from $33.6 million in the six months ended December 31, 2014 . Research and development expenses in the comparable three month period primarily reflect increases in stock-based compensation of $0.7 million and outside services of $0.4 million, offset by a decrease of $0.9 million due to the reversal of deferred rent associated with our facility lease termination and a decrease in severance pay of $0.5 million. The increase in the comparable six month period was due primarily to increases in stock-based compensation of $0.6 million, outside services of $0.6 million, travel and entertainment expenses of $0.4 million, compensation and benefits expense of $0.3 million and a reduction in the amount of development costs deferred of $0.4 million, partially offset by a decrease of $0.9 million due to the reversal of deferred rent associated with our facility lease termination and a decrease in severance pay of $0.7 million. As a percentage of revenue, research and development expenses decreased to 37% in the three months ended December 31, 2015 from 42% in the three months ended December 31, 2014 , and decreased to 39% in the six months ended December 31, 2015 from 45% in the six months ended December 31, 2014 . The total number of research and development personnel decreased 4% to 428 at December 31, 2015 from 446 at December 31, 2014 . We believe that as we deliver our contracted customer requirements for our automotive customers, establish relationships with new automotive manufacturers and OEMs, enhance our service offerings around our OSM capabilities, and develop new services and products for advertisers, revenue from those investments and development efforts will lag the related research and development expenses.

Sales and marketing . Our sales and marketing expenses decreased 3% to $6.5 million in the three months ended December 31, 2015 from $6.7 million in the three months ended December 31, 2014 . Our sales and marketing expenses increased 5% to $13.5 million in the six months ended December 31, 2015 from $12.9 million in the six months ended December 31, 2014 . The decrease in the comparable three month period was primarily due to decreases in advertising and promotion of $0.2 million, outside services of $0.1 million and recruiting expense of $0.1 million, partially offset by an increase in compensation and benefits expense of $0.3 million. The increase in the comparable six month period was primarily due to increases in compensation and benefits expense of $0.9 million and travel and entertainment expense of $0.3 million, partially offset by decreases in advertising of $0.2 million, outside services of $0.2 million and recruiting of $0.2 million. As a percentage of revenue, sales and marketing expenses decreased to 14% in the three months ended December 31, 2015 from 17% in the three months ended December 31, 2014 , and decreased to 15% in the six months ended December 31, 2015 from 17% in the six months ended December 31, 2014 . The total number of sales and marketing personnel decreased 1% to 71 at December 31, 2015 from 72 at December 31, 2014 .

General and administrative . Our general and administrative expenses increased 3% to $5.8 million in the three months ended December 31, 2015 from $5.7 million in the three months ended December 31, 2014 . Our general and administrative expenses increased 1% to $12.1 million in the six months ended December 31, 2015 from $11.9 million in the six months ended December 31, 2014 . The increase in the comparable three month period was primarily due to an increase in legal expenses of $1.5 million, resulting primarily from ongoing intellectual property litigation, that was partially offset primarily by decreases in compensation and benefits expense of $0.6 million, severance pay of $0.2 million, stock-based compensation

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expense of $0.1 million and a decrease of $0.3 million due to the reversal of deferred rent associated with our facility lease termination. The increase in the comparable six month period was primarily due to an increase in legal expenses of $2.4 million, resulting primarily from ongoing intellectual property litigation, that was partially offset by decreases in compensation and benefits expense of $0.9 million, stock-based compensation expense of $0.5 million, severance pay of $0.3 million, and a decrease of $0.3 million due to the reversal of deferred rent associated with our facility lease termination. As a percentage of revenue, general and administrative expenses decreased to 13% in the three months ended December 31, 2015 from 14% in the three months ended December 31, 2014 , and decreased to 14% in the six months ended December 31, 2015 from 16% in the six months ended December 31, 2014 . The total number of general and administrative personnel decreased 11% to 58 at December 31, 2015 from 65 at December 31, 2014 . We anticipate that our general and administrative expenses may vary substantially from period to period as our legal expenses associated with ongoing intellectual property litigation and requests for indemnification related to intellectual property litigation proceed.

Restructuring . The three and six months ended December 31, 2015 reflect the reversal of a $1.5 million restructuring accrual related to our facility at 920 De Guigne Drive, as this amount represents the fair value of our lease obligation from April 2016 through November 2019 that is no longer payable in connection with our office lease termination agreement. In the three and six months ended December 31, 2014 , we incurred restructuring costs of $0.6 million . These restructuring costs were associated with facility lease impairment in connection with the consolidation of our Sunnyvale headquarters facilities in fiscal 2014.

Other income (expense), net . Our other income (expense), net was $0.5 million in the three months ended December 31, 2015 and $0.9 million in the three months ended December 31, 2014 . Our other income, net was $0.3 million in the six months ended December 31, 2015 and $2.2 million in the six months ended December 31, 2014 . Other income, net for the three months ended December 31, 2014 included a $0.3 million foreign exchange gain and a $0.2 million gain from the sale of an investment in a privately-held company. Other income, net for the six months ended December 31, 2014 included a $0.9 million foreign exchange gain, $0.5 million other income from our transaction services agreement with Fleetcor Technologies Operating Company, LLC and a $0.2 million gain from the sale of an investment in a privately-held company.

Provision (benefit) for income taxes . Our provision (benefit) for income taxes was $0.3 million in the three months ended December 31 2015 and $(5.8) million in the three months ended December 31, 2014. Our provision (benefit) for income taxes was $0.4 million in the six months ended December 31, 2015 compared to $(6.9) million in the six months ended December 31, 2014 . Our effective tax rate, which resulted in the recognition of a tax expense, was 3% in the six months ended December 31, 2015 compared to an effective tax rate, which resulted in the recognition of a tax benefit, of 39% in the six months ended December 31, 2014 . Our effective tax rate of 3% for the six months ended December 31, 2015 was less than the tax benefit computed at the U.S. federal statutory income tax rate due primarily to losses for which no benefit will be recognized since they are not more likely than not to be realized due to the lack of current and future income and the inability to carry back losses within the two year carryback period. Our effective tax rate of 39% for the six months ended December 31, 2014 was greater than the tax benefit computed at the U.S. federal statutory income tax rate due primarily to the recognition of a $3.0 million state income tax refund as a result of the filing and subsequent audit of our California amended returns for fiscal 2009 and 2010 as well as true up adjustments totaling $1.5 million in connection with the filing of our fiscal 2014 tax return, partially offset by an increase in the valuation allowance as a result of the limitations of benefit from the loss carryback.

We record liabilities related to uncertain tax positions in accordance with authoritative guidance on accounting for uncertainty in income taxes. As of December 31, 2015 and June 30, 2015, our cumulative unrecognized tax benefits were $6.1 million . Included in the balance of unrecognized tax benefits at December 31, 2015 and June 30, 2015 was $1.7 million that, if recognized, would affect the effective tax rate.

We recognize interest and penalties related to unrecognized tax benefits as part of our provision for income taxes. We had $0.5 million accrued for the payment of interest and penalties at December 31, 2015 and June 30, 2015.

We file income tax returns with the Internal Revenue Service, or IRS, California, various states and foreign tax jurisdictions in which we have subsidiaries. The statute of limitations remains open for fiscal 2012 through fiscal 2015 in the United States, for fiscal 2011 through fiscal 2015 in state jurisdictions, and for fiscal 2010 through fiscal 2015 in foreign jurisdictions. Fiscal years outside the normal statute of limitations remain open to audit by tax authorities due to tax attributes generated in those early years which have been carried forward and may be audited in subsequent years when utilized.

Due to operating losses in previous years and continued earnings volatility, we maintain a valuation allowance on the majority of our foreign deferred tax assets. Our valuation allowance at June 30, 2015 was $17.7 million . In evaluating our ability to recover our deferred tax assets each quarter, we consider all available positive and negative evidence, including current and previous operating results, ability to carryback losses for a tax refund, and forecasts of future operating results.

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We have recorded a $5.4 million income tax receivable as of December 31, 2015 for a U.S. federal tax refund resulting from our ability to carry back fiscal 2015 losses and credits to previous years.

Liquidity and capital resources

The following table sets forth the major sources and uses of cash and cash equivalents for each of the periods set forth below (in thousands):



	Six Months Ended
	December 31,
	2015			2014
Net cash used in operating activities	$	(6,662	)	$	(5,426	)
Net cash provided by investing activities	2,055			7,096
Net cash used in financing activities	(1,445		)	(212		)
Effect of exchange rate changes on cash and cash equivalents	(576		)	(1,005		)
Net increase (decrease) in cash and cash equivalents	$	(6,628	)	$	453

At December 31, 2015 , we had cash, cash equivalents and short-term investments of $110.3 million , which primarily consisted of asset-backed securities, municipal securities and agency and corporate bonds held. Our cash, cash equivalents and short-term investments are held and managed by financial institutions that are required to adhere to our investment policy.

Our accounts receivable are heavily concentrated in a small number of customers. As of December 31, 2015 , our accounts receivable balance was $37.4 million , of which Ford and AT&T represented 58% and 9% , respectively.

Our future capital requirements will depend on many factors, including our ability to grow our revenue and control expenses in fiscal 2016 and beyond, whether we return to profitability, the timing and extent of expenditures to support development efforts, the expansion of research and development and sales and marketing activities and headcount, the introduction of our new and enhanced service and product offerings and the growth in our end user base. We believe our cash, cash equivalents and short-term investments will be sufficient to satisfy our financial obligations through at least the next 12 months. However, we expect to use cash in operating activities in fiscal 2016 and possibly beyond, and we may experience greater than expected cash usage in operating activities if revenue is lower than we anticipate or we incur greater than expected cost of revenue or operating expenses. Our revenue and operating results could be lower than we anticipate if, among other reasons, our customers, two of which we are substantially dependent upon for a large portion of our revenue, were to limit or terminate our relationships with them; we were to fail to successfully compete in our highly competitive market, including against competitors who offer their services for free; our revenue did not grow as expected or we were unable to reduce our costs by using OSM. In the future, we may acquire businesses or technologies or license technologies from third parties, and we may decide to raise additional capital through debt or equity financing to the extent we believe this is necessary to successfully complete these acquisitions or license these technologies. However, additional financing may not be available to us on favorable terms, if at all, at the time we make such determinations, which could have a material adverse effect on our business, operating results, financial condition and liquidity and cash position.

Net cash used in operating activities . Net cash used in operating activities was $ 6.7 million and $5.4 million in the six months ended December 31, 2015 and 2014 , respectively. Cash provided by or used in operating activities is affected by changes in our declining mobile navigation end user base, anticipated growth in our auto and advertising businesses, and increases in our operating costs, which are primarily driven by headcount related costs and royalty payments for portions of the content provided in our products. In the six months ended December 31, 2015 , cash used in operating activities was primarily the result of a net loss of $17.5 million which was offset by non-cash charges for depreciation and amortization of $ 1.9 million , stock-based compensation of $ 6.3 million , accretion of net premium on short-term investments of $ 0.4 million and $ 1.7 million from changes in our operating assets and liabilities. In the six months ended December 31, 2014 , cash used in operating activities was the result of a net loss of $10.7 million and $ 4.4 million from changes in our operating assets and liabilities, partially offset by non-cash charges for depreciation and amortization of $ 2.9 million , stock-based compensation of $ 5.9 million , and accretion of net premium on short-term investments of $0.9 million .

Net cash provided by investing activities . Our investing activities provided $ 2.1 million and $ 7.1 million during the six months ended December 31, 2015 and 2014 , respectively. Cash flows from investing activities have historically been affected

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by purchases, sales and maturities of short-term investments, purchases of property and equipment, internal software development costs, and acquisitions. In the six months ended December 31, 2015 , cash provided by investing activities was principally the result of proceeds from sales and maturities of short-term investments, net of purchases, of $2.4 million . In the six months ended December 31, 2014 , cash provided by investing activities was principally the result of proceeds from sales and maturities of short-term investments, net of purchases, of $7.8 million .

Net cash used in financing activities . During the six months ended December 31, 2015 and 2014 , our financing activities used cash of $ 1.4 million and $ 0.2 million , respectively. In the six months ended December 31, 2015 , we utilized $0.6 million of cash to repurchase our common stock and $1.8 million for payment of tax withholdings related to net share settlements of RSUs, partially offset by proceeds of $0.9 million provided from the exercise of stock options. In the six months ended December 31, 2014 , we utilized $1.1 million of cash to repurchase our common stock and $0.9 million of tax withholdings related to net share settlements of RSUs, partially offset by proceeds of $1.8 million provided from the exercise of stock options.

Off-balance sheet arrangements

We do not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Contractual obligations, commitments and contingencies

As of December 31, 2015 , we had an aggregate of $19.5 million of future minimum noncancelable financial commitments primarily related to office space under noncancelable operating leases and license fees due to certain of our third party content providers, regardless of usage level. The aggregate of $19.5 million of future minimum commitments were comprised of $4.0 million due in fiscal 2016; $4.9 million due in fiscal 2017; $3.3 million due in fiscal 2018; $2.6 million due in fiscal 2019; $2.2 million due in fiscal 2020; and $2.5 million due thereafter.

On October 16, 2015, we entered into a lease termination agreement with our landlord for the termination of our office lease dated June 28, 2011 for our corporate facilities on De Guigne Drive in Sunnyvale, California. The lease termination is to become effective on (a) March 31, 2016 with respect to 920 De Guigne Drive and 950 De Guigne Drive; and (b) June 30, 2016 with respect to 930 De Guigne Drive. On the same day, we also entered into a lease termination agreement with our sublease tenant for the termination of our sublease of 930 De Guigne Drive. The sublease termination is to become effective on June 30, 2016, and the sublease tenant has the right to advance the termination date to no earlier than March 31, 2016, subject to certain terms and conditions.

On December 18, 2015, we entered into a sublease agreement dated November 11, 2015 (the “Lease”) with Avaya Inc. to lease approximately 55,000 square feet of office and research and development space located at 4655 Great America Parkway, 3rd Floor, in Santa Clara, California (the “Great America Facility”) for a period of five years and one month (the “Term”), which is expected to begin on April 1, 2016, subject to the completion of certain improvements to the facility prior to our occupancy. The Lease provides for average monthly base rent payments during the Term of approximately $0.1 million as set forth in the Lease. The Lease also provides that we must also pay certain expenses and fees, including common area maintenance and property tax, in addition to the base rent. We plan to relocate our corporate headquarters, and all employees currently based at the DeGuigne Drive facilities in Sunnyvale, California, to the Great America Facility.

In September 2015, we entered into an agreement with Ningbo Huazhong Holdings Company Limited, or Huazhong, a subsidiary of a publicly traded automotive OEM supplier in China, whereby we and Huazhong agreed to form a joint venture limited liability company in China for the development, manufacture and sales of auto entertainment systems. We agreed to invest RMB 9.95 million (approximately $1.5 million as of December 31, 2015 ) in cash, which is expected to represent 19.9% of the equity interests of the joint venture. We and Huazhong also agreed to negotiate a Technology License Agreement, or TLA, whereby we will license our existing navigation platform technologies to the joint venture in exchange for a RMB 5.0 million (approximately $0.8 million as of December 31, 2015) license fee.

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with our customer to evaluate the appropriate solution. If the actual costs exceed our estimates, our results of operations and financial condition may be adversely affected.


Item 3.	Quantitative and Qualitative Disclosures about Market Risk.

Interest rate sensitivity . The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing risk. By policy, we do not enter into investments for trading or speculative purposes. Some of the securities we invest in are subject to market risk. This means that a change in prevailing interest rates may cause the fair value of the investment to fluctuate. To minimize this risk, we invest in a variety of securities, which primarily consist of money market funds, commercial paper, municipal securities and other debt securities of domestic corporations. Due to the nature of these investments and relatively short duration of the underlying securities, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Declines in interest rates, however, will reduce future interest income. During the three months ended December 31, 2015 , a 10% appreciation or depreciation in overall interest rates would not have had a material impact on our interest income or the fair value of our marketable securities.

Foreign currency risk . A substantial majority of our revenue has been generated to date from our end users and customers in the United States and, as such, our revenue has not been substantially exposed to fluctuations in currency exchange rates. However, some of our contracts with our wireless carrier customers outside of the United States are denominated in currencies other than the U.S. dollar and therefore expose us to foreign currency risk. Should the revenue generated outside of the United States grow in absolute amounts and as a percentage of our revenue, we will increasingly be exposed to foreign currency exchange risks. In addition, a substantial portion of our operating expenses are incurred outside the United States, are denominated in foreign currencies and are subject to changes in foreign currency exchange rates, particularly the Euro. Additionally, changes in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statement of operations.

To date, we have not used any foreign currency forward contracts or similar instruments to attempt to mitigate our exposure to changes in foreign currency rates.


Item 4.	Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2015 . The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2015 , our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Limitations on the Effectiveness of Controls

Control systems, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in any control system, misstatements due to error or fraud may occur and not be detected.

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PART II. OTHER INFORMATION


Item 1.	Legal Proceedings.

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We have received, and may in the future continue to receive, claims from third parties asserting infringement of their intellectual property rights. Future litigation may be necessary to defend ourselves and our customers by determining the scope, enforceability and validity of third party proprietary rights or to establish our proprietary rights. From time to time we also may be subject to claims from our third party content providers that we owe them additional royalties and interest, which claims may result in litigation if we and the third party content provider are unable to resolve the matter. There can be no assurance with respect to the outcome of any current or future litigation brought against us or pursuant to which we have indemnification obligations and the outcome could have a material adverse impact on our business, operating results and financial condition.

On December 31, 2009, Vehicle IP, LLC, or Vehicle IP, filed a patent infringement lawsuit against us in the U.S. District Court for the District of Delaware, seeking monetary damages, fees and expenses and other relief. Verizon Wireless, or Verizon, was named as a co-defendant in the Vehicle IP litigation based on the VZ Navigator product and has demanded that we indemnify and defend Verizon against Vehicle IP. At this time, we have not agreed to defend or indemnify Verizon. AT&T was also named as a co-defendant in the Vehicle IP litigation based on the AT&T Navigator and Telenav Track products. AT&T has tendered the defense of the litigation to us and we are defending the case on behalf of AT&T. After the district court issued its claim construction ruling the parties agreed to focus on early summary judgment motions, the defendants filed motions for summary judgment of noninfringement. On April 10, 2013 the district court granted AT&T and our motion for summary judgment of noninfringement. Plaintiff appealed the district court's claim construction and summary judgment rulings to the U.S. Court of Appeals for the Federal Circuit. On November 18, 2014, the U.S. Court of Appeals for the Federal Circuit reversed the district court's claim construction and overturned the district court's grant of summary judgment of noninfringement. The case has been sent back to the U.S. District Court for the District of Delaware and trial is currently scheduled for February 2017. During the three months ended December 31, 2015, we accrued $750,000 related to this litigation. We believe that it is probable that we will incur a loss; however, we cannot currently estimate a range of any possible losses we may experience in connection with this case. Accordingly, we are unable at this time to estimate the effects of this lawsuit on our financial condition, results of operations, or cash flows.

In March 2009, AT&T demanded that we indemnify and defend them against a patent infringement lawsuit brought by Tendler Cellular of Texas LLC, or Tendler, in the U.S. District Court for the Eastern District of Texas. In June 2010, AT&T settled its claims with Tendler and we came to an agreement with AT&T as to the extent of our contribution towards AT&T's settlement and the amount of our contribution was not material; however, there continues to be a disagreement as to whether any additional amounts are owed to AT&T for legal fees and expenses related to the defense of the matter. We believe that it is reasonably possible that we will incur additional loss; however, we cannot currently estimate a range of other possible losses we may experience in connection with this case. Accordingly, we are unable at this time to estimate the overall effects on our financial condition, results of operations, or cash flows.

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While we presently believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, cash flows or overall trends in results of operations, legal proceedings are subject to inherent uncertainties and unfavorable rulings could occur. Nevertheless, were unfavorable final outcomes to occur, there exists the possibility of a material adverse impact on our business, financial position, cash flows or overall trends in results of operations.

Large future indemnity payments and associated legal fees and expenses, including potential indemnity payments and legal fees and expenses relating to our wireless carrier and other customers’ indemnity demands with respect to pending litigation, could materially harm our business, operating results and financial condition. When we believe a loss or a cost of indemnification is probable and can be reasonably estimated, we accrue the estimated loss or cost of indemnification in our consolidated financial statements. Where the outcome of these matters is not determinable, we do not make a provision in our financial statements until the loss or cost of indemnification, if any, is probable and can be reasonably estimated or the outcome becomes known. Although to date we have not agreed to defend or indemnify our customers for outstanding and unresolved indemnity demands where we do not believe we have an obligation to do so or that our solution infringes on asserted intellectual property rights, we may in the future agree to defend and indemnify our customers in connection with demands for indemnification, irrespective of whether we believe that we have an obligation to indemnify them or whether we believe our solution infringes the asserted intellectual property rights. Alternatively, we may reject certain of our customers’ indemnity demands, including the outstanding demands, which may lead to disputes with our customers, negatively impact our relationships with them or result in litigation against us. Our wireless carrier or other customers may also claim that any rejection of their indemnity demands constitutes a material breach of our agreements with them, allowing them to terminate such agreements. If we make substantial payments as a result of indemnity demands, our relationships with our customers are negatively impacted, or any of our customer agreements is terminated, our business, operating results and financial condition could be materially harmed.

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Item 1A.	Risk Factors.

We operate in a rapidly changing environment that involves numerous uncertainties and risks. The following risks and uncertainties may have a material and adverse effect on our business, financial condition or results of operations. You should consider these risks and uncertainties carefully, together with all of the other information included or incorporated by reference in this Form 10-Q. If any of the risks or uncertainties we face were to occur, the trading price of our securities could decline, and you may lose all or part of your investment.

Risk related to our business

We incurred losses in fiscal 2014, 2015 and the first six months of fiscal 2016. We expect that we will continue to incur losses in fiscal 2016 and we do not know when, or if, we will return to profitability, as we make further expenditures to enhance and expand our operations in order to support growth and diversification of our business.

As a percentage of revenue, our net loss was (15)% and (14)% in the six months ended December 31, 2015 and 2014 , respectively. Our revenue from paid wireless carrier mobile navigation has substantially declined and we expect it to continue to do so. Our gross margin declined to 46% in the six months ended December 31, 2015 from 53% in the six months ended December 31, 2014 due primarily to the increased proportion of product revenue contributed from our on-board automotive navigation solutions, which generally have higher associated content costs and resulting lower gross margins than our mobile navigation services provided through our wireless carrier customers, and the increased revenue contribution of our advertising business, which has lower gross margins than our automotive and mobile navigation businesses.

We anticipate that we will continue to incur net operating losses in fiscal 2016, as we anticipate increased expenditures to operate our business. These expected losses are due in part to the expected continued decline in our higher margin mobile navigation revenue. Furthermore, there will be a lengthy delay between the time we secured the award of a new contract with GM, and the timing of revenue thereto, as well as a substantial required upfront investment in research and development resources for this new contract, and continued investments necessary due to the early nature of our advertising business.

Although we are working to replace the continued decline in wireless carrier revenue, our efforts to develop new services and products and attract new customers require investments in anticipation of longer term revenue. For example, the design cycle for automotive navigation products and services is 18 to 24 months and in order to win designs and achieve revenue from this growth area, we typically have to make investments two to four years before we anticipate receiving revenue, if any. This is the case for our relationship with GM. In addition, once we begin to recognize revenue from new automotive products, we may be required to recognize that revenue over time if there are contractual service periods or other obligations to fulfill. Certain contractual service periods or other obligations currently extend up to ten years. We intend to make additional investments in systems and continue to expand our operations to support diversification of our business, but it is likely that these efforts at diversification will not replace our declining wireless carrier revenue in the short-term, if at all. As a result of these factors, we believe we will incur a net operating loss and that we will incur net losses at least through fiscal 2016 and we cannot predict when, or if, we will return to profitability. Our investments and expenditures may not result in the growth that we anticipate. Although we acquired skobbler and have expended additional internal resources to develop our own OSM-based maps to reduce our mapping costs in the long-term, in the short-term, those development efforts will have a negative effect on our ability to become profitable.

Our quarterly revenue and operating results have fluctuated in the past and may fluctuate in the future due to a number of factors. As a result, we may fail to meet or exceed the expectations of securities analysts or investors, which could cause our stock price to decline.

Our quarterly revenue and operating results may vary significantly in the future. Therefore, you should not rely on the results achieved in any one quarter as an indication of future performance. Period to period comparisons of our revenue and operating results may not be meaningful. Our quarterly results of operations may fluctuate as a result of a variety of factors, including, but not limited to, those listed below, many of which are outside of our control:


•	the ability of automobile manufacturers to sell automobiles equipped with our products;


•	the introduction of competitive in-car platforms and products, such as Apple's CarPlay and Google's auto initiatives, including Open Automotive Alliance;


•	the seasonality of new vehicle model introductions and consumer buying patterns, as well as the effects of economic uncertainty on vehicle purchases , particularly outside of the United States;


•	the effectiveness of our entry into new business areas, such as advertising;


•	changes made to existing contractual obligations with a customer that may affect the nature and timing of revenue recognition, such as the change in revenue recognition anticipated with the Ford Sync 3 on-board solution;


•	the loss of our relationship, a change in our revenue model, or a change in pricing with any particular customer;

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•	poor reviews of automotive service offerings into which our navigation solutions are integrated resulting in limited uptake of navigation options by car buyers;


•	warranty claims based on the performance of our products and the potential impact on our reputation with navigation users and automotive OEMs;


•	the transition away from paid carrier navigation to freemium offerings for mobile phone-based navigation services;


•	loss of subscribers by our wireless carrier customers or a reduction in the number of subscribers to plans that include our services;


•	the timing and quality of information we receive from our customers;


•	our inability to attract new end users;


•	the amount and timing of operating costs and capital expenditures related to the expansion of our operations and infrastructure through acquisitions or organic growth;


•	the timing of expenses related to the development or acquisition of technologies, products or businesses;


•	the timing and success of new service introductions by us or our competitors;


•	the timing and success of marketing expenditures for our products;


•	the extent of any interruption in our services;


•	potential foreign currency exchange gains and losses associated with expenses and sales denominated in currencies other than the U.S. dollar;


•	general economic, industry and market conditions that impact expenditures for new vehicles, smartphones and mobile location services in the United States and other countries where we sell our services and products;


•	changes in interest rates and our mix of investments, which would impact our return on our investments in cash and marketable securities;


•	changes in our effective tax rates; and


•	the impact of new accounting pronouncements.

Fluctuations in our quarterly operating results might lead analysts and investors to change their models for valuing our common stock. As a result, our stock price could decline rapidly and we could face costly securities class action lawsuits or other unanticipated issues.

We are dependent on Ford for a substantial and increasing portion of our revenue and our business, financial condition and results of operations will be harmed if our revenue from Ford does not continue to grow or declines.

Ford represented approximately 68% and 55% of our revenue in the six months ended December 31, 2015 and 2014 , respectively. We expect that Ford, other automobile manufacturers and OEMs will account for an increasing portion of our revenue, as our revenue from paid wireless carrier provided navigation declines. However, our revenue could potentially decline if Ford increases the cost to consumers of our navigation product or reduces the number of vehicles or the geographies in which vehicles with our product as an option are sold, or its sales of vehicles fall below forecast due to competition or global macro-economic conditions. Our agreement with Ford expires in December 2017 and also allows either party to terminate the agreement if the other party is insolvent or materially breaches its obligations and fails to cure such breach. In the event that Ford does not elect to renew our contract after December 2017, or chooses to renegotiate our contract on less favorable terms, our revenue may decline and our business operating results and financial condition could be harmed. The agreement may be renewed for successive 12-month periods if either party provides notice of renewal at least 45 days prior to the expiration of the applicable term, and the other party agrees to such renewal. We may not successfully increase our revenue from Ford if our products are replaced within vehicles by Ford with our competitors' products or from price competition from third parties.

For on-board automotive navigation, we recognize revenue as the related customized software is delivered to and accepted by our customers. In addition we recognize royalties earned from our on-board solutions. We have limited experience managing, supporting and retaining automobile manufacturers and OEMs as customers and if we are not able to maintain Ford as a customer our revenue will decline.

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We may not be successful in generating material revenue from automotive manufacturers and OEMs other than Ford, and our automotive revenue could fluctuate due to the complexities of revenue recognition. As a result, our business, financial condition and results of operations will be harmed if we are unable to diversify our automotive revenue.

Although we have attempted to mitigate our dependence on Ford by establishing relationships with other automobile manufacturers and OEMs, these relationships may not produce significant revenue if the products are launched in limited models or due to competition from third parties. In addition, due to the complexities of revenue recognition in accordance with GAAP, when and if we generate revenue we may be required to recognize certain revenue over extended periods. Revenue recognition could also be impacted by changes in procurement patterns, shipping terms and title transfer. For example, we recognize revenue from our Ford Sync 2 on-board solutions as the software is reproduced for installation in vehicles; however, we currently recognize revenue from Ford Sync 3 on-board solutions as the hardware that includes our software is received by Ford. By December 2016, we anticipate that our Ford Sync 3 arrangement will transition to title transfer as our software is installed in the vehicle and, accordingly, the timing of our revenue recognition will change. As Ford Sync 3 completely replaces Sync 2, this transition could result in a period during which we have reduced revenue. The effect of this change in timing of revenue recognition may be greater for vehicles manufactured outside North America. As our solutions encompass greater value-added services, such as Ford Australia and New Zealand's map update program, there is potential for changes in the timing of revenue recognition. Furthermore, we may incur significant expense to develop products for automobile manufacturers, such as under our worldwide connected navigation services agreement with GM, without ever receiving any revenue related to the sale of vehicles with our navigation services. Our ability to attract automobile manufacturers may also be limited if the OEMs chosen to provide navigation services have existing relationships with other navigation vendors or provide their own solutions.

Even if we are able to diversify our automotive navigation business through new arrangements, such as our more recently established relationships with GM and Toyota, customers may not elect to purchase automobile manufacturer and OEM navigation offerings that include our software and/or services for reasons unrelated to performance of our software or services. If customer purchase rates are less than anticipated, we may be unable to effectively diversify our automotive navigation revenue and our business, financial condition and results of operations may be harmed.

Our automotive navigation products are an important part of our effort to expand outside of mobile device navigation to other platforms and we may not be successful in our efforts to attract and retain automobile manufacturers and OEMs, implement profitable and high quality products or achieve end customer acceptance of our services and fee model.

In fiscal 2009, we began offering our first brought-in connected automotive navigation products and prior to that time, we had limited experience in the automotive navigation market. In fiscal 2010, we began offering our first on-board automotive navigation products. Our on-board solutions may not satisfy automotive manufacturers’ or end customers’ expectations for those solutions. If automobile manufacturers and OEMs do not believe that our services meet their customers’ needs, our products and services may not be designed in to future model year vehicles.

The design and sales cycle for on-board or brought-in automotive navigation services and products is substantially longer than those associated with our mobile navigation services to customers of wireless carriers or our advertising platform services. As a result, we may not be able to achieve significant revenue growth with new customers from the automotive navigation business in a short period of time, or at all. For example, design wins for vehicles may be awarded 12 to 36 months prior to the anticipated commercial launch of the vehicle. Our relationship with GM includes brought-in services for vehicles and in January 2015 GM launched the new version of its OnStar RemoteLink® mobile application, but we cannot assure you that the RemoteLink® project will lead to us receiving significant revenue in the short-term, if at all. We also entered into a contract with GM to provide its worldwide connected navigation services beginning with select model year 2017 vehicles. We do not expect to receive any revenue from the launch of those vehicles until fiscal 2017 at the earliest, and in the course of the development of those vehicles we may be designed out altogether. We cannot assure you that when and if our products go into production and launch in GM vehicles and become available for sale, they will be in a wide variety of geographic markets in which GM sells vehicles in or across a variety of models and brands. GM has not provided us with any volume or revenue guarantees. In July 2015, we and Toyota announced a partnership for brought-in navigation services where our Scout GPS Link will be available in Entune™ Audio Plus equipped model year 2016 Toyota vehicles in the United States. In August 2015, Toyota began shipping vehicles enabled to connect with our Scout GPS Link mobile application, and as of December 2015, the ability to connect to our mobile application is a standard feature or is available as an option on more than 75% of 2016 Toyota models in the United States. We cannot assure you that the Scout GPS Link Toyota project will lead to us receiving significant revenue in the short-term, if at all.

As we have limited experience in the automotive navigation market, we also may not price our solutions in such a way that is profitable for us and enables us to recoup the development expenses we incurred to provide such solutions in the time we expect or at all. Development schedules for automotive navigation products are difficult to predict, and there can be no assurance that we will achieve timely delivery of these products to our customers. To the extent that we charge service fees beyond an initial fee at the time the vehicle is purchased, we may not be successful in gaining traction with customers to

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provide services and charge ongoing monthly or annual fees outside of the traditional on-board navigation service model. Our map, POI and other content costs for our automobile navigation solutions are higher than those we have historically paid for our mobile phone-based navigation services and to date we have not been able to use OSM offerings for automotive navigation, other than our Scout® GPS Link mobile application for Toyota. If we are unable to improve our margins, we may not be able to operate our automobile navigation business profitably. If we fail to achieve revenue growth in any of our automotive navigation solutions (whether on-board, brought-in or other), we may be unable to achieve the benefits of revenue diversification. In addition, our third party automotive and mobile navigation content suppliers, HERE and TomTom, are also becoming competitors with their own automotive navigation services offerings.

As our offerings in automobile navigation expand to brought-in, as well as built-in, we may not correctly anticipate the financial accounting treatment for the various products. We could be required to amortize revenue from products over time although we previously recognized revenue for similar products when the applicable vehicle was sold.

We may be unable to enter into agreements to provide automobile navigation products if we do not offer navigation products that serve geographies throughout the world or automobile manufacturers and OEMs are uncomfortable with our ability to support markets outside of the United States. Our automobile manufacturer and OEM customers may choose to partner with providers of location services with extensive international operations. We may be at a disadvantage to attracting such customers due to our business being concentrated in the United States and we may not be successful in other geographies if customers are uncomfortable with the look and feel of our solutions. If we are unable to attract or retain such automobile manufacturer and OEM customers, our revenue and operating results will be negatively affected.

Our ability to build demand for our automobile navigation products is also dependent upon our ability to provide the products in a cost effective manner, which may require us to renegotiate map and POI content relationships to address the specific demands of on-board navigation applications.

Our multi-platform products are new and may not find market acceptance.

We introduced Scout, a service that end users can access for navigation and planning with their mobile phones and cars. We have not previously offered a planning service or a service that spans different platforms. We cannot assure you that automobile manufacturers and end users will accept our Scout service or, even if they do, that end users will adopt and use this service, which encompasses services different than our historical strength in navigation, or that we will be able to generate sufficient revenue from Scout to offset its costs. If we fail to develop innovative products that automobile manufacturers and end users adopt, our operating results and financial condition could be harmed. Further, Google and Apple have each developed technology platforms that they are marketing to auto manufacturers. If auto manufacturers adopt these platforms, they may also adopt Google and Apple’s navigation services that run on these platforms and if so, consumers may elect to use these free service offerings rather than pay for our products which are currently sold as new car features with substantial cost to the consumer.

The success of our automotive navigation products may be affected by the number of vehicle models offered with our navigation solutions, as well as overall demand for new vehicles.

Our ability to succeed long term in the automotive industry depends on our ability to expand the number of models offered with our navigation solution by our current automobile manufacturers. We are also dependent upon our ability to attract new automobile manufacturers and OEMs. For automobile manufacturers with whom we have established relationships, such as Ford, our success depends on continued production and sale of new vehicles with, and adoption by, end users of our products offered by such automobile manufacturers, when our product are not standard features. As we move forward, our existing automobile manufacturers and OEMs may not include our solutions in future year vehicles or territories, which would negatively affect our revenue from these products. Production and sale of new vehicles are subject to delay from forces outside of our control, such as natural disasters, parts shortages and work stoppages, as well as general economic conditions.

Strategic transactions in the mapping and automotive industries could jeopardize our map pricing and, in turn, our competitive pricing for our automotive customers.

Audi, BMW and Mercedes recently announced the completion of their acquisition of Nokia’s HERE map business. Though the auto manufacturers have stated that HERE's map business will remain autonomous and continue to serve other auto manufacturers, there is a risk that HERE will increase its prices for maps to competitors of the group of companies that acquired HERE. If HERE increases the price of maps, our gross margins, most notably in our automotive business, may be adversely affected by such increase in map costs.

We may not successfully generate advertising revenue as a result of our acquisition of Thinknear or from our navigation services if we are unable to attract and retain advertisers.

Although we began providing advertising to some of our end users in 2010 and the percentage of our revenue represented by advertising had grown rapidly, advertising was 11% of our total revenue during fiscal 2015 and may not grow significantly over the remainder of fiscal 2016. In October 2012, we acquired Thinknear, a privately held California-based hyper-local

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mobile advertising company. To date, the margins of our advertising business have been well below those we experience in our automotive navigation and mobile navigation businesses. Furthermore, we believe the advertising business can be subject to varying buying patterns and seasonality which can impact our ability to grow our revenue. For example, in the three months ended December 31, 2015, we experienced higher advertising revenue as the second quarter is traditionally stronger due to seasonality, and we anticipate that advertising revenue will decline sequentially in our third quarter ending March 31, 2016. In order to grow our advertising business, we need to identify and attract a significant number of advertisers through our Thinknear platform. The mobile advertising market is highly competitive, and advertisers have many options through which to purchase mobile advertising. Our business will require us to attract and retain a large number of advertisers and will also require us to maintain the ability to purchase a large volume of inventory at competitively attractive rates. Increased competition from other mobile advertising companies and technology developers could impair our ability to secure advertiser revenue. Increased competition could also limit our ability to purchase inventory for advertising placements at an economically attractive rate. We do not have substantial experience in selling advertising and supporting advertisers and may not be able to develop these capabilities successfully. We may not be successful recruiting the number of sales personnel we need to scale or effectively train them to sell mobile advertising. Sales personnel may also be slow to ramp up their sales pipelines, negatively impacting our ability to grow. We may not succeed in attracting and retaining a critical mass of advertisers and ad placements and may not be successful in demonstrating the value of mobile advertising. If we fail to do so, we may be unable to generate a material level of revenue from advertising to offset the costs of providing free navigation. Even if we are able to increase our advertising revenue, we may not be able to improve the margins of our advertising business if we do not generate additional ad impression space within our own applications, such as Scout. If we are unable to improve the margins of our advertising business, it may not become profitable and may impair our ability to become profitable as a whole and invest in new opportunities.

Our legacy wireless carrier mobile navigation business is declining and as it continues to decline, our revenue and net income or loss will continue to be adversely affected.

We have historically been substantially dependent on two wireless carrier customers for a large portion of our revenue. Sprint ceased paying us for mobile navigation provided to its subscribers in bundles on September 30, 2013. Our other large wireless carrier customers have also experienced declines in monthly recurring revenue from subscriptions for mobile navigation. In the six months ended December 31, 2015 and 2014, AT&T represented 10% and 19% of our total revenue, respectively. In the last three fiscal years, AT&T subscribers have materially decreased their subscriptions for, and usage of, our paid navigation services and our revenue from our relationship with AT&T has declined accordingly. We anticipate that AT&T subscribers, and subscribers of other carriers who pay monthly recurring charges for our services, will continue to decrease their subscriptions for paid navigation services in favor of free or freemium offerings and that our revenue from our relationship with AT&T will continue to decline. In addition, as AT&T shifts the manner in which our applications are loaded on their devices to one where users are directed to an application store, the rate of decline in our revenue from AT&T may increase as those subscribers may then search for free alternatives. AT&T may determine that the cost of offering our service to its subscribers outweighs the benefits if the drop off of subscribers continues. Our failure to maintain our relationship with AT&T would substantially harm our business and we cannot assure you that we and AT&T will be able to reduce subscriber erosion. We anticipate that even if AT&T remains a wireless carrier customer, our revenue from AT&T will continue to decline substantially during fiscal 2016 and beyond.

Our experience has been that subscribers do not opt to pay monthly recurring charges for mobile navigation products and instead use free or freemium offerings. We have sought to develop other sources of revenue from our location-based platforms, including automotive navigation and location-based advertising, but those sources of revenue have substantially lower margins than wireless carrier mobile navigation revenue and, as a result, we would have to generate substantially more revenue from those services to replace the declining wireless carrier revenue. Our other sources of revenue have only recently begun to grow as fast as the declines in mobile wireless carrier revenue and we cannot assure you that this recent growth will continue. As a result of the lower margins on automobile navigation and advertising revenue, we anticipate that we will continue to incur net losses in fiscal 2016 and possibly future periods. If we are unable to demonstrate to investors that we have developed stable, long-term revenue streams, the trading prices of our common stock may decline further and the trading volumes for our common stock may be low, adding to price volatility.

We provide freemium navigation to compete with free offerings and we may not be successful with these new products or convert “free” users to paid users.

We provide freemium personalized navigation applications on the Apple App Store, the Google Play marketplace, Microsoft Windows Marketplace and through other marketplaces and our wireless carrier partners. Freemium offerings are free basic navigation services that are monetized through paid upgrades to premium products, as well as through advertising. We may not achieve substantial end user acceptance of these products, and even if end users download and use the freemium products, we may not be successful in converting those “free” users into paid users, particularly since we have begun to offer voice-guided navigation in our freemium offerings. Our freemium offerings provide planning features and other features unrelated to pure navigation that we do not have substantial experience in designing or marketing. These features may deter

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users who are looking for a pure navigation offering. We have limited experience in marketing our products and services directly to end users or generating advertising revenue through our mobile navigation users. To the extent that our number of active subscribers is low, we may not be able to fulfill sufficient advertising orders to generate meaningful advertising revenue from a freemium model. Bad reviews from end users may dissuade other end users from downloading our freemium offerings or converting to paid users. We may not be successful in gaining visibility among end users without incurring significant expenses to market our products and services to those users. In addition, we do not have experience in converting users of free applications to paid users or in generating revenue from full featured products solely through advertising revenue. If we are unable to achieve high visibility among end users on a cost effective basis or fail to convince those end users to convert to paid products and revenue producing services, we may be unable to sustain our revenue and we may incur losses in the future.

Our customer requirements and content management are complex. If we inadvertently include content for which we have liability to the vendor but may not be entitled to payment from our customer, our financial condition and results of operation could be harmed.

The nature and extent of content that is delivered as part of our navigation solutions is complex to manage. Matching the requirements of our customers with the content offered by our vendors may result in our inclusion of content which we believe is necessary to meet our customers’ requirements for which the customer may not have agreed to make payment to us. In addition, our customers speak directly to our vendors and often those conversations influence the expected content for our end products; however, customers may not be fully informed as to the license costs associated with the various components. Therefore, there is some risk that we may include content for which we have liability to the vendor but may not be entitled to payment from our customer. If these situations were to occur, our business, financial condition and results of operations could be adversely affected.

Our planned move to a new corporate facility may not occur on time and may lead to disruptions in our operations and service to our customers.

On October 16, 2015, we entered into a lease termination agreement with our landlord for the termination of our office lease dated June 28, 2011 for corporate facilities on De Guigne Drive in Sunnyvale, California. The lease termination is to become effective on (a) March 31, 2016 with respect to 920 De Guigne Drive and 950 De Guigne Drive; and (b) June 30, 2016 with respect to 930 De Guigne Drive. We are currently in the process of locating a new facility, and in December 2015, we entered into a sublease agreement to lease approximately 54,635 square feet of office and research and development space for the Great America Facility, which is expected to begin on April 1, 2016, subject to the completion of certain improvements to the facility prior to our occupancy. We plan to relocate our corporate headquarters, and all employees currently based at our De Guigne Drive facilities in Sunnyvale, California, to the Great America Facility.

We can provide no assurance that we will be able to complete the move to a new facility efficiently or effectively, or on time, or that we will not experience service disruptions, loss in customers, or decreased revenue as a result of the move. The occurrence of any of the foregoing events affecting or resulting from our move could harm our business.

Mobile connected device users may choose not to allow tracking of their location information and therefore local advertising may not be feasible on their devices.

The growth of our advertising revenue will depend on our ability to deliver location targeted, highly relevant ads to consumers on their mobile connected devices. Our targeted advertising is highly dependent on the consumers allowing applications to have access to their location data. Users may elect not to allow location data sharing for a number of reasons, including personal privacy concerns. Mobile operating systems vendors and application developers are also promoting features that allow device users to disable device functionality that consumers may elect to invoke. In addition, companies may develop products that enable users to prevent ads from appearing on their mobile device screens. If any of these developments were to become widely used by consumers, our ability to deliver effective advertising campaigns on behalf of our advertiser clients would suffer, which could hurt our ability to generate advertising revenue.

Our business practices with respect to data could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection.

Our advertising services depend on our ability to collect, store and use information related to mobile devices and the ads we place, including a device's geographic location for the purpose of targeting ads to the user of the device. Federal, state and international laws and regulations govern the collection, use, retention, sharing and security of data that we collect across our mobile advertising platform. We strive to comply with all applicable laws, regulations, policies and legal obligations relating to privacy and data protection. However, it is possible that these requirements may be interpreted and applied in a manner that is inconsistent with our practices. Any failure, or perceived failure, by us to comply with such laws could result in proceedings or actions against us by governmental entities, consumers or others. Such proceedings or actions could hurt our reputation, force us to spend significant amounts to defend ourselves, distract our management, increase our costs of doing business, require us to change our advertising services or disclosures, adversely affect the demand for our services and ultimately result in the

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imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless our users from the costs or consequences of inadvertent or unauthorized disclosure of data that we store or handle as part of providing our services.

The regulatory framework for privacy issues worldwide is evolving, and various government and consumer agencies and public advocacy groups have called for new regulation and changes in industry practices, including some directed at the mobile and advertising industries in particular. It is possible that new laws, regulations, standards, recommendations, best practices or requirements will be adopted that would affect our business, particularly with regard to location-based services, collection or use of data to target ads and communication with consumers via mobile devices. To the extent that we or our clients are subject to new laws or recommendations or choose to adopt new standards, recommendations, or other requirements, we may have greater compliance burdens. If we are perceived as not operating in accordance with industry best practices or any such guidelines or codes with regard to privacy, our reputation may suffer and we could lose relationships with advertiser or developer partners.

We operate in a highly competitive market, including competitors that offer their services for free, which could make it difficult for us to acquire and retain customers and end users.

The market for development, distribution and sale of location services is highly competitive. Many of our competitors have greater name recognition, larger customer bases and significantly greater financial, technical, marketing, public relations, sales, distribution and other resources than we do. Competitors may offer mobile location services that have at least equivalent functionality to ours for free. For example, Google offers free voice-guided turn by turn navigation as part of its Google Maps product for mobile devices, including those based on the Android and iOS operating system platforms, and Apple offers proprietary maps and voice-guided turn by turn directions. Microsoft also provides a free voice-guided turn by turn navigation solution on its Windows Mobile and Windows Phone operating systems. Competition from these free offerings may reduce our revenue, result in our incurring additional costs to compete and harm our business. If our wireless carrier customers can offer these mobile location services to their subscribers for free, they may elect to cease their relationships with us, like Sprint did, or alter or reduce the manner or extent to which they market or offer our services or require us to substantially reduce our fees or pursue other business strategies that may not prove successful. In addition, new car buyers may not value navigation solutions built in to their vehicles if they feel that free (brought-in) offerings, for example Apple CarPlay or Google's auto initiatives, including Open Automotive Alliance, are adequate and may not purchase our solutions with their new cars.

Our primary competitors include location service providers such as Apple, Google (including Waze), Microsoft, HERE, TeleCommunication Systems, or TCS, and TomTom; PND providers such as Garmin Ltd., or Garmin, and TomTom; providers of Internet and mobile based maps and directions such as AOL Inc., Apple, MapQuest, Inc., Google, Microsoft, Yahoo Inc., Yelp Inc., Foursquare Labs, Inc. and Fullpower Technologies, Inc.; and wireless carriers and communication solutions providers developing their own location services. In the automotive navigation market, we compete with established automotive OEMs and providers of on-board navigation services such as AISIN AW CO., Ltd, Robert Bosch GmbH, Elektrobit Corporation, Garmin, TomTom and NNG LLC, as well as other competitors such as Apple, Google, Microsoft and TCS. In our advertising business, we compete against Google, Apple, Millennial Media, Inc., xAD, Inc., Verve Wireless, Inc., PlaceIQ, Inc. and NinthDecimal, Inc., among others. Some of our competitors’ and our potential competitors’ advantages over us, either globally or in particular geographic markets, include the following:


•	the provision of their services at no or low cost to consumers;


•	significantly greater revenue and financial resources;


•	stronger brand and consumer recognition regionally or worldwide;


•	the capacity to leverage their marketing expenditures across a broader portfolio of mobile and non-mobile products;


•	access to core technology and intellectual property, including more extensive patent portfolios;


•	access to custom or proprietary content;


•	quicker pace of innovation;


•	stronger wireless carrier, automotive, handset manufacturer and advertising agency relationships;


•	stronger international presence may make our larger competitors more attractive partners to automotive manufacturers and OEMs;


•	greater resources to make and integrate acquisitions;


•	lower labor and development costs; and


•	broader global distribution and presence.

Our competitors’ and potential competitors’ advantages over us could make it more difficult for us to sell our navigation services, and could result in increased pricing pressures, reduced profit margins, increased sales and marketing expenses and

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failure to increase, or the loss of, market share or expected market share, any of which would likely cause harm to our business, operating results and financial condition.

If we are unable to integrate future acquisitions successfully, our operating results and prospects could be harmed.

In the future, we may make acquisitions to improve our navigation services offerings or expand into new markets. Our future acquisition strategy will depend on our ability to identify, negotiate, complete and integrate acquisitions and, if necessary, to obtain satisfactory debt or equity financing to fund those acquisitions. Mergers and acquisitions are inherently risky, and any mergers and acquisitions we complete may not be successful. Future mergers and acquisitions we may pursue would involve, numerous risks, including the following:


•	difficulties in integrating and managing the operations, technologies and products of the companies we acquire including skobbler, which is geographically remote from our existing operations;


•	diversion of our management’s attention from normal daily operation of our business;


•	our inability to maintain the key business relationships and the reputations of the businesses we acquire, such as the European automobile manufacturer and OEM relationships of skobbler;


•	our inability to retain key personnel of the acquired company;


•	uncertainty of entry into markets in which we have limited or no prior experience and in which competitors have stronger market positions;


•	our dependence on unfamiliar affiliates and customers of the companies we acquire;


•	insufficient revenue to offset our increased expenses associated with acquisitions;


•	our responsibility for the liabilities of the businesses we acquire, including those which we may not anticipate; and


•	our inability to maintain internal standards, controls, procedures and policies.

We may be unable to secure the equity or debt funding necessary to finance future acquisitions on terms that are acceptable to us. If we finance acquisitions by issuing equity or convertible debt securities, our existing stockholders will likely experience dilution, and if we finance future acquisitions with debt funding, we will incur interest expense and may have to comply with financial covenants and secure that debt obligation with our assets.

We may be required to recognize a significant charge to earnings if our goodwill or other intangible assets become impaired.

We have recorded goodwill related to our prior acquisitions, and may do so in connection with any potential future acquisitions. Goodwill and other intangible assets with indefinite lives are not amortized, but are reviewed for impairment annually or on an interim basis whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Factors that may indicate that the carrying value of our goodwill or other intangible assets may not be recoverable include a persistent decline in our stock price and market capitalization, reduced future cash flow estimates and slower growth rates in our industry. We may be required to record a significant charge in our financial statements during the period in which any impairment of our goodwill or other intangible assets is determined, which would adversely impact our results of operations. Furthermore, in fiscal 2015 we began to report results in three business segments, which requires the allocation of goodwill and intangibles to each of these segments. As a result, our impairment review each year or on an interim basis shall be conducted by segment, which can result in a different outcome than if assessed on an overall consolidated basis. Revenue from our mobile navigation business has been declining substantially over the last few years and continued deterioration of this revenue base can result in an impairment of the goodwill and intangibles assigned to this reporting unit. Based on the results of our annual goodwill impairment test as of April 1, 2015, the estimated fair value of our mobile navigation business exceeded its carrying value by 22%. We have not recognized any impairment of goodwill in the three year period ended June 30, 2015 and the six months ended December 31, 2015 .

In addition, in January 2016, we decided to shift our focus in our advertising business from growth to profitability. We anticipate that our third quarter ending March 31, 2016, which is typically seasonally down in revenue from the December quarter, will be the peak quarter of losses for our advertising business. In the near-term, we are taking actions to reduce our operating costs and expect to achieve break-even on a cash basis for our advertising business by the end of calendar 2016. We use the adjusted EBITDA metric in measuring this performance. We expect that this shift in strategy from growth to profitability will require us to evaluate the carrying value of our goodwill and intangible assets for impairment during the three months ending March 31, 2016 rather than in the ordinary course of practice during the last quarter of our fiscal year.

Warranty claims, product liability claims and product recalls could subject us to significant costs and adversely affect our financial results.

We warrant our automotive navigation products to be free from defects in materials, workmanship and design for periods ranging from three months to seven years. If our navigation services or products contain defects, there are errors in the maps supplied by third party map providers or if our end users do not heed our warnings about the proper use of these products,

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collisions or accidents could occur resulting in property damage, personal injury or death. If any of these events occurs, we could be subject to significant liability for personal injury and property damage and under certain circumstances could be subject to a judgment for punitive damages. In addition, if any of our designed products are defective or are alleged to be defective, we may be required to participate in a recall campaign. These recall and warranty costs could be exacerbated to the extent they relate to global platforms. Furthermore, recall actions could adversely affect our reputation or market acceptance of our products, particularly if those recall actions cause consumers to question the safety or reliability of our products. Warranty claims, a successful product liability claim or a requirement that we participate in a product recall campaign may adversely affect our results of operations and financial condition.

We accrue costs related to warranty claims when they are probable of being incurred and reasonably estimable. Our warranty costs have historically not been material. From time to time, we experience incidents where it may be necessary for us to expend resources to investigate and remedy a potential warranty claim.

We maintain limited insurance against accident related risks involving our products. However, we cannot assure you that this insurance would be sufficient to cover the cost of damages to others or will continue to be available at commercially reasonable rates. In addition, we may be named as a defendant in litigation by consumers individually or on behalf of a class if their handsets or automobiles suffer problems from software downloads from our customers. If we are unable to obtain indemnification from our customer for any damages or legal fees we may incur in connection with such complaints, our financial position may be adversely impacted. In addition, insurance coverage generally will not cover awards of punitive damages and may not cover the cost of associated legal fees and defense costs. If we are unable to maintain sufficient insurance to cover product liability costs or if our insurance coverage does not cover an award, our business, financial condition and results of operations could be adversely affected.

Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, damages caused by defective software and other losses.

Our agreements with our customers include indemnification provisions. We agree to indemnify them for losses suffered or incurred in connection with our navigation services or products, including as a result of intellectual property infringement, damages caused by defects and damages caused by viruses, worms and other malicious software. The term of these indemnity provisions is generally perpetual after execution of the corresponding agreement, and the maximum potential amount of future payments we could be required to make under these indemnification provisions is generally substantial and may be unlimited. In addition, some of these agreements permit our indemnitees to terminate their agreements with us if they determine that the use of our navigation services or products infringes third party intellectual property rights.

We have received, and expect to receive in the future, demands for indemnification under these agreements. These demands can be very expensive to settle or defend, and we have in the past incurred substantial legal fees and settlement costs in connection with certain of these indemnity demands. Furthermore, we have been notified by several customers that they have been named as defendants in certain patent infringement cases for which they may seek indemnification from us. See Part I, Item 3 “Legal Proceedings” for a description of these matters. These indemnity demands remain outstanding and unresolved as of the date of this Form 10-K. Large future indemnity payments and associated legal fees and expenses, including potential indemnity payments and legal fees and expenses relating to the current or future notifications, could materially harm our business, operating results and financial condition.

We may in the future agree to defend and indemnify our customers in connection with the pending notifications or future demands, irrespective of whether we believe that we have an obligation to indemnify them or whether we believe that our services and products infringe the asserted intellectual property rights. Alternatively, we may reject certain of our customers’ indemnity demands, which may lead to disputes with our customers and may negatively impact our relationships with them or result in litigation against us. Our customers may also claim that any rejection of their indemnity demands constitutes a material breach of our agreements with them, allowing them to terminate such agreements. Our agreements with certain customers may be terminated in the event an infringement claim is made against us and it is reasonably determined that there is a possibility our technology or services infringed upon a third party’s rights. If, as a result of indemnity demands, we make substantial payments, our relationships with our customers are negatively impacted or if any of our customer agreements is terminated, our business, operating results and financial condition could be materially adversely affected.

In connection with a software quality issue that was identified related to maps displayed in software deployed to certain vehicles released in North America in 2015, we have accrued a reserve of $0.1 million as of December 31, 2015 . The software quality issue does not present a risk to driver safety. The actual costs are uncertain at this time and we are currently working with our customer to evaluate the appropriate solution. If the actual costs exceed our estimates, our results of operations and financial condition may be adversely affected.

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We may be required to recognize a significant charge to earnings if our strategic private equity investments become impaired.

We have in the past and may in the future enter into investments in businesses in order to complement or expand our current business or enter into new markets. Private equity investments are inherently risky and subject to factors outside of our control and no assurance can be given that our previous or future investments will be successful, will deliver the intended benefits, and will not materially harm our business, operating results or financial condition. We may be required to record a significant charge in our financial statements during the period in which any impairment of our private equity investments is determined, which could adversely impact our results of operations. We recorded impairment charges of $0.5 million for cost-basis and equity method investments during the six months ended December 31, 2015 .

Our effective tax rate may fluctuate, which could reduce our anticipated income tax benefit in the future.

Our effective tax rate could be adversely affected by several factors, many of which are outside of our control. Our effective tax rate may be affected by the proportion of our revenues and income (loss) before taxes in the various domestic and international jurisdictions in which we operate. Our revenue and operating results are difficult to predict and may fluctuate substantially from quarter to quarter. We are also subject to changing tax laws, regulations and interpretations in multiple jurisdictions in which we operate, as well as the requirements of certain tax and other accounting body rulings. Since we must estimate our annual effective tax rate each quarter based on a combination of actual results and forecasted results of subsequent quarters, any significant change in our actual quarterly or forecasted annual results may adversely impact the effective tax rate for the period. Our estimated annual effective tax rate may fluctuate for a variety of reasons, including:


•	impacts from our inability to benefit from the carryback of net losses expected to be incurred in fiscal 2016 and thereafter due to the limitations of the two year loss carryback for federal tax purposes.


•	changes in forecasted annual operating income or loss by jurisdiction;


•	changes in relative proportions of revenue and income or loss before taxes in the various jurisdictions in which we operate;


•	changes to the valuation allowance on net deferred tax assets;


•	changes to actual or forecasted permanent differences between book and tax reporting, including the tax effects of purchase accounting for acquisitions and non-recurring charges which may cause fluctuations between reporting periods;


•	impacts from any future tax settlements with state, federal or foreign tax authorities;


•	impacts from increases or decreases in tax reserves due to new assessments of risk, the expiration of the statute of limitations or the completion of government audits;


•	impacts from changes in tax laws, regulations and interpretations in the jurisdictions in which we operate, as well as the requirements of certain tax rulings;


•	impacts from withholding requirements in various non-U.S. jurisdictions and our ability to recoup those withholdings, which may depend on how much revenue we have in a particular jurisdiction to offset the related expenses;


•	impacts from acquisitions and related integration activities; or


•	impacts from new FASB requirements.

Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in future periods. In fiscal 2014, we recorded a valuation allowance on the majority of our deferred tax assets, net of liabilities since the assets are not more likely than not to be realized based upon our assessment of all positive and negative evidence. Realization of deferred tax assets is dependent upon future taxable earnings, the timing of which is uncertain. Due to losses in fiscal 2014 and 2015, and expected losses in fiscal 2016 and potentially future years in the United States, we maintained a full valuation allowance on deferred tax assets in the United States. Due to foreign operating losses in previous years and continued foreign earnings volatility, we continued to maintain a full valuation allowance for our foreign deferred tax assets in China and the United Kingdom. In the event deferred tax assets in Germany cannot be realized based upon the ability to generate future income in Germany, our effective tax rate would be negatively impacted.

We rely on our customers for timely and accurate subscriber and vehicle sales information. A failure or disruption in the provisioning of this data to us would materially and adversely affect our ability to manage our business effectively.

We rely on our automotive and OEM customers to provide us with reports on the number of vehicles they sell with our on-board and brought-in navigation services included and to remit royalties for those sales to us. We also rely on our wireless carrier customers to bill subscribers and collect monthly fees for our mobile navigation services, either directly or through third

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party service providers. If our customers or their third party service providers provide us with inaccurate data or experience errors or outages in their own billing and provisioning systems when performing these services, our revenue may be less than anticipated or may be subject to adjustment with the customer. In the past, we have experienced errors in wireless carrier reporting. If we are unable to identify and resolve discrepancies in a timely manner, our revenue may vary more than anticipated from period to period and this could harm our business, operating results and financial condition.

We rely on a proprietary provisioning and reporting system to track end user activation, deactivation and usage data and any material failures in this system could harm our revenue, affect our costs and impair our ability to manage our business effectively.

Our provisioning and reporting system that authenticates end users and tracks the number of end users and their use of our services is a proprietary and customized system that we developed internally. Although we believe that the flexibility of this service to integrate tightly with wireless carriers’ reporting and provisioning systems gives us a competitive advantage, we might lose revenue and the ability to manage our business effectively if the system were to experience material failures or be unable to scale as our business grows. In addition, we may not be able to report our financial results on a timely basis if our customers question the accuracy of our records or we experience significant discrepancies between the data generated by our provisioning and reporting systems and data generated by their systems, or if our systems fail or we are unable to report timely and accurate information to our third party data providers. The inability to timely report our financial results would impair the quality of our financial reporting and could result in the delisting of our common stock.

If our end users increase their usage of our services, our operating loss may increase, or we may incur larger losses because we offer the service as a free offering or usage for paid offerings outpaces our expectations.

With limited exceptions, fees for the use of our services do not vary depending on whether or how often an end user uses our services, and we offer certain of our mobile phone-based navigation services for free. Historically, end users using certain mobile phones or under certain service plans tended to use our services more than other end users. We budget and operate our services by making certain assumptions about usage patterns. If our end users were to further increase their usage of our services substantially or more end users access our services for free through a freemium model, we would incur additional expenses to expand our server capacity through our use of third party hosted services and pay additional third party content fees. These additional costs would harm our operating results and financial condition.

We rely on third party data and content to provide our services and if we were unable to obtain content at reasonable prices, or at all, our gross margins and our ability to provide our services would be harmed.

We rely on third party data and content to provide our services, including map data, POI, traffic information, gas prices and weather information. If our suppliers of this data or content were to enter into exclusive relationships with other providers of location services or were to discontinue providing such information and we were unable to replace them cost effectively, or at all, our ability to provide our services would be harmed. Our gross margins may also be affected if the cost of third party data and content increases substantially. Although we have recently announced efforts to use OSM data to reduce the expenses we incur for third party map data, we may not be successful at integrating OSM data into our products and may experience difficulty with customer acceptance if the quality of the consumer generated data within OSM is lower than that of paid maps. We have only recently introduced mobile phone-based navigation with OSM and launched our first brought-in automotive navigation service with OSM in 2015. As a result, we may not have sufficient data for automotive manufacturers and OEMs to feel comfortable electing to use OSM in the products and services we provide them.

We obtain map data from TomTom and HERE, which are companies owned by our current and potential competitors. Accordingly, these third party data and content providers may act in a manner that is not in our best interest. For example, they may cease to offer their map and POI data to us. We entered into a new TomTom agreement effective as of January 1, 2016 to license TomTom map data for voice-guided turn by turn GPS navigation service for our existing mobile navigation products through December 31, 2016. The term of our TomTom agreement automatically renews for additional one-year periods until December 31, 2018, by which time the term of our TomTom agreement shall not be further renewed. Our agreement with HERE was automatically renewed under its existing terms through January 31, 2016, and automatically renews for successive one year periods unless either party provides notice of non-renewal at least 180 days prior to the expiration of the applicable term. HERE was acquired by a consortium of German automobile manufacturers in late 2015, and the sale of HERE may increase our costs.

We may identify other requisite content and content-related technologies, including certain geocoding data necessary for our OSM products, that we may be unable to license or develop internally. If we are unsuccessful in these endeavors, we may be unable to successfully launch our OSM-based products globally and across all desired product offerings.

We may not be able to upgrade our navigation services platform to support certain advanced features and functionality without obtaining technology licenses from third parties. Obtaining these licenses may be costly and may delay the introduction of such features and functionality, and these licenses may not be available on commercially favorable terms, or at all. The

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inability to offer advanced features or functionality, or a delay in our ability to upgrade our navigation services platform, may adversely affect consumer demand for our navigation services and, consequently, harm our business.

We also use our proprietary provisioning and reporting system to record and report royalties we owe to third party providers of content used by end users in connection with our services. Certain of the third party content providers have the right to audit our use of their services and, if we were found to have under or incorrectly reported usage, we may be required to pay the third party content providers for the actual usage, as well as interest and the cost of the audit. Any significant error in our recording and payment of royalties to our third party content providers could have a material and adverse effect on our financial results. We may also incur losses as a result of any significant error.

Network failures, disruptions or capacity constraints in our third party hosted data center facilities could affect the performance of our navigation services and harm our reputation and our revenue.

We use hosted services provided by Amazon Web Services, or AWS, and wireless carrier networks to deliver our navigation and advertising platform services. Our operations rely to a significant degree on the efficient and uninterrupted operation of the third party data centers we use. In the event that AWS experiences a disruption in services or a natural disaster, our ability to continue providing our services would be compromised. Depending on the growth rate in the number of our end users and their usage of our services, if we do not timely complete the negotiation for and scale of additional hosting services, we may experience capacity issues, which could lead to service failures and disruptions. In addition, if we are unable to secure third party hosting services with appropriate power, cooling and bandwidth capacity, we may be unable to efficiently and effectively scale our business to manage the addition of new wireless carrier customers, increases in the number of our end users or increases in data traffic.

AWS hosting services are potentially vulnerable to damage or interruption from a variety of sources, including fire, flood, earthquake, power loss, telecommunications or computer systems failure, human error, terrorist acts or other events. We have not yet completed a comprehensive business continuity plan and there can be no assurance that the measures implemented by us to date, or measures implemented by us in the future, to manage risks related to network failures or disruptions in our data centers will be adequate, or that the redundancies built into our servers will work as planned in the event of network failures or other disruptions. In particular, if we experienced damage or interruptions to AWS hosting services our ability to provide efficient and uninterrupted operation of our services would be significantly impaired.

We could also experience failures of our data centers or interruptions of our services, or other problems in connection with our operations, as a result of:


•	damage to or failure of our computer software or hardware or our connections and outsourced service arrangements with third parties;


•	errors in the processing of data;


•	computer viruses or software defects;


•	physical or electronic break-ins, sabotage, intentional acts of vandalism and similar events; or


•	errors by our employees or third party service providers.

Poor performance in or disruptions of our services could harm our reputation, delay market acceptance of our services and subject us to liabilities. Our wireless carrier agreements require us to meet at least 99.9% operational uptime requirements, excluding scheduled maintenance periods, or be subjected to penalties. Any outage in a network or system, or other unanticipated problem that leads to an interruption or disruption of our navigation services, could have a material adverse effect on our operating results and financial condition.

We may not be able to enhance our location services to keep pace with technological and market developments, or develop new location services in a timely manner or at competitive prices.

The market for location services is characterized by rapid technological change, evolving industry standards, frequent new product introductions and short product life cycles. To keep pace with technological developments, satisfy increasing customer requirements and achieve product acceptance, our future success depends upon our ability to enhance our current navigation services platform and advertising services platforms and to continue to develop and introduce new navigation services, advertising services and other location-based product offerings and enhanced performance features and functionality on a timely basis at competitive prices. Our inability, for technological or other reasons, to enhance, develop, introduce or deliver compelling services and products in a timely manner, or at all, in response to changing market conditions, technologies or consumer expectations could have a material adverse effect on our operating results or could result in our services becoming obsolete. Our ability to compete successfully will depend in large measure on our ability to maintain a technically skilled development and engineering team and to adapt to technological changes and advances in the industry, including providing for the continued compatibility of our services platform with evolving industry standards and protocols and competitive network operating environments.

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Our lengthy sales cycle makes it difficult for us to predict when we will generate revenue from automobile manufacturer and OEM customers.

Being selected to participate and being designed into new vehicle models is a lengthy and time consuming process and our navigation services platform may not be included for factors beyond our control even if we are participating in the vehicle design with an OEM. Because of these lengthy cycles, we may experience delays from the time we begin the sales process and incur increased costs and expenses to obtain a partner as a customer and integrate our navigation services platform until the time we generate revenue from such wireless carrier, OEM or automobile manufacturer. These delays may make it difficult to predict when we will generate revenue from new customers. For example, we entered into an agreement with GM in January 2014, but we do not anticipate generating meaningful revenue related to the distribution of our embedded and connected navigation solutions in vehicles under this agreement until certain model year 2017 vehicles come to market. While we may launch brought-in services, such as GM’s OnStar RemoteLink® application and Toyota's Scout GPS Link, more quickly, we may not be able to recognize a significant portion of the revenue we generate from those services if we have obligations to provide support for a long period of time. Although we may develop usage data to support a more rapid revenue recognition for those services, we may not have sufficient evidence to support earlier revenue recognition.

A large percentage of our research and development operations are conducted in China and Romania, and our ability to introduce new services and support our existing services cost effectively depends on our ability to manage those remote development sites successfully.

Our success depends on our ability to enhance our current services and develop new services and products rapidly and cost effectively. A majority of our research and development personnel are in China and Romania. Although we have sought to retain certain key personnel, we may be unable to retain them over the long-term. In addition, we have been experiencing significant increases in compensation costs in China due to competitive market conditions for qualified staff, as well as higher risk of employee turnover in certain China markets.

We also expect that we may continue to consolidate certain of our operations or reduce our workforce if we are unable to continue to replace wireless carrier revenue with other sources of high gross margin revenue. These reorganizations or reductions in force could result in unexpected costs or delays in product development that could impair our ability to meet market windows or cause us to forego certain new product opportunities.

Because our long term success depends on our ability to increase the number of end users located outside of the United States, our business will be susceptible to risks associated with international operations.

As of December 31, 2015 , we had international operations in China, Romania, Germany, Mexico and Japan. Our experience with wireless carriers, automobile manufacturers and OEMs and advertisers outside the United States is limited. Our revenue from customers in the United States comprised 97% and 95% of our total revenue in the six months ended December 31, 2015 and 2014 , respectively. However, our product is distributed globally in many different regions outside the United States, including South America, Europe, Asia, Australia, China and New Zealand. Our limited experience in operating our business outside the United States increases the risk that our current and future international expansion efforts may not be successful. In particular, our business model may not be successful in particular countries or regions outside the United States for reasons that we currently do not anticipate. In addition, conducting international operations subjects us to risks that we have not generally faced in the United States. These include:


•	fluctuations in currency exchange rates;


•	unexpected changes in foreign regulatory requirements;


•	difficulties in managing the staffing of remote operations;


•	potentially adverse tax consequences, including the complexities of foreign value added tax systems, foreign tax withholding, restrictions on the repatriation of earnings and changes in tax rates;


•	dependence on foreign wireless carriers with different pricing models;


•	roaming charges to end users;


•	availability of reliable mobile networks in those countries;


•	requirements that we comply with local telecommunication regulations and automobile hands free laws in those countries;


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


•	increased financial accounting and reporting burdens and complexities;


•	political, social and economic instability in some jurisdictions;


•	terrorist attacks and security concerns in general; and

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

The occurrence of any one of these risks could negatively affect our international business and, consequently, our operating results. Additionally, operating in international markets requires significant management attention and financial resources. We cannot be certain that the investment and additional resources required to establish, acquire or integrate operations in other countries will produce desired levels of revenue or profitability and we may incur larger losses as a result.

We may not succeed in realizing the anticipated benefits of our joint venture in China.

In addition to the general risks associated with international operations, the joint venture, in which we expect to hold a 19.9% interest, is subject to a number of other risks and uncertainties, including the following:

•

Our reliance is, in part, on the operational skill of our joint venture partner. Additionally, because we will be the minority equity holder of the joint venture, we may not have the ability to exercise significant influence over the operating and financial policies of the entity. For these reasons, or as a result of other factors, we may not realize the anticipated benefits of the joint venture, and our participation in the joint venture could adversely affect the results of our operations.

•

Our ability to operate the joint venture is dependent upon, among other things, our ability to attract personnel with the skills, knowledge and experience necessary to carry out the operations of the joint venture. We face intense competition for these individuals worldwide, including in China. We may not be able to attract qualified employees to operate the joint venture, which may negatively affect the value of our investment in the joint venture.

•

Although we believe we have achieved a strong market position in China, many of our competitors who are significantly larger than we are and have substantially greater financial, distribution, marketing and other resources, more stable manufacturing resources and greater brand strength are also concentrating on growing their businesses in China. In addition, the number of competitors in the marketplace has increased significantly in recent years. Increased investment by our competitors in this market could decrease our market share and competitive position in China.

We rely on our management team and need specialized personnel to grow our business, and the loss of one or more key employees or our inability to attract and retain qualified personnel could harm our business.

Our success and future growth depend on the skills, working relationships and continued services of our management team. Our future performance will depend on our ability to continue to retain our senior management, particularly in the growth areas of our business, such as automotive and advertising.

Our future success also will depend on our ability to attract, retain and motivate highly skilled personnel in the United States and internationally. All of our U.S. employees work for us on an at will basis. Competition for highly skilled personnel is intense, particularly in the software industry and for persons with experience with GPS and location services. The high degree of competition for personnel we experience has resulted in and may also continue to result in the incurrence of significantly higher compensation costs to attract, hire and retain employees. We have from time to time experienced, and we expect to continue to experience, difficulty in attracting, hiring and retaining highly skilled employees with appropriate qualifications. In addition, existing employees often consider the value of the stock awards they receive in connection with their employment. If our stock price performs poorly, it may adversely affect our ability to retain highly skilled employees. Our inability to attract and retain the necessary personnel could adversely affect our business and future growth prospects.

We may be required to incur unanticipated capital expenditures.

Circumstances may arise that require us to make unanticipated capital expenditures, including:


•	requirements to replace outsourced hosting with third party data centers for which we provide equipment due to cost, natural disasters or inadequate quality of services;


•	the replacement of outdated or failing equipment; and


•	the acquisition of key technologies to support or expand our products and services.

We rely on network infrastructures provided by our wireless carrier customers, mobile phones and in-car wireless connections for the delivery of our mobile navigation services to end users.

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We generally provide our navigation services from third party hosted servers, which require close integration with the wireless carriers’ networks. We may be unable to provide high quality services if the wireless carriers’ networks perform poorly or experience delayed response times. Our future success will depend on the availability and quality of our wireless carrier customers’ networks in the United States and abroad to run our mobile navigation services. This includes deployment and maintenance of reliable networks with the speed, data capacity and security necessary to provide reliable wireless communications services. We do not establish or maintain these wireless networks and have no control over interruptions or failures in the deployment and maintenance by wireless carrier customers of their network infrastructure. In addition, these wireless network infrastructures may be unable to support the demands placed on them if the number of subscribers increases, or if existing or future subscribers increase their use of limited bandwidth. Market acceptance of our mobile navigation services will depend in part on the quality of these wireless networks and the ability of our wireless carrier customers to effectively manage their subscribers’ expectations.

In addition, certain automobile navigation applications rely on wireless connections between the vehicle and our network. We have no influence or control over the vehicle’s wireless equipment and if it does not operate in a satisfactory manner, our ability to provide those services would be impaired and our reputation would be harmed.

Wireless communications have experienced a variety of outages and other delays as a result of infrastructure and equipment failures and could face outages and delays in the future. These outages and delays could affect our ability to provide our navigation services successfully. In addition, changes by a wireless carrier to its network infrastructure may interfere with the integration of our servers with their network and delivery of our navigation services and may cause end users to lose functionality for services they have already purchased. Any of the foregoing could harm our business, operating results and financial condition.

We cannot control the quality standards of our wireless carrier customers, their mobile phone providers, automobile manufacturers and other technology customers. We cannot guarantee that the mobile phones or in-car wireless equipment are free from errors or defects. If errors or defects occur in mobile phones or services offered by our wireless carrier customers, it could result in consumers terminating our services, damage to our reputation, increased customer service and support costs, warranty claims, lost revenue and diverted development resources, any of which could adversely affect our business, results of operations and financial condition.

Mergers, consolidations or other strategic transactions in the wireless communications industry could weaken our competitive position, reduce the number of our map providers and adversely affect our business.

The mapping data industry continues to experience consolidation. Should one of our map providers consolidate or enter into an alliance with another navigation provider, this could have a material adverse impact on our business. Currently, two of our map suppliers are owned by competitors in the navigation space. Recently Nokia sold its mobile phone business to Microsoft and sold HERE, its mapping business, to a consortium of German automobile manufacturers. Such a consolidation may cause us to lose a map supplier or require us to increase the royalties we pay to map vendors as a result of enhanced supplier leverage, which would have a negative effect on our business. We may be unable to replace our map suppliers, were we to lose a map supplier, and the remaining map supplier may increase license fees. In addition, as we continue to use more OSM-based maps and no longer purchase maps from those suppliers, we may be unable to purchase other data that is integral to our navigation products from our existing map suppliers.

Changes in business direction and market conditions could lead to charges related to structural reorganization and discontinuation of certain products or services, which may adversely affect our financial results.

In response to changing market conditions and the desire to focus on new and more potentially attractive opportunities, we may be required to strategically realign our resources and consider restructuring, eliminating, or otherwise exiting certain business activities. For example, in April 2013, we sold our enterprise business to a third party, which resulted in a net gain to us but also required us to provide transition services to the buyer. In the fourth quarters of fiscal 2013 and 2014, in order to better align and focus our resources we initiated restructuring plans resulting in reductions of approximately 83 and 108 full-time positions, respectively, and restructuring charges of $1.5 million and $2.4 million, respectively, related to severance and benefits for the positions eliminated. Any decision to reduce investment in, dispose of, or otherwise exit business activities may result in the recording of special charges, such as workforce reduction and excessive facility space costs.

Risks related to our intellectual property and regulation

We operate in an industry with extensive intellectual property litigation. Claims of infringement against us, our customers, or other business partners may cause our business, operating results and financial condition to suffer.

Our commercial success depends in part upon us, our partners and our customers not infringing intellectual property rights owned by others and being able to resolve claims of intellectual property infringement without major financial expenditures and/or need to alter our technologies or cease certain activities. We operate in an industry with extensive intellectual property litigation and it is not uncommon for our wireless carrier customers, handset manufacturing partners,

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automobile manufacturers and OEMs and competitors to be involved in infringement lawsuits by or against third parties. Many industry participants that own, or claim to own, intellectual property aggressively assert their rights, and our customers and other business partners, who we agree in certain circumstances to indemnify for intellectual property infringement claims related to our services, are often targets of such assertions. We cannot determine with certainty whether any existing or future third party intellectual property rights would require us to alter our technologies, obtain licenses or cease certain activities.

We have received, and may in the future receive, claims from third parties alleging infringement and other related claims. As of the date of this Quarterly Report on Form 10-Q, we were named as a defendant in several cases alleging that our services infringe other parties' patents, as well as other matters. See Part II, Item 1, “Legal Proceedings,” for a description of these matters. These cases and future litigation may make it necessary to defend ourselves and our customers and other business partners by determining the scope, enforceability and validity of third party proprietary rights or to establish our proprietary rights. Some of our competitors may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us, our wireless carrier customers or our other business partners. These companies typically have little or no product revenue and therefore our patents may provide little or no deterrence against such companies filing patent infringement lawsuits against us. Regardless of whether claims that we are infringing patents or other intellectual property rights have any merit, these claims are time consuming and costly to evaluate and defend and could:


•	adversely affect our relationships with our current or future customers and other business partners;


•	cause delays or stoppages in the shipment of Telenav enabled or preloaded mobile phones or vehicles, or cause us to modify or suspend the provision of our navigation services;


•	cause us to incur significant expenses in defending claims brought against our customers, other business partners or us;


•	divert management's attention and resources;


•	subject us to significant damages or settlements;


•	require us to enter into settlements, royalty or licensing agreements on unfavorable terms; or


•	require us or our business partners to cease certain activities and/or modify our products or services.

In addition to liability for monetary damages against us or, in certain circumstances, our customers, we may be prohibited from developing, commercializing or continuing to provide certain of our navigation services unless we obtain licenses from the holders of the patents or other intellectual property rights. We cannot assure you that we will be able to obtain any such licenses on commercially reasonable terms, or at all. If we do not obtain such licenses, our business, operating results and financial condition could be materially adversely affected and we could, for example, be required to cease offering our navigation services or be required to materially alter our navigation services, which could involve substantial costs and time to develop.

Unauthorized control or manipulation of our systems in vehicles may cause them to operate improperly or not at all, or compromise their safety and data security, which could result in loss of confidence in us and our products, cancellation of contracts with certain of our auto OEM customers and harm our business.

There have been reports of vehicles of certain automobile manufacturers being “hacked” to grant access and operation of the vehicles to unauthorized persons and would-be thieves. Modern vehicles are technologically advanced machines requiring the interoperation of numerous complex and evolving hardware and software systems, including the navigation system, and with respect to vehicles with autonomous driving features, control of the vehicle. We have agreed with some of our auto OEM customers to adopt certain security procedures and we may be subject to claims or our contracts with those OEMs may be terminated if we do not comply with our covenants or if our products are the source of access to the systems in their vehicles by intruders.

Although we have designed, implemented and tested security measures to prevent unauthorized access to our products when installed in vehicles, our information technology networks and communications with vehicles in which our products are installed may be vulnerable to interception, manipulation, damage, disruptions or shutdowns due to attacks by hackers or breaches due to errors by personnel who have access to our networks and systems. Any such attacks or breaches could result in unexpected control of or changes to the vehicles’ functionality and our products’ user interface and performance characteristics. Hackers may also use similar means to gain access to data stored in or generated by the vehicle, such as its current geographical position, previous and stored destination address history and web browser “favorites.” Any such unauthorized control of vehicles or access to or loss of information could result in legal claims or proceedings and negative publicity, which would negatively affect our brand and harm our business, prospects, financial condition and operating results.

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Our business is subject to online security risks, including security and privacy breaches.

Our business involves the collection, storage, processing and transmission of users’ personal data including information about routes mapped and taken. An increasing number of organizations, including large online and offline merchants and businesses, other large Internet companies, financial institutions, and government institutions, have disclosed breaches of their security, some of which have involved sophisticated and highly targeted attacks, including on portions of their websites or infrastructure. We have been subject to such attacks in the past, although they have not, to our knowledge, resulted in the disclosure of user information and we work to evaluate and improve our security. A breach of security or privacy could have negative consequences to our reputation, which could result in users discontinuing or reducing their use of our products and our automotive OEM and advertising customers terminating their agreements with us, and could have significant out-of-pocket financial impact, which could harm our business. Similarly, a breach of security or privacy in vehicles in which our navigation products are installed could result in a reduction in adoption of our navigation products.

The techniques used to obtain unauthorized, improper or illegal access, disable or degrade service, or sabotage systems change frequently, may be difficult to detect quickly, and often are not recognized until launched against a target. Certain efforts may be state-sponsored and supported by significant financial and technological resources and may therefore be even more difficult to detect. As a result, we may be unable to anticipate these techniques or to implement adequate preventative measures. Unauthorized parties also may attempt to gain access to our systems or facilities through various means, including hacking into our systems or facilities, fraud, trickery or other means of deceiving our employees, contractors and temporary staff. A party that is able to circumvent our security measures could misappropriate our, our customers’ or our employees’ personal or proprietary information, cause interruption in our operations and damage our computers and systems or those of our customers. In addition, our customers have been and likely will continue to be targeted by parties using fraudulent “spoof” and “phishing” emails to misappropriate user names, passwords, payment card numbers, GPS data or other personal information or to introduce viruses or other malware, including through “trojan horse” programs, to our users' phones and vehicles. Also, our information technology and infrastructure may be vulnerable to cyberattacks or security incidents, and third parties may be able to access our customers’ personal or proprietary information and payment card data that are stored on or accessible through our systems. Any security or privacy breach at a company providing services to us or our OEM customers, or integrated with our products and services, could have similar effects.We may also need to expend significant additional resources to protect against security or privacy breaches or to redress problems caused by breaches. These issues are likely to become more difficult and costly as we expand the number of markets where we operate. Additionally, our insurance policies carry low coverage limits, which may not be adequate to reimburse us for losses caused by security breaches, and we may not be able to collect fully, if at all, under these insurance policies.

Changes in government regulation of the wireless communications, the automobile and mobile advertising industries may adversely affect our business.

It is possible that a number of laws and regulations may be adopted in the United States and elsewhere that could restrict the wireless communications industry, further regulate the automobile industry or impair the mobile advertising industry, including laws and regulations regarding lawful interception of personal data, hands free use of mobile phones or navigation services within vehicles or the control of such use, privacy, taxation, content suitability, copyright and antitrust. Furthermore, the growth and development of electronic storage of personal information may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies such as ours that store personal information. We anticipate that regulation of the industries in which our products and services are used will increase and that we will be required to devote legal and other resources to address this regulation. Changes in current laws or regulations or the imposition of new laws and regulations in the United States or elsewhere regarding the wireless communications or automobile industries may make operation more costly, and may materially reduce our ability to increase or maintain sales of our products and services.

Government regulation designed to protect end user privacy may make it difficult for us to provide our services or adopt advertising based revenue models.

We transmit and store a large volume of personal information in the course of providing our products and services. This information is increasingly subject to legislation and regulations in numerous jurisdictions around the world. This government action is typically intended to protect the privacy and security of personal information that is collected, stored and transmitted in or from the governing jurisdiction.

Legislation may also be adopted in various jurisdictions that prohibits use of personal information and search histories to target end users with tailored advertising, or provide advertising at all. Although our advertising revenue to date is not significant, we anticipate we will continue to grow advertising revenue in the future to improve average revenue per user in certain markets.

We could be adversely affected if domestic or international legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business. For example, the USA PATRIOT Act provides certain rights to U.S. law enforcement authorities to obtain personal information in the control of U.S. persons and entities without notifying the affected individuals. If we are required to

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allocate significant resources to modify the delivery of our services to enable enhanced legal interception of the personal information that we transmit and store, our results of operations and financial condition may be adversely affected.

In addition, because various foreign jurisdictions have different laws and regulations concerning the storage and transmission of personal information, we may face unknown requirements that pose compliance challenges in new international markets that we seek to enter. Such variation could subject us to costs, delayed service launches, liabilities or negative publicity that could impair our ability to expand our operations into some countries and therefore limit our future growth.

As privacy and data protection have become more sensitive issues, we may also become exposed to potential liabilities as a result of differing views on the privacy of personal information. These and other privacy concerns could adversely impact our business, results of operations and financial condition.

If we are unable to protect our intellectual property and proprietary rights, our competitive position and our business could be harmed.

We rely primarily on a combination of patent laws, trademark laws, copyright laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary technology. However, our issued patents and any future patents that may issue may not survive a legal challenge to their scope, validity or enforceability, or provide significant protection for us. The failure of our patents to adequately protect our technology might make it easier for our competitors to offer similar products or technologies. In addition, patents may not issue from any of our current or any future applications.

Monitoring unauthorized use of our intellectual property is difficult and costly. The steps we have taken to protect our proprietary rights may not be adequate to prevent misappropriation of our intellectual property. We may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Our competitors may also independently develop similar technology. In addition, the laws of many countries do not protect our proprietary rights to as great an extent as do the laws of the United States. Any failure by us to meaningfully protect our intellectual property could result in competitors offering products that incorporate our most technologically advanced features, which could seriously reduce demand for our navigation services. In addition, we may in the future need to initiate infringement claims or litigation. Litigation, whether we are a plaintiff or a defendant, can be expensive, time consuming and may divert the efforts of our technical staff and managerial personnel, which could harm our business, whether or not such litigation results in a determination favorable to us.

Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information.

We have devoted substantial resources to the development of our proprietary technology, including the proprietary software components of our navigation services and related processes. In order to protect our proprietary technology and processes, we rely in part on confidentiality agreements with our employees, licensees, independent contractors and other advisors. These agreements may not effectively prevent disclosure of our confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of our confidential information. In addition, others may independently discover trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such parties. Costly and time consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

We use open source software in our navigation services platform and client applications and may use more open source software in the future. Use of open source software may subject our navigation services platform and client applications to general release or require us to re-engineer our navigation services platform and client applications, which may cause harm to our business. From time to time, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software. Some open source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the open source software and that we license such modifications or derivative works under the terms of a particular open source license or other license granting third parties certain rights of further use. If we combine our proprietary software products with open source software in a certain manner, we could, under certain of the open source licenses, be required to release our proprietary source code. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third party commercial software, as open source licensors generally do not provide warranties or controls on origin of the software. Open source license terms may be ambiguous and many of the risks associated with usage of open source cannot be eliminated, and could, if not properly addressed, negatively affect our business. If we were found to have inappropriately used open source software, we may be required to release our proprietary source code, re-engineer our navigation services platform and client applications, discontinue the sale of our service in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our development efforts, any of which could adversely affect our business, operating results and financial condition.

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Risks related to being a publicly traded company and holding our common stock

As a public company, we are obligated to develop and maintain effective internal control over financial reporting. We may not always complete our assessment of the effectiveness of our internal control over financial reporting in a timely manner, or such internal control 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.

The Sarbanes-Oxley Act requires that we test our internal control over financial reporting and disclosure controls and procedures annually. For example, as of June 30, 2015, we performed system and process evaluation and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our compliance with Section 404 requires that we incur substantial expense and expend significant management time on compliance-related issues. Moreover, if we are not able to comply with the requirements of Section 404 in the future, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock may decline and we could be subject to sanctions or investigations by the NASDAQ Global Market, the SEC or other regulatory authorities, which would require significant additional financial and management resources.

We will incur continued high costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could harm our operating results.

As a public company, we incur significant legal, accounting, investor relations and other expenses, including costs associated with public company reporting requirements. We also have incurred and will continue to incur costs associated with current corporate governance requirements, including requirements under Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the SEC and the stock exchange on which our common stock is traded. We are generally not eligible to report under reduced disclosure requirements or benefit from longer phase in periods for “emerging growth companies” as such term is defined in the Jumpstart Our Business Act of 2012. The expenses incurred by public companies for reporting and corporate governance purposes have increased dramatically over the past several years. We expect these rules and regulations to continue to impact our legal and financial compliance costs substantially and to make some activities more time consuming and costly. We are unable currently to estimate these costs with any degree of certainty. We also expect that, over time, it may be more expensive for us to obtain director and officer liability insurance. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers if we cannot provide a level of insurance coverage that they believe is adequate.

Regulations relating to offshore investment activities by residents of China may limit our ability to acquire Chinese companies and could adversely affect our business.

In October 2005, SAFE, a Chinese government agency, promulgated “Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Corporate Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles,” or Circular 75, that states that if Chinese residents use assets or equity interests in their Chinese entities as capital contributions to establish offshore companies or inject assets or equity interests of their Chinese entities into offshore companies to raise capital overseas, they must register with local SAFE branches with respect to their overseas investments in offshore companies. They must also file amendments to their registrations if their offshore companies experience material events involving capital variation, such as changes in share capital, share transfers, mergers and acquisitions, spinoff transactions, long term equity or debt investments or uses of assets in China to guarantee offshore obligations. Under this regulation, their failure to comply with the registration procedures set forth in such regulation may result in restrictions being imposed on the foreign exchange activities of the relevant Chinese entity, including restrictions on the payment of dividends and other distributions to its offshore parent, as well as restrictions on the capital inflow from the offshore entity to the Chinese entity.

We attempt to comply, and attempt to ensure that our stockholders who are subject to Circular 75 and other related rules comply, with the relevant requirements. However, we cannot provide any assurances that all of our stockholders who are Chinese residents have complied or will comply with our request to make or obtain any applicable registrations or comply with other requirements required by Circular 75 or other related rules. Any future failure by any of our stockholders who is a Chinese resident, or controlled by a Chinese resident, to comply with relevant requirements under this regulation could subject us to fines or sanctions imposed by the Chinese government, including restrictions on our Chinese subsidiary’s ability to pay dividends or make distributions to us.

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If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline.

We expect that the trading price for our common stock will be affected by any research or reports that industry or financial analysts publish about us or our business. If one or more of the analysts who may elect to cover us downgrade their evaluations of our stock, the price of our stock could decline. For example, in late July 2011, following our earnings release for the three months and fiscal year ended June 30, 2011, several financial analysts published research reports lowering their price targets of our stock. After our announcement and the publication of these reports, our stock price fell more than 40%. If one or more of these analysts cease coverage of our company, our stock may lose visibility in the market, which in turn could cause its price to decline. As of December 31, 2015 , only four research analysts published reports regarding our company. In addition, if our stock was to trade at prices below $5.00 per share in the future, financial analysts may terminate coverage of our company due to internal policies within their investment banks, which could result in further stock price declines.

Our stock price has fluctuated significantly and may continue to fluctuate in the future.

Our common stock was sold in our IPO at $8.00 per share. Although our common stock has traded at prices as high as $22.07 per share, it has also traded at prices as low as $4.65 and has tended to have significant downward and upward price movements in a relatively short time period. Future fluctuations or declines in the trading price of our common stock may result from a number of events or factors, including those discussed in the preceding risk factors relating to our operations, as well as:


•	actual or anticipated fluctuations in our operating results;


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


•	announcements by us or our competitors of significant technical innovations, relationship changes with key customers, acquisitions, strategic partnerships, joint ventures, capital raising activities or capital commitments;


•	the public’s response to our press releases or other public announcements, including our filings with the SEC;


•	lawsuits threatened or filed against us; and


•	large distributions of our common stock by significant stockholders to limited partners or others who immediately resell the shares.

General market conditions and domestic or international macroeconomic factors unrelated to our performance, such as the continuing unprecedented volatility in the financial markets, may also affect our stock price. For these reasons, investors should not rely on recent trends to predict future stock prices or financial results. Investors in our common stock may not be able to dispose of the shares they purchased at prices above the IPO price, or, depending on market conditions, at all.

In addition, if the market price of our common stock falls below $5.00 per share for an extended period of time, under stock exchange rules, our stockholders will not be able to use such shares as collateral for borrowing in margin accounts. Further, certain institutional investors are restricted from investing in shares priced below $5.00 per share. This inability to use shares of our common stock as collateral and the inability of certain institutional investors to invest in our shares may depress demand and lead to sales of such shares creating downward pressure on and increased volatility in the market price of our common stock.

Recently, the market price for our common stock has traded only slightly above the cash value of our common stock. If investors do not value our company as an ongoing business and only value it for the cash on our balance sheet, our stock price may decline if we continue to incur net losses and use our cash to fund operations. We may also attract investors who are looking for short-term gains in our shares rather than being interested in our long-term outlook. As a result, the price of our common stock may be volatile.

The concentration of ownership of our capital stock limits your ability to influence corporate matters.

Our executive officers, directors, current 5% or greater stockholders and entities affiliated with them beneficially owned (as determined in accordance with the rules of the SEC) approximately 37.5% of our common stock outstanding as of December 31, 2015 . This significant concentration of share ownership may adversely affect the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with controlling stockholders. Also, these stockholders, acting together, will be able to control our management and affairs and matters requiring stockholder approval, including the election of directors and the approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of our assets. Consequently, this concentration of ownership may have the effect of delaying or preventing a change of control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if that change of control would benefit our other stockholders.

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

Unregistered Sales of Equity Securities

None.

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Item 6.	Exhibits.



Exhibit Number	Description	Incorporated by Reference From Form	Incorporated by Reference From Exhibit Number	Date Filed
10.16.32+	First Amendment to Amended and Restated Territory License No. 8, dated November 4, 2015 by and between Telenav, Inc., and HERE North America, LLC (f/k/a NAVTEQ North America, LLC).	Filed herewith
10.16.33+	First Amendment to General License Agreement, dated November 12, 2015 by and between HERE North America, LLC, and Telenav, Inc.	Filed herewith
10.36	Sublease, dated as of November 11, 2015, among Avaya Inc. and Telenav, Inc.	Filed herewith
10.37	Landlord Consent to Sublease, dated as of December 18, 2015, by and among The Prudential Insurance Company of America, Avaya Inc., and Telenav, Inc.	Filed herewith
10.38	License Termination Agreement dated October 16, 2015, by and between St. Paul Fire and Marine Insurance Company and Telenav, Inc.	Form 8-K	10.1	October 22, 2015
31.1	Certification Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of President and Chief Executive Officer	Filed herewith
31.2	Certification Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer	Filed herewith
32.1~	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of President and Chief Executive Officer	Furnished herewith
32.2~	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer	Furnished herewith
101.INS	XBRL Instance Document	Filed herewith
101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith
101.CAL	XBRL Taxonomy Calculation Linkbase Document	Filed herewith
101.DEF	XBRL Taxonomy Definition Linkbase Document	Filed herewith
101.LAB	XBRL Taxonomy Label Linkbase Document	Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith


+	Portions of the exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

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SIGNATURES

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



		TELENAV, INC.

Dated:	February 9, 2016	By:	/s/ Dr. HP J IN
			Dr. HP Jin
			President and Chief Executive Officer

Dated:	February 9, 2016	By:	/s/ MICHAEL STRAMBI
			Michael Strambi
			Chief Financial Officer and Treasurer
			(Principal Financial and Accounting Officer)

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EXHIBIT LIST



Exhibit Number	Description	Incorporated by Reference From Form	Incorporated by Reference From Exhibit Number	Date Filed
10.16.32+	First Amendment to Amended and Restated Territory License No. 8, dated November 4, 2015 by and between Telenav, Inc., and HERE North America, LLC (f/k/a NAVTEQ North America, LLC).	Filed herewith
10.16.33+	First Amendment to General License Agreement, dated November 12, 2015 by and between HERE North America, LLC, and Telenav, Inc.	Filed herewith
10.36	Sublease, dated as of November 11, 2015, among Avaya Inc. and Telenav, Inc.	Filed herewith
10.37	Landlord Consent to Sublease, dated as of December 18, 2015, by and among The Prudential Insurance Company of America, Avaya Inc., and Telenav, Inc.	Filed herewith
10.38	License Termination Agreement dated October 16, 2015, by and between St. Paul Fire and Marine Insurance Company and Telenav, Inc.	Form 8-K	10.1	October 22, 2015
31.1	Certification Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of President and Chief Executive Officer	Filed herewith
31.2	Certification Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer	Filed herewith
32.1~	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of President and Chief Executive Officer	Furnished herewith
32.2~	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer	Furnished herewith
101.INS	XBRL Instance Document	Filed herewith
101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith
101.CAL	XBRL Taxonomy Calculation Linkbase Document	Filed herewith
101.DEF	XBRL Taxonomy Definition Linkbase Document	Filed herewith
101.LAB	XBRL Taxonomy Label Linkbase Document	Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith


+	Portions of the exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.



HERE CONFIDENTIAL		Exhibit 10.16.32+

FIRST AMENDMENT TO AMENDED AND RESTATED TERRITORY LICENSE NO. 8

This First Amendment (“ First Amendment ”) to the Amended and Restated Territory License No. 8, effective April 1, 2014 (“ TL 8 ”), to the Data License Agreement (“ Agreement ”), dated December 1, 2002, by and between Telenav, Inc. (“ Client ”) and Navigation Technologies Corporation, which was subsequently assigned to HERE North America, LLC (f/k/a NAVTEQ North America, LLC) (collectively, “ HERE ”), is made and entered into as of the date of latest signature below (“ Amendment Effective Date ”). The Agreement and TL 8 is hereby referred to herein as the “Agreement.” Capitalized terms not otherwise defined in the body of this First Amendment shall have the meanings set forth in the Agreement.

WHEREAS, the Parties desire to amend certain terms of the Agreement;

NOW THEREFORE, the Parties agree to amend certain provisions of the Agreement with this First Amendment as follows:


1.	Definitions . The following terms shall be added to the “Definitions” provision of TL 8:

“F. “[*****]” means that in addition to the distribution of the [*****] distributed to an End-User with an Application (the “[*****]”), Client obligates itself to [*****] to the same End-User on an [*****] basis beginning in the [*****] period following distribution to the End-User of the [*****] and continuing for up to [*****] (i.e., “[*****]”) thereafter (the “[*****]”).”

“G. “[*****]” means a [*****] that is [*****] in the Application [*****], and thus [*****], with respect to all units of a product line of an Application, and for which the End-User cannot [*****].”

“H. “[*****]” means a [*****] other than a [*****] and is [*****] at the time of [*****] of the Application unit.

“I. “[*****]” means an [*****] provided to an End-User, containing Data with the same Additional Content and for the [*****] as contained in a [*****] provided to such End-User, wherein the Data contained in the [*****] is [*****] from the version of Data contained in the [*****] distributed to the End-User.”

____________________________

[*****] Certain portions denoted with an asterisk have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

Page 1 of 1



HERE CONFIDENTIAL		Exhibit 10.16.32+


2.	Pricing . The following new Section IV shall be added to Exhibit A (Pricing) of TL 8:

“IV. [*****] for [*****]. During the TL Term, for each [*****] for the [*****] for each [*****] shipped to [*****] ([*****]) (“[*****]”) as of [*****], the total License Fee, including the License Fee for the [*****] and for subsequent [*****], is calculated by adding [*****] the [*****] for the [*****] as specified herein and [*****] the [*****] specified in Table 1 below for the applicable [*****]. The [*****] shall be reported and paid together with the [*****] for the [*****], pursuant to Section V.B of this TL 8.”



Table 1 – [***] for [***]
[*****]	[*****]
Through the [***] of [***]	[*****]

Notwithstanding the foregoing, the [*****] specified above shall be [*****] solely for [*****] distributed by Client to [*****] solely in connection with the [*****] in the [*****].


3.	[*****]. The following shall be added as a new Section V to Exhibit A (Pricing) of TL 8:

“V. [*****] . Upon written notice to HERE prior to expiration of the [*****], the [*****] may be [*****] for [*****] for all [*****], subject to payment by Client of an [*****] license fee per [*****] (“[*****]”). For sake of clarity, if Client elects to exercise the foregoing [*****], such [*****] must be [*****] for all End-Users of [*****] and is not applicable to [*****].”


4.	[***] for [***]. The following shall be added as a new Section VI to Exhibit A (Pricing) of TL 8:

“VI. [*****] for [*****] . Subject to Client’s compliance with the terms set forth herein, the [*****] shall be [*****] for no more than [*****] of the [*****] for [*****] that are distributed to End-Users solely to [*****] on [*****] with [*****] on [*****] (each, a “[*****]”) to enable such End-Users to [*****] during a [*****]. The [*****] shall be subject to payment by Client to HERE for the [*****] for the [*****] per the foregoing sentence. Client shall report all [*****] on its [*****] report at [*****].”

License Fee Reports . For sake of clarity, Client shall include, in its License Fee report due following the Amendment Effective Date, the license fees due to HERE in connection with the [*****] associated with all [*****] distributed between [*****] and [*****], including [*****] where the [*****]is [*****] (i.e., [*****]) under this First Amendment in accordance with Section V(B) of TL 8. For further sake of clarity, all License Fee reports under Section V(B) of TL 8 shall include license fees for [*****] and [*****] due under Sections IV and V of Exhibit A for the duration of the TL Term.


6.	Except as modified hereunder, all other terms and conditions of the Agreement shall stay in full force and effect.

____________________________

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HERE CONFIDENTIAL		Exhibit 10.16.32+

IN WITNESS WHEREOF, the parties have caused this First Amendment to be executed by their authorized representatives as of the Amendment Effective Date.



HERE NORTH AMERICA, LLC	TELENAV, INC.
By: /s/ Neil McTeigue	By: /s/ Michael Strambi
Name: Neil McTeigue	Name: Michael Strambi
Title: Senior Legal Counsel	Title: Chief Financial Officer, Telenav, Inc.
Date: November 4, 2015	Date: 10/28/15

HERE NORTH AMERICA, LLC
By: /s/ Jeannie Lee Newman
Name: Jeannie Lee Newman
Title: Senior Legal Counsel
Date: 11-04-2015

____________________________

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HERE CONFIDENTIAL		Exhibit 10.16.33+

FIRST AMENDMENT TO GENERAL LICENSE AGREEMENT

This First Amendment (“First Amendment”) to the General License Agreement, effective February 10, 2014 (“Agreement”), by and between Telenav, Inc. (“Customer”) and HERE North America, LLC ( “HERE”), is made and entered into as of the date of latest signature below (“Amendment Effective Date”). Capitalized terms not otherwise defined in the body of this First Amendment shall have the meanings set forth in the Agreement.

WHEREAS, the Parties desire to amend certain terms of the Agreement;

NOW THEREFORE, the Parties agree to amend certain provisions of the Agreement with this First Amendment as follows:


1.	Term . The following shall be added to the end of the first sentence of Section 2 of the Agreement: “…; provided, however, the Term shall extend as necessary in accordance with the Update Term to the TL Term as defined under [*****].


2.	Exhibit C (Service Level Agreement) . Section 2.4 of Exhibit C (Latency Targets) to the Agreement is hereby deleted in its entirety and replaced with the following:

Provider will use commercially reasonable efforts to fulfill End User requests for the Location Platform Services in accordance with the table below.

Service Response Time means the period of time, measured in [*****], from the point in time when the [*****] of a valid request is received by the HERE service to the point in time when the [*****] of the corresponding response is sent from HERE and is computed as the [*****] of all valid requests sent each and every [*****] starting at [*****] Coordinated Universal Time (UTC). Service Response Times are measured based on [*****].



Table 2.4 – Service Response Time
HERE Service	Use Case	Service Response Time [***] ( [***] )
[*****]	[*****]	[*****]
[*****]	[*****]	[*****]
[*****]	[*****]	[*****]
	[*****]	[*****]
	[*****]	[*****]

For each HERE Location Platform Service listed in Exhibit A, but for which no Service Response Time is defined in Table 2.4, HERE shall provide a [*****] report that indicates the observed Service Response Time at the [*****] of all valid requests for the service.


3.	Except as modified hereunder, all other terms and conditions of the Agreement shall stay in full force and effect.

____________________________

Amendment 1 to General License Agreement [Telenav, Inc.][NA Automotive PR-010645][10-28-15 lee] Page 1 of 1



HERE CONFIDENTIAL		Exhibit 10.16.33+

IN WITNESS WHEREOF, the parties have caused this First Amendment to be executed by their authorized representatives as of the Amendment Effective Date.



HERE NORTH AMERICA, LLC	TELENAV, INC.
By: /s/ Neil McTeigue	By: /s/ Michael Strambi
Name: Neil McTeigue	Name: Michael Strambi
Title: Senior Legal Counsel	Title: Chief Financial Officer, Telenav, Inc.
Date: November 4, 2015	Date: 11/12/15

HERE NORTH AMERICA, LLC
By: /s/ Jeannie Lee Newman
Name: Jeannie Lee Newman
Title: Senior Legal Counsel
Date: 11-05-2015

____________________________

Amendment 1 to General License Agreement [Telenav, Inc.][NA Automotive PR-010645][10-28-15 lee] Page 2 of 2

Exhibit 10.36

SUBLEASE

BETWEEN

AVAYA INC.

SUBLANDLORD

and

TELENAV, INC.

SUBTENANT

4655 Great America Parkway, Santa Clara, CA

Dated: November 11, 2015

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The mailing, delivery or negotiation of this Sublease shall not be deemed an offer to enter into any transaction or to enter into any other relationship, whether on the terms contained herein or on any other terms. This Sublease shall not be binding nor shall either party have any obligations or liabilities or any rights with respect thereto, or with respect to the Subleased Premises, unless and until both parties have executed and delivered this Sublease and the Prime Landlord has consented in writing to this Sublease. Until such execution and delivery of, and consent to this Sublease by Prime Landlord, either party may terminate all negotiation and discussion of the subject matter hereof, without cause and for any reason, without recourse or liability.

* * * *

SUBLEASE

This Sublease is entered into as of this 11th day of November 2015, by and between AVAYA INC. , a Delaware corporation (hereinafter “ Sublandlord” ), and TELENAV, INC. , a Delaware corporation (hereinafter “ Subtenant” ).

INTRODUCTORY STATEMENTS

A. By Lease dated August 25, 2011 (the “ Lease” ), The Prudential Insurance Company of America, a New Jersey corporation (the “ Prime Landlord” ) leased to Sublandlord certain premises containing approximately 257,155 square feet (the “ Premises” ) in the building located at 4655 Great America Parkway, Santa Clara, California (the “ Building” ). A copy of the Lease and amendments thereto is attached hereto as Exhibit A (as amended, the “ Prime Lease” ). The Building is part of a larger office project (the “Project”) as more particularly described in the Prime Lease which includes the Adjacent Building and the Amenities Facility as such terms are defined in the Lease.


B.	Subtenant has agreed to sublet from Sublandlord certain portions of the Premises.

C. The parties desire to enter into this Sublease defining their respective rights, duties and liabilities relating to the Subleased Premises (defined below).

WITNESSETH

NOW THEREFORE, Sublandlord and Subtenant, in consideration of the mutual promises and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and each with intent to be legally bound, for themselves and their respective successors and assigns, agree as follows:


1.	SUBLEASE

Sublandlord, for and in consideration of the Subtenant's payment of the rent and performance of the covenants contained in this Sublease, does hereby demise and lease to Subtenant the following portions of the Premises: the entire (3rd) floor of the Building as shown on the floor plan attached hereto as Exhibit B (the “ Subleased Premises ”), containing approximately 54,635 rentable square feet.

To the best of Sublandlord’s knowledge, all measurements of the Sublease Premises have been made in accordance with the American National Standard Institute of Building Owners and Managers Association International (BOMA) Z65.1.1996 for multi-tenant buildings and shall not be subject to re-measure by Sublandlord or modification for the duration of the Sublease Term (as herein defined) or any extension(s) thereof.


2.	PARKING AND ACCESS CARDS

Subtenant and its employees and visitors shall be permitted to use 180 parking spaces in the parking areas on a non-exclusive basis in common with other Building tenants on the parking lot without charge. Subtenant shall have the right to obtain the allotment of access cards to the Building allocable to the Subleased Premises in accordance with Section 3 of Exhibit D. Subtenant shall be responsible for any cost that Prime Landlord may impose in connection with issuing access cards. Upon written request by Subtenant, Sublandlord shall allow Subtenant to use additional parking spaces from Sublandlord’s allocated parking under the Prime Lease but only to the extent that Sublandlord is not using such parking spaces (the “ Additional Parking Spaces ”); provided, however, that Sublandlord shall have the right to terminate Subtenant’s use of the Additional Parking Spaces at any time upon written notice to Subtenant.


3.	PRIME LEASE

A true and complete copy of the Prime Lease (with certain financial provisions deleted for reasons of confidentiality) is attached hereto as Exhibit A . Where not expressly inconsistent with the terms hereof and except as otherwise stated herein to the contrary, this Sublease shall be subject and subordinate to all of the terms and conditions contained in the Prime Lease as said terms and conditions affect the Subleased Premises, and all of the terms and conditions of the Prime Lease, except as otherwise set forth herein, are hereby incorporated into this Sublease and shall be binding upon Subtenant with respect to the Subleased Premises to the same extent as if Subtenant were named as tenant and Sublandlord as landlord under the Prime Lease. This Sublease is also subject and subordinate to any amendments and supplements to the Prime Lease hereafter entered into between Prime Landlord and Sublandlord, provided that any such amendment or supplement to the Prime Lease which would materially and adversely affect the use or occupancy by Subtenant of the Subleased Premises in accordance with the terms of this Sublease, increase the financial obligations of Subtenant, or decrease Subtenant’s rights under this Sublease, shall not be deemed incorporated herein and shall not be binding on Tenant or impact its rights hereunder without the express prior written consent of Subtenant. For purposes of this Sublease, references in the Prime Lease to the “Term” shall mean the Term of this Sublease and references to the “Premises” in the Prime Lease shall mean the Subleased Premises. Except as otherwise provided herein, when any fraction, factor or formula, which is based on the number of square feet leased, is expressed in the Prime Lease, it will be adjusted by substituting the number of square feet of the Subleased Premises for the number of square feet of the Premises leased in the Prime Lease. Each party agrees that it shall not do or omit to do anything which would result in a default under the Prime Lease, and each party agrees to indemnify and hold the other harmless from and against all claims, demands or liabilities resulting from such party's breach, violation or nonperformance of any of its obligations under the Prime Lease, as incorporated herein. With the exceptions set forth herein, Subtenant shall be entitled to all of the rights and privileges of the Sublandlord as tenant under the terms of the Prime Lease with respect to the Subleased Premises.

Notwithstanding anything to the contrary in this Sublease, none of the provisions of the Prime Lease dealing with the following matters shall be applicable to Subtenant or be incorporated

into this Sublease: (i) tenant improvements allowances, (ii) extensions of the term of the Prime Lease, (iii) rights of first refusals or options (iv) parking allocations (but Subtenant shall benefit from the allocations and associated rights set forth in this Sublease), and (v) any other matters that, in context, should not apply to the terms of this Sublease. Specifically, but without limiting the generality of the foregoing, the following provisions of the Prime Lease shall not be incorporated into this Sublease: Sections 9.3, 29.1(but such section shall be incorporated as it relates to the liability of Prime Landlord), 32.4, 51, 54, 55, 56, and 57.

Sublandlord represents and warrants to Subtenant that, as of the date hereof, to the actual knowledge of Sublandlord, (i) the Prime Lease is in full force and effect, (ii) Sublandlord has neither given nor received a notice of a present default under the Prime Lease, and (iii) Sublandlord is not aware of any present default under the Prime Lease.


4.	DEFINITIONS

All terms not expressly defined in this Sublease shall have the meanings given to them in the Prime Lease.


5.	PRIME LANDLORD

Sublandlord shall use reasonable efforts to enforce the provisions of the Prime Lease with regard to Prime Landlord’s obligations to provide services and utilities to the Subleased Premises and common areas of the Building to the extent required of the Prime Landlord under the Prime Lease. Sublandlord shall not be liable to Subtenant for the failure of Prime Landlord to keep and perform, according to the terms of the Prime Lease, Prime Landlord’s duties, covenants, agreements, obligations, restrictions and provisions, or for any delay or interruption in Prime Landlord’s keeping and performing the same.

Sublandlord shall perform or cause to be performed in a timely and proper fashion all of its obligations as Tenant under the Prime Lease, except for obligations which have been delegated to Subtenant hereunder.


6.	TERM; END OF TERM

(b) Provided that Sublandlord has obtained the written consent of the Prime Landlord to this Sublease, the term of this Sublease (the “ Term ”) shall be approximately 5 years and one month, commencing on the earlier of (i) the date Subtenant occupies the Subleased Premises to conduct business and (ii) April 1, 2016 (“ Commencement Date ”) and ending on April 30, 2021 (“ Termination Date ”), unless otherwise terminated in accordance with the terms hereof. Upon Sublandlord’s receipt of: (i) the fully executed copy of this Sublease; (ii) Subtenant’s base rent, and additional rent pursuant to paragraph 7(a) and 7(b) of this Sublease; (iii) Subtenant’s security deposit pursuant to paragraph 10 herein; (iv) Prime Landlord’s consent to this Sublease; and (v) evidence that Subtenant’s insurance required under this Sublease is in place, Subtenant shall have the right to enter the Subleased Premises prior to anticipated Commencement Date to prepare its plans and specifications for Subtenant Improvements (defined in paragraph 38 herein), construct the Subtenant Improvements, and install its equipment and trade fixtures as needed to commence its business

operations. Tenant shall not occupy the Subleased Premises for the conduct of business prior to the Commencement Date. The Term is subject to the term of the Prime Lease. In the event that the term of the Prime Lease expires or is terminated at any time, the Term of this Sublease shall terminate one (1) day prior to the termination or expiration of the term of the Prime Lease. If requested by either party, the parties agree to execute a Commencement Date Memorandum in accordance herewith. Prime Landlord has the right to review and consent to, or not consent to, this Sublease in accordance with Section 18.2 of the Prime Lease and Landlord also has recapture rights under Section 18.6 of the Prime Lease. Subtenant shall have the right to terminate this Sublease if Prime Landlord has not consented to this Sublease on or before December 30, 2015 .

(c) Upon the expiration or other termination of the term of this Sublease, Subtenant shall peaceably quit and surrender to Sublandlord the Subleased Premises and all alterations and additions thereto, broom clean, in good order, repair and condition excepting only ordinary wear and use and damage by fire or other casualty for which, under other provisions of this Sublease. At the expiration or sooner termination of the Sublease, Subtenant shall not be required to restore the Subleased Premises to its condition prior to Subtenant’s construction and installation of the Subtenant Improvements. Subtenant shall remove all of its property and, to the extent specified by Sublandlord or Prime Landlord, all alterations, additions, and partitions made by Subtenant after the completion of the Subtenant Improvements (unless Sublandlord or Prime Landlord has agreed to allow said items to remain on the Subleased Premises) wholly within the Subleased Premises, and shall repair any damage to the Subleased Premises or the Building caused by their installation or by such removal. Within 10 days prior to the expiration or other termination of the term of this Sublease, Sublandlord or its agents shall have the right, but not the obligation, to conduct a walk-thru of the Subleased Premises to determine the condition of the Subleased Premises and to prepare a punch-list for Subtenant of the items Subtenant is required to repair and restore pursuant to this Subparagraph 6(b). Subtenant's obligation to observe or perform this covenant shall survive the expiration or other termination of this Sublease. Subtenant will remove any personal property from the Building and the Subleased Premises upon or prior to the expiration or termination of this Sublease and any such property which shall remain in the Building or the Subleased Premises thereafter shall be conclusively deemed to have been abandoned, and may either be retained by Sublandlord as its property or sold or otherwise disposed of in such manner as Sublandlord may see fit. If any part thereof shall be sold, that Sublandlord may receive and retain the proceeds of such sale and apply the same, at its option, against the expenses of the sale, the cost of moving and storage, any arrears of Rent, additional or other charges payable hereunder by Subtenant to Sublandlord and any damages to which Sublandlord may be entitled pursuant to this Sublease.


7.	RENT

(a) Commencing on the Commencement Date, basic rent under this Sublease shall be as follows:



Rent Period April 1, 2016 – March 31, 2017	Per Annum $1,278,459.00	Monthly Payment $106,538.25
April 1, 2017 – March 31, 2018	$1,316,812.77	$109,734.40
April 1, 2018 – March 31, 2019	$1,356,317.15	$113,026.43
April 1, 2019 – March 31, 2020	$1,397,006.67	$116,417.22
April 1, 2020 – March 31, 2021	$1,438,916.87	$119,909.74
April 1, 2021 – April 30, 2021	N/A	$123,507.03

Provided that Subtenant is not otherwise in default under this Sublease beyond any applicable cure period, Sublandlord hereby agrees to abate the basic rent for the first 4 months of the Term beginning on the Commencement Date and ending on the date that is 4 months following the Commencement Date. In addition, provided that Subtenant is not otherwise in default under this Sublease beyond any applicable cure period, monthly basic rent payments for the following months will also be abated: April 2017, April 2018, April 2019 and April 2020. For the avoidance of doubt, only payments of basic rent and not payments of additional rent or other amounts payable by Subtenant under this Sublease may be abated in accordance with the foregoing sentence.

Rent shall be payable in lawful money of the United States of America in advance on the first day of each calendar month, except that a proportionately lesser sum may be paid for the first and last months of the Term of this Sublease if the Term commences on a date other than the first day of the month or ends on other than the last day of a month.

Within two (2) business days after the execution of this Sublease and receipt of Prime Landlord’s written consent to this Sublease, Subtenant shall send a payment in the amount of $106,538.25 as the basic rent due under the Sublease for month five of the Term.

(b) In addition to the basic rent set forth in subparagraph 7(a) above, Subtenant shall pay Sublandlord (as and when due under the terms of the Prime Lease), as additional rent, Subtenant’s proportionate share of Tenant’s Share of Operating Expenses pursuant to Section 5.2 of the Prime Lease and Subtenant’s proportionate share of Tenant’s Tax Share pursuant to Section 5.6 of the Prime Lease. Subtenant’s proportionate share of Tenant’s Share of Operating Expenses and Tenant’s Tax Share shall be 21.25%. Accordingly, for each year, Subtenant shall be responsible for paying to Sublandlord an amount equal to 21.25% of Tenant’s Share of Operating Expenses and Tenant’s Tax Share payable under Sections 5.2 and 5.6 of the Prime Lease. The estimated annual amount of Tenant’s Share of Operating Expenses and Tenant’s Tax Share for 2015 is $3,418,987, resulting in a monthly payment by Sublandlord of $284,916. Accordingly, by way of illustration, the monthly amount of Subtenant’s portion of Tenant’s Share of Operating Expenses and Tenant’s Tax Share for 2015 would be $60,544.56 . Sublandlord will promptly notify Subtenant when the estimated Operating Expenses for 2016 become available. Operating Expenses paid by Subtenant will be reconciled annually in the same manner as set forth in Article 5 of the Prime Lease.

Within two (2) business days after the execution of this Sublease and receipt of Prime Landlord’s written consent to this Sublease, Subtenant shall send a payment in the amount

of $60,544.65 as the estimated additional rent due under the Sublease for the first month of the Term.

(c) The terms “basic rent” and “additional rent” are sometimes referred to herein as “Rent” or “rent” and shall include all sums due from Subtenant to Sublandlord under the terms of this Sublease. Subtenant shall pay all basic rent and additional rent when due and, in the case of basic rent, without notice of any kind, and without any abatement, deduction or set-off for any reason whatsoever, except as may be explicitly provided in this Sublease. All Rent shall be payable at the office of the Sublandlord at the following address:

Regular Mail:

Cushman Wakefield

P.O. Box 28891

New York, New York Attn: Lease Adminstration

Overnight Mail to:

JPMorgan Chase – Lockbox Processing Attn: Cushman Wakefield 28891

4 Change Metrotech Center 7th Floor East

Brooklyn, New York 11245

or at such other address as directed by written notice from Sublandlord to Subtenant.

(d) Timely payment is of the essence of this Sublease and Subtenant may not delay or refuse any payment of Rent for any reason. In the event the payment of any installment of Rent due hereunder is not paid to Sublandlord within five (5) calendar days after it is due, then Subtenant may impose late fees and charge interest on such late amounts in accordance with Article 4 of the Prime Lease.


8.	USE OF SUBLEASED PREMISES

(a) The Subleased Premises shall only be used as permitted under the Prime Lease, and Subtenant shall not, without the Sublandlord's prior written consent, use, suffer or permit the use of all or any portion thereof for any other purpose. The Subtenant shall use the Subleased Premises and all parking areas, sidewalks, hallways or other similar facilities or areas of the Building or the land on which the Building is located (“ Building Parcel” ) available for use by the Subtenant in common with other occupants of the Building (collectively, “ Common Areas” ) only as permitted by the terms of the Prime Lease and in a careful, lawful, safe and proper manner and in accordance with all requirements of any governmental or quasi- governmental body and, in addition, shall comply with such reasonable rules and regulations as the Prime Landlord may from time to time

impose, as may be permitted under the Prime Lease, upon written notice to Subtenant. Subtenant and its employees and guests shall be entitled to use the Amenities Facility, including without limitation the cafeteria, fitness center and the auditorium/meeting rooms on the same basis as Sublandlord, subject to the terms of the Lease. The Subtenant shall not use the Subleased Premises or any of the Common Areas for any use or activity which is hazardous or which would constitute a nuisance or which: (i) would violate any covenant, agreement, term, provision or condition of the Prime Lease or this Sublease, (ii) is in contravention of the certificate of occupancy for the Subleased Premises or the Building, (iii) would violate any requirement of any governmental or quasi-governmental body or (iv) may in any way impair or interfere with any of the Building services or the proper and economic heating, air conditioning, cleaning or other servicing of the Subleased Premises or the Building, the Common Areas or the Building Parcel or any portion thereof or impair or interfere with the use of any of the Common Areas by, or occasion discomfort, inconvenience or annoyance to, other occupants of the Building or their employees, guests or invitees (including, without limitation, the Sublandlord) or impair the appearance of the Building.

(b) If any governmental license or permit shall be required for the proper and lawful conduct of any business or other activity carried on in the Subleased Premises (including but not limited to a Certificate of Occupancy), the Subtenant shall, at the Subtenant's sole expense, procure and thereafter maintain such license or permit, shall promptly submit a copy thereof to the Sublandlord, and shall comply with the terms and conditions thereof.

(c) As between Sublandlord and Subtenant, Subtenant shall be solely responsible for the performance of those items of maintenance and repair of the Subleased Premises specified as being the responsibility of the Sublandlord as tenant under the Prime Lease. In this regard, the Subtenant shall, to the same extent as required by Sublandlord as tenant under the Prime Lease:

(i) Promptly comply with all laws, orders, rules and requirements of governmental authorities, insurance carriers, board or fire underwriters, or similar groups, applicable to the use and occupancy of the Subleased Premises after the Commencement Date.

(ii) Maintain the Subleased Premises and all equipment and fixtures in it in good repair and appearance, ordinary wear and tear excepted.

(iii) Make all necessary repairs to the Subleased Premises and all equipment and fixtures in it, except structural repairs and repairs due to non-compliance of the Subleased Premises with laws, orders, rules and requirements of governmental authorities, insurance carriers, board or fire underwriters, or similar groups, applicable to the Subleased Premises and said non-compliance pre-dates the Commencement Date.

(iv) Maintain the Subleased Premises in a neat, clean, safe, and sanitary condition, free of all garbage.

(v) Use all electric, plumbing and other facilities in the Subleased Premises safely.

(vi) Use no more electricity than the wiring or feeders to the Subleased Premises can safely carry.


(vii)	Promptly replace all broken glass in the Subleased Premises.

(viii) Do nothing to destroy, deface, damage, or remove any part of the Subleased Premises.

(ix) Keep nothing in the Subleased Premises which is flammable, dangerous or explosive or which might increase the danger of fire or other casualty.

(x) Do nothing to destroy the peace and quiet of the Sublandlord, other tenants, or persons in the neighborhood.


(xi)	Avoid littering in the Building or on its grounds.

The Subtenant shall pay any and all expense involved in complying with the above.

(d) Except to the extent resulting from the negligence or willful misconduct of Sublandlord, its employees, agents or contractors during the Term hereof, the Subtenant shall indemnify and hold the Sublandlord harmless from and against any fine, penalty, cost, expense (including, without limitation, reasonable attorneys' fees) or other damage or loss suffered by the Sublandlord as a result of the Subtenant's failure to perform its obligations under the Prime Lease or this Sublease, including without limitation this Paragraph 8. To the extent Subtenant has failed to perform any of its obligations under this Paragraph 8, then such obligations shall survive termination of this Sublease and surrender of the Subleased Premises to the Sublandlord.


9.	DEFAULT OF SUBTENANT AND SUBLANDLORD’S REMEDIES

Any of the following events shall be a default of the Subtenant: (a) the Subtenant’s failure to pay on the due date the Rent or Additional Rent or any other payment required to be paid by the Subtenant under this Sublease which failure continues uncured for 5 business days after notice thereof is given to Subtenant; (b) the Subtenant’s default in the performance of any of the other terms, covenants or conditions to be observed or performed by the Subtenant under this Sublease (including the terms, covenants and conditions of the Prime Lease), unless the Subtenant shall cure such default within 20 days after receipt by the Subtenant of notice from the Sublandlord specifying the nature of the default or, if the breach is of such a nature that it cannot with due diligence be cured within 20 days, Subtenant shall have failed to commence curing such breach within such 20 day period and to proceed with due diligence and in good faith to complete the curing thereof within 50 days; (c) insolvency or bankruptcy of the Subtenant; (d) the transfer, sale or attempted sale by or under execution or other legal process of the Subtenant’s leasehold interest hereunder and/or substantially all of the Subtenant’s other assets other than the sale of all or substantially all of the Subtenant’s assets to any of the Subtenant’s affiliates; (e) the initiation of legal proceedings to effect, or resulting in, the seizure, sequestering or impounding of any of the Subtenant’s goods or chattels used in, or incident to, the operation of the Subleased Premises by the Subtenant, if the same are not dismissed within 45 days; (f) any attempt by the Subtenant to remove such goods or chattels, other than in the ordinary course of business, (g) an assignment or subletting or attempted assignment

or subletting by the Subtenant in violation of Paragraph 16 of this Sublease or (h) any other action or omission that would constitute and Event of Default under the Prime Lease.

Upon any default of the Subtenant as set forth in this Paragraph, the Sublandlord, at the Sublandlord’s sole option, may elect and enforce any one or more of the remedies described in subparagraphs (a) through (f) below; provided, however, that the Sublandlord may, at the Sublandlord’s sole option, elect and enforce multiple remedies from among those remedies to the extent such remedies are not legally mutually exclusive and to the extent that the Sublandlord, in the Sublandlord’s reasonable judgment, deems the enforcement of such multiple remedies to be necessary or appropriate to indemnify and make the Sublandlord whole from any loss or damage as a result of the default or defaults of the Subtenant which remain uncured after any applicable cure period.

(a) Termination and the Subtenant’s Liabilities. The Sublandlord shall have the right to terminate this Sublease upon notice of such termination given by the Sublandlord to the Subtenant in accordance with the notice provisions of this Sublease, whereupon the Subtenant’s right to possession, use and enjoyment of the Subleased Premises shall cease, and the Subtenant shall immediately quit and surrender the Subleased Premises to the Sublandlord, but the Subtenant shall remain liable to the Sublandlord as provided in Section 22.2 (b) of the Prime Lease as incorporated herein. Upon termination of this Sublease following such notice, the Sublandlord may at any time thereafter re-enter and resume possession of the Subleased Premises and remove the Subtenant and/or other occupants and the goods and chattels thereof. In any case where the Sublandlord has recovered possession of the Subleased Premises by reason of the Subtenant’s default, the Sublandlord may, at the Sublandlord’s option, reenter the Subleased Premises and cause the Subleased Premises to be redecorated, altered, divided, consolidated with other adjoining Subleased Premises, or otherwise changed or prepared for reletting, and may relet the Subleased Premises or any part thereof for a term or terms to expire prior to, at the same time as, or subsequent to, the original expiration date of this Sublease, at the Sublandlord’s sole option, and the Sublandlord shall receive the rent therefor. Rent and other payments so received shall, up to an amount equivalent to the rent and other payments required of the Subtenant hereunder, be applied as follows: (i) first to the payment of such expenses as the Sublandlord may have incurred in connection with the recovery of possession, redecorating, altering, dividing, consolidating with other adjoining Subleased Premises, or otherwise changing or preparing for reletting, and the reletting, including brokerage and reasonable attorney’s fees;

(ii) next to the payment of damages in amounts equal to the Rent, Additional Rent and any other payments required of the Subtenant hereunder (whether or not specifically designated as Rent or Additional Rent) and to the costs and expenses of performance of the other covenants of the Subtenant as herein provided. In the event any reletting is at a rental amount greater than that amount reserved herein at the time of Subtenant’s default, the Subtenant shall not be entitled to receive, by way of direct payment or credit against the Subtenant’s obligations, any surplus accruing as a result of any such reletting. In attempting to relet the Subleased Premises as aforesaid, the Sublandlord may grant rent and other concessions. No such reletting shall constitute a surrender and acceptance or be deemed evidence thereof. In no event shall occupancy by the Sublandlord be construed as a release of the Subtenant’s liability hereunder.

(b) Continuation of Lease. The Sublandlord, at its option, shall have the right upon the Subtenant’s default to continue this Sublease in full force and effect and to recover Rent, Additional Rent and other payments required of the Subtenant by this Sublease for the full balance of the Term as provided in Section 22.2(a) of the Prime Lease as incorporated hereby.

(c) Waiver of Jury Trial and Right of Redemption. The Subtenant hereby waives its right to a jury trial and waives all right of redemption to which the Subtenant or any person under the Subtenant or any successor in interest to the Subtenant might be entitled by any law now or hereafter in force.

(d) Right to Distraint. The Sublandlord may distrain against any personal property of the Subtenant in or on the Subleased Premises at the time of such default. The Subtenant hereby specifically and expressly waives any and all right to notice or hearing prior to the Sublandlord’s exercise of such distraint remedy.

(e) Recapture of Unamortized Costs. In the event that Subtenant’s right of possession of the Subleased Premises is terminated prior to the end of the Term by reason of any default of Subtenant, then immediately upon such termination, an amount equal to the unamortized portion as of that date (which amortization shall be based on an interest rate of 10% per annum) of the sum of (i) the cost of Sublandlord’s work to prepare the Subleased Premises for occupancy by Subtenant, if any, (ii) the value of any basic rent abated under Paragraph 7(a),

(iii) the amount of the Allowance paid under Paragraph 38, (iv) the amount of all commissions paid by Sublandlord in order to procur this Sublease.

(f) Other Remedies. The remedies provided to the Sublandlord under this Sublease are cumulative and are in addition to any remedies allowed under the Prime Lease, by law or in equity.


10.	SECURITY DEPOSIT

(a) Within two (2) business days after the execution of this Sublease and receipt of Prime Landlord’s written consent to this Sublease, Subtenant shall deposit with Sublandlord the sum of $119,909.74 (“ Security Deposit ”) as security for the full and faithful performance of every portion of this Sublease to be performed by Subtenant. If Subtenant defaults with respect to any provision of this Sublease, Sublandlord may use, apply or retain all or any portion of the Security Deposit to remedy such default. If any portion of said deposit is so used or applied, Subtenant shall, within ten (10) days after demand therefor, deposit cash with Sublandlord in an amount sufficient to restore the Security Deposit to its original amount, and Subtenant's failure to do so shall be a material breach of this Sublease. Sublandlord shall not be required to keep this Security Deposit separate from its general funds, and Subtenant shall not be entitled to interest on the Security Deposit.

(b) Provided that Subtenant is not in default at the expiration or other termination of this Sublease, the Security Deposit, or any balance thereof, shall be returned to Subtenant within

30 days after both the (i) Termination Date and (ii) return of the Subleased Premises to Sublandlord in the condition required by this Sublease, less only that portion, if any, accessed and retained by Sublandlord pursuant to Paragraph 10(a) above. In the event of an assignment of the Prime Lease

by Sublandlord, Sublandlord shall have the right to transfer the Security Deposit to the assignee and upon notice thereof to Subtenant, Sublandlord shall thereupon be released by Subtenant from all liability for the return of such Security Deposit only after such new sublandlord or other transferee has acknowledged in writing to Subtenant that it has taken possession of the full amount of the Security Deposit, or Sublandlord provides to Subtenant other evidence reasonably satisfactory to Subtenant that such Security Deposit has been delivered to the transferee; and then Subtenant agrees to look to the new sublandlord solely for the return of said Security Deposit; and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the Security Deposit to a new sublandlord.

(c) Subtenant further covenants that it will not assign or encumber or attempt to assign or encumber the monies deposited herein as Security Deposit, and that neither Sublandlord nor its successor or assigns shall be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance.


11.	SUBTENANT FIT-UP

Sublandlord shall have no obligations to make any alterations or improvements to the Subleased Premises to make them ready for Subtenant’s occupancy.


12.	CONDITION OF PREMISES

Subtenant acknowledges that it has examined the Subleased Premises and is taking the Subleased Premises, including all existing leasehold improvements of Sublandlord and all existing wiring and cabling within the Subleased Premises, in their “AS IS” condition on the Commencement Date. Subtenant’s use of any leasehold improvements, wiring or cabling shall be conducted in a manner so as not to cause Sublandlord to incur any costs and expenses in connection therewith. Sublandlord confirms that, to Sublandlord’s actual knowledge, Sublandlord has not received written notice that any portion of the Subleased Premises is in violation of applicable law.

Sublandlord, at Sublandlord's cost, shall provide to the Subleased Premises a minimum of eight (8) watts of electrical capacity per rentable square foot, demand load, for general office, light and convenience power, and for Subtenant’s equipment and supplemental air conditioning usage (such amount of power shall be net of any power required for the base Building systems or any other base Building requirements). Such electrical capacity shall be available to be distributed by Subtenant at Subtenant’s cost, throughout the Subleased Premises for Subtenant’s use, at Subtenant’s sole discretion. Sublandlord acknowledges that Subtenant shall have certain areas within the Subleased Premises that will utilize more than eight (8) watts of electrical capacity per rentable square foot including but not limited to the server room, fitness area and kitchen.


13.	ALTERATIONS

Subtenant shall not make any alterations, improvements or installations in or to the Subleased Premises without the prior written consent of Sublandlord, which Sublandlord will not unreasonably

withhold, condition or delay (subject to Prime Landlord’s approval rights). All alterations and improvements shall be subject to the terms and conditions of the Prime Lease, and in those instances, if required, shall be subject to the Prime Landlord's approval in the manner provided in the Prime Lease. Any alterations, improvements or installations consented to by Sublandlord shall be made at the sole cost and expense of Subtenant. Upon the expiration or sooner termination of this Sublease, Subtenant shall not be required to restore the Subleased Premises to the condition as was originally delivered by Sublandlord to Subtenant, but Subtenant may be required to restore the Subleased Premises to the condition existing immediately after Subtenant’s completion of the Subtenant Improvements which will require the removal of Subtenant’s alterations made after completion of the Subtenant Improvements, at Subtenant’s sole cost and expense, unless Prime Landlord agrees that no restoration is required.


14.	REPAIRS AND MAINTENANCE

Any repair and maintenance obligations with respect to the Subleased Premises which are the responsibility of the Sublandlord, as tenant under the Prime Lease, shall be performed bySubtenant at Subtenant's sole cost and expense. Subtenant agrees that it will notify Sublandlord promptly of the need for any repair to the Subleased Premises, even if Sublandlord is not responsible for any such repair. Notwithstanding anything contained herein to the contrary, in the event that a condition exists in the Subleased Premises that Prime Landlord is obligated to repair under the terms of the Prime Lease, Subtenant shall so advise Sublandlord, and Sublandlord, in turn, shall promptly advise Prime Landlord thereof. Sublandlord shall have no liability to Subtenant for Prime Landlord's failure to make any such repair.


15.	UTILITIES AND SERVICES

Subtenant shall be entitled to all those services and utilities which Prime Landlord is required to provide under the terms of the Prime Lease or otherwise provides to or for other tenants of the Building. Subtenant shall reimburse Sublandlord, within 15 business days following Subtenant’s receipt of an invoice for any excess or abnormal amounts of electricity or other utilities or services consumed by Subtenant and the cost of all after-hours HVAC usage. Sublandlord shall use reasonable efforts to enforce the provisions of the Prime Lease with regard to Prime Landlord’s obligations to provide services and utilities to the Subleased Premises and common areas of the Building to the extent required of the Prime Landlord under the Prime Lease. Sublandlord shall not be responsible for Prime Landlord's failure to provide the same nor shall any such failure constitute an abrogation of any other terms or conditions of this Sublease, but Subtenant shall be entitled to an abatement of Rent hereunder to the same extent that Sublandlord is entitled to Rent abatement under Section 6.7 of the Prime Lease. To the extent that Prime Landlord charges Sublandlord for any increases in the cost of such services or utilities and such charge or increase is due solely to Subtenant's use of the Subleased Premises or such utilities or services, Subtenant agrees to pay the charges therefore promptly upon receipt of Sublandlord's bill.


16.	ASSIGNMENT AND SUBLEASING

(a) Subtenant shall not have the right to assign this Sublease or sublet the Subleased Premises, in whole or in part, without the prior written consent of Sublandlord, which consent shall not be unreasonably withheld, conditioned or delayed, and Prime Landlord if required under the Prime Lease. The consent by Sublandlord to any assignment or to any sublease or occupancy of the Subleased Premises by any other party than Subtenant, or any part thereof, shall not be deemed to relieve or release (i) Subtenant from the full performance and observance by Subtenant of all of its obligations under this Sublease, or (ii) Subtenant or any assignee or sublessee of Subtenant from the obligation of obtaining the consent in writing of Sublandlord and Prime Landlord to any further assignment, sublease or occupancy. Subtenant shall pay to Sublandlord upon demand, (x) any cost, expense or fee of Prime Landlord charged to Sublandlord or to Subtenant which is required to be paid in connection with any assignment, subletting or occupancy pursuant to this Paragraph 16, and (y) any reasonable cost or expense of Sublandlord which is incurred by Sublandlord from non-related third parties in connection with any request for consent to any assignment, subletting or occupancy pursuant to this Paragraph, provided that the aggregate of such costs and expenses does not exceed $3,000.

(c) In the event that Subtenant shall desire Sublandlord’s consent to an assignment of this Sublease or to a subletting of all or any part of the Subleased Premises, Subtenant shall request such consent by submitting to Sublandlord a proposal setting forth the terms and conditions of the assignment or sublease and financial information with respect to the assignee or sublessee, and such other information as Sublandlord may reasonably require.

(d) In the event that Sublandlord and Prime Landlord shall grant their consent to subletting all or part of the Subleased Premises or an assignment of this Sublease, Subtenant shall, in consideration therefore, promptly pay to Sublandlord as additional rent, as and when received by Subtenant, the amounts that would be due under Section 18.4 of the Prime Lease provided that in addition to the specific costs that are deductible from rent under the sublease or assignment pursuant to Section 18.4 of the Prime Lease, Subtenant shall also be entitled to deduct its legal fees, marketing expenses and any other costs or expenses that are directly related to the subletting or assignment.

(e) If this Sublease shall be assigned or if the Subleased Premises, or any part thereof, shall be sublet or occupied by any person or persons other than Subtenant, whether or not such assignment, sublet or occupancy was made with the consent of Sublandlord, Sublandlord may after default by Subtenant, collect rent from the assignee, subtenant or occupant and apply the net amount collected to the rent herein reserved, but no such assignment, subletting, occupancy or collection of rent shall be deemed a waiver of any of the covenants, terms or provisions contained in this Section, nor shall it be deemed an acceptance of the assignee, subtenant or occupant as subtenant hereunder, or a release or Subtenant from the full performance and observance by Subtenant of all of the covenants and obligations contained in this Sublease on the part of Subtenant to be performed or observed.


17.	INSURANCE

Subtenant agrees to comply with all of the insurance requirements and obligations of Sublandlord as set forth in the Prime Lease and to name both Sublandlord and Prime Landlord as

additional insureds on any required insurance policies. With respect to the release of claims and waiver of subrogation contained in Section 13.4 of the Prime Lease, such release and waiver shall be deemed to be modified to constitute an agreement by and among Prime Landlord, Sublandlord and Subtenant to release claims and waive subrogation rights as provided therein (and Prime Landlord’s consent to this Sublease shall expressly confirm its approval of this modification).


18.	NON-BINDING MEDIATION

(a) If a dispute arises out of or relates to this Sublease, or its breach, and the parties have not been successful in resolving such dispute through negotiation, the parties agree to attempt to resolve the dispute through non-binding mediation by submitting the dispute to a sole mediator selected by the parties or, at the option of a party, to mediation by the American Arbitration Association (“AAA”). If such dispute is not resolved by such non-binding mediation, the parties shall have the right to resort to any remedies permitted by law. All defenses based on passage of time shall be tolled during the mediation.

19. The direct expenses of the mediation, including the compensation and expenses of the mediator and the fees of the AAA, shall be borne equally by the parties. All other costs incurred by the parties to this Sublease, including the parties' legal expenses and their witnesses' expenses, shall be borne by the party incurring the expense. The parties, their representatives, other participants and the mediator shall hold the existence, content and result of the mediation in confidence.


20.	COMPLIANCE WITH LAWS

(a) In addition to any obligations under the Prime Lease, Subtenant shall promptly comply with all statutes, ordinances, rules, orders, regulations and requirements of the Federal, State and municipal Governments and of any and all their Departments and Bureaus applicable to the use and occupancy of the Subleased Premises by Subtenant or any subtenant or assignee of Subtenant, for the correction, prevention and abatement of nuisances, violations or other grievances, in, upon or connected with the Subleased Premises during the Term or any renewal thereof, including without limitation all laws relating to environmental matters and the Americans with Disabilities Act, and shall also promptly comply with, and execute all rules, orders and regulations of the Board of Fire Underwriters for the prevention of fires (collectively referred to as “ Legal Requirements” ) at its own cost and expense, except if such non-compliance with such Legal Requirements pre-dates the Commencement Date. Nothing in this paragraph shall be deemed to be Sublandlord’s consent to the alteration, subletting or assignment of all or any portion of the Subleased Premises or of all or any of Subtenant's interests in this Sublease.

(b) If Subtenant shall fail or neglect to comply with the aforesaid Legal Requirements, or if Subtenant shall fail or neglect to make any repairs required by the terms of this Sublease, then Sublandlord or its agents may (but shall not be obligated to) enter the Subleased Premises and take such actions as necessary to cure the breach and comply with any and all of the said Legal Requirements, at the cost and expense of Subtenant; and, in case of Subtenant's failure to pay therefor, the said cost and expense shall be added to the next month's Rent and be due and payable as such.


21.	LIMITATIONS ON SUBLANDLORD'S LIABILITY

(a) Subtenant acknowledges that Sublandlord has made no representations or warranties with respect to the Building or the Subleased Premises except as provided in this Sublease and Subtenant accepts the Subleased Premises in its “AS IS” condition.

(b) If Sublandlord assigns its leasehold estate in the Building, Sublandlord shall have no obligation to Subtenant arising after the date of such assignment. Subtenant shall then recognize Sublandlord's assignee as Sublandlord of this Sublease so long as Sublandlord’s assignee recognizes Subtenant as Subtenant of this Sublease.

(d) Except as specifically provided herein, Sublandlord shall not be required to perform any of the covenants and obligations of the Prime Landlord under the Prime Lease, and insofar as any of the obligations of the Sublandlord hereunder are required to be performed under the Prime Lease by the Prime Landlord thereunder, Subtenant shall rely on and look solely to the Prime Landlord for the performance thereof. If the Prime Landlord shall default in the performance of any of its obligations under the Prime Lease or breach any provision of the Prime Lease pertaining to the Subleased Premises, Subtenant shall have the right, at Subtenant's expense and upon prior notice to Sublandlord, and in the name of Sublandlord to make any demand or institute any action or proceeding, in accordance with and not contrary to any provision of the Prime Lease, against the Prime Landlord under the Prime Lease for the enforcement of the Prime Landlord's obligations thereunder. Subtenant shall defend, indemnify and hold Sublandlord harmless from and against any suit, action, cost, expense, damage or liability which arises out of or results from or is alleged to arise out of or result from Subtenant's exercise of its rights under this paragraph. Notwithstanding the foregoing, except as otherwise set forth in this Sublease, as between Subtenant and Sublandlord, Sublandlord shall be entitled to all of the rights, privileges and remedies of Prime Landlord under the Prime Lease as if Sublandlord were “Landlord” under the Prime Lease.

(e) Except to the extent caused by the gross negligence or willful misconduct of Sublandlord, its agents, contractors or employees, Subtenant shall indemnify Sublandlord, its owners, officers, agents and employees and save them harmless from and against all claims, actions, damages, liabilities and expenses in connection with loss of life, personal injury and/or damage to property caused by (i) the negligence or willful misconduct of the Subtenant, its agents, employees, contractors, invitees or licensees; or (ii) any failure on the part of Subtenant to perform its obligations under the Sublease.

(f) Except to the extent caused by the negligence or willful misconduct of Subtenant, its agents, contractors or employees, Sublandlord shall indemnify Subtenant, its owners, officers, agents and employees and save them harmless from and against all claims, actions, damages, liabilities and expenses in connection with loss of life, personal injury and/or damage to property caused by (i) the negligence or willful misconduct of the Sublandlord, its agents, employees, contractors, invitees or licensees; or (ii) any failure on the part of Sublandlord to perform its obligations under the Sublease.


21.	ESTOPPEL CERTIFICATES

Either party hereto (the requested party) agrees that from time to time upon not less than 10 business days prior notice by the other party (requesting party), the requested party or its duly authorized representative having knowledge of the following facts will deliver to the requesting party, or to such person or persons as the requesting party may designate, a statement in writing certifying (a) that this Sublease is unmodified and in full force and effect (or if there have been modifications, that the Sublease as modified is in full force and effect); (b) the date to which the Rent and other charges have been paid; (c) that to the best of the requested party's knowledge, the requesting party is not in default under any provision of this Sublease or if in default, the nature thereof in detail.


22.	SUBORDINATION

This Sublease shall be automatically subject and subordinate to the Prime Lease, any ground lease and to any mortgage or deed of trust thereon or on the fee simple interest in the Building or the land on which the Building is located. This Paragraph 22 shall be self-operative and no further instrument of subordination shall be required, it being understood that neither Prime Landlord nor Sublandlord shall be obligated to provide Subtenant with any non- disturbance agreement. To confirm such subordination, Subtenant shall execute within 10 business days after demand, or such shorter period as may be required under the Prime Lease, any reasonable certificate, agreement or instrument that Prime Landlord requests Subtenant to execute pursuant to the terms of the Prime Lease.


23.	CASUALTY AND CONDEMNATION

If the Prime Lease is terminated with respect to the Subleased Premises pursuant to the provisions of the Prime Lease, this Sublease shall automatically terminate at the same time and Subtenant shall have no claim against Sublandlord or Prime Landlord for the loss of its subleasehold interest or any of Subtenant's property. If the Prime Lease is not terminated with respect to the Subleased Premises upon the occurrence of a casualty or condemnation, the provisions of the Prime Lease with respect to casualty or condemnation shall apply to this Sublease and the Subleased Premises.


24.	CONSENT OR APPROVAL OF PRIME LANDLORD

If the consent or approval of Prime Landlord is required under the Prime Lease with respect to any matter relating to the Subleased Premises, Subtenant shall be required first to obtain the consent or approval of Sublandlord with respect thereto and, if Sublandlord grants such consent or approval, Sublandlord shall forward a request for consent or approval to the Prime Landlord, and Sublandlord shall use reasonable efforts to obtain such consent or approval. Sublandlord shall have no liability to Subtenant for the failure of Prime Landlord to give its consent.


25.	NOTICES

All notices given pursuant to the provisions of this Sublease shall be in writing, addressed to the party to whom notice is given and sent registered or certified mail, return receipt requested, in a postpaid envelope or by nationally recognized overnight delivery service as follows:

To Subtenant:

Prior to the Commencement Date:

Telenav, Inc. 950 DeGuigne Drive

Sunnyvale, California 94085

Attn: Michael Strambi, Chief Financial Officer

With copies to:

Telenav, Inc. 950 DeGuigne Drive

Sunnyvale, California 94085 Attn: Loren Hillberg, General Counsel

After the Commencement Date:

Telenav, Inc.

4655 Great America Parkway Santa Clara, California 95054

Attn: Michael Strambi, Chief Financial Officer

With copies to:

Telenav, Inc.

4655 Great America Parkway Santa Clara, California 95054 Attn: Loren Hillberg, General Counsel

To Sublandlord at the following address:

Avaya Inc.

Attn: Brian Bradley—Senior Manager 123730 Fair Lakes Circle Fairfax, VA 22033

and

Avaya Inc.

c/o Cushman Wakefield Attn: Lease Administration

12802 Tampa Oaks Blvd. Suite 330 Temple Terrace, FL 33637

With copies to: Avaya Inc.

c/o Cushman Wakefield Contract Manager—Real Estate 2C2277

211 Mount Airy Road

Basking Ridge, New Jersey 07920

It is understood and agreed that unless specifically modified by this Sublease, Sublandlord shall be entitled to the length of notice required to be given Prime Landlord under the Prime Lease plus five (5) days and shall be entitled to give Subtenant the amount of notice required to be given tenant under the Prime Lease less five (5) days. All notices shall be deemed given upon receipt or rejection.

Either party by written notice to the other may change or add persons and places where notices are to be sent or delivered.


26.	BROKERS

The parties warrant that they have had no dealings with any real estate broker or agent in connection with this Sublease, except Cushman & Wakefield (representing the Sublandlord) and Colliers International (representing the Subtenant) collectively (the “ Brokers ”). Each party covenants to pay, hold harmless and indemnify the other from and against any and all costs, expenses or liabilities for any compensation, commissions and charges claimed by any other broker or agent with respect to this Sublease or the negotiation thereof, based upon alleged dealings with the indemnifying party. Sublandlord agrees to pay the commissions of the Brokers in accordance with separate agreement(s) following Prime Landlord’s approval of this Sublease.


27.	SUBLANDLORD'S AND SUBTENANT'S POWER TO EXECUTE

Sublandlord (subject to Prime Landlord's consent) and Subtenant covenant, warrant and represent that they have full power and proper authority to execute this Sublease.


28.	TABLE OF CONTENTS - CAPTIONS

The Table of Contents and the captions appearing in this Sublease are inserted only as a matter of convenience and do not define, limit, construe or describe the scope or intent of the sections of this Sublease nor in any way affect this Sublease.


29.	CONSENT TO SUBLEASE BY PRIME LANDLORD

This Sublease shall not become operative until and unless the Prime Landlord has given to Sublandlord its consent hereto. Sublandlord shall not be responsible for Prime Landlord's failure to consent to this Sublease. Prime Landlord’s consent shall confirm that (i) Prime Landlord’s release of claims and waiver of subrogation in favor of Sublandlord as provided in Section 13.4 of the Prime Lease shall also be effective as between Prime Landlord and Subtenant for their mutual benefit, (ii) Subtenant shall be entitled to place signage on the Monument Sign (defined in Paragraph 37) as provided in Paragraph 37 and (iii) Subtenant shall be entitled to place roof-mounted HVAC and/or communications equipment on the roof of the Building as provided in Paragraph 38.


30.	ENTIRE AGREEMENT

This Sublease (which includes the Prime Lease and the Exhibits attached hereto) contains the entire agreement between the parties and all prior negotiations and agreements are merged into this Sublease. This Sublease may not be changed, modified, terminated or discharged, in whole or in part, nor any of its provisions waived except by a written instrument which (a) shall expressly refer to this Sublease and (b) shall be executed by the party against whom enforcement of the change, modification, termination, discharge or waiver shall be sought.


31.	HOLDING OVER

If Subtenant holds over after the Termination Date or the earlier termination of the Term of this Sublease without the express written consent of Sublandlord, Subtenant shall become a tenant of sufferance only, at a rental rate determined as follows: (i) if such holdover does not cause Sublandlord to hold over under the Prime Lease, then such rental rate shall be 150% of the Rent payable to Sublandlord for the immediately preceding calendar month, and (ii) if such holdover causes Sublandlord to hold over under the Prime Lease, then such rental rate shall be 100% of all holdover rent that Sublandlord is required to pay to Prime Landlord under the Prime Lease. Nothing in this Sublease to the contrary shall limit Sublandlord’s remedies hereunder or Sublandlord’s right to recover damages from Subtenant accruing to Sublandlord as tenant under the Prime Lease, in the event Subtenant holds over in the Subleased Premises after the expiration of the Term of this Sublease. If Subtenant fails to surrender the Subleased Premises to Sublandlord on or before the Termination Date, Subtenant shall indemnify and hold Sublandlord harmless from all loss or liability, including without limitation, any claim made by Prime Landlord or any successor tenant resulting from Subtenant’s failure to surrender the Subleased Premises and any reasonable attorneys’ fees and costs incurred by Sublandlord and Prime Landlord.


32.	RULES AND REGULATIONS

Subtenant shall comply with all rules and regulations provided to Subtenant regarding the Subleased Premises and the Building as may be prescribed by Sublandlord and Prime Landlord including without limitation, the rules and regulations set forth in the Prime Lease.


33.	GOVERNING LAW

The exercise, validity, construction, operation and effect of the terms and provisions of this Sublease shall be determined and enforced in accordance with the laws of the state where the Subleased Premises is located.


34.	NO AUTHORITY

The Subtenant has no authority to contact or make any agreement with the Prime Landlord about the Subleased Premises or the Prime Lease, unless agreed to by all the parties. No purported agreement between Prime Landlord and Subtenant shall be binding upon Sublandlord, and shall not act to increase or modify Sublandlord’s obligations or liabilities under the Prime Lease, unless and except Sublandlord has documented its agreement in a signed writing. The Subtenant may not pay rent or other charges to the Prime Landlord, but only to the Sublandlord, unless otherwise instructed in a written notice signed by Sublandlord. Notwithstanding anything to the contrary herein, if acceptable to the Prime Landlord, Subtenant may communicate directly with the Prime Landlord’s management agent with respect to day-to- day matters within the scope of services provided by Prime Landlord to, and for use and occupancy of the Subleased Premises under the terms of the Prime Lease, including, without limitation, after-hours service.


35.	SUCCESSORS

Unless otherwise stated, the Sublease is binding on all parties who lawfully succeed to the rights or take the place of the Sublandlord or the Subtenant.


36.	MISCELLANEOUS

(a) The headings of the articles and the numbers of the items in this Sublease are inserted as a matter of convenience to the parties and shall not affect the construction of this Sublease.

(b) The terms, conditions, covenants and provisions of this Sublease shall be deemed to be severable. If any clause or provision herein contained shall be adjudged to be invalid or unenforceable by a court of competent jurisdiction or by operation of any applicable law, it shall not affect the validity of any other clause or provision herein, but such other clauses or provisions shall remain in full force and effect. In addition, Sublandlord may pursue the relief or remedy sought in any invalid clause, by conforming such clause with the provisions of the statutes or the regulations of any governmental agency in such case made and provided as if the particular provisions of the applicable statutes or regulations were set forth herein at length.

(c) In all references herein to any parties, person, entities or corporations the use of any particular gender or the plural or singular number is intended to include the appropriate gender or number as the context of the within instrument may require. All the terms, covenants and conditions herein contained shall be for and shall inure to the benefit of and shall bind the parties hereto, and their respective heirs, executors, administrators, personal or legal representatives, successors and assigns.

(d) No provision of this Sublease shall be deemed to have been waived unless such waiver is in writing signed by the party charged with such waiver. A waiver by either party of any default, breach or failure of the other party under this Sublease shall not be construed as a waiver of any subsequent or different default, breach or failure.

(e) In the event Sublandlord or Subtenant is required or elects to take legal action against the other party to enforce provisions of this Sublease, then the prevailing party in such action shall be entitled to collect from the other party its costs and expenses incurred in connection with the legal action (including, without limitation, reasonable attorneys’ fees and court costs).


37.	SIGNAGE

Sublandlord, at Subtenant’s expense, will coordinate with the Prime Landlord to provide Subtenant a listing in the building Directory. Subtenant shall be permitted signage in the Sublandlord’s reception area at Sublandlord’s approval, and, if required under the Prime Lease, Prime Landlord’s approval. If obtained, Subtenant would bear all costs and expense of the approvals and installation. Subtenant shall, at its sole cost and expense, be required to remove such signage at the expiration or early termination of the Sublease and repair any damage caused by said removal. Subject to Sublandlord obtaining Prime Landlord’s approval, with Sublandlord making reasonable efforts to secure said approval, Subtenant shall also be entitled to place Subtenant’s name and/or logo on the Building’s existing monument sign along Great America Parkway (the “Monument Sign”) with the design and size of said signage being reasonably acceptable to Subtenant and Prime Landlord.


38.	SUBTENANT IMPROVEMENTS

Sublandlord shall provide Subtenant an allowance (the “ Allowance ”) of $15.00 per rentable square foot of the Subleased Premises (or $819,525) in connection with design, permitting and construction of the improvements to be constructed in the Subleased Premises pursuant to this paragraph of the Sublease and as described in the attached Exhibit C (the “ Subtenant Improvements ”). Prior to undertaking any Subtenant Improvements in the Subleased Premises, Subtenant shall submit to Sublandlord for its approval full working drawings (the “ Working Drawings ”) depicting all of the Subtenant Improvements which Subtenant desires to install in the Subleased Premises. All Working Drawings depicting the Subtenant Improvements to be constructed in or to the Subleased Premises shall be subject to approval by both Sublandlord and the Prime Landlord in accordance with the timeframes and process for reviewing alterations plans as set forth in Section 15.1 of the Prime Lease with both Sublandlord and Prime Landlord having the same rights to review such Working Drawings contemporaneously. The Subtenant Improvements shall be considered to be alterations and improvements and shall be constructed

(1) in a good and workmanlike manner, (2) in strict accordance with the terms and conditions of this Sublease and the Prime Lease, and (3) by a licensed general contractor designated by Subtenant approved in writing by Sublandlord.

Payment of the Subtenant Improvements from the Allowance shall be made by the Sublandlord within sixty (60) days after Subtenant’s application for payment submitted to Sublandlord. Such application shall be submitted upon completion of the Subtenant Improvements along with the

following; (a) invoices for design, architectural permit, costs and Miscellaneous Costs incurred by Subtenant; (b) partial lien waivers (or, with respect to the final Draw Request, final lien waivers) and releases of mechanic's and materialmen's liens from the general contractor, subcontractors and material suppliers providing work or services in or to the Subleased Premises.

Subtenant shall pay Sublandlord a fee to compensate Sublandlord for Sublandlord's review and approval of the plans and specifications for the Tenant Improvements, which fee shall not exceed

$2,500.

As part of the Subtenant Improvements that Subtenant may make to the Subleased Premises, Subtenant shall be entitled to install and maintain roof-mounted HVAC or communications equipment on the roof of the Building, subject to such reasonable requirements as may be imposed by the Prime Landlord and the Prime Landlord’s consent to this Sublease shall permit such installation and maintenance.


39.	TITLE AND POSSESSION

Sublandlord covenants, agrees and represents that, subject to the terms of the Prime Lease, it has full right and authority to enter into this Sublease for the full Term hereof, that, to the best of Sublandlord’s knowledge, Sublandlord is not in default beyond applicable cure periods under the Prime Lease and that Subtenant, subject to the provisions of the Prime Lease and upon paying the rents and other sums provided herein and upon performing the duties, covenants, agreements and obligations hereof and upon keeping and obeying all of the restrictions, conditions and provisions hereof, will have, hold and enjoy quiet possession of the Sublease Premises, free from claims of persons claiming by or through Sublandlord for the Term herein granted but subject to all of the duties, covenants, agreements, obligations, restrictions, conditions and provisions set forth or incorporated herein.


40.	FORCE MAJEURE

In the event Sublandlord or Subtenant shall be delayed, hindered or prevented from the performance of any act required hereunder, by reason of governmental restrictions, scarcity of labor or materials, delay in obtaining governmental approvals or permits, strikes, fire, or any other reasons beyond its reasonable control (“ Force Majeure ”), the performance of such act shall be excused for the period of delay, and the period for performance of any such act shall be extended as necessary to complete performance after the delay period.

[Signature Page Follows.]

IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be properly executed as of the day and year first above written.

SUBLANDLORD:

AVAYA INC.

By: /s/ Jim Charico

Name: Jim Charico

Title: EVP, Business Operations

SUBTENANT:

TELENAV, INC.

By: /s/ Michael Strambi

Name: Michael Strambi

Title: Chief Financial Officer

EXHIBIT A

Prime Lease

LEASE AGREEMENT

By and Between

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,

a New Jersey corporation

("Landlord”)

and

AVAYA INC.,

a Delaware corporation

("Tenant")

August 25, 2011

4655 Great America Parkway

Santa Clara, California

TABLE OF CONTENTS

ARTICLE 1. PREMISES; COMMON AREAS 3

ARTICLE 2. TERM AND CONDITION OF PREMISES 5

ARTICLE 3. USE, NUISANCE, OR HAZARD 6

ARTICLE4. RENT 7

ARTICLE 5. RENT ADJUSTMENT 8

ARTICLE 6. SERVICES TO BE PROVIDED BY LANDLORD 15

ARTICLE 7. REPAIRS AND MAINTENANCE BY LANDLORD 17

ARTICLE 8. REPAIRS AND CARE OF PROJECT BY TENANT 18

ARTICLE 9. TENANT'S EQUIPMENT AND INSTALLATIONS 18

ARTICLE 10. FORCE MAJEURE 19

ARTICLE 11. CONSTRUCTION, MECHANICS' AND MATERIALMAN'S LIENS 20

ARTICLE 12. [INTENTIONALLY OMITTED] 20

ARTICLE 13. INSURANCE 20

ARTICLE 14. QUIET ENJOYMENT 22

ARTICLE 15. ALTERATIONS 22

ARTICLE 16. FURNITURE, FIXTURES, AND PERSONAL PROPERTY 24

ARTICLE 17. PERSONAL PROPERTY AND OTHER TAXES 25

ARTICLE 18. ASSIGNMENT AND SUBLETTING 25

ARTICLE 19. DAMAGE OR DESTRUCTION 30

ARTICLE 20. CONDEMNATION 33

ARTICLE 21. HOLD HARMLESS 34

ARTICLE 22. DEFAULT BY TENANT 35

ARTICLE 23. INTENTIONALLY OMITTED 39

ARTICLE 24. [INTENTIONALLY OMITTED] 39

ARTICLE 25. ATTORNEYS' FEES 39

ARTICLE 26. NON-WAIVER 40

ARTICLE 27. RULES AND REGULATIONS 40

ARTICLE 28. ASSIGNMENT BY LANDLORD 41

ARTICLE 29. LIABILITY OF LANDLORD 41

ARTICLE 30. SUBORDINATION AND ATTORNMENT 41

ARTICLE 31. HOLDING OVER 42

ARTICLE 32. SIGNS 43

ARTICLE 33. HAZARDOUS SUBSTANCES 45

ARTICLE 34. COMPLIANCE WITH LAWS AND OTHER REGULATIONS 47

ARTICLE 35. SEVERABILITY 48

ARTICLE 36. NOTICES 48

ARTICLE 37. OBLIGATIONS OF, SUCCESSORS, PLURALITY, GENDER 49

ARTICLE 38. ENTIRE AGREEMENT 49

ARTICLE 39. CAPTIONS 49

ARTICLE 40. CHANGES 50

ARTICLE 41. AUTHORITY 50

ARTICLE 42. BROKERAGE 50

ARTICLE 43. EXHIBITS 50

ARTICLE 44. APPURTENANCES 51

ARTICLE 45. PREJUDGMENT REMEDY, REDEMPTION, COUNTERCLAIM, AND

JURY 51

ARTICLE 46. RECORDING 51

ARTICLE 47. MORTGAGEE PROTECTION 51

ARTICLE 48. OTHER LANDLORD CONSTRUCTION 52

ARTICLE 49. PARKING 52

ARTICLE 50. ELECTRICAL CAPACITY 53

ARTICLE 51. OPTION TO EXTEND LEASE 53

ARTICLE 52. TELECOMMUNICATIONS LINES AND EQUIPMENT 56

ARTICLE 53. ERISA 58

ARTICLE 54. EMERGENCY GENERATORS 59

ARTICLE 55. TENANT'S RIGHT OF FIRST REFUSAL 60

ARTICLE 56. LETTER OF CREDIT 61

ARTICLE 57. ALLOWANCE 66

LEASE AGREEMENT

THIS LEASE AGREEMENT, (this "Lease") is made and entered into as of August 25, 2011 by and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation ("Landlord"), and AVAYA INC., a Delaware corporation (''Tenant").

BASIC LEASE INFORMATION

Tenant: AVAYA INC., a Delaware corporation

Premises: Suite 100 on the first floor of the Building, containing approximately 41,900 square feet of rentable area, Suite 200 on the second floor of the Building, containing approximately 52,268 square feet of rentable area, Suite 300 on the third floor of the Building, containing approximately 54,635 square feet of rentable area, Suite 400 on the fourth floor of the Building, containing approximately 53,717 square feet of rentable area and Suite 500 on the fifth floor of the Building, containing approximately 54,635 square feet of rentable area. The total rentable area of the Premises is 257, 155 square feet.

Building: The Building commonly known as 4655 Great America Parkway, Santa Clara, California. The rentable area of the Building is 310,873 square feet.

Base Rent:



Period	Monthly Base Rent
06/01/12 to 7/31/12	Abated*
08/01/12 to 12/31/12	$460,995.75*
01/01/13 to 05/31/13	$	578,598.75
06/01/13 to 05/31/14	$	595,956.71
06/01/14 to 05/31/15	$613,835.41
06/01/15 to 05/31/16	$	632,250.48
06/01/16 to 05/31/17	$	651,217.99
06/01/17 to 05/31/18	$	670,754.53
06/01/18 to 05/31/19	$	690,877.17
06/01/19 to 05/31/20	$	711,603.48
06/01/20 to 05/31/21	$	732,951.59

As an inducement to Tenant entering into this Lease, Base Rent in the amount of $578,598.75 per month shall be abated for the period from June 1, 2012, through July 31, 2012, and Base Rent in the amount of $117,603.00 per month shall be abated for the period from August 1, 2012, through December 31, 2012. The rental amounts stated in the table above reflect those Base Rent abatements. During such abatement period, Tenant shall still be responsible for the payment of all of its other monetary obligations under the Lease.

Letter of Credit Required Amount: $2,500,000.00, subject to reduction as provided in Article 56.

Rent Payable Upon Execution: $460,995.75.

Tenant's Building Percentage: 82.72%; provided that as an inducement to Tenant entering into this Lease, Landlord agrees to abate Tenant's Share of Operating Expenses and Taxes with respect to the portion of the Premises on the second floor of the Building for the period from June 1, 2012, through December 31, 2012, and, accordingly, during that period Tenant's Building Percentage shall be deemed to be 65.91%.

Tenant's Project Percentage: 40.59%; provided that as an inducement to Tenant entering into this Lease, Landlord agrees to abate Tenant's Share of Operating Expenses and Taxes with respect to the portion of the Premises on the second floor of the Building for the period from June 1, 2012, through December 31, 2012, and, accordingly, during that period Tenant's Project Percentage shall be deemed to be 32.23%.

Commencement Date: June 1, 2012.

Expiration Date: May 31, 2021.

Landlord's Address:

c/o The Prudential Insurance Company of America

4 Embarcadero Center, 27th Floor

San Francisco, CA 94111

Attn: PRISA II Asset Manager

With a copy by the same method to:

c/o The Prudential Insurance Company of America

8 Campus Drive, 4th Floor

Parsippany, New Jersey 07054

Attention: Greg Shanklin, Esquire

With a copy by the same method to:

Harvest Properties, Inc.

6475 Christie Avenue, Suite 550

Emeryville, California 94608

Attention: Joss Hanna

Address for rental payment:

Payments via FedEx/UPS/Courier:

The Prudential Insurance Company of America

c/o Harvest Properties, Inc.

6475 Christie Avenue, Suite 550

Emeryville, California 94608

Tenant's Address:

Avaya Inc.

211 Mount Airy Road

Basking Ridge, NJ 07920

Attention: Real Estate Paralegal

With a copy to:

Newmark Knight Frank

125 Park Avenue

12th floor

New York, NY 10017

Attention: Lease Administration

Landlord's Broker: CB Richard Ellis, Inc.

Tenant's Broker: Newmark Knight Frank.

Address for rental payment:

Payments via FedEx/UPS/Courier:

The Prudential Insurance Company of America c/o Harvest Properties, Inc.

6475 Christie Avenue, Suite 550

Emeryville, California 94608

Tenant's Address:

Avaya Inc.

211 Mount Airy Road
Basking Ridge, NJ 07920

Attention: Real Estate Paralegal

With a copy to:

Newmark Knight Frank
125 Park Avenue
12 ^th floor

New York, NY 10017
Attention: Lease Administration

Landlord's Broker: CB Richard Ellis, Inc. Tenant's Broker: Newmark Knight Frank.

Maximum Parking Allocation: eight hundred forty-eight (848), which is based on a parking ratio of 3.3 non-exclusive parking spaces per one thousand (1,000) square feet of rentable space in the Premises.

The Basic Lease Information is incorporated into and made part of this Lease. Each reference in this Lease to any Basic Lease Information shall mean the applicable information set forth in the Basic Lease Information, except that in the event of any conflict between an item in the Basic Lease Information and this Lease, this Lease shall control. Additional defined terms used in the Basic Lease Information shall have the meanings given those terms in this Lease.

ARTICLE 1.
PREMISES; COMMON AREAS

1.1 Subject to all of the terms and conditions hereinafter set forth, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Premises. The property shown on Exhibit A to this Lease and all improvements thereon and appurtenances on that land thereto, including, but not limited to, the Building, an additional office building ("the "Adjacent Building"), a cafeteria/auditorium/meeting room building (the "Amenities Facility"), access roadways, and all other related areas, shall be collectively hereinafter referred to as the "Project." The parties hereto hereby acknowledge that the purpose of Exhibit A and Exhibit B are to show the approximate location of the Premises in the Building and the general layout of the Project and such Exhibits are not meant to constitute an agreement, representation or warranty as to the construction of the Premises, the Buildings or the Project, the precise area of the Premises, the Project Buildings or the Project or the specific location of the Project Buildings, "Common Areas," as that term is defined in Section 1.3 , below, or the elements thereof or of the accessways to the Premises, or the Project.

1.2 For purposes of this Lease, (1) "rentable area" and "usable area" shall be calculated pursuant to the Standard Method for Measuring Floor Area in Office Buildings (ANSJJBOMA Z65.1, 1996); (2) "rentable square feet" and "rentable footage" shall have the same meaning as the term "rentable area;" and (3) "usable square feet" and "usable square footage" shall have the same meaning as the term "usable area." Notwithstanding anything to the contrary in this Lease, the recital of the rentable area herein above set forth is for descriptive purposes only.

Tenant shall have no right to terminate this Lease or receive any adjustment or rebate of any Base Rent or Additional Rent (as hereinafter defined) payable hereunder if said recital is incorrect. Tenant has inspected the Premises and is fully familiar with the scope and size thereof and agrees to pay the full Base Rent and Additional Rent set forth herein in consideration for the use and occupancy of said space, regardless of the actual number of square feet contained therein.

1.3 Tenant shall have the non-exclusive right to use in common with other tenants in the Project, and subject to the rules and regulations referred to in Article 27 of this Lease, those portions of the Project which are provided, from time to time, for use in common by Landlord, Tenant and any other tenants of the Project (such areas, together with such other portions of the Project designated by Landlord, in its discretion, including certain areas designated for the exclusive use of certain tenants, or to be shared by Landlord and certain tenants, are collectively referred to herein as the "Common Areas"). The Common Areas shall consist of the "Project Common Areas" and the "Building Common Areas." The term "Project Common Areas," as used in this Lease, shall mean the portion of the Project reasonably designated as such by Landlord. The term "Building Common Areas," as used in this Lease, shall mean the portions of the Common Areas located within the Building reasonably designated as such by Landlord. The manner in which the Common Areas are maintained and operated shall be at the reasonable discretion of Landlord and the use thereof shall be subject to such rules, regulations and restrictions as Landlord may make from time to time. Landlord reserves the right to close temporarily, make alterations or additions to, or change the location of elements of the Project and the Common Areas. Subject to "Applicable Laws," as that term is defined in Section 5.1(a) of this Lease, except when and where Tenant's right of access is specifically excluded in this Lease, and except in the event of an emergency, Tenant shall have the right of access to the Premises, the Building, and the parking facilities servicing the Building twenty four (24) hours per day, seven (7) days per week during the "Term," as that term is defined in Section 2.1 , below. Use of the Amenities Facility shall be subject to such rules and regulations as Landlord may establish from time to time. The square footage of the Amenities Facility shall be included in the load factor to be used to determine the rentable area of the Project, but shall not be separately measured and added to the rentable area of the Project for any lease for space at the Project. The cost to maintain the Amenities Facility shall be included in Operating Expenses for the Project.

ARTICLE2.

TERM AND CONDITION OF PREMISES

2.1 The term of this Lease (the "Term") shall commence on the Commencement Date and end on the Expiration Date, unless sooner terminated (the "Termination Date") as hereinafter provided. The Commencement Date of this Lease and the obligation of Tenant to pay Base Rent, Additional Rent and all other charges hereunder shall not be delayed or postponed by reason of any delay by Tenant in performing changes or alteration in the Premises not required to be performed by Landlord.

2.2 Tenant acknowledges that Tenant will be in possession of a portion of the Premises prior to the Commencement Date pursuant to a sublease dated December 18, 2009 (the "Nortel Sublease") with Nortel Networks, Inc. Landlord shall deliver possession of the portion of

the Premises not covered b the Nortel Sublease, which is approximately 50% of the 2 ^nd , 50% of the 3 ^rd and 50% of the 4 ^th floor of the Building (the "Partial Premises") no later than the Commencement Date. Tenant acknowledges that Landlord has no obligation and has made no promise to alter, remodel, improve or repair the Premises, or any part thereof, or to repair, bring into compliance with applicable laws, or improve any condition existing in the Premises except as provided in Section 2.3, below. Any improvements or personal property located in the Premises are delivered without any representation or warranty from Landlord, either express or implied, of any kind, including without limitation title, merchantability or suitability for a particular purpose. The taking of possession of the Premises by Tenant shall be conclusive evidence that the Premises and the Building were in good and satisfactory condition at the time possession was taken by Tenant. Neither Landlord nor Landlord's agents have made any representations or promises with respect to the condition of the Building, the Premises, the land upon which the Building is constructed, or any other matter or thing affecting or related to the Building or the Premises, except as herein expressly set forth, and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in this Lease. If Landlord does not deliver possession of the portion of the Premises not covered by the Nortel Sublease to Tenant on or before the Commencement Date, Landlord shall not be subject to any liability nor shall the validity of this Lease nor the obligations of Tenant hereunder be affected. Landlord shall deliver the Partial Premises to Tenant "broom-clean" provided that Landlord shall have no obligation to remove the existing workstations or furniture in the Partial Premises. Notwithstanding the foregoing, if Landlord fails to deliver any portion of the Partial Premises to Tenant by the Outside Delivery Date (as defined below), then Tenant shall be entitled to a rent credit equal to one day's Base Rent for the applicable portion of the Partial Premises not delivered for each one full day in the period from the Outside Delivery Date until the date upon which Landlord delivers possession of the applicable portion of the Partial Premises to Tenant. The term "Outside Delivery Date" initially means June 7, 2012, which shall be extended by one day for every one day of delay in delivery of the applicable portion of the Partial Premises caused by Tenant

2.3 By the date which is ninety (90) days after the Commencement Date (the "Surrender Date"), Tenant shall vacate and surrender the 6th floor in the same condition which Tenant is required to surrender the 6th floor at the end of the term of the Nortel Sublease pursuant to the Nortel Sublease, and Tenant's failure to do so shall be deemed a holdover with respect to the 6th floor and subject to the provisions of Article 31 below in connection therewith. In the event Landlord does not deliver the Partial Premises by the Outside Delivery Date, the Surrender Date shall be extended by one full day for each one full day in the period from the Outside Delivery Date until the date upon which Landlord delivers possession of the Partial Premises to Tenant.

2.4 Within six (6) months after the Surrender Date, Landlord, at Landlord's sole cost and expense, shall (a) demise the 6th floor of the Building so that it is separate from the Premises (including but not limited to installation of any required submeters at Landlord's cost and expense) and (b) perform work on the first floor to create a multi-tenant lobby area using building standard materials.. Landlord shall have the right to enter the Premises for purposes of performing such work and Tenant agrees to cooperate with Landlord to accommodate Landlord's contractor as necessary for the performance and completion of such work. Landlord shall use commercially

reasonable effort not to unreasonably interfere with the business of Tenant during the performance of such work.

ARTICLE3.

USE, NUISANCE, OR HAZARD

3.1 The Premises shall be used and occupied by Tenant solely for general office and lab purposes and for no other purposes without the prior written consent of Landlord.

3.2 Tenant shall not use, occupy, or permit the use or occupancy of the Premises for any purpose which Landlord, in its reasonable discretion, deems to be illegal, immoral, or dangerous; permit any public or private nuisance; do or permit any act or thing which may disturb the quiet enjoyment of any other tenant of the Project; keep any substance or carry on or permit any operation which might introduce offensive odors or conditions into other portions of the Project, use any apparatus which might make undue noise or set up vibrations in or about the Project; permit anything to be done which would increase the premiums paid by Landlord for fire and extended coverage insurance on the Project or its contents or cause a cancellation of any insurance policy covering the Project or any part thereof or any of its contents; or permit anything to be done which is prohibited by or which shall in any way conflict with any law, statute, ordinance, or governmental rule, regulation or covenants, conditions and restrictions affecting the Project, including without limitation the CC&R's (as defined below) now or hereinafter in force. Should Tenant do any of the foregoing without the prior written consent of Landlord, and the same is not cured within ten (10) business days after notice from Landlord (which ten (10) business day period shall be subject to extension if the nature of the breach is such that it is not possible to cure the same within such ten (10) business day period so long as the Tenant commences the cure of such breach within such ten (10) day period and diligently prosecutes the same to completion) it shall constitute an Event of Default (as hereinafter defined) and shall enable Landlord to resort to any of its remedies hereunder.

3.3 The ownership, operation, maintenance and use of the Project shall be subject to certain conditions and restrictions contained in an instrument ("CC&R's") recorded or to be recorded against title to the Project. The current form of the CC&R's is attached to this Lease as Exhibit I . Tenant agrees that regardless of when those CC&R's are so recorded, this Lease and all provisions hereof shall be subject and subordinate thereto. Accordingly, as a consequence of that subordination, during any period in which the entire Project is not owned by Landlord, (a) the portion of Operating Expenses and Taxes (each as defined below) for the Common Areas shall be allocated among the owners of the Project as provided in the CC&R's, and (b) the CC&R's shall govern the maintenance and insuring of the portions of the Project not owned by Landlord. Tenant shall, promptly upon request of Landlord, sign all documents reasonably required to carry out the foregoing into effect.

ARTICLE4.

RENT

4.1 Tenant hereby agrees to pay Landlord the Base Rent. For purposes of Rent adjustment under the Lease, the number of months is measured from the first day of the calendar month in which the Commencement Date falls. Each monthly installment (the "Monthly Rent") shall be payable by check or by money order on or before the first day of each calendar month. In addition to the Base Rent, Tenant also agrees to pay Tenant's Share of Operating Expenses and Taxes (each as hereinafter defined), and any and all other sums of money as shall become due and payable by Tenant as hereinafter set forth, all of which shall constitute additional rent under this Lease (the "Additional Rent"). Landlord expressly reserves the right to apply any payment received to Base Rent or any other items of Rent that are not paid by Tenant. The Monthly Rent and the Additional Rent are sometimes hereinafter collectively called "Rent" and shall be paid when due in lawful money of the United States without demand, deduction, abatement, or offset to the addresses for the rental payment set forth in the Basic Lease Information, or as Landlord may designate from time to time.

4.2 In the event any Monthly or Additional Rent or other amount payable by Tenant hereunder is not paid within five (5) days after its due date, Tenant shall pay to Landlord a late charge (the "Late Charge"), as Additional Rent, in an amount of five percent (5%) of the amount of such late payment. Failure to pay any Late Charge shall be deemed a Monetary Default (as hereinafter defined). Provision for the Late Charge shall be in addition to all other rights and remedies available to Landlord hereunder, at law or in equity, and shall not be construed as liquidated damages or limiting Landlord's remedies in any manner. Failure to charge or collect such Late Charge in connection with any one (1) or more such late payments shall not constitute a waiver of Landlord's right to charge and collect such Late Charges in connection with any other similar or like late payments.

4.3 Simultaneously with the execution hereof, Tenant shall deliver to Landlord the Rent Payable on Execution as payment of the first installment of Monthly Rent due hereunder.

4.4 If the Term commences on a date other than the first day of a calendar month or expires or terminates on a date other than the last day of a calendar month, the Rent for any such partial month shall be prorated to the actual number of days in such partial month.

4.5 All Rents and any other amount payable by Tenant to Landlord hereunder, if not paid when due pursuant to Section 4.2 above, shall bear interest from the date due until paid at a rate equal to the prime commercial rate established from time to time by Bank of America, plus four percent (4%) per annum; but not in excess of the maximum legal rate permitted by law. Failure to charge or collect such interest in connection with any one (1) or more delinquent payments shall not constitute a waiver of Landlord's right to charge and collect such interest in connection with any other or similar or like delinquent payments.

4.6 If Tenant fails to make when due two (2) consecutive payments of Monthly Rent or makes two (2) consecutive payments of Monthly Rent which are returned to Landlord by Tenant's financial institution for insufficient funds, Landlord may require, by giving written notice

to Tenant, that all future payments of Rent shall be made in cashier's check or by money order. The foregoing is in addition to any other remedy of Landlord hereunder, at law or in equity.

ARTICLE 5.
RENT ADJUSTMENT

5.1 Definitions.

(a) " Operating Expenses ", as said term is used herein, shall mean all expenses, costs, and disbursements of every kind or nature which Landlord shall pay or become obligated to pay because of or in connection with the ownership, operation, management, security, repair, restoration, replacement, or maintenance of the Project, or any portion thereof. Operating Expenses shall be computed in accordance with generally accepted real estate practices, consistently applied, and shall include, but not be limited to, the items as listed below:

(i) Wages, salaries, other compensation and any and all taxes, insurance and benefits of, the Building manager and of all other persons engaged in the operation, maintenance and security of the Project;

(ii) Payments under any equipment rental agreements or management agreements, including without limitation the cost of any actual or charged management fee and all expenses for the Project management office including rent, office supplies, and materials therefor;

(iii) Costs of all supplies, equipment, materials, and tools and amortization (including interest on the unamortized cost) of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Project, or any portion thereof;

(iv) All costs incurred in connection with the operation, maintenance, and repair of the Project including without limitation, the following: (A) the cost of operation, repair, maintenance and replacements of all systems and equipment and components thereof of the Project; (B) the cost of janitorial, alarm, security and other services, replacement of wall and floor coverings, ceiling tiles and fixtures in common areas, maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (C) the cost of licenses, certificates, permits and inspections and the cost of contesting any governmental enactments which are reasonably anticipated by Landlord to increase Operating Expenses, and the cost incurred in connection with a transportation system management program or similar program; (D) the cost of landscaping, decorative lighting, and relamping, the cost of maintaining fountains, sculptures, bridges; and (E) all reasonable costs, fees, charges or assessments imposed by, or resulting from any mandate imposed on Landlord by, any federal, state or local government for fire and police protection,

trash removal, community services, or other services which do not constitute "Taxes" as that term is defined below.

(v) The cost of supplying all utilities, the cost of operating, maintaining, repairing, replacing, renovating and managing the utility systems, mechanical systems, sanitary, storm drainage systems, communication systems and escalator and elevator systems, and the cost of supplies, tools, and equipment and maintenance and service contracts in connection therewith.

(vi) The cost of all insurance carried by Landlord in connection with the Project as reasonably determined by Landlord, including without limitation commercial general liability insurance, physical damage insurance covering damage or other loss caused by fire, earthquake, flood or other water damage, explosion, vandalism and malicious mischief, theft or other casualty, rental interruption insurance and such insurance as may be required by any lessor under any present or future ground or underlying lease of the Building or Project or any holder of a mortgage, deed of trust or other encumbrance now or hereafter in force against the Building or Project or any portion thereof, and any deductibles payable thereunder; including, without limitation, Landlord's cost of any self insurance deductible or retention;

(vii) Capital improvements made to or capital assets acquired for the Project, or any portion thereof, after the Commencement Date that (1) are intended to reduce Operating Expenses or (2) are necessary for the health, safety and/or security of the Project, its occupants and visitors and are deemed advisable and the reasonable judgment of Landlord or (3) are required under any and all applicable laws, statutes, codes, ordinances, orders, rules, regulations, conditions of approval and requirements of all federal, state, county, municipal and governmental authorities and all administrative or judicial orders or decrees and all permits, licenses, approvals and other entitlements issued by governmental entities, and rules of common law, relating to or affecting the Project, the Premises or the Building or the use or operation thereof, whether now existing or hereafter enacted, including, without limitation, the Americans with Disabilities Act of 1990, 42 USC 12111 et seq. (the "ADA") as the same may be amended from time to time, all Environmental Laws (as hereinafter defined), and any CC&R's, or any corporation, committee or association formed in connection therewith, or any supplement thereto recorded in any official or public records with respect to the Project or any portion thereof (collectively, "Applicable Laws"), which capital costs, or an allocable portion thereof, shall be amortized over the period reasonably determined by Landlord with interest on the unamortized balance at ten percent ( 10%) per annum;

(viii) fees, charges and other costs, including management fees (or amounts in lieu thereof), consulting fees, legal fees, and accounting fees, of all contractors, engineers, consultants and other persons engaged by Landlord or

otherwise incurred by or charged by Landlord in connection with the management, operation, maintenance and repair of the Buildings and the Project; and

(ix) payments, fees or charges under the CC&R's and any easement, license, operating agreement, declaration, restricted covenant, or instrument pertaining to the sharing of costs by the Project, or any portion thereof.

Expressly excluded from Operating Expenses are the following items:

(x) Advertising and leasing commissions;

(xi) Repairs and restoration paid for by the proceeds of any insurance policies or amounts otherwise reimbursed to Landlord or paid by any other source (other than by tenants paying their share of Operating Expenses);

(xii) Principal, interest, and other costs directly or indirectly related to financing the Project or ground lease rental or depreciation;

(xiii) The cost of special services to tenants (including Tenant) for which a special charge is made;

(xiv) The costs of repair of casualty damage or for restoration following condemnation to the extent covered by insurance proceeds or condemnation awards;

(xv) The costs of any capital expenditures except as expressly permitted to be included in Operating Expenses as provided under clauses (vi), and (vii) above;

(xvi) The costs, including permit, license and inspection costs and supervision fees, incurred with respect to the installation of tenant improvements within the Project or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space within the Project or promotional or other costs in order to market space to potential tenants;

(xvii) The legal fees and related expenses and legal costs incurred by Landlord (together with any damages awarded against Landlord) due to the violation by Landlord or any tenant of the terms and conditions of any lease of space in the Project;

(xviii) Costs incurred: (x) to comply with Applicable Laws with respect to any Hazardous Materials (as defined below) which were in existence in, on, under or about the Project (or any portion thereof) prior to the Commencement Date, and were of such a nature that a federal, state or municipal governmental or quasi-governmental authority, if it had then had knowledge of the presence of such

Hazardous Materials, in the state, and under the conditions that they then existed in, on, under or about the Project, would have then required the removal, remediation or other action with respect thereto; and/or (y) with respect to Hazardous Materials which are disposed of or otherwise introduced into, on, under or about the Project after the date hereof by Landlord or Landlord's agents or employees and are of such a nature, at time of disposition or introduction, that a federal, state or municipal governmental or quasi governmental authority, if it had then had knowledge of the presence of such Hazardous Materials, in the state, and under the conditions, that they then existed in, on, under or about the Project, would have then required the removal, remediation or other action with respect thereto; provided, however, Operating Expenses shall include costs incurred in connection with the clean-up, remediation, monitoring, management and administration of (and defense of claims related to) the presence of (1) Hazardous Materials used by Landlord (provided such use is not negligent and is in compliance with Applicable Laws) in connection with the operation, repair and maintenance of the Project to perform Landlord's obligations under this Lease (such as, without limitation, fuel oil for generators, cleaning solvents, and lubricants) and which are customarily found or used in Comparable Buildings and (2) Hazardous Materials created, released or placed in the Premises, Building or the Project by Tenant (or Tenant's affiliates or their tenants, contractors, employees or agents) prior to or after the Commencement Date;

(xix) The attorneys' fees in connection with the negotiation and preparation of letters, deal memos, letters of intent, leases, subleases and/or assignments, space planning costs, and other costs and expenses incurred in connection with lease, sublease and/or assignment negotiations and transactions with present or prospective tenants or other occupants of the Project;

(xx) The expenses in connection with services or other benefits which are not available to Tenant;

(xxi) The overhead and profit paid to Landlord or to subsidiaries or affiliates of Landlord for goods and/or services in the Project to the extent the same exceeds the costs of such goods and/or services rendered by qualified, unaffiliated third parties on a competitive basis;

(xxii) The costs arising from Landlord’s charitable or political contributions;

(xxiii) The costs (other than ordinary maintenance and insurance) for sculpture, paintings and other objects of art;

(xxiv) The interest and penalties resulting from Landlord's failure to pay any items of Operating Expense when due;

(xxv) The Landlord's general corporate overhead and general and administrative expenses, costs of entertainment, dining, automobiles or travel for Landlord's employees, and costs associated with the operation of the business of the partnership or entity which constitutes Landlord as the same are distinguished from the costs of the operation of the Project, including partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee, costs of selling, syndicating, financing, mortgaging or hypothecating any of Landlord's interest in the Project, costs of any disputes between Landlord and its employees (if any) not engaged in the operation of the Project, disputes of Landlord with management, or outside fees paid in connection with disputes with other Project tenants or occupants (except to the extent such dispute is based on Landlord's good faith efforts to benefit Tenant or meet Landlord's obligations under this Lease);

(xxvi) The costs arising from the gross negligence or willful misconduct of Landlord;

(xxvii) The management and engineering office rental to the extent such rental exceeds the fair market rental for such space or the rentable area of those offices exceeds 1,000 square feet in the aggregate;

(xxviii) The costs of correction of latent defects in the Project to the extent covered by warranties; and

(xxix) The costs of Landlord's membership in professional organizations (such as, by way of example and without limitation, BOMA) in excess of $2,500.00 per year.

(b) " Taxes " shall mean all ad valorem taxes, personal property taxes, and all other taxes, assessments, embellishments, use and occupancy taxes, transit taxes, water, sewer and pure water charges not included in Section 5.l.(a)(v) above, excises, levies, license fees or taxes, and all other similar charges, levies, penalties, or taxes, if any, which are levied, assessed, or imposed, by any Federal, State, county, or municipal authority, whether by taxing districts or authorities presently in existence or by others subsequently created, upon, or due and payable in connection with, or a lien upon, all or any portion of the tax parcel on which the Building is located, or facilities used in connection therewith, and rentals or receipts therefrom and all taxes of whatsoever nature that are imposed in substitution for or in lieu of any of the taxes, assessments, or other charges included in its definition of Taxes, and any costs and expenses of contesting the validity of same.

(d) " Tenant's Share Percentages " shall mean Tenant's percentage of the Operating Expenses applicable to the following categories: (i) Operating Expenses incurred for the Building, ("Tenant's Building Percentage"), and (ii) Operating Expenses incurred

for the Project Common Areas, excluding the Building and the Adjacent Building ("Tenant's Project Percentage"). Tenant's Share Percentages shall be calculated as follows: Tenant's Building Percentage shall be calculated by dividing the number of rentable square feet of the Premises by the total number of rentable square feet in the Building; and Tenant's Project Percentage shall be calculated by dividing the number of rentable square feet of the Premises by the total number of rentable square feet of all buildings in the Project. Consequently, any reference in this Lease to "Tenant's Share Percentage" shall mean and refer to Tenant's Building Percentage or Tenant's Project Percentage, as applicable.

(e) " Tenant's Tax Percentage " shall mean the percentage determined by dividing the Rentable Area of the Premises by the total Rentable Area of all buildings on the same tax parcel on which the Building is located.

(f) “ Market Area ” shall mean the City of Santa Clara, California (the “City”).

(g) " Comparable Buildings " shall mean comparable Class "A" office use buildings owned by institutions in the Market Area.

5.2 Tenant shall pay to Landlord, as Additional Rent, Tenant's Share (as hereinafter defined) of the Operating Expenses applicable to each category of Tenant's Share Percentage. "Tenant's Share" shall be determined by multiplying Operating Expenses applicable to each category of Tenant's Share Percentage for any Lease Year or pro rata portion thereof, by the applicable Tenant's Share Percentage. Landlord shall, in advance of each Lease Year, estimate what Tenant's Share will be for each category for such Lease Year based, in part, on Landlord's operating budget for such Lease Year, and Tenant shall pay Tenant's Share as so estimated each month (the "Monthly Escalation Payments"). The Monthly Escalation Payments shall be due and payable at the same time and in the same manner as the Monthly Rent. Landlord shall not include an Operating Expense in more than one category of Tenant's Share Percentage.

5.3 Landlord shall, within one hundred fifty (150) days after the end of each Lease Year, or as soon thereafter as reasonably possible, provide Tenant with a written statement of the actual Operating Expenses incurred during such Lease Year for the Project and such statement shall set forth Tenant's Share of such Operating Expenses. Tenant shall pay Landlord, as Additional Rent, the difference between Tenant's Share of Operating Expenses and the amount of Monthly Escalation Payments made by Tenant attributable to said Lease Year, such payment to be made within thirty (30) days of the date of Tenant's receipt of said statement (except as provided in Section 5.4 below); similarly, Tenant shall receive a credit if Tenant's Share is less than the amount of Monthly Escalation Payments collected by Landlord during said Lease Year, such credit to be applied to future Monthly Escalation Payments to become due hereunder. If utilities, janitorial services or any other components of Operating Expenses increase during any Lease Year, Landlord may revise Monthly Escalation Payments due during such Lease Year by giving Tenant written notice to that effect; and thereafter, Tenant shall pay, in each of the remaining months of such Lease Year, a sum equal to the amount of the revised difference in Operating Expenses multiplied by Tenant's Building Percentage divided by the number of months remaining in such Lease Year.

5.4 If, within sixty (60) days following Tenant's receipt of the Operating Expense statement or Taxes statement, neither party hereto delivers to the other party a notice referring in reasonable detail to one (1) or more errors in such statement, it shall be deemed conclusively that the information set forth in such statement(s) is correct. Tenant shall, however, be entitled to conduct or require an audit to be conducted, provided that (a) not more than one (1) such audit may be conducted during any Lease Year of the Term, (b) the records for each Lease Year may be audited only once, (c) such audit is commenced within sixty (60) days following Tenant's receipt of the applicable statement, and (d) such audit is completed and a copy thereof is delivered to Landlord within one hundred eighty (180) days following Tenant's receipt of the applicable statement. If Landlord responds to any such audit with an explanation of any issues raised in the audit, such issues shall be deemed resolved unless Tenant responds to Landlord with further written objections within thirty (30) days after receipt of Landlord's response to the audit. In no event shall payment of Rent ever be contingent upon the performance of such audit. For purposes of any audit, Tenant or Tenant's duly authorized representative, at Tenant's sole cost and expense, shall have the right, upon fifteen (15) days' written notice to Landlord, to inspect Landlord's books and records pertaining to Operating Expenses and Taxes at the offices of Landlord or Landlord's managing agent during ordinary business hours, provided that such audit must be conducted so as not to interfere with Landlord's business operations and must be reasonable as to scope and time. Alternatively, at Landlord's sole discretion, Landlord may provide an audit of such books and records prepared by a certified public accountant of Landlord's selection, prepared at Tenant's expense, which shall be deemed to be conclusive for the purposes of this Lease. If actual Operating Expenses or Taxes are determined to have been overstated or understated by Landlord for any calendar year, then the parties shall within thirty (30) days thereafter make such adjustment payment or refund as is applicable, and if actual Operating Expenses and Taxes are determined to have been overstated by Landlord for any calendar year by in excess of five percent (5%), then Landlord shall pay the actual and reasonable cost of Tenant's audit, not to exceed $5,000.00.

5.5 If the occupancy of the Building during any part of any Lease Year is less than one hundred percent (100%), Landlord shall make an appropriate adjustment of the variable components of Operating Expenses for that Lease Year, as reasonably determined by Landlord using sound accounting and management principles, to determine the amount of Operating Expenses that would have been incurred had the Building been one hundred percent (100%) occupied. This amount shall be considered to have been the amount of Operating Expenses for that Lease Year. For purposes of this Section 5.5 , "variable components" include only those component expenses that are affected by variations in occupancy levels.

5.6 Tenant shall pay to Landlord, as Additional Rent, "Tenant's Tax Share" (as hereinafter defined) of the Taxes. "Tenant's Tax Share" shall be determined by multiplying Taxes for any Lease Year or pro rata portion thereof, by Tenant's Tax Percentage. Landlord shall, in advance of each Lease Year, estimate what Tenant's Tax Share will be for such Lease Year and Tenant shall pay Tenant's Tax Share as so estimated each month (the "Monthly Tax Payments"). The Monthly Tax Payments shall be due and payable at the same time and in the same manner as the Monthly Rent.

5.7 Landlord shall, within one hundred fifty (150) days after the end of each Lease Year, or as soon thereafter as reasonably possible, provide Tenant with a written statement of the actual Taxes incurred during such Lease Year for the tax parcel on which the Building is located and such statement shall set forth Tenant's Tax Share of such Taxes. Tenant shall pay Landlord, as Additional Rent, the difference between Tenant's Tax Share of any increases in Taxes and the amount of Monthly Tax Payments made by Tenant attributable to said Lease Year, such payment to be made within thirty (30) days of the date of Tenant's receipt of said statement; similarly, Tenant shall receive a credit if Tenant's Tax Share is less than the amount of Monthly Tax Payments collected by Landlord during said Lease Year, such credit to be applied to future Monthly Tax Payments to become due hereunder. If Taxes increase during any Lease Year, Landlord may revise Monthly Tax Payments due during such Lease Year by giving Tenant written notice to that effect; and, thereafter, Tenant shall pay, in each of the remaining months of such Lease Year, a sum equal to the amount of revised difference in Taxes multiplied by Tenant's Tax Percentage divided by the number of months remaining in such Lease Year.

5.8 If the Taxes for any Lease Year are changed as a result of protest, appeal or other action taken by a taxing authority, the Taxes as so changed shall be deemed the Taxes for such Lease Year. Any expenses incurred by Landlord in attempting to protest, reduce or minimize Taxes shall be included in Taxes in the Lease Year in which those expenses are paid. Landlord shall have the exclusive right to conduct such contests, protests and appeals of the Taxes as Landlord shall determine is appropriate in Landlord's sole discretion.

5.9 Tenant's obligation with respect to Additional Rent and the payment of Tenant's Share of Operating Expenses and Tenant's Tax Share of Taxes shall survive the Expiration Date or Termination Date of this Lease and Landlord shall have the right to retain the Security Deposit, or so much thereof as it deems necessary, to secure payment of Tenant's Share of Operating Expenses and Tenant's Tax Share of Taxes for the final year of the Lease, or part thereof, during which Tenant was obligated to pay such expenses.

ARTICLE6.

SERVICES TO BE PROVIDED BY LANDLORD

6.1 Subject to Articles 5 and 10 herein, and provided Tenant is not in default under this Lease, Landlord agrees to furnish or cause to be furnished to the Premises the utilities and services described in the Standards for Utilities and Services, attached hereto as Exhibit G , subject to the conditions and in accordance with the standards set forth herein.

6.2 Landlord shall not be liable for any loss or damage arising or alleged to arise in connection with the failure, stoppage, or interruption of any such services ("Service Failure"); nor shall the same be construed as an eviction of Tenant, work an abatement of Rent, entitle Tenant to any reduction in Rent, or relieve Tenant from the operation of any covenant or condition herein contained except as stated below; it being further agreed that Landlord reserves the right to discontinue temporarily such services or any of them at such times as may be necessary by reason of repair or capital improvements performed within the Project, accident, unavailability of

employees, repairs, alterations or improvements, or whenever by reason of strikes, lockouts, riots, acts of God, or any other happening or occurrence beyond the reasonable control of Landlord. In the event of any Service Failure, Landlord shall use reasonable diligence to have the same restored as soon as possible to the levels existing prior to such Service Failure. Neither diminution nor shutting off of light or air or both, nor any other effect on the Project by any structure erected or condition now or hereafter existing on lands adjacent to the Project, shall affect this Lease, abate Rent, or otherwise impose any liability on Landlord.

6.3 Landlord shall have the right to reduce heating, cooling, or lighting within the Premises and in the public area in the Building as required by any mandatory fuel or energy saving program imposed by statute, law, court order or regulation applicable with respect to the Premises and the public area in the Building.

6.4 Unless otherwise provided by Landlord, Tenant shall separately arrange with the applicable local public authorities or utilities, as the case may be, for the furnishing of and payment of all telephone and facsimile services as may be required by Tenant in the use of the Premises. Tenant shall directly pay for such telephone and facsimile services as may be required by Tenant in the use of the Premises, including the establishment and connection thereof, at the rates charged for such services by said authority or utility; and the failure of Tenant to obtain or to continue to receive such services for any reason whatsoever shall not relieve Tenant of any of its obligations under this Lease.

6.5 Landlord shall have the exclusive right, but not the obligation, to provide any locksmithing services, and Landlord shall also have the non-exclusive right, but not the obligation, to provide any additional services which may be required by Tenant, including without limitation additional repairs and maintenance, provided that Tenant shall pay to Landlord upon billing, the sum of the actual costs to Landlord of such additional services plus a reasonable administration fee. If Tenant requests the Landlord provide locksmithing services and Landlord declines, then Tenant shall not be obligated to use Landlord's locksmithing services. Charges for any utilities or service for which Tenant is required to pay from time to time hereunder, shall be deemed Additional Rent hereunder and shall be billed on a monthly basis.

6.6 At all times during the Term Landlord shall have the right to select the utility company or companies that shall provide electric, telecommunication and/or other utility services to the Premises and, subject to all Applicable Requirements, Landlord shall have the right at any time and from time to time during the Term to either (a) contract for services from electric, telecommunication and/or other utility service provider(s) other than the provider with which Landlord has a contract as of the date of this Lease (the "Current Provider"), or (b) continue to contract for services from the Current Provider. The cost of such utility services and any energy management and procurements services in connection therewith shall be Operating Expenses.

6.7 Notwithstanding anything to the contrary in Section 6.2 or elsewhere in this Lease, if (a) Landlord fails to provide Tenant with the electrical service or elevator service described in Section 6.1 , (b) such failure is not due to any one or more Force Majeure Events, to Tenant's default, or to an event covered by Article 19 , (c) Tenant has given Landlord reasonably prompt

written notice of such failure, and (d) as a result of such failure all or any part of the Premises are rendered untenantable (and, as a result, all or such part of the Premises are not used by Tenant during the applicable period) for more than five (5) consecutive business days, then Tenant shall be entitled to an abatement of Rent proportional to the extent to which the Premises are thereby rendered unusable by Tenant, commencing with the later of (i) the sixth business day during which such untenantability continues or (ii) the sixth business day after Landlord receives such notice from Tenant, until the Premises (or part thereof affected) are again usable or until Tenant again uses the Premises (or part thereof rendered unusable) in its business, whichever first occurs. The foregoing rental abatement shall be Tenant's exclusive remedy therefor. Notwithstanding the foregoing, the provisions of Article 19 below and not the provisions of this subsection shall govern in the event of casualty damage to the Premises or Project and the provisions of Article 20 below and not the provisions of this subsection shall govern in the event of condemnation of all or a part of the Premises or Project.

ARTICLE7.

REPAIRS AND MAINTENANCE BY LANDLORD

7.1 Landlord shall provide for the cleaning and maintenance of the public portions of the Project in keeping with the ordinary standard for Comparable Buildings as part of Operating Expenses. Unless otherwise expressly stipulated herein, Landlord shall not be required to make any improvements or repairs of any kind or character to the Premises during the Term, except such repairs as may be required to the exterior walls, corridors, windows, roof, elevators serving the Building, integrated Building utility and mechanical systems including HVAC, electrical, plumbing, and fire/safety systems serving the Building, and other base Building elements and other structural elements and equipment of the Project, and subject to Section 13.4, below, such additional maintenance as may be necessary because of the damage caused by persons other than Tenant, its agents, employees, licensees, or invitees.

7.2 Landlord or Landlord's officers, agents, and representatives (subject to any security regulations imposed by any governmental authority) shall have the right to enter all parts of the Premises at all reasonable hours upon reasonable prior notice to Tenant (other than in an emergency) to Tenant to inspect, clean, make repairs, alterations, and additions to the Project or the Premises which it may deem necessary or desirable, to make repairs to adjoining spaces, to cure any defaults of Tenant hereunder that Landlord elects to cure pursuant to Section 22.5 , below, to show the Premises to prospective tenants (during the final nine (9) months of the Term or at any time after the occurrence of an Event of Default that remains uncured), mortgagees or purchasers of the Building, or to provide any service which it is obligated or elects to furnish to Tenant; and Tenant shall not be entitled to any abatement or reduction of Rent by reason thereof. Landlord shall have the right to enter the Premises at any time and by any means in the case of an emergency.

7.3 Except as otherwise expressly provided in this Lease, Tenant hereby waives all rights it would otherwise have under California Civil Code Sections 1932(1) and 1942(a) or any successor statutes to deduct repair costs from Rent and/or terminate this Lease as the result of any failure by Landlord to maintain or repair.

ARTICLE 8.

REPAIRS AND CARE OF PROJECT BY TENANT

8.1 If the Building, the Project, or any portion thereof, including but not limited to, the elevators, boilers, engines, pipes, and other apparatus, or members of elements of the Building (or any of them) used for the purpose of climate control of the Building or operating of the elevators, or of the water pipes, drainage pipes, electric lighting, or other equipment of the Building or the roof or outside walls of the Building and also the Premises improvements, including but not limited to, the carpet, wall coverings, doors, and woodwork, become damaged or are destroyed through the negligence, carelessness, or misuse of Tenant, its servants, agents, employees, or anyone permitted by Tenant to be in the Building, or through it or them, then the actual cost of the necessary repairs, replacements, or alterations shall be borne by Tenant who shall pay the same to Landlord as Additional Rent within thirty (30) days after demand, subject to Section 13.4 below. Landlord shall have the exclusive right, but not the obligation, to make any repairs necessitated by such damage.

8.2 Subject to Section 13.4 below, Tenant agrees, at its sole cost and expense, to repair or replace any damage or injury done to the Project, or any part thereof, caused by Tenant, Tenant's agents, employees, licensees, or invitees which Landlord elects not to repair. Tenant shall not injure the Project or the Premises and shall maintain the elements of the Premises not to be maintained by Landlord pursuant to this Lease in a clean, attractive condition and in good repair. If Tenant fails to keep such elements of the Premises in such good order, condition, and repair as required hereunder to the satisfaction of Landlord, and does not make such repairs for more than thirty (30) days after notice from Landlord (although notice shall not be required if there is an emergency), Landlord may restore the Premises to such good order and condition and make such repairs, and within thirty (30) days after completion thereof, Tenant shall pay to Landlord, as Additional Rent, upon demand, the cost of restoring the Premises to such good order and condition and of the making of such repairs, plus an administrative charge of five percent (5%) thereof. Tenant shall leave the Premises at the end of each business day in a reasonably tidy condition for the purpose of allowing the performance of Landlord's cleaning services. Upon the Expiration Date or the Termination Date, Tenant shall surrender and deliver up the Premises to Landlord in the same condition in which it existed at the Commencement Date, excepting only ordinary wear and tear and damage arising from any cause not required to be repaired by Tenant. Upon the Expiration Date or the Termination Date, Landlord shall have the right to re-enter and take possession of the Premises.

ARTICLE 9.

TENANT'S EQUIPMENT AND INSTALLATIONS

9.1 If heat-generating machines or equipment, including telephone equipment, cause the temperature in the Premises, or any part thereof, to exceed the temperatures the Building's air conditioning system would be able to maintain in such Premises were it not for such heat-generating equipment, then Landlord reserves the right to install supplementary air conditioning units in the Premises at Tenant's sole cost and expenses; provided Tenant may, subject to all of the terms and conditions of this Lease, including without limitation Article 15 , install supplemental air conditioning units in the Premises to address such issue.

9.2 Except for desk or table-mounted typewriters, adding machines, office calculators, dictation equipment, personal computers, lab equipment, and other similar office equipment consistent with first-class general office use in Comparable Buildings, Tenant shall not install within the Premises any fixtures, equipment, facilities, or other improvements without the specific written consent of Landlord, subject to Article 15 , below. Tenant shall not, without the specific written consent of Landlord (which consent shall not be unreasonably withheld, conditioned, or delayed), install or maintain any apparatus or device within the Premises which shall increase the usage of electrical power or water for the Premises to an amount greater than would be normally required for general office use for space of comparable size in the Market Area; and if any such apparatus or device is so installed, Tenant agrees to furnish Landlord a written agreement to pay for any additional costs of utilities as the result of said installation.

9.3 As of the delivery of possession of the Premises, the Premises contains the equipment described on Exhibit G-1 attached hereto (the "Existing Supplemental Units"). At Tenant's sole cost and expense, Tenant shall at all times maintain the Existing Supplemental Units, in good order, condition and repair and Landlord shall have no obligation to repair, replace or maintain the Existing Supplemental Units. Tenant shall pay the cost of all electrical usage of the Existing Supplemental Units at the rates charged for furnishing the same within thirty (30) days after receipt of a invoice for the dame from Landlord. Landlord shall install, at Landlord's sole expense, any meters necessary for measuring the use of electricity for the Existing Supplemental Units. Tenant shall enter into a maintenance contract with a reputable maintenance contractor approved by Landlord for the maintenance and testing of the Existing Supplemental Units and shall provide Landlord with copies of that contract and quarterly maintenance reports within thirty (30) days after they are received by Tenant. Tenant shall be solely responsible for payment of all costs under that maintenance contract.

ARTICLE 10.

FORCE MAJEURE

10.1 It is understood and agreed that with respect to any service or other obligation to be furnished or obligations to be performed by either party that in no event shall either party be liable for failure to furnish or perform the same when prevented from doing so by strike, lockout, breakdown, accident, supply, or inability by the exercise of reasonable diligence to obtain supplies, parts, or employees necessary to furnish such service or meet such obligation; or because of war or other emergency; or for any cause beyond the reasonable control with the party obligated for such performance; or for any cause due to any act or omission of the other party or its agents, employees, licensees, invitees, or any persons claiming by, through, or under the other party; or because of the failure of any public utility to furnish services through no fault of a party hereunder; or because of order or regulation of any federal, state, county or municipal authority (collectively, "Force Majeure Events"). Nothing in this Section 10.1 shall limit or otherwise modify or waive Tenant's obligation to pay Base Rent and Additional Rent as and when due pursuant to the terms of this Lease.

ARTICLE 11.

CONSTRUCTIONS, MECHANICS' AND MATERIALMAN'S LIENS

11.1 Tenant shall not suffer or permit any construction, mechanics' or materialman's lien to be filed against the Premises or any portion of the Project by reason of work, labor services, or materials supplied or claimed to have been supplied to Tenant. Nothing herein contained shall be deemed or construed in any way as constituting the consent or request of Landlord, expressed or implied, by inference or otherwise, for any contractor, subcontractor, laborer, or materialman to perform any labor or to furnish any materials or to make any specific improvement, alteration, or repair of or to the Premises or any portion of the Project; nor of giving Tenant any right, power, or authority to contract for, or permit the rendering of, any services or the furnishing of any materials that could give rise to the filing of any construction, mechanics' or materialman's lien against the Premises or any portion of the Project.

11.2 If any such construction, mechanics' or materialman's lien shall at any time be filed against the Premises or any portion of the Project as the result of any act or omission of Tenant, Tenant covenants that it shall, within twenty (20) days after Tenant has notice of the claim for lien, procure the discharge thereof by payment or by giving security or in such other manner as is or may be required or permitted by law or which shall otherwise satisfy Landlord. If Tenant fails to take such action, Landlord, in addition to any other right or remedy it may have, may take such action as may be reasonably necessary to protect its interests. Any amounts paid by Landlord in connection with such action, all other expenses of Landlord incurred in connection therewith, including reasonable attorneys' fees, court costs, and other necessary disbursements shall be repaid by Tenant to Landlord within thirty (30) days after demand.

ARTICLE 12.
[INTENTIONALLY OMITTED]

ARTICLE 13.
INSURANCE

13.1 Landlord shall maintain, as a part of Operating Expenses, special causes of loss form insurance on the Project in an amount equal to the full replacement cost of the Project, subject to such deductibles as Landlord may determine. Landlord shall not be obligated to insure, and shall not assume any liability of risk of loss for, any of Tenant's furniture, equipment, machinery, goods, supplies, improvements or alterations upon the Premises. Such insurance shall be maintained with an insurance company selected, and in amounts desired, by Landlord or Landlord's mortgagee, and payment for losses thereunder shall be made solely to Landlord subject to the rights of the holder of any mortgage or deed of trust which may now or hereafter encumber the Project. Additionally Landlord may maintain such additional insurance, including, without limitation, earthquake insurance, flood insurance, liability insurance and/or rent insurance, as Landlord may in its sole discretion elect. The cost of all such additional insurance shall also be part of the Operating Expenses. Any or all of Landlord's insurance may be provided by blanket coverage maintained by Landlord or any affiliate of Landlord under its insurance program for its portfolio of properties or by Landlord or any affiliate of Landlord's program of self insurance, and in such event Operating

Expenses shall include the portion of the reasonable cost of blanket insurance or self-insurance that is allocated to the Project.

13.2 Tenant, at its own expense, shall maintain with insurers authorized to do business in the State of California and which are rated A- and have a financial size category of at least VIII in the most recent Best's Key Rating Guide, or any successor thereto (or if there is none, an organization having a national reputation), (a) commercial general liability insurance with the following minimum limits: General Aggregate $3,000,000.00; Products/Completed Operations Aggregate $2,000,000.00; Each Occurrence $2,000,000.00; Personal and Advertising Injury $1,000,000.00; Medical Payments $5,000.00 per person, (b) Umbrella/Excess Liability on a following form basis with the following minimum limits: General Aggregate $5,000,000.00; Each Occurrence $5,000,000.00; (c) Workers' Compensation with statutory limits; (d) Employer's Liability insurance with the following limits: Bodily injury by disease per person $1,000,000.00; Bodily injury by accident policy limit $1,000,000.00; Bodily injury by disease policy limit $1,000,000.00; (e) property insurance on special causes of loss insurance form covering any and all personal property of Tenant including but not limited to alterations, improvements (inclusive of the initial improvements (if any) constructed pursuant to Exhibit C ), betterments, furniture, fixtures and equipment in an amount not less than their full replacement cost, with a deductible not to exceed $500,000.00; and (t) business auto liability insurance having a combined single limit of not less than One Million Dollars ($1,000,000.00) per occurrence and insuring Tenant against liability for claims arising out of ownership, maintenance or use of any owned, hired or non-owned automobiles. At all times during the Term, such insurance shall be maintained, and Tenant shall cause a current and valid certificate of such policies to be deposited with Landlord. If Tenant fails to have a current and valid certificate of such policies on deposit with Landlord at all times during the Term and such failure is not cured within three (3) business days following Tenant's receipt of notice thereof from Landlord, Landlord shall have the right, but not the obligation, to obtain such an insurance policy, and Tenant shall be obligated to pay Landlord the amount of the premiums applicable to such insurance within ten (10) days after Tenant's receipt of Landlord's request for payment thereof. Said policy of liability insurance shall name Landlord and Landlord's managing agent as additional insureds and Tenant as the insured and shall be noncancellable with respect to Landlord except after thirty (30) days' written notice from the insurer to Landlord.

13.3 Tenant shall adjust annually the amount of coverage established in Section 13.2 hereof to such amount as in Landlord's reasonable opinion, adequately protects Landlord's interest; provided the same is consistent with the amount of coverage customarily required of comparable tenants in Comparable Buildings.

13.4 Notwithstanding anything in this Lease to the contrary, Landlord and Tenant each hereby waives any and all rights of recovery, claim, action, or cause of action against the other, its agents, employees, licensees, or invitees for any loss or damage to or at the Premises or the Project or any personal property of such party therein or thereon by reason of fire, the elements, or any other cause which would be insured against under the terms of (i) fire and extended coverage insurance, or (ii) the liability insurance referred to in Section 13.2 , to the extent of such insurance, regardless of cause or origin, including omission of the other party hereto, its agents, employees, licensees, or invitees. Landlord and Tenant covenant that no insurer shall hold any right of subrogation against either of such parties with respect thereto. This waiver shall be ineffective

against any insurer of Landlord or Tenant to the extent that such waiver is prohibited by the laws and insurance regulations of the State of California. The parties hereto agree that any and all such insurance policies required to be carried by either shall be endorsed with a subrogation clause, substantially as follows: "This insurance shall not be invalidated should the insured waive, in writing prior to a loss, any and all right of recovery against any party for loss occurring to the property described therein, " and shall provide that such party's insurer waives any right of recovery against the other party in connection with any such loss or damage.

13.5 In the event Tenant's occupancy or conduct of business in or on the Premises, whether or not Landlord has consented to the same, results in any increase in premiums for the insurance carried from time to time by Landlord with respect to the Building, Tenant shall pay any such increase in premiums as Rent within ten (10) days after bills for such additional premiums shall be rendered by Landlord. In determining whether increased premiums are a result of Tenant's use or occupancy of the Premises, a schedule issued by the organization computing the insurance rate on the Building showing the various components of such rate, shall be conclusive evidence of the several items and charges which make up such rate. Tenant shall promptly comply with all reasonable requirements of the insurance authority or of any insurer now or hereafter in effect relating to the Premises.

ARTICLE 14.
QUIET ENJOYMENT

14.1 Provided Tenant is not in default under this Lease after the expiration of any period for cure in the performance of all its obligations under this Lease, including, but not limited to, the payment of Rent and all other sums due hereunder, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term, without hindrance by Landlord, subject to the provisions and conditions set forth in this Lease.

ARTICLE 15.
ALTERATIONS

15.1 Tenant agrees that it shall not make or allow to be made any alterations, physical additions, or improvements in or to the Premises without first obtaining the written consent of Landlord in each instance. As used herein, the term "Minor Alteration" refers to an alteration that (a) does not affect the outside appearance of the Building and is not visible from the Common Areas, (b) is non-structural and does not impair the strength or structural integrity of the Building, and (c) does not affect the mechanical, electrical, HVAC or other systems of the Building. Landlord agrees not to unreasonably withhold or delay its consent to any Minor Alterations, but shall have the right to withhold and condition its consent to any other form of alterations in Landlord sole discretion. Notwithstanding the foregoing, Landlord consents to any repainting, recarpeting, or other purely cosmetic changes or upgrades to the Premises, so long as (i) the aggregate cost of such work is less than $10,000 in any twelve-month period, (ii) such work constitutes a Minor Alteration (iii) no building permit is required in connection therewith, and (iv) such work conforms to the then existing Building standards. At the time of said request, Tenant shall submit to Landlord plans and specifications of the proposed alterations, additions, or improvements; and Landlord shall have a period of not less than twenty (20) days therefrom in which to review and approve

or disapprove said plans; provided that if Landlord determines in good faith that Landlord requires a third party to assist in reviewing such plans and specifications, Landlord shall instead have a period of not less than forty-five (45) days in which to review and approve or disapprove said plans. Tenant shall pay to Landlord upon demand third party cost and expense incurred by Landlord in (A) reviewing said plans and specifications, and (B) inspecting the alterations, additions, or improvements to determine whether the same are being performed in accordance with the approved plans and specifications and all laws and requirements of public authorities, including, without limitation, the actual reasonable fees of any architect or engineer employed by Landlord for such purpose. In any instance where Landlord grants such consent, and permits Tenant to use its own contractors, laborers, materialmen, and others furnishing labor or materials for Tenant's construction (collectively, "Tenant's Contractors"), Landlord's consent shall be deemed conditioned upon each of Tenant's Contractors (1) not interfering with any laborer utilized by Landlord, Landlord's contractors, laborers, or materialmen; and (2) furnishing Landlord with evidence of acceptable liability insurance, worker's compensation coverage and if required by Landlord, completion bonding, and if at any time such entry by one or more persons furnishing labor or materials for Tenant's work shall cause such interference, the consent granted by Landlord to Tenant may be withdrawn immediately upon written notice from Landlord to Tenant. Tenant, at its expense, shall obtain all necessary governmental permits and certificates for the commencement and prosecution of alterations, additions, or improvements and for final approval thereof upon completion, and shall cause any alterations, additions, or improvements to be performed in compliance therewith and with all applicable laws and requirements of public authorities and with all applicable requirements of insurance bodies. All alterations, additions, or improvements shall be diligently performed in a good and workmanlike manner, using new materials and equipment at least equal in quality and class to be better than (a) the original installations of the Building, or (b) the then standards for the Comparable Building. Upon the completion of work and upon request by Landlord, Tenant shall provide Landlord copies of all waivers or releases of lien from each of Tenant's Contractors. No alterations, modifications, or additions to the Project or the Premises shall be removed by Tenant either during the Term or upon the Expiration Date or the Termination Date without the express written approval of Landlord. Notwithstanding anything to the contrary herein, Tenant may remove any emergency generator which has been installed by the Tenant during the Term; provided that Tenant shall perform that removal work in compliance with all Applicable Laws.. For the sake of clarification, Tenant acknowledges that any generators existing in or serving the Premises as of the date of this Lease, or which are installed by Landlord after the date of this Lease, are the sole property of Landlord, and shall not be removed by Tenant. Tenant shall not be entitled to any reimbursement or compensation resulting from its payment of the cost of constructing all or any portion of said improvements or modifications thereto unless otherwise expressly agreed by Landlord in writing. Tenant agrees specifically that no food, soft drink, or other vending machine shall be installed within the Premises, without the prior written consent of Landlord.

15.2 Landlord's approval of Tenant's plans for work shall create no responsibility or liability on the part of Landlord for their completeness, design sufficiency, or compliance with all laws, rules, and regulations of governmental agencies or authorities, including, but not limited to, the Americans with Disabilities Act. Landlord may, at its option, at Tenant's expense, require that Landlord's contractors be engaged for any work upon the integrated Building mechanical or electrical systems.

15.3 At least five (5) days prior to the commencement of any work permitted to be done by persons requested by Tenant on the Premises, Tenant shall notify Landlord of the proposed work and the names and addresses of Tenant's Contractors. During any such work on the Premises, Landlord, or its representatives, shall have the right to go upon and inspect the Premises at all reasonable times, and shall have the right to post and keep posted thereon building permits or to take any further action which Landlord may deem to be proper for the protection of Landlord's interest in the Premises. Tenant may elect to have a representative accompany Landlord during any such inspections but such accompaniment shall not be required for Landlord to exercise its rights hereunder.

ARTICLE 16.

FURNITURE, FIXTURES, AND PERSONAL PROPERTY

16.1 Tenant, at its sole cost and expense, may remove its trade fixtures, office supplies and moveable office furniture and equipment not attached to the Project or Premises provided:

(a) Such removal is made prior to the Expiration Date or the Termination Date; and


(b)	Tenant promptly repairs all damage caused by such removal.

16.2 If Tenant does not remove its trade fixtures, office supplies, and moveable furniture and equipment as herein above provided prior to the Expiration Date or the Termination Date (unless prior arrangements have been made with Landlord and Landlord has agreed in writing to permit Tenant to leave such items in the Premises for an agreed period), then, in addition to its other remedies, at law or in equity, Landlord shall have the right to have such items removed and stored at Tenant's sole cost and expense and all damage to the Project or the Premises resulting from said removal shall be repaired at the cost of Tenant; Landlord may elect that such items automatically become the property of Landlord upon the Expiration Date or the Termination Date, and Tenant shall not have any further rights with respect thereto or reimbursement therefor subject to the provisions of applicable law. Subject to Article 15.1 above, all other property in the Premises, any alterations, or additions to the Premises (including wall-to-wall carpeting, paneling, wall covering, specially constructed or built-in cabinetry or bookcases), and any other article attached or affixed to the floor, wall, or ceiling of the Premises shall become the property of Landlord and shall remain upon and be surrendered with the Premises as a part thereof at the Expiration or Termination Date regardless of who paid therefor, and Tenant hereby waives all rights to any payment or compensation therefor. If, however, Landlord so requests, in writing, Tenant shall remove, prior to the Expiration Date or the Termination Date, any and all alterations, additions, fixtures, equipment, and property placed or installed in the Premises and shall repair any damage caused by such removal. In addition, if any alterations performed by Tenant do not use materials that conform to the building standards used by Landlord at the time of the particular alteration or if Tenant requests any initial improvements to the Premises pursuant to Exhibit C . if any, that use materials that do not conform to the building standards used by Landlord at the time of that work, Tenant shall (a) at Tenant's sole cost and expense, no later than the expiration of the

Term (or no later than thirty (30) days after the earlier termination of the Term) cause the improvements in the Premises to be restored to conform to Landlord's building standard at Tenant's sole cost and expense, or (b) if Landlord so elects in writing, Tenant shall pay Landlord a lump-sum amount determined by Landlord in its reasonable judgment sufficient to pay the cost of restoring the improvements in the Premises to building standard. Prior to commencing any alteration, Tenant may request that Landlord notify Tenant whether or not the proposed alteration will be required by Landlord to be removed or restored to conform to Landlord's Building standard at the end of the Term.

16.3 All the furnishings, fixtures, equipment, effects, and property of every kind, nature, and description of Tenant and of all persons claiming by, through, or under Tenant which, during the continuance of this Lease or any occupancy of the Premises by Tenant or anyone claiming under Tenant, may be on the Premises or elsewhere in the Project shall be at the sole risk and hazard of Tenant, and if the whole or any part thereof shall be destroyed or damaged by fire, water, or otherwise, or by the leakage or bursting of water pipes, steam pipes, or other pipes, by theft, or from any other cause, no part of said loss or damage is to be charged to or be borne by Landlord unless due to the gross negligence or willful misconduct of Landlord or its employees, agents or contractors.

ARTICLE 17.

PERSONAL PROPERTY AND OTHER TAXES

17.1 During the Term hereof, Tenant shall pay, prior to delinquency, all business and other taxes, charges, notes, duties, and assessments levied, and rates or fees imposed, charged, or assessed against or in respect of Tenant's occupancy of the Premises or in respect of the personal property, trade fixtures, furnishings, equipment, and all other personal and other property of Tenant contained in the Project (including without limitation taxes and assessments attributable to the cost or value of any leasehold improvements made in or to the Premises by or for Tenant (to the extent that the assessed value of those leasehold improvements exceeds the assessed value of standard office improvements in other space in the Project regardless of whether title to those improvements is vested in Tenant or Landlord)), and shall hold Landlord harmless from and against all payment of such taxes, charges, notes, duties, assessments, rates, and fees, and against all loss, costs, charges, notes, duties, assessments, rates, and fees, and any and all such taxes. Tenant shall cause said fixtures, furnishings, equipment, and other personal property to be assessed and billed separately from the real and personal property of Landlord. In the event any or all of Tenant's fixtures, furnishings, equipment, and other personal property shall be assessed and taxed with Landlord's real property, Tenant shall pay to Landlord Tenant's share of such taxes within thirty (30) days after delivery to Tenant by Landlord of a statement in writing setting forth the amount of such taxes applicable to Tenant's property.

ARTICLE 18.

ASSIGNMENT AND SUBLETTING

18.1 Tenant shall not, without the prior written consent of Landlord, which consent shall not be unreasonably withheld (except that Landlord shall in no event be obligated to consent to an encumbrance of this Lease or any transfer by operation of law): (a) assign, convey, mortgage or otherwise transfer this Lease or any interest hereunder, or sublease the Premises, or any part thereof, whether voluntarily or by operation of law; or (b) permit the use of the Premises or any part thereof by any person other than Tenant and its employees. Any such transfer, sublease or use described in the preceding sentence (a "Transfer") occurring without the prior written consent of Landlord shall, at Landlord's option, be void and of no effect. Landlord's consent to any Transfer shall not constitute a waiver of Landlord's right to withhold its consent to any future Transfer. Landlord may require as a condition to its consent to any assignment of this Lease that the assignee execute an instrument in which such assignee assumes the remaining obligations of Tenant hereunder; provided that the acceptance of any assignment of this Lease by the applicable assignee shall automatically constitute the assumption by such assignee of all of the remaining obligations of Tenant that accrue following such assignment. The voluntary or other surrender of this Lease by Tenant or a mutual cancellation hereof shall not work a merger and shall, at the option of Landlord, terminate all or any existing sublease or may, at the option of Landlord, operate as an assignment to Landlord of Tenant's interest in any or all such subleases.

For purposes of this Lease, the term "Transfer" shall also include (i) if a Tenant is a partnership or limited liability company, the withdrawal or change, voluntary, involuntary or by operation of law, of fifty percent (50%) or more of the partners, members or managers thereof, or transfer of twenty-five percent (25%) or more of partnership or membership interests therein within a twelve (12) month period, or the dissolution of the partnership or the limited liability company without immediate reconstitution thereof, and (ii) if Tenant is a corporation whose stock is not publicly held and not traded through an exchange or over the counter or any other form of entity, (A) the dissolution, merger, consolidation or other reorganization of Tenant, the sale or other transfer of more than an aggregate of fifty percent (50%) of the voting shares or other interests of or in Tenant (other than to immediate family members by reason of gift or death), within a twelve (12) month period, or (B) the sale, mortgage, hypothecation or pledge of more than an aggregate of fifty percent (50%) of the value of the unencumbered assets of Tenant within a twelve (12) month period; provided that clause (B) shall not apply to bona fide financing transactions entered into by Avaya Inc.

18.2 If Tenant desires the consent of Landlord to a Transfer, Tenant shall submit to Landlord, at least thirty (30) business days prior to the proposed effective date of the Transfer, a written notice (the "Transfer Notice") which includes (a) the name of the proposed sublessee or assignee, (b) the nature of the proposed sublessee's or assignee's business, (c) the terms and provisions of the proposed sublease or assignment, and (d) current financial statements and information on the proposed sublessee or assignee. Upon receipt of the Transfer Notice, Landlord, acting reasonably and in good faith, may request additional information concerning the Transfer or the proposed sublessee or assignee (the "Additional Information"). Subject to Landlord's rights under Section 18.6 , Landlord shall not unreasonably withhold its consent to any assignment or sublease (excluding an encumbrance or transfer by operation of law), which consent or lack thereof shall be provided within thirty (30) business days of receipt of Tenant's Transfer Notice; provided, however, Tenant hereby agrees that it shall be a reasonable basis for Landlord to withhold

its consent if Landlord has not received the Additional Information requested by Landlord. Without limiting any other reasonable basis for Landlord to withhold its consent to the proposed Transfer, Landlord and Tenant agree that for purposes of this Lease and any Applicable Law, Landlord shall not be deemed to have unreasonably withheld its consent if, in the judgment of Landlord: (i) the transferee is of a character or engaged in a business which is not in keeping with the standards or criteria used by Landlord in leasing the Project, or the general character or quality of the Project; (ii) the financial net worth of the assignee or sublesee as of the time of the proposed transfer is equal to or greater than the financial net worth of the Tenant upon the Commencement Date and is sufficient for such assignee or sublease to fulfill its obligation pursuant to such assignment or; (iii) the transferee, or any person or entity which directly or indirectly controls, is controlled by, or is under common control with, the transferee, is a tenant of or negotiating for space in the Project occupies space in the Project or has negotiated with Landlord within the preceding one hundred twenty(120) days (or is currently negotiating with Landlord) to lease space in the Project, (iv) the transferee has the power of eminent domain, is a governmental agency or an agency or subdivision of a foreign government; (v) an Event of Default by Tenant has occurred and is uncured at the time Tenant delivers the Transfer Notice to Landlord; (vi) in the judgment of Landlord, such a Transfer would violate any term, condition, covenant, or agreement of Landlord involving the Project or any other tenant's lease within it or would give an occupant of the Project a right to cancel or modify its lease; (vii) in Landlord's judgment, the use of the Premises by the proposed transferee would not be comparable to the types of office use by other tenants in the Project, would entail any alterations which would lessen the value of the tenant improvements in the Premises, would result in more than a reasonable density of occupants per square foot of the Premises, would increase the burden on elevators or other Building systems or equipment over the burden thereon prior to the proposed Transfer, would require increased services by Landlord or would require any alterations to the Project to comply with applicable laws; (viii) the transferee intends to use the space for purposes which are not permitted under this Lease; (ix) the terms of the proposed Transfer would allow the transferee to exercise a right of renewal, right of expansion, right of first offer, or other similar right held by Tenant; (x) the proposed Transfer would result in more than three subleases per each full floor of the Premises being in effect at any one time during the Term; or (xi) any ground lessor or mortgagee whose consent to such Transfer is required fails to consent thereto;. Tenant hereby waives any right to terminate the Lease and/or recover damages as remedies for Landlord wrongfully withholding its consent to any Transfer and agrees that Tenant's sole and exclusive remedy therefor shall be to seek specific performance of Landlord's obligation to consent to such Transfer.

18.3 Landlord and Tenant agree that, in the event of any approved assignment or subletting, the rights of any such assignee or sublessee of Tenant herein shall be subject to all of the terms, conditions, and provisions of this Lease, including, without limitation, restriction on use, assignment, and subletting and the covenant to pay Rent. Landlord may collect the rent owing by the assignee or sublessee directly from such assignee or sublessee and apply the amount so collected to the Rent herein reserved. No such consent to or recognition of any such assignment or subletting shall constitute a release of Tenant or any guarantor of Tenant's performance hereunder from further performance by Tenant or such guarantor of covenants undertaken to be performed by Tenant herein. Tenant and any such guarantor shall remain liable and responsible for all Rent and other obligations herein imposed upon Tenant, and Landlord may condition its consent to any

Transfer upon the receipt of a written reaffirmation from each such guarantor in a form acceptable to Landlord (which shall not be construed to imply that the occurrence of a Transfer without such a reaffirmation would operate to release any guarantor). Consent by Landlord to a particular assignment, sublease, or other transaction shall not be deemed a consent to any other or subsequent transaction. In any case where Tenant desires to assign, sublease or enter into any related or similar transaction, whether or not Landlord consents to such assignment, sublease, or other transaction, Tenant shall pay any reasonable attorneys' fees incurred by Landlord in connection with such assignment, sublease or other transaction, including, without limitation, fees incurred in reviewing documents relating to, or evidencing, said assignment, sublease, or other transaction. All documents utilized by Tenant to evidence any subletting or assignment for which Landlord's consent has been requested and is required hereunder, shall be subject to prior approval (not to be unreasonably withheld, conditioned or delayed) by Landlord or its attorney.

18.4 Tenant shall be bound and obligated to pay Landlord a portion of any sums or economic consideration payable to Tenant by any sublessee, assignee, licensee, or other transferee, within ten (10) days following the date the same is payable to Tenant from such sublessee, assignee, licensee, or other transferee, as the case might be, as follows:

(a) In the case of an assignment, fifty percent (50%) of any sums or other economic consideration payable to Tenant as a result of such assignment shall be paid to Landlord after first deducting the unamortized cost of reasonable leasehold improvements paid for by Tenant in connection with such assignment and reasonable cost of any real estate commissions incurred by Tenant in connection with such assignment.

(b) In the case of a subletting, fifty percent (50%) of any sums or economic consideration payable to Tenant as a result of such subletting shall be paid to Landlord after first deducting (i) the Rent due hereunder prorated to reflect only Rent allocable to the sublet portion of the Premises, (ii) the reasonable cost of tenant improvements made to the sublet portion of the Premises by Tenant for the specific benefit of the sublessee, which shall be amortized over the term of the sublease, and

(iii) the reasonable cost of any real estate commissions incurred by Tenant in connection with such subletting, which shall be amortized over the term of the sublease.

(c) Tenant shall provide Landlord with a detailed statement setting forth any sums or economic consideration Tenant either has or will derive from such Transfer, the deductions permitted under (a) and (b) of this Section 18.5 , and the calculation of the amounts due Landlord under this Section 18.5 , and upon Landlord's request, shall provide Landlord with all applicable documents related to such Transfer which may contain information related to the foregoing, and an Officer's Certificate from an Officer of Tenant certifying that such information is true, correct, and complete in all material respects.

18.5 If this Lease is assigned to any person or entity pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq. or any successor or substitute therefor (the "Bankruptcy Code"), any and all monies or other consideration payable or otherwise to be delivered in connection with such assignment shall be paid or delivered to Landlord, shall be and remain the exclusive property of Landlord, and shall not constitute property of Tenant or of the estate of

Tenant within the meaning of the Bankruptcy Code. Any such monies or other consideration not paid or delivered to Landlord shall be held in trust for the benefit of Landlord and shall be promptly paid or delivered to Landlord. Any person or entity to whom this Lease is so assigned shall be deemed, without further act or deed, to have assumed all of the remaining obligations arising under this Lease as of the date of such assignment. Any such assignee shall, upon demand therefor, execute and deliver to Landlord an instrument confirming such assumption.

18.6 Landlord shall have the following option with respect to any assignment or subletting proposed by Tenant:

(a) Notwithstanding any other provision of this Article, Landlord has the option, by written notice to Tenant (the "Recapture Notice") within thirty (30) days after receiving any Transfer Notice to recapture the Space covered by the proposed sublease or the entire Premises in the case of an assignment (the "Subject Space") by terminating this Lease for the Subject Space or taking an assignment or a sublease of the Subject Space from Tenant. A timely Recapture Notice terminates this Lease or creates an assignment or a sublease for the Subject Space for the same term as the proposed Transfer, effective as of the date specified in the Transfer Notice. After such termination, Landlord may (but shall not be obligated to) enter into a lease with the party to the sublease or assignment proposed by Tenant.

(b) To determine the new Base Rent under this Lease in the event Landlord recaptures the Subject Space without terminating this Lease, the original Base Rent under the Lease shall be multiplied by a fraction, the numerator of which is the rentable square feet of the Premises retained by Tenant after Landlord's recapture and the denominator of which is the total rentable square feet in the Premises before Landlord's recapture. The Additional Rent, to the extent that it is calculated on the basis of the rentable square feet within the Premises, shall be reduced to reflect Tenant's proportionate share based on the rentable square feet of the Premises retained by Tenant after Landlord's recapture. This Lease as so amended shall continue thereafter in full force and affect. Either party may require a written confirmation of the amendments to this Lease necessitated by Landlord's recapture of the Subject Space. If Landlord recaptures the Subject Space, Landlord shall, at Landlord's sole expense, construct any partitions required to segregate the Subject Space from the remaining Premises retained by Tenant. Tenant shall, however, pay for painting, covering or otherwise decorating the surfaces of the partitions facing the remaining Premises retained by Tenant.

18.7 Notwithstanding anything to the contrary contained in this Article 18 , Tenant may assign this Lease or sublet the Premises without the need for Landlord's prior consent if such assignment or sublease is to any parent, subsidiary or affiliate business entity which the initially named Tenant controls, is controlled by or is under common control with (each, an "Affiliate") provided that: (i) at least thirty (30) days prior to such assignment or sublease, Tenant delivers to Landlord the financial statements or other financial and background information of the assignee or sublessee as required for other transfers; (ii) if the transfer is an assignment, the assignee assumes, in full, the obligations of Tenant under this Lease (or if a sublease, the sublessee of a portion of

the Premises or term assumes, in full, the obligations of Tenant with respect to such portion); (iii) the financial net worth of the assignee or sublessee as of the time of the proposed transfer is equal to or greater than the financial net worth of the Tenant upon the Commencement Date and is sufficient for such assignee or sublessee to fulfill its obligations pursuant to such assignment or sublease; (iv) Tenant remains fully liable under this Lease; and (v) unless Landlord consents to the same, the use of the Premises set forth herein remains unchanged in all material respects. As used in this section, "control" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies through ownership of at least fifty-one (51%) of the securities or partnership or other ownership interests of the entity subject to control.

18.8 Notwithstanding anything to the contrary contained in this Article 18, Tenant may engage in Approved Reorganizations (as defined below), without the express consent of Landlord; provided that (a) at least ten (10) days prior to the effective date of the Approved Reorganization, Tenant shall furnish Landlord with the name of the transferee and a written certification from an officer of Tenant certifying that the assignment or sublease qualifies as an Approved Reorganization, (b) no Event of Default exists under this Lease during the period commencing on the date of Tenant's request and ending on the effective date of the Approved Reorganization, and (c) there is no change in use of the Premises. To the extent that legal requirements or confidentiality requirements do not permit Tenant to give Landlord prior notice of an Approved Reorganization, then Tenant may in lieu of the prior notice required under this Section give Landlord notice within ten (10) days after the effective date of the Approved Reorganization, together with the name of the transferee and a written certification from an officer of Tenant certifying that the assignment or sublease qualifies as an Approved Reorganization. As used herein, the term "Approved Reorganizations" means any merger, reorganization or consolidation of Tenant (whether or not Tenant is the surviving entity), or the sale of substantially all of the assets or stock of Tenant, in each case as a going concern, where (1) Tenant's successor (together with Tenant, so long as Tenant remains liable under this Lease) shall have a net worth following consummation of such transaction, as reasonably determined by Landlord in accordance with generally accepted accounting principles, that is at least equal to the net worth, on the Commencement Date, of the original named Tenant, and (2) Tenant's successor shall have a net worth following consummation of such transaction, as reasonably determined by Landlord in accordance with generally accepted accounting principles, that is sufficient to meet the remaining obligations of Tenant under this Lease.

ARTICLE 19.
DAMAGE OR DESTRUCTION

19.1 Casualty . If the Premises or Building should be damaged or destroyed by fire or other casualty, Tenant shall give immediate written notice to Landlord. Within thirty (30) days after receipt from Tenant of such written notice, Landlord shall notify Tenant whether the necessary repairs can reasonably be made: (a) within ninety (90) days; (b) in more than ninety (90) days but in less than one hundred eighty (180) days; or (c) in more than one hundred eighty (180) days, in each case after the date of the issuance of permits for the necessary repair or reconstruction of the portion of the Premises or Building which was damaged or destroyed.

19.1.1 Less Than 90 Days . If the Premises or Building should be damaged only to such extent that rebuilding or repairs can reasonably be completed within

ninety (90) days after the issuance of permits the necessary repair or reconstruction of the portion of the Premises which was damaged or destroyed, this Lease shall not terminate and, provided that insurance proceeds are available to pay for the full repair of all damage, Landlord shall repair the Premises or Building, except that Landlord shall not be required to rebuild, repair or replace Tenant's furniture, fixtures, furnishings, or equipment (collectively, "Tenant's Property") which may have been placed in, on or about the Premises by or for the benefit of Tenant. If Tenant is required to vacate all or a portion of the Premises during Landlord's repair thereof, the Base Rent payable hereunder shall be abated proportionately on the basis of the size of the area of the Premises that is damaged (i.e., the number of square feet of floor area of the Premises that is damaged compared to the total square footage of the floor area of the Premises) from the date Tenant vacates all or a portion of the Premises that was damaged only to the extent rental abatement insurance proceeds are received by Landlord and only during the period the Premises are unfit for occupancy.

19.1.2 Greater Than 90 Days . If the Premises or Building should be damaged only to such extent that rebuilding or repairs can reasonably be completed in more than ninety (90) days but in less than one hundred eighty (180) days after the issuance of permits for the necessary repair or reconstruction of the portion of the Premises which was damaged or destroyed, then Landlord shall have the option of (a) terminating the Lease effective upon the occurrence of such damage, in which event the Base Rent shall be abated from the date Tenant vacates the Premises; or (b) to repair the Premises, provided insurance proceeds are available to pay for the full repair of all damage (except that Landlord shall not be required to rebuild, repair or replace Tenant's Property). If Tenant is required to vacate all or a portion of the Premises during Landlord's repair thereof, the Base Rent payable hereunder shall be abated proportionately on the basis of the size of the area of the Premises that is damaged (i.e., the number of square feet of floor area of the Premises that is damaged compared to the total square footage of the floor area of the Premises) from the date Tenant vacates all or a portion of the Premises that was damaged only to the extent rental abatement insurance proceeds are received by Landlord and only during the period the Premises are unfit for occupancy. In the event that Landlord should fail to substantially complete such repairs within one hundred eighty (180) days after the issuance of permits for the necessary repair or reconstruction of the portion of the Premises which was damaged or destroyed (such period to be extended for delays caused by Tenant or because of any Force Majeure Events, as hereinafter defined), and Tenant has not reoccupied the Premises, Tenant shall have the right, as Tenant's exclusive remedy, within ten (10) days after the expiration of such one hundred eighty (180) day period, and provided that such repairs have not been substantially completed within such ten (10) day period, to terminate this Lease by delivering written notice to Landlord as Tenant's exclusive remedy, whereupon all rights of Tenant hereunder shall cease and terminate thirty (30) days after Landlord's receipt of such notice.

19.1.3 Greater Than 180 Days . If the Premises or Building should be so damaged that rebuilding or repairs cannot be completed within one hundred eighty (180) days after the issuance of permits for the necessary repair or reconstruction of the portion of the

Premises or Building which was damaged or destroyed, either Landlord or Tenant may terminate this Lease by giving written notice within ten (10) days after notice from Landlord specifying such time period of repair, and this Lease shall terminate and the Rent shall be abated from the date Tenant vacates the Premises. In the event that neither party elects to terminate this Lease, Landlord shall commence and prosecute to completion the repairs to the Premises or Building, provided insurance proceeds are available to pay for the repair of all damage (except that Landlord shall not be required to rebuild, repair or replace Tenant's Property). If Tenant is required to vacate all or a portion of the Premises during Landlord's repair thereof, the Base Rent payable hereunder shall be abated proportionately on the basis of the size of the area of the Premises that is damaged (i.e., the number of square feet of floor area of the Premises that is damaged compared to the total square footage of the floor area of the Premises), from the date Tenant vacates all or a portion of the Premises that was damaged only to the extent rental abatement insurance proceeds are received by Landlord and only during the period that the Premises are unfit for occupancy.

19.1.4 Casualty During the Last Year of the Lease Term. Notwithstanding any other provisions hereof, if the Premises or Building shall be damaged within the last year of the Lease Term, and if the cost to repair or reconstruct the portion of the Premises or Building which was damaged or destroyed shall exceed $250,000.00, then, irrespective of the time necessary to complete such repair or reconstruction, Landlord shall have the right, in its sole and absolute discretion, to terminate the Lease effective upon the occurrence of such damage, in which event the Rent shall be abated from the date Tenant vacates the Premises. The foregoing right shall be in addition to any other right and option of Landlord under this Article 19 .

19.1.5 Tenant's Termination Right . If the Building or the Premises is destroyed or damaged by fire or other casualty such that Tenant is deprived of access to the Premises or the use and occupancy thereof and a reputable contractor or architect designated by Landlord ("Landlord's Architect or Contractor") estimates in a notice (the "Reconstruction Estimate") provided to Tenant by Landlord within ninety (90) days after the casualty that the Building or the Premises is damaged to such an extent that Tenant will be deprived of access to the Premises or use and occupancy of the Premises for a period in excess of two hundred seventy days, then Tenant may terminate this Lease by giving Landlord notice within thirty (30) days after delivery of such contractor's or architect's estimate, whereupon this Lease shall terminate as of the date of the casualty. Landlord shall use commercially reasonable efforts to provide the Reconstruction Estimate to Tenant within 60 days after the casualty. If the Building or the Premises is destroyed or damaged by fire or other casualty and Landlord's Architect or Contractor has estimated (in a notice delivered to Tenant pursuant to the previous sentence) that Tenant will be deprived of access to the Premises or use and occupancy of the Premises for a period of two hundred seventy (270) days or less, but the Premises and access thereto and the use and occupancy thereof are not actually restored within two hundred seventy (270) days from the date (the "Untenantability Date") that Tenant is first deprived of such access or use and occupancy due to such casualty (the "Outside Date"), Tenant may terminate this Lease as of the Untenantability Date by giving Landlord notice within thirty (30) days after the Outside Date.

19.2 Uninsured Casualty . Tenant shall be responsible for and shall pay to Landlord Tenant's Share of any deductible or retention amount payable under the property insurance for the Building as part of Operating Expenses. In the event that the Premises or any portion of the Building is damaged to the extent Tenant is unable to use the Premises and such damage is not covered by insurance proceeds received by Landlord or in the event that the holder of any indebtedness secured by the Premises requires that the insurance proceeds be applied to such indebtedness, then Landlord shall have the right at Landlord's option, in Landlord's sole and absolute discretion, either (i) to repair such damage as soon as reasonably possible at Landlord's expense, or (ii) to give written notice to Tenant within thirty (30) days after the date of the occurrence of such damage of Landlord's intention to terminate this Lease as of the date of the occurrence of such damage. In the event Landlord elects to terminate this Lease, Tenant shall have the right, but not the obligation, within ten (10) days after receipt of such notice to give written notice to Landlord of Tenant's commitment to pay the cost of repair of such damage, in which event this Lease shall continue in full force and effect, and Landlord shall make such repairs as soon as reasonably possible subject to the following conditions: Tenant shall deposit with Landlord Landlord's estimated cost of such repairs not later than fifteen (15) business days prior to Landlord's commencement of the repair work. If the cost of such repairs exceeds the amount deposited, Tenant shall reimburse Landlord for such excess cost within thirty (30) business days after receipt of an invoice from Landlord. Any amount deposited by Tenant in excess of the cost of such repairs shall be refunded within thirty (30) days of Landlord's final payment to Landlord's contractor. If Tenant does not give such notice within the ten (10) day period, or fails to make such deposit as required, Landlord shall have the right, in Landlord's sole and absolute discretion, to immediately terminate this Lease to be effective as of the date of the occurrence of the damage.

19.3 Waiver . The provisions of this Lease, including this Article 19 , constitute an express agreement between Landlord and Tenant with respect to damage to, or destruction of, all or any portion of the Premises or the Project, and any statute or regulation of the State of California, including without limitation Sections 1932(2) and 1933(4) of the California Civil Code, with respect to any rights or obligations concerning damage or destruction in the absence of an express agreement between the parties (and any other statute or regulation now or hereafter in effect with respect to such rights or obligations), shall have no application to this Lease or to any damage or destruction to all or any portion of the Premises or the Project.

ARTICLE20.
CONDEMNATION

20.1 Total Condemnation . If all of the Premises is condemned by eminent domain, inversely condemned or sold under threat of condemnation for any public or quasi public use or purpose ("Condemned"), this Lease shall terminate as of the earlier of the date the condemning authority takes title to or possession of the Premises, and Rent shall be adjusted to the date of termination.

20.2 Partial Condemnation . If any portion of the Premises or Building is condemned and such partial condemnation materially impairs Tenant's ability to use the Premises for Tenant's business as reasonably determined by both parties, Landlord shall have the option in

Landlord's sole and absolute discretion of either (i) relocating Tenant to comparable space within the Project or (ii) terminate this Lease as of the earlier of the date title vests in the condemning authority or as of the date an order of immediate possession is issued and Rent shall be adjusted to the date of termination. If such partial condemnation does not materially impair Tenant's ability to use the Premises for the business of Tenant, Landlord shall promptly restore the Premises to the extent of any condemnation proceeds recovered by Landlord, excluding the portion thereof lost in such condemnation, and this Lease shall continue in full force and effect except that after the date of such title vesting or order of immediate possession Rent, and the square footage shall be adjusted as reasonably determined by Landlord.

20.3 Award . If the Premises are wholly or partially condemned, Landlord shall be entitled to the entire award paid for such condemnation, and Tenant waives any claim to any part of the award from Landlord or the condemning authority; provided, however, Tenant shall have the right to recover from the condemning authority such compensation as may be separately awarded to Tenant in connection with costs in removing Tenant's merchandise, furniture, fixtures, leasehold improvements and equipment to a new location. No condemnation of any kind shall be construed to constitute an actual or constructive eviction of Tenant or a breach of any express or implied covenant of quiet enjoyment. Tenant hereby waives the effect of Sections 1265.120 and 1265.130 of the California Code of Civil Procedure.

20.4 Temporary Condemnation . In the event of a temporary condemnation not extending beyond the Term, this Lease shall remain in effect, Tenant shall continue to pay Rent and Tenant shall receive any award made for such condemnation except damages to any of Landlord's property. If a temporary condemnation is for a period which extends beyond the Term, this Lease shall terminate as of the date of initial occupancy by the condemning authority and any such award shall be distributed in accordance with the preceding section. If a temporary condemnation remains in effect at the expiration or earlier termination of this Lease, Tenant shall pay Landlord the reasonable cost of performing any obligations required of Tenant with respect to the surrender of the Premises.

ARTICLE 21.
HOLD HARMLESS

21.1 Tenant agrees to defend all actions against Landlord, any member, partner, trustee, stockholder, officer, director, employee, or beneficiary of Landlord (collectively, "Landlord Parties"), holders of mortgages secured by the Premises or the Project and any other party having an interest therein (collectively with Landlord Parties, the "Indemnified Parties") with respect to, and to pay, protect, indemnify, and save harmless, to the extent permitted by law, all Indemnified Parties from and against, any and all liabilities, losses, damages, costs, expenses (including reasonable attorneys' fees and expenses), causes of action, suits, claims, demands, or judgments of any nature to which any Indemnified Party is subject because of its estate or interest in the Premises or the Project (provided, however, that Tenant's indemnity shall, in no event, extend to loss of profits, loss of business or other consequential damages incurred by any Indemnified Party) arising from (a) injury to or death of any person, or damage to or loss of property on the Premises, the Project, except to the extent, if any, caused by the gross negligence or willful misconduct of Landlord or its employees, contractors or agents, (b) any violation of this Lease by or attributable

to Tenant, or (c) subject to Section 13.4 , any act, fault, omission or other misconduct of Tenant or its agents, contractors, licensees, sublessees, or invitees. Tenant agrees to use and occupy the Premises and other facilities of the Project at its own risk, and hereby releases the Indemnified Parties from any and all claims for any damage or injury to the fullest extent permitted by law.

21.2 Tenant agrees that Landlord shall not be responsible or liable to Tenant, its agents, employees, or invitees for fatal or non-fatal bodily injury or property damage occasioned by the acts or omissions of any other tenant, or such other tenant's agents, employees, licensees, or invitees, of the Project and (ii) Landlord shall not be liable to Tenant for losses due to theft, burglary, or damages done by persons on the Project.

21.3 To the extent permitted by law, and not insured (or required to be insured) by Tenant under this Lease, Landlord shall indemnify Tenant and hold it harmless from and against any and all liability for any loss of or damage or injury to any person (including death resulting therefrom) or property occurring in, on or about the Project, caused by the gross negligence or willful misconduct of Landlord, its employees or agents (provided, however, that Landlord's indemnity shall, in no event, extend to loss of profits, loss of business or other consequential damages incurred by Tenant). Landlord's obligation to indemnify Tenant hereunder shall include the duty to defend against any claims asserted by reason of such loss, damage or injury and to pay any judgments, settlements, costs, fees and expenses, including reasonable attorneys' fees incurred in connection therewith.

ARTICLE 22.

DEFAULT BY TENANT

22.1 The term "Event of Default" refers to the occurrence of any one (1) or more of the following:

(a) Failure of Tenant to pay when due any sum required to be paid hereunder which is not received by Landlord within seven (7) days after the date due (the "Monetary Default");

(b) Failure of Tenant, after thirty (30) days written notice thereof, to perform any of Tenant's obligations, covenants, or agreements except a Monetary Default, provided that if the cure of any such failure is not reasonably susceptible of performance within such thirty (30) day period, then an Event of Default of Tenant shall not be deemed to have occurred so long as Tenant has promptly commenced and thereafter diligently prosecutes such cure to completion and completes that cure within sixty (60) days;

(c) Tenant, or any guarantor of Tenant's obligations under this Lease (the "Guarantor"), admits in writing that it cannot meet its obligations as they become due; or is declared insolvent according to any law; or assignment of Tenant's or Guarantor's property is made for the benefit of creditors; or a receiver or trustee is appointed for Tenant or Guarantor or its property; or the interest of Tenant or Guarantor under this Lease is levied on under execution or other legal process; or any petition is filed by or against Tenant or Guarantor to declare Tenant bankrupt or to delay, reduce, or modify Tenant's debts or

obligations; or any petition filed or other action taken to reorganize or modify Tenant's or Guarantor's capital structure if Tenant is a corporation or other entity. Any such levy, execution, legal process, or petition filed against Tenant or Guarantor shall not constitute a breach of this Lease provided Tenant or Guarantor shall vigorously contest the same by appropriate proceedings and shall remove or vacate the same within ninety (90) days from the date of its creation, service, or filing;

(d) The abandonment of the Premises by Tenant for more than 15 days after written notice from Landlord, if the notice is served personally (or, if the notice is mailed, for more than 18 days after written notice from Landlord) while Tenant is in default in the payment of Rent;

(e) The discovery by Landlord that any financial statement given by Tenant or any of its assignees, subtenants, successors-in-interest, or Guarantors was materially false; or

(f) If Tenant or any Guarantor shall die, cease to exist as a corporation or partnership, or be otherwise dissolved or liquidated or become insolvent, or shall make a transfer in fraud of creditors.

22.2 In the event of any Event of Default by Tenant, Landlord, at its option, may pursue one or more of the following remedies without notice or demand in addition to all other rights and remedies provided for at law or in equity:

(a) Landlord may continue this Lease in full force and effect, and this Lease shall continue in full force and effect as long as Landlord does not terminate Tenant's right to possession, and Landlord shall have the right to collect Rent when due. Landlord may enter the Premises and relet it, or any part of it, to third parties for Tenant's account, provided that any Rent in excess of the Rent due hereunder shall be payable to Landlord. Tenant shall be liable immediately to Landlord for all costs Landlord incurs in reletting the Premises, including, without limitation, brokers' commissions, expenses of cleaning and reasonably redocorating the Premises required by the reletting and like costs. Reletting may be for a period shorter or longer than the remaining Term of this Lease. Tenant shall pay to Landlord the Rent and other sums due under this Lease on the dates the Rent is due, less the Rent and other sums Landlord receives from any reletting. No act by Landlord allowed by this Section 22.2(a) shall terminate this Lease unless Landlord notifies Tenant in writing that Landlord elects to terminate this Lease.

"The lessor has the remedy described in Civil Code Section 1951.4 (lessor may continue the lease in effect after lessee's breach and abandonment and recover rent as it becomes due, if lessee has the right to sublet or assign subject only to reasonable limitations)."

(b) Landlord may terminate Tenant's right to possession of the Premises at any time by giving written notice to that effect. No act by Landlord other than giving

written notice to Tenant shall terminate this Lease. Acts of maintenance, efforts to relet the Premises or the appointment of a receiver on Landlord's initiative to protect Landlord's interest under this Lease shall not constitute a termination of Tenant's right to possession. On termination, Landlord shall have the right to remove all personal property of Tenant and store it at Tenant's cost and to recover from Tenant as damages: the worth at the time of award of unpaid Rent and other sums due and payable which had been earned at the time of termination; plus (ii) the worth at the time of award of the amount by which the unpaid Rent and other sums due and payable which would have been payable after termination until the time of award exceeds the amount of the Rent loss that Tenant proves could have been reasonably avoided; plus (iii) the worth at the time of award of the amount by which the unpaid Rent and other sums due and payable for the balance of the Term after the time of award exceeds the amount of the Rent loss that Tenant proves could be reasonably avoided; plus (iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform Tenant's obligations under this Lease, or which, in the ordinary course of things, would be likely to result therefrom, including, without limitation, actual costs or expenses incurred by Landlord: (A) in retaking possession of the Premises, including reasonable attorneys' fees and costs therefor; (B) maintaining or preserving the Premises for reletting to a new tenant, including repairs or alterations to the Premises for the reletting; (C) leasing commissions; (D) any other costs necessary or appropriate to relet the Premises; and (E) at Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by the laws of the State of California.

The "worth at the time of award" of the amounts referred to in Sections 22.2(b)(i) and 22.2(b)(ii) shall be calculated by allowing interest at the lesser of twelve percent (12%) per annum or the maximum rate permitted by law, on the unpaid Rent and other sums due and payable from the termination date through the date of award. The "worth at the time of award" of the amount referred to in Section 22.2(b)(iii) shall be calculated by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award, plus one percent ( 1%). Tenant waives redemption or relief from forfeiture under California Code of Civil Procedure Sections 1174 and 1179, or under any other present or future law, if Tenant is evicted or Landlord takes possession of the Premises by reason of any Event of Default by Tenant.

22.3 If Landlord shall exercise any one or more remedies hereunder granted or otherwise available, it shall not be deemed to be an acceptance or surrender of the Premises by Tenant whether by agreement or by operation of law; it is understood that such surrender can be effected only by the written agreement of Landlord and Tenant. No alteration of security devices and no removal or other exercise of dominion by Landlord over the property of Tenant or others in the Premises shall be deemed unauthorized or constitute a conversion, Tenant hereby consenting to the aforesaid exercise of dominion over Tenant's property within the Premises after any Event of Default.

22.4 Each right and remedy provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease or now or hereafter

existing at law or in equity or by statute or otherwise, including, but not limited to, suits for injunctive relief and specific performance. The exercise or beginning of the exercise by Landlord of any one or more of the rights or remedies provided for in this Lease or now or hereafter existing at law or in equity, or by statute or otherwise shall not preclude the simultaneous or later exercise by Landlord for any or all other rights or remedies provided for in this Lease or now or hereafter existing at or in equity or by statute or otherwise. All such rights and remedies shall be considered cumulative and non-exclusive. All costs incurred by Landlord in connection with collecting any Rent or other amounts and damages owing by Tenant pursuant to the provisions of this Lease, or to enforce any provision of this Lease, including reasonable attorneys' fees from the date such matter is turned over to an attorney, whether or not one or more actions are commenced by Landlord, shall also be recoverable by Landlord from Tenant. If any notice and grace period required under subparagraphs 22.1(a) or (b) was not previously given, a notice to pay rent or quit, or to perform or quit, as the case may be, given to Tenant under any statute authorizing the forfeiture of leases for unlawful detainer shall also constitute the applicable notice for grace period purposes required by subparagraphs 22.1(a) or (b) . In such case, the applicable grace period under subparagraphs 22.1(a) or (b) and under the unlawful detainer statute shall run concurrently after the one such statutory notice, and the failure of Tenant to cure the default within the greater of the two (2) such grace periods shall constitute both an unlawful detainer and an Event of Default entitling Landlord to the remedies provided for in this Lease and/or by said statute.

22.5 If Tenant should fail to make any payment or cure any default hereunder within the time herein permitted and such failure constitutes an Event of Default (except in the case where if Landlord in good faith believes that action prior to the expiration of any cure period under Section 22.1 is necessary to prevent damage to persons or property, in which case Landlord may act without waiting for such cure period to expire), Landlord, without being under any obligation to do so and without thereby waiving such default, may make such payment and/or remedy such default for the account of Tenant (and enter the Premises for such purpose), and thereupon, Tenant shall be obligated and hereby agrees to pay Landlord, upon demand, all reasonable costs, expenses, and disbursements, plus five percent (5%) thereof as partial reimbursement of Landlord's overhead and administrative costs likely to be incurred.

22.6 In addition to Landlord's rights set forth above, if Tenant fails to pay its Rent or any other amounts owing hereunder on the due date thereof more than two (2) times during any calendar year during the Term, then upon the occurrence of the third or any subsequent default in the payment of monies during said calendar year, Landlord, at its sole option, shall have the right to require that Tenant, as a condition precedent to curing such default, pay to Landlord, in check or money order, in advance, the Rent and Landlord's estimate of all other amounts which will become due and owing hereunder by Tenant for a period of two (2) months following said cure. All such amounts shall be paid by Tenant within thirty (30) days after notice from Landlord demanding the same. All monies so paid shall be retained by Landlord, without interest, for the balance of the Term and any extension thereof, and shall be applied by Landlord to the last due amounts owing hereunder by Tenant. If, however, Landlord's estimate of the Rent and other amounts for which Tenant is responsible hereunder are inaccurate, when such error is discovered, Landlord shall pay to Tenant, or Tenant shall pay to Landlord, within thirty (30) days after written notice thereof, the excess or deficiency, as the case may be, which is required to reconcile the amount on deposit with Landlord with the actual amounts for which Tenant is responsible.

22.7 Nothing contained in this Article 22 shall limit or prejudice the right of Landlord to prove and obtain as damages in any bankruptcy, insolvency, receivership, reorganization, or dissolution proceeding, an amount equal to the maximum allowed by any statute or rule of law governing such a proceeding and in effect at the time when such damages are to be proved, whether or not such amount be greater, equal, or less than the amounts recoverable, either as damages or Rent, referred to in any of the preceding provisions of this Article 22 . Notwithstanding anything contained in this Article to the contrary, any such proceeding or action involving bankruptcy, insolvency, reorganization, arrangement, assignment for the benefit of creditors, or appointment of a receiver or trustee, as set forth above, shall be considered to be an Event of Default only when such proceeding, action, or remedy shall be taken or brought by or against the then holder of the leasehold estate under this Lease.

22.8 Landlord is entitled to accept, receive, in check or money order, and deposit any payment made by Tenant for any reason or purpose or in any amount whatsoever, and apply them at Landlord's option to any obligation of Tenant, and such amounts shall not constitute payment of any amount owed, except that to which Landlord has applied them. No endorsement or statement on any check or letter of Tenant shall be deemed an accord and satisfaction or recognized for any purpose whatsoever. The acceptance of any such check or payment shall be without prejudice to Landlord's rights to recover any and all amounts owed by Tenant hereunder and shall not be deemed to cure any other default nor prejudice Landlord's rights to pursue any other available remedy, Landlord's acceptance of partial payment of Rent does not constitute a waiver of any rights, including without limitation any right Landlord may have to recover possession of the Premises.

22.9 In the event that Tenant's right of possession of the Premises is terminated prior to the end of the initial Term by reason of an Event of Default by Tenant, then immediately upon such termination, an amount shall be due and payable by Tenant to Landlord equal to the unamortized portion as of that date (which amortization shall be based on an interest rate of ten percent (10%) per annum) of the sum of (a) the cost of Landlord's Work (if any), (b) the Allowance (if any), (c) the value of any free Base Rent (i.e., the Base Rent stated in this Lease to be abated as an inducement to Tenant's entering into this Lease) enjoyed as of that date by Tenant, and (d) the amount of all commissions paid by Landlord in order to procure this Lease.

22.10 Tenant waives the right to terminate this Lease due to Landlord's default hereunder, and Tenant's sole remedy on Landlord's default is an action for damages or injunctive or declaratory relief. Landlord's failure to perform any of its obligations under this Lease shall constitute a default by Landlord under this Lease if the failure continues for thirty (30) days after written notice of the failure from Tenant to Landlord. If the required performance cannot be completed within thirty (30) days, Landlord's failure to perform shall constitute a default under the Lease unless Landlord undertakes to cure the failure within thirty (30) days and diligently and continuously attempts to complete this cure as soon as reasonably possible. All obligations of each party hereunder shall be construed as covenants, not conditions.

ARTICLE 23.

INTENTIONALLY OMITTED

ARTICLE 24.

[INTENTIONALLY OMITTED]

ARTICLE25.
ATTORNEYS' FEES

25.1 All costs and expenses, including reasonable attorneys' fees (whether or not legal proceedings are instituted), involved in collecting rents, enforcing the obligations of Tenant, or protecting the rights or interests of Landlord in each case under and in accordance with the terms of this Lease, whether or not an action is filed, including without limitation the cost and expense of instituting and prosecuting legal proceedings or recovering possession of the Premises after default by Tenant or upon expiration or sooner termination of this Lease, shall be due and payable by Tenant on demand, as Additional Rent. In addition, and notwithstanding the foregoing, if either party hereto shall file any action or bring any proceeding against the other party arising out of this Lease or for the declaration of any rights hereunder, the prevailing party in such action shall be entitled to recover from the other party all costs and expenses, including reasonable attorneys' fees incurred by the prevailing party, as determined by the trier of fact in such legal proceeding. For purposes of this provision, the terms "attorneys' fees" or "attorneys' fees and costs," or "costs and expenses" shall mean the fees and expenses of external legal counsel of the parties hereto, which include printing, photocopying, duplicating, mail, overnight mail, messenger, court filing fees, costs of discovery, and fees billed for law clerks, paralegals, investigators and other persons not admitted to the bar for performing services under the supervision and direction of an attorney. In addition, the prevailing party shall be entitled to recover reasonable attorneys' fees and costs incurred in enforcing any judgment arising from a suit or proceeding under this Lease, including without limitation post-judgment motions, contempt proceedings, garnishment, levy and debtor and third party examinations, discovery and bankruptcy litigation, without regard to schedule or rule of court purporting to restrict such award. This post-judgment award of attorneys' fees and costs provision shall be severable from any other provision of this Lease and shall survive any judgment/award on such suit or arbitration and is not to be deemed merged into the judgment/award or terminated with the Lease.

ARTICLE26.

NON-WAIVER

26.1 Neither acceptance of any payment by Landlord from Tenant nor, failure by Landlord to complain of any action, non-action, or default of Tenant shall constitute a waiver of any of Landlord's rights hereunder. Time is of the essence with respect to the performance of every obligation of each party under this Lease in which time of performance is a factor. Waiver by either party of any right or remedy arising in connection with any default of the other party shall not constitute a waiver of such right or remedy or any other right or remedy arising in connection with either a subsequent default of the same obligation or any other default. No right or remedy of either party hereunder or covenant, duty, or obligation of any party hereunder shall be deemed waived by the other party unless such waiver is in writing, signed by the other party or the other party's duly authorized agent.

ARTICLE27.

RULES AND REGULATIONS

27.1 Such reasonable rules and regulations applying to all lessees in the Project for the safety, care, and cleanliness of the Project and the preservation of good order thereon are hereby made a part hereof as Exhibit D , and Tenant agrees to comply with all such rules and regulations. Landlord shall have the right at all times to change such rules and regulations or to amend them in any reasonable and non-discriminatory manner as may be deemed advisable by Landlord, all of which changes and amendments shall be sent by Landlord to Tenant in writing and shall be thereafter carried out and observed by Tenant. Landlord shall not have any liability to Tenant for any failure of any other lessees of the Project to comply with such rules and regulations.

ARTICLE28.
ASSIGNMENT BY LANDLORD

28.1 Landlord shall have the right to transfer or assign, in whole or in part, all its rights and obligations hereunder and in the Premises and the Project. In such event, no liability or obligation shall accrue or be charged to Landlord with respect to the period from and after such transfer or assignment and assumption of Landlord's obligations by the transferee or assignee.

ARTICLE29.
LIABILITY OF LANDLORD

29.1 It is expressly understood and agreed that the obligations of Landlord under this Lease shall be binding upon Landlord and its successors and assigns and any future owner of the Project only with respect to events occurring during its and their respective ownership of the Project. In addition, Tenant agrees to look solely to Landlord's interest in the Project for recovery of any judgment against Landlord arising in connection with this Lease, it being agreed that neither Landlord nor any successor or assign of Landlord nor any future owner of the Project, nor any partner, shareholder, member, or officer of any of the foregoing shall ever be personally liable for any such judgment. The limitations of liability contained in this Section 29.1 shall inure to the benefit of Landlord's and the Landlord Parties' present and future partners, beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective partners, heirs, successors and assigns. Under no circumstances shall any present or future partner of Landlord (if Landlord is a partnership), or trustee or beneficiary (if Landlord or any partner of Landlord is a trust), have any liability for the performance of Landlord's obligations under this Lease. Notwithstanding any contrary provision herein, neither Landlord nor the Landlord Parties shall be liable under any circumstances for any indirect or consequential damages or any injury or damage to, or interference with, Tenant's business, including but not limited to, loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, in each case, however occurring.

ARTICLE30.
SUBORDINATION AND ATTORNMENT

30.1 This Lease, at Landlord's option, shall be subordinate to any present or future mortgage, ground lease or declaration of covenants regarding maintenance and use of any areas contained in any portion of the Building, and to any and all advances made under any present or future mortgage and to all renewals, modifications, consolidations, replacements, and extensions of any or all of same. Tenant agrees, with respect to any of the foregoing documents, that no documentation other than this Lease shall be required to evidence such subordination. If any holder of a mortgage shall elect for this Lease to be superior to the lien of its mortgage and shall give written notice thereof to Tenant, then this Lease shall automatically be deemed prior to such mortgage whether this Lease is dated earlier or later than the date of said mortgage or the date of recording thereof. Tenant agrees to execute such documents as may be further required to evidence such subordination or to make this Lease prior to the lien of any mortgage or deed of trust, as the case may be, and by failing to do so within fifteen (15) days after written demand. Tenant hereby attorns to all successor owners of the Building, whether or not such ownership is acquired as a result of a sale through foreclosure or otherwise.

30.2 Each party shall, at such time or times as the other party may request, upon not less than fifteen (15) days' prior written request by the requesting party, sign and deliver to the requesting party a certificate stating whether this Lease is in full force and effect; whether any amendments or modifications exist; whether any Monthly Rent has been prepaid and, if so, how much; whether to the knowledge of the certifying party there are any defaults hereunder; and in the circumstance where Landlord is the requesting party, such other information and agreements as may be reasonably requested, it being intended that any such statement delivered pursuant to this Article may be relied upon by the requesting party and by any prospective purchaser of all or any portion of the requesting party's interest herein, or a holder or prospective holder of any mortgage encumbering the Building. Tenant's failure to deliver such statement within five (5) business days after Landlord's second written request therefor shall conclusively be deemed to be an admission by Tenant of the matters set forth in the request for an estoppel certificate.

30.3 Tenant shall deliver to Landlord prior to the execution of this Lease and thereafter at any time upon Landlord's request, Tenant's current audited financial statements, including a balance sheet and profit and loss statement for the most recent prior year (collectively, the "Statements"), which Statements shall accurately and completely reflect the financial condition of Tenant. Landlord shall have the right to deliver the same to any proposed purchaser of the Building or the Project, and to any encumbrancer of all or any portion of the Building or the Project.

30.4 Tenant acknowledges that Landlord is relying on the Statements in its determination to enter into this Lease, and Tenant represents to Landlord , which representation shall be deemed made on the date of this Lease and again on the Commencement Date, that no material change in the financial condition of Tenant, as reflected in the Statements, has occurred since the date Tenant delivered the Statements to Landlord. The Statements are represented and warranted by Tenant to be correct and to accurately and fully reflect Tenant's true financial condition as of the date of submission of any Statements to Landlord.

ARTICLE31.
HOLDING OVER

31 . 1 In the event Tenant, or any party claiming under Tenant, retains possession of the Premises after the Expiration Date or Termination Date, without the expressed prior written approval of Landlord, then such possession shall be that of a holdover tenant and an unlawful detainer. No tenancy or interest shall result from such possession, and such parties shall be subject to eviction and removal. Tenant or any such party shall pay Landlord, as Base Rent for the period of such holdover, an amount equal to one hundred fifty percent (150%) of the Base Rent otherwise provided for herein, during the time of holdover together with all other Additional Rent and other amounts payable pursuant to the terms of this Lease. Tenant shall also be liable for any and all damages sustained by Landlord as a result of such holdover. Tenant shall vacate the Premises and deliver same to Landlord immediately upon Tenant's receipt of notice from Landlord to so vacate. The Rent during such holdover period shall be payable to Landlord on demand. No holding over by Tenant, whether with or without consent of Landlord, shall operate to extend the Term of this Lease.

ARTICLE 32.

SIGNS

32.1 Subject to Landlord's prior written approval, in its reasonable discretion, and provided all signs are in keeping with the quality and nature of the Building and Project, Tenant, if the Premises comprise an entire floor of the Building, at its sole cost and expense, may install identification signage anywhere in the Premises, provided that such signs must not be visible from the exterior of the Building and any elevator lobby sign shall comply with Landlord's then-current Building standard signage program. Any signs within an elevator lobby or visible from an elevator lobby shall be subject to Landlord's reasonable approval.

32.2 If other tenants occupy space on the floor on which a portion of the Premises is located, Tenant's identifying signage with respect to such floor shall be provided by Landlord, at Landlord's cost, and such signage shall be comparable to that used by Landlord for other similar floors in the Building and shall comply with Landlord's then-current Building standard signage program.

32.3 Any signs, notices, logos, pictures, names or advertisements which are installed and that have not been separately approved by Landlord or permitted pursuant to Section 32.4 below may be removed, upon not less than five (5) business days prior written notice to Tenant, at the sole expense of Tenant. Except as provided in Section 32.4, below, Tenant may not install any signs on the exterior or roof of the Building or the Common Areas. Any signs, window coverings, blinds or other items visible from the exterior of the Premises or the Building, shall be subject to the prior approval of Landlord, in its sole discretion.

32.4 Tenant shall be entitled to install the following signage (collectively, the "Tenant's Signage"):

(a) So long as Tenant leases and occupies at least five (5) full floors in the Building, to the extent allowed pursuant to Applicable Laws and the provisions of any CC&Rs affecting the Project, exclusive signage on the Building identifying Tenant's

name or logo located in the same location as Tenant's Building top sign as of the date of

this Lease (the "Building Top Signage").

(b) So long as Tenant leases and occupies at least one (1) full floor in the Building, space on the existing monument sign located on Great America Parkway adjacent to the Building equal to one-sixth of the total signage area for each full floor of the Building leased and occupied by Tenant, not to exceed 50% of the total signage are on that monument sign.

32.4.1 Tenant's Signage shall set forth Tenant's name and logo as determined by Tenant in its sole discretion; provided, however, in no event shall Tenant's Signage include an "Objectionable Name," as that term is defined in Section 32.4.2, of this Lease. The graphics, materials, color, design, lettering, lighting, size, illumination, specifications and exact location of Tenant's Signage (collectively, the "Sign Specifications") shall be subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed, and shall be consistent and compatible with the quality and nature of the Project. Landlord hereby approves Tenant's Building Top Signage and monument signage existing on the date of this Lease. For purposes of this Section 32.4.1, the reference to "name" shall mean name and/or logo. In addition, Tenant's Signage shall be subject to Tenant's receipt of all required governmental permits and approvals and shall be subject to all Applicable Laws and to any CC&Rs affecting the Project. Landlord shall use commercially reasonable efforts to assist Tenant in obtaining all necessary governmental permits and approvals for Tenant's Signage. Tenant hereby acknowledges that, notwithstanding Landlord's approval of Tenant's Signage, Landlord has made no representation or warranty to Tenant with respect to the probability of obtaining all necessary governmental approvals and permits for Tenant's Signage. In the event Tenant does not receive the necessary governmental approvals and permits for Tenant's Signage, Tenant's and Landlord's rights and obligations under the remaining provisions of this Lease shall be unaffected.

32.4.2 To the extent Tenant desires to change the name and/or logo set forth on Tenant's Signage, such name and/or logo shall not have a name which relates to an entity which is of a character or reputation, or is associated with a political faction or orientation, which is inconsistent with the quality of the Project, or which would otherwise reasonably offend a landlord of the Comparable Buildings (an "Objectionable Name").

32.4.3 The rights contained in this Section 32.4 shall be personal to Original Tenant and its Permitted Transferees, and may only be exercised and maintained by such parties (and not any other assignee, sublessee or other transferee of the Original Tenant's interest in this Lease) to the extent (i) they are not in monetary or material non-monetary default under this Lease (beyond any applicable notice and cure period) and (ii) if they lease the required amounts of space in the Building set forth above (i.e., at least five (5) full floors in the Building with respect to the Building Top Signage, and at least one full floor in the Building, with respect to the monument signage, as applicable).

32.4.4 In the event Tenant vacates the entire Premises for a period of time longer than three (3) months, then Landlord shall have the right upon sixty (60) days' written

notice to Tenant to either remove Tenant's Signage or require Tenant to remove Tenant's Signage. In the event Landlord gives that notice, Tenant's rights to Tenant's Signage shall terminate and Tenant's Signage shall be removed unless Tenant reoccupies at least fifty percent (50%) of the rentable area of the Premises for bona fide purposes of conducting business therein prior to the expiration of that 60-day period.

32.4.5 The costs of the actual signs comprising Tenant's Signage and the installation, design, construction, and any and all other costs associated with Tenant's Signage, including, without limitation, utility charges and hook-up fees, permits, and maintenance and repairs, shall be the sole responsibility of Tenant. Should Tenant's Signage require repairs and/or maintenance, as determined in Landlord's reasonable judgment, Landlord shall have the right to provide notice thereof to Tenant and Tenant (except as set forth above) shall cause such repairs and/or maintenance to be performed within fifteen (15) business days after receipt of such notice from Landlord, at Tenant's sole cost and expense; provided, however, if such repairs and/or maintenance are reasonably expected to require longer than fifteen (15) business days to perform, Tenant shall commence such repairs and/or maintenance within such fifteen (15) business day period and shall diligently prosecute such repairs and maintenance to completion. Should Tenant fail to perform such repairs and/or maintenance within the periods described in the immediately preceding sentence, Landlord shall, upon the delivery of an additional five (5) business days' prior written notice, have the right to cause such work to be performed and to charge Tenant as Additional Rent for the cost of such work. Upon the expiration or earlier termination of this Lease or the earlier termination of Tenant's signage rights pursuant to this Section 32, Tenant shall, at Tenant's sole cost and expense, cause Tenant's Signage to be removed and shall cause the areas in which such Tenant's Signage was located to be restored to the condition existing immediately prior to the placement of such Tenant's Signage. If Tenant fails to timely remove such Tenant's Signage or to restore the areas in which such Tenant's Signage was located, as provided in the immediately preceding sentence, then Landlord, upon the delivery of an additional five (5) business days' prior written notice, may perform such work, and all actual out-of-pocket costs reasonably incurred by Landlord in so performing shall be reimbursed by Tenant to Landlord within thirty (30) days after Tenant's receipt of an invoice therefor. Tenant shall be solely responsible for any damage caused as a result of the Building Top Signage and (i) any additional maintenance costs with respect to the roof arising out of the installation, maintenance, repair, replacement or removal of the Building Top Signage. The provisions of this Section 32.4.5 shall survive the expiration or earlier termination of this Lease.

ARTICLE33
HAZARDOUS SUBSTANCES

33.1 Except for Hazardous Material (as defined below) contained in products used by Tenant for ordinary cleaning and office purposes in quantities not violative of applicable Environmental Requirements, Tenant shall not permit or cause any party to bring any Hazardous Material upon the Premises and/or the Project or transport, store, use, generate, manufacture, dispose, or release any Hazardous Material on or from the Premises and/or the Project without Landlord's prior written consent. Tenant, at its sole cost and expense, shall operate its business in

the Premises in strict compliance with all Environmental Requirements (as defined below) and all requirements of this Lease. Tenant shall complete and certify to disclosure statements as requested by Landlord from time to time relating to Tenant's transportation, storage, use, generation, manufacture, or release of Hazardous Materials on the Premises, and Tenant shall promptly deliver to Landlord a copy of any notice of violation relating to the Premises or the Project of any Environmental Requirement.

33.2 The term "Environmental Requirements" means all applicable present and future statutes, regulations, ordinances, rules, codes, judgments, permits, authorizations, orders, policies or other similar requirements of any governmental authority, agency or court regulating or relating to health, safety, or environmental conditions on, under, or about the Premises or the environment, including without limitation, the following: the Comprehensive Environmental Response, Compensation and Liability Act; the Resource Conservation and Recovery Act; the Clean Air Act; the Clean Water Act; the Toxic Substances Control Act and all state and local counterparts thereto; all applicable California requirements, including, but not limited to, Sections 25115, 25117, 25122.7, 25140, 25249.8, 25281, 25316 and 25501 of the California Health and Safety Code and Title 22 of the California Code of Regulations, Division 4.5, Chapter 11, and any policies or rules promulgated thereunder as well as any County or City ordinances that may operate independent of, or in conjunction with, the State programs, and any common or civil law obligations including, without limitation, nuisance or trespass, and any other requirements of Article 3 of this Lease. The term "Hazardous Materials" means and includes any substance, material, waste, pollutant, or contaminant that is or could be regulated under any Environmental Requirement or that may adversely affect human health or the environment, including, without limitation, any solid or hazardous waste, hazardous substance, asbestos, petroleum (including crude oil or any fraction thereof, natural gas, synthetic gas, polychlorinated biphenyls (PCBs), and radioactive material). For purposes of Environmental Requirements, to the extent authorized by law, Tenant is and shall be deemed to be the responsible party, including without limitation, the "owner" and "operator" of Tenant's "facility" and the "owner" of all Hazardous Materials brought on the Premises by Tenant, its agents, employees, contractors or invitees, and the wastes, by-products, or residues generated, resulting, or produced therefrom.

33.3 Tenant, at its sole cost and expense, shall remove all Hazardous Materials stored, disposed of or otherwise released by Tenant, its assignees, subtenants, agents, employees, contractors or invitees onto or from the Premises, in a manner and to a level satisfactory to Landlord taking into consideration the level and manner which complies with all Environmental Requirements and does not limit any future uses of the Premises or require the recording of any deed restriction or notice regarding the Premises. Tenant shall perform such work at any time during the Term of the Lease upon written request by Landlord or, in the absence of a specific request by Landlord, before Tenant's right to possession of the Premises terminates or expires. If Tenant fails to perform such work within the time period specified by Landlord or before Tenant's right to possession terminates or expires (whichever is earlier), Landlord may at its discretion, and without waiving any other remedy available under this Lease or at law or equity (including without limitation an action to compel Tenant to perform such work), perform such work at Tenant's cost. Tenant shall pay all costs incurred by Landlord in performing such work within ten (10) days after Landlord's request therefor. Such work performed by Landlord is on behalf of Tenant and Tenant

remains the owner, generator, operator, transporter, and/or arranger of the Hazardous Materials for purposes of Environmental Requirements. Tenant agrees not to enter into any agreement with any person, including without limitation any governmental authority, regarding the removal of Hazardous Materials that have been disposed of on the Premises or otherwise released onto or from the Premises without the written approval of Landlord.

33.4 Tenant shall indemnify, defend, and hold Landlord harmless from and against any and all losses (including, without limitation, diminution in value of the Premises or the Project and loss of rental income from the Project), claims, demands, actions, suits, damages (including, without limitation, punitive damages), expenses (including, without limitation, remediation, removal, repair, corrective action, or cleanup expenses), and costs (including, without limitation, actual attorneys' fees, consultant fees or expert fees and including, without limitation, removal or management of any asbestos brought into the Premises or disturbed in breach of the requirements of this Article 33 , regardless of whether such removal or management is required by law) which are brought or recoverable against, or suffered or incurred by Landlord as a result of any release of Hazardous Materials or any breach of the requirements under this Article 33 by Tenant, its agents, employees, contractors, subtenants, assignees or invitees, regardless of whether Tenant had knowledge of such noncompliance. The obligations of Tenant under this Article 33 shall survive any termination of this Lease.

33.5 Landlord shall have access to, and a right to perform inspections and tests of, the Premises to determine Tenant's compliance with Environmental Requirements, its obligations under this Article 33 , or the environmental condition of the Premises. Access shall be granted to Landlord upon Landlord's prior notice to Tenant and at such times so as to minimize, so far as may be reasonable under the circumstances, any disturbance to Tenant's operations. Such inspections and tests shall be conducted at Landlord's expense, unless such inspections or tests reveal that Tenant has not complied with any Environmental Requirement, in which case Tenant shall reimburse Landlord for the reasonable cost of such inspection and tests. Landlord's receipt of or satisfaction with any environmental assessment in no way waives any rights that Landlord holds against Tenant. Tenant shall promptly notify Landlord of any communication or report that Tenant makes to any governmental authority regarding any possible violation of Environmental Requirements or release or threat of release of any Hazardous Materials onto or from the Premises. Tenant shall, within five (5) days of receipt thereof, provide Landlord with a copy of any documents or correspondence received from any governmental agency or other party relating to a possible violation of Environmental Requirements or claim or liability associated with the release or threat of release of any Hazardous Materials onto or from the Premises.

33.6 In addition to all other rights and remedies available to Landlord under this Lease or otherwise, Landlord may, in the event of a breach of the requirements of this Article 33 that is not cured within thirty (30) days following notice of such breach by Landlord, require Tenant to provide financial assurance (such as insurance, escrow of funds or third party guarantee) in an amount and form satisfactory to Landlord. The requirements of this Article 33 are in addition to and not in lieu of any other provision in the Lease.

ARTICLE 34.

COMPLIANCE WITH LAWS AND OTHER REGULATIONS

34.1 Tenant, as its sole cost and expense, shall promptly comply with all laws, statutes, ordinances, and governmental rules, regulations, or requirements now in force or which may hereafter become in force, of federal, state, county, and municipal authorities, including, but not limited to, the Americans with Disabilities Act, with the requirements of any board of fire underwriters or other similar body now or hereafter constituted, and with any occupancy certificate issued pursuant to any law by any public officer or officers, which impose, any duty upon Landlord or Tenant, insofar as any thereof relate to or affect the condition, use, alteration, or occupancy of the Premises. Landlord's approval of Tenant's plans for any improvements shall create no responsibility or liability on the part of Landlord for their completeness, design sufficiency, or compliance with all laws, rules, and regulations of governmental agencies or authorities, including, but not limited to, the Americans with Disabilities Act.

34.2 As an inducement to Landlord to enter into this Lease, Tenant hereby represents and warrants that as of the date hereof: (i) Tenant is not, nor is it owned or controlled directly or indirectly by, any person, group, entity or nation named on any list issued by the Office of Foreign Assets Control of the United States Department of the Treasury ("OFAC") pursuant to Executive Order 13224 or any similar list or any law, order, rule or regulation or any Executive Order of the President of the United States as a terrorist, "Specially Designated National and Blocked Person " or other banned or blocked person (any such person, group, entity or nation being hereinafter referred to as a "Prohibited Person"); (ii) Tenant is not (nor is it owned or controlled, directly or indirectly, by any person, group, entity or nation which is) acting directly or indirectly for or on behalf of any Prohibited Person; and (iii) neither Tenant (nor any person, group, entity or nation which owns or controls Tenant, directly or indirectly) has conducted business or has engaged in any transaction or dealing with any Prohibited Person, including without limitation any assignment of this Lease or any subletting of all or any portion of the Premises or the making or receiving of any contribution of funds, goods or services to or for the benefit of a Prohibited Person. Tenant covenants and agrees (a) to comply with all requirements of law relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect, (b) to immediately notify Landlord in writing if any of the representations, warranties or covenants set forth in this Section 34.2 are no longer true or have been breached or if Tenant has a reasonable basis to believe that they may no longer be true or have been breached, (c) not to use funds from any Prohibited Person to make any payment due to Landlord under the Lease and (d) at the request of Landlord, to provide such information as may be requested by Landlord to determine Tenant's compliance with the terms hereof. Any breach by Tenant of the foregoing representations and warranties shall be deemed an Event of Default by Tenant under this Lease and shall be covered by the indemnity provisions of Section 21.1 above. The representations and warranties contained in this subsection shall be continuing in nature and shall survive the expiration or earlier termination of this Lease.

ARTICLE35.
SEVERABILITY

35 . 1 This Lease shall be construed in accordance with the laws of the State of California. If any clause or provision of this Lease is illegal, invalid, or unenforceable under

present or future laws effective during the Term, then it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby . It is also the intention of both parties that in lieu of each clause or provision that is illegal, or unenforceable, there is added as a part of this Lease a clause or provision as similar in terms to such illegal, invalid, or unenforceable clause or provision as may be possible and still be legal, valid, and enforceable.

ARTICLE36.
NOTICES

36.1 Whenever in this Lease it shall be required or permitted that notice or demand be given or served by either party to this Lease to or on the other, such notice or demand shall be given or served in writing and delivered personally, or forwarded by certified or registered mail, postage prepaid, or recognized overnight courier, addressed to Landlord's address and Tenant's address, as applicable, as specified in the Basic Lease Information. Either party may change its address for notice from time to time by serving written notice of the new address as provided in this Article 36.

36.2 Notice hereunder shall become effective upon (a) delivery in case of personal delivery and (b) receipt or refusal in case of certified or registered mail or delivery by overnight courier.

ARTICLE37.

OBLIGATIONS OF, SUCCESSORS, PLURALITY, GENDER

37.1 Landlord and Tenant agree that all the provisions hereof are to be construed as covenants and agreements as though the words imparting such covenants were used in each paragraph hereof, and that, except as restricted by the provisions hereof, shall bind and inure to the benefit of the parties hereto, their respective heirs, legal representatives, successors, and assigns. If the rights of Tenant hereunder are owned by two or more parties, or two or more parties are designated herein as Tenant, then all such parties shall be jointly and severally liable for the obligations of Tenant hereunder . Whenever the singular or plural number, masculine or feminine or neuter gender is used herein, it shall equally include the other.

ARTICLE38.
ENTIRE AGREEMENT

38.1 This Lease and any attached addenda or exhibits constitute the entire agreement between Landlord and Tenant. No prior or contemporaneous written or oral leases or representations shall be binding. This Lease shall not be amended, changed, or extended except by written instrument signed by Landlord and Tenant.

38.2 THE SUBMISSION OF THIS LEASE BY LANDLORD, ITS AGENT OR REPRESENTATIVE FOR EXAMINATION OR EXECUTION BY TENANT DOES NOT CONSTITUTE AN OPTION OR OFFER TO LEASE THE PREMISES UPON THE TERMS AND CONDITIONS CONTAINED HEREIN OR A RESERVATION OF THE PREMISES IN FAVOR OF TENANT, IT BEING INTENDED HEREBY THAT THIS LEASE SHALL ONLY

BECOME EFFECTIVE UPON THE EXECUTION HEREOF BY LANDLORD AND DELIVERY OF A FULLY EXECUTED LEASE TO TENANT.

38.3 This Lease may be executed in counterparts, all of which shall constitute the same Lease, notwithstanding that all parties to this Lease are not signatory to the same or original counterpart. Delivery of an executed counterpart of this Lease by telefacsimile shall be equally as effective as delivery of an original executed counterpart. Any party delivering an executed counterpart of this Lease by telefacsimile also shall deliver an original executed counterpart of this Lease, but the failure to deliver an original executed counterpart shall not affect the validity, enforceability and binding effect of this Lease. Signature pages may be detached from the counterparts and attached to a single copy of this Lease to physically form one (1) document.

ARTICLE39
CAPTIONS

39.1 Paragraph captions are for Landlord's and Tenant's convenience only, and neither limit nor amplify the provisions of this Lease.

ARTICLE40
CHANGES

40.1 Should any mortgagee require a modification of this Lease, which modification will not bring about any increased cost or expense to Tenant or in any other way substantially and adversely change the rights and obligations of Tenant hereunder, then and in such event Tenant agrees that this Lease may be so modified .

ARTICLE41
AUTHORITY

41.1 All rights and remedies of Landlord under this Lease, or those which may be provided by law, may be exercised by Landlord in its own name individually, or in its name by its agent , and all legal proceedings for the enforcement of any such rights or remedies , including distress for Rent, unlawful detainer, and any other legal or equitable proceedings may be commenced and prosecuted to final judgment and be executed by Landlord in its own name individually or in its name by its agent. Landlord and Tenant each represent to the other that each has full power and authority to execute this Lease and to make and perform the agreements herein contained, and Tenant expressly stipulates that any rights or remedies available to Landlord, either by the provisions of this Lease or otherwise, may be enforced by Landlord in its own name individually or in its name by its agent or principal .

ARTICLE42.
BROKERAGE

42.1 Tenant represents and warrants to Landlord that it has dealt only with Tenant's Broker and Landlord's Broker as defined in Basic Lease Information, in negotiation of this Lease.

Landlord shall make payment of the brokerage fee due the Landlord's Broker pursuant to and in accordance with a separate agreement between Landlord and Landlord's Broker. Landlord's Broker shall pay a portion of its commission to Tenant's Broker pursuant to a separate agreement between Landlord's Broker and Tenant ' s Broker. Except for amounts owing to Landlord's Broker and Tenant's Broker, each party hereby agrees to indemnify and hold the other party harmless of and from any and all damages, losses, costs, or expenses (including, without limitation, all attorneys' fees and disbursements) by reason of any claim of or liability to any other broker or other person claiming through the indemnifying party and arising out of or in connection with the negotiation, execution, and delivery of this Lease. Additionally, except as may be otherwise expressly agreed upon by Landlord in writing, Tenant acknowledges and agrees that Landlord and/or Landlord's agent shall have no obligation for payment of any brokerage fee or similar compensation to any person with whom Tenant has dealt or may in the future deal with respect to leasing of any additional or expansion space in the Building or renewals or extensions of this Lease.

ARTICLE43.

EXHIBITS

43.1 Exhibits A through H are attached hereto and incorporated herein for all purposes and are hereby acknowledged by both parties to this Lease.

ARTICLE44
APPURTENANCES

44.1 The Premises include the right of ingress and egress thereto and therefrom; however, Landlord reserves the right to make changes and alterations to the Building, fixtures and equipment thereof, in the street entrances, doors, halls, corridors, lobbies, passages, elevators, escalators, stairways, toilets and other parts thereof which Landlord may deem necessary or desirable; provided that Tenant at all times has a means of access to the Premises (subject to a temporary interruption due to Force Majeure Events or necessary maintenance that cannot reasonably be performed without such interruption of access). Neither this Lease nor any use by Tenant of the Building or any passage, door, tunnel, concourse, plaza or any other area connecting the garages or other buildings with the Building, shall give Tenant any right or easement of such use and the use thereof may, without notice to Tenant, be regulated or discontinued at any time and from time to time by Landlord without liability of any kind to Tenant and without affecting the obligations of Tenant under this Lease.

ARTICLE45.

PREJUDGMENT REMEDY, REDEMPTION, COUNTERCLAIM, AND JURY

45.1 Tenant, for itself and for all persons claiming through or under it, hereby expressly waives any and all rights which are, or in the future may be, conferred upon Tenant by any present or future law to redeem the Premises, or to any new trial in any action for ejection under any provisions of law, after reentry thereupon, or upon any part thereof, by Landlord, or after any warrant to dispossess or judgment in ejection. If Landlord shall acquire possession of the Premises by summary proceedings, or in any other lawful manner without judicial proceedings, it shall be deemed a reentry within the meaning of that word as used in this Lease. In the event that Landlord commences any summary proceedings or action for nonpayment of Rent or other charges

provided for in this Lease, Tenant shall not interpose any counterclaim of any nature or description in any such proceeding or action. Tenant and Landlord both waive a trial by jury of any or all issues arising in any action or proceeding between the parties hereto or their successors, under or connected with this Lease, or any of its provisions.

ARTICLE46.
RECORDING

46.1 Tenant shall not record this Lease but will, at the request of Landlord, execute a memorandum or notice thereof in recordable form satisfactory to both Landlord and Tenant specifying the date of commencement and expiration of the Term of this Lease and other information required by statute. Either Landlord or Tenant may then record said memorandum or notice of lease at the cost of the recording party.

ARTICLE47.
MORTGAGEE PROTECTION

47.1 Tenant agrees to give any mortgagees and/or trust deed holders, by registered mail, a copy of any notice of default served upon Landlord, provided that prior to such notice Tenant has been notified, in writing of the address of such mortgagees and/or trust deed holders. Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for in this Lease, then the mortgagees and/or trust deed holders shall have an additional thirty (30) days within which to cure such default or if such default cannot be cured within that time, then such additional time as may be necessary to cure such default (including but not limited to commencement of foreclosure proceedings, if necessary to effect such cure) in which event this Lease shall not be terminated while such remedies are being so diligently pursued.

ARTICLE48.

OTHER LANDLORD CONSTRUCTION

48.1 Tenant acknowledges that portions of the Project may be under construction following Tenant's occupancy of the Premises, and that such construction may result in levels of noise, dust, odor, obstruction of access, etc. which are in excess of that present in a fully constructed project. Tenant hereby waives any and all rent offsets or claims of constructive eviction which may arise in connection with such construction. If any excavation or construction is made adjacent to, upon or within the Building, or any part thereof, Tenant shall afford to any and all persons causing or authorized to cause such excavation or construction license to enter upon the Premises for the purpose of doing such work as such persons shall deem necessary to preserve the Building or any portion thereof from injury or damage and to support the same by proper foundations, braces and supports, without any claim for damages or indemnity or abatement of Rent (subject to the express provisions of this Lease), or of a constructive or actual eviction of Tenant.

48.2 It is specifically understood and agreed that Landlord has no obligation and has made no promises to alter, remodel, improve, renovate, repair or decorate the Premises, the Building, or any part thereof and that no representations respecting the condition of the Premises or the Building have been made by Landlord to Tenant except as specifically set forth herein or in

the Tenant Work Letter. However, Tenant hereby acknowledges that Landlord is currently renovating or may during the Lease Term renovate, improve, alter, or modify (collectively, the "Renovations") the Project, the Building and/or the Premises. Tenant hereby agrees that such Renovations shall in no way constitute a constructive eviction of Tenant nor entitle Tenant to any abatement of Rent. Landlord shall use commercially reasonable efforts to not unreasonably interfere with Tenant's use of the Premises during the performance of such Renovations. Landlord shall have no responsibility and shall not be liable to Tenant for any injury to or interference with Tenant's business arising from the Renovations, nor shall Tenant be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Premises or of Tenant's personal property or improvements resulting from the Renovations, or for any inconvenience or annoyance occasioned by such Renovations.

ARTICLE49.
PARKING

49.1 The use by Tenant, its employees and invitees, of the parking facilities of the Project shall be on the terms and conditions set forth in Exhibit E attached hereto and by this reference incorporated herein and shall be subject to such other agreement between Landlord and Tenant as may hereinafter be established and to such other rules and regulations as Landlord may establish. Tenant, its employees and invitees shall use no more than the Maximum Parking Allocation. Tenant's use of the parking spaces shall be confined to the Project. If, in Landlord's reasonable business judgment, it becomes necessary, Landlord shall exercise due diligence to cause the creation of cross-parking easements and such other agreements as are necessary to permit Tenant, its employees and invitees to use parking spaces on properties and buildings which are separate legal parcels from the Project. Tenant acknowledges that other tenants of the Project and the tenants of the other buildings, their employees and invitees, may be given the right to park at the Project.

ARTICLE 50.
ELECTRICAL CAPACITY

Tenant covenants and agrees that at all times, its use of electric energy shall never exceed the capacity of the existing feeders to the Building or the risers of wiring installation. Any riser or risers to supply Tenant's electrical requirements upon written request of Tenant shall be installed by Landlord at the sole cost and expense of Tenant, if, in Landlord's sole judgment, the same are necessary and will not cause or create a dangerous or hazardous condition or entail excess or unreasonable alterations, repairs or expense or interfere with or disrupt other tenants or occupants. In addition to the installation of such riser or risers, Landlord will also, at the sole cost and expense of Tenant, install all other equipment proper and necessary in connection therewith subject to the aforesaid terms and conditions.

ARTICLE 51.
OPTION TO EXTEND LEASE

51.1 Extension Option. Tenant shall have the option to extend this Lease (the "Extension Option") for one additional term of five (5) years (the "Extension Period"), upon the terms and conditions hereinafter set forth:

(a) If the Extension Option is exercised, then the Base Rent per annum for such Extension Period (the "Option Rent") shall be an amount equal to the Fair Market Rental Value (as defined hereinafter) for the Premises as of the commencement of the Extension Option for such Extension Period; provided, however, that the Option Rent shall in no event be less than the Base Rent scheduled to be paid during the year immediately prior to the commencement of the Extension Period.

(b) The Extension Option must be exercised by Tenant, if at all, only at the time and in the manner provided in this Section 5l.l(b) .

(i) If Tenant wishes to exercise the Extension Option, Tenant must, on or before the date occurring nine (9) months before the expiration of the initial Lease Term (but not before the date that is twelve (12) months before the expiration of the Initial Lease Term), exercise the Extension Option by delivering written notice (the "Exercise Notice") to Landlord. If Tenant timely and properly exercises its Extension Option, the Lease Term shall be extended for the Extension Period upon all of the terms and conditions set forth in the Lease, as amended, except that the Base Rent for the Extension Period shall be as provided

in Section 51.1(a) and Tenant shall have no further options to extend the Lease Term.

(ii) If Tenant fails to deliver a timely Exercise Notice, Tenant shall be considered to have elected not to exercise the Extension Option.

(c) It is understood and agreed that the Extension Option hereby granted is personal to Tenant and is not transferable. In the event of any assignment or subletting of the Premises or any part thereof, the Extension Option shall automatically terminate and shall thereafter be null and void.

(d) Tenant's exercise of the Extension Option shall, if Landlord so elects in its absolute discretion, be ineffective in the event that (i) an Event of Default by Tenant remains uncured at the time of delivery of the Exercise Notice or at the commencement of the Extension Period, or (ii) Tenant shall have reduced the size of and/or modified the Premises below three (3) full contiguous floors by agreement with Landlord or pursuant to an express right in this Lease.

51.2 Fair Market Rental Value. The provisions of this Section shall apply in any instance in which this Lease provides that the Fair Market Rental Value is to apply .

(a) "Fair Market Rental Value" means the annual amount per square foot that a willing tenant would pay and a willing landlord would accept in arm's length negotiations, without any additional inducements, for a lease of the applicable space on the applicable terms and conditions for the applicable period of time. Fair Market Rental Value

shall be determined by Landlord considering the most recent new direct leases (and market renewals and extensions, if applicable) in the Building and in Comparable Buildings owned or managed by Landlord in the Market Area. If there are no such direct leases that are recent, consideration shall be given to the most recent new direct leases (and market renewals and extensions, if applicable) in other Comparable Buildings in the Market Area.

(b) In determining the rental rate of comparable space, the parties shall include all escalations and take into consideration the following concessions:

(i) Rental abatement concessions, if any, being granted to tenants in connection with the comparable space;

(ii) Tenant improvements or allowances provided or to be provided for the comparable space, taking into account the value of the existing improvements in the Premises, based on the age, quality, and layout of the improvements.

(c) If in determining the Fair Market Rental Value the parties determine that the economic terms of leases of comparable space include a tenant improvement allowance, Landlord may, at Landlord's sole option, elect to do the following:

(i) Grant some or all of the value of the tenant improvement allowance as an allowance for the refurbishment of the Premises; and

(ii) Reduce the Base Rent component of the Fair Market Rental Value to be an effective rental rate that takes into consideration the total dollar value of that portion of the tenant improvement allowance that Landlord has elected not to grant to Tenant (in which case that portion of the tenant improvement allowance evidenced in the effective rental rate shall not be granted to Tenant).

51.3 Determination of Fair Market Rental Value. The determination of Fair Market Rental Value shall be as provided in this Section 51.3.

(a) Negotiated Agreement. Landlord and Tenant shall diligently attempt in good faith to agree on the Fair Market Rental Value on or before the date (the "Outside Agreement Date") that is six (6) months prior to the expiration of the initial Lease Term.

(b) Parties' Separate Determinations. If Landlord and Tenant fail to reach agreement on or before the Outside Agreement Date, Landlord and Tenant shall each make a separate determination of the Fair Market Rental Value and notify the other party of this determination within five (5) days after the Outside Agreement Date.

(iii) Two Determinations. If each party makes a timely determination of the Fair Market Rental Value, those determinations shall be submitted to arbitration in accordance with subsection (c).

(iv) One Determination. If Landlord or Tenant fails to make a determination of the Fair Market Rental Value within the five (5) day period, that failure shall be conclusively considered to be that party's approval of the Fair Market Rental Value submitted within the five (5) day period by the other party.

(c) Arbitration . If both parties make timely individual determinations of the Fair Market Rental Value under subsection (b), the Fair Market Rental Value shall be determined by arbitration under this subsection (c).

(i) Scope of Arbitration. The determination of the arbitrators shall be limited to the sole issue of whether Landlord's or Tenant's submitted Fair Market Rental Value is the closest to the actual Fair Market Rental Value as determined by the arbitrators, taking into account the requirements of Section 51.2.

(ii) Qualifications of Arbitrator(s) . The arbitrators must be licensed real estate brokers who have been active in the leasing of commercial multi-story properties in the Market Area over the five-year period ending on the date of their appointment as arbitrator(s).

(iii) Parties' Appointment of Arbitrators. Within fifteen (15) days after the Outside Agreement Date, Landlord and Tenant shall each appoint one arbitrator and notify the other party of the arbitrator's name and business address.

(iv) Appointment of Third Arbitrator . If each party timely appoints an arbitrator, the two (2) arbitrators shall, within ten (10) days after the appointment of the second arbitrator, agree on and appoint a third arbitrator (who shall be qualified under the same criteria set forth above for qualification of the initial two (2) arbitrators) and provide notice to Landlord and Tenant of the arbitrator's name and business address.

(v) Arbitrators' Decision . Within thirty (30) days after the appointment of the third arbitrator, the three (3) arbitrators shall decide whether the parties will use Landlord's or Tenant's submitted Fair Market Rental Value and shall notify Landlord and Tenant of their decision. The decision of the majority the three (3) arbitrators shall be binding on Landlord and Tenant.

(vi) If Only One Arbitrator is Appointed . If either Landlord or Tenant fails to appoint an arbitrator within fifteen (15) days after the Outside Agreement Date, the arbitrator timely appointed by one of them shall reach a decision and notify Landlord and Tenant of that decision within thirty (30) days after the arbitrator's appointment. The arbitrator's decision shall be binding on Landlord and Tenant.

(vii) If Only Two Arbitrators Are Appointed. If each party appoints an arbitrator in a timely manner, but the two (2) arbitrators fail to agree on

and appoint a third arbitrator within the required period, the arbitrators shall be dismissed without delay and the issue of Fair Market Rental Value shall be submitted to binding arbitration under the real estate arbitration rules of JAMS, subject to the provisions of this section.

(viii) If No Arbitrator Is Appointed. If Landlord and Tenant each fail to appoint an arbitrator in a timely manner, the matter to be decided shall be submitted without delay to binding arbitration under the real estate arbitration rules of JAMS subject the provisions of this Section 5l.3(c) .

51.4 Cost of Arbitration . The cost of the arbitration shall paid by the losing Party.

ARTICLE 52.
TELECOMMUNICATIONS LINES AND EQUIPMENT

52.1 Location of Tenant's Equipment and Landlord Consent:

52.1.1 Tenant may install, maintain, replace, remove and use communications or computer wires, cables and related devices (collectively, the "Lines") at the Building in or serving the Premises only with Landlord's prior written consent, which consent may not be unreasonably withheld. Tenant shall locate all electronic telecommunications equipment within the Premises and shall coordinate the location of all Lines with Landlord. Any request for consent shall contain such information as Landlord may request.

52.1.2 Landlord's approval of, or requirements concerning, the Lines or any equipment related thereto, the plans, specifications or designs related thereto, the contractor or subcontractor, or the work performed hereunder, shall not be deemed a warranty as to the adequacy or appropriateness thereof, and Landlord hereby disclaims any responsibility or liability for the same.

52.1.3 If Landlord consents to Tenant's proposal, Tenant shall pay all of Tenant's and Landlord's third party costs in connection therewith (including without limitation all costs related to new Lines) and shall use, maintain and operate the Lines and related equipment

in accordance with and subject to all laws governing the Lines and equipment and at Tenant's sole risk and expense. Tenant shall comply with all of the requirements of this Lease concerning alterations in connection with installing the Lines. As soon as the work is completed, Tenant shall submit as-built drawings to Landlord.

52.1.4 Landlord reserves the right to require that Tenant remove any Lines located in or serving the Premises which are installed in violation of these provisions, or which are at any time in violation of any laws or present a dangerous or potentially dangerous

condition (whether such Lines were installed by Tenant or any other party), within three (3) days after written notice.

52.2 Reallocation of Line Space. Landlord may (but shall not have the obligation to) (a) install and relocate Lines at the Building; and (b) monitor and control the installation, maintenance, replacement and removal of, the allocation and periodic re-allocation of available space (if any) for, and the allocation of excess capacity (if any) on, any Lines now or hereafter installed at the Building by Landlord, Tenant or any other party.

52.3 Line Problems . Except to the extent arising from the gross negligence or willful misconduct of Landlord or Landlord's contractors, agents or employees, Landlord shall have no liability for damages arising from, and Landlord does not warrant that the Tenant's use of any Lines will be free from the following (collectively called "Line Problems"): (a) any shortages, failures, variations, interruptions, disconnections, loss or damage caused by the installation, maintenance, or replacement, use or removal of Lines by or for other tenants or occupants in the Building, by any failure of the environmental conditions or the power supply for the Building to conform to any requirement of the Lines or any associated equipment, or any other problems associated with any Lines by any other cause; (b) any failure of any Lines to satisfy Tenant's requirements; or (c) any eavesdropping or wiretapping by unauthorized parties. Landlord in no event shall be liable for damages by reason of loss of profits, business interruption or other consequential damage arising from any Line Problems.

52.4 Electromagnetic Fields . If Tenant at any time uses any equipment that may create an electromagnetic field and/or radio frequency exceeding the normal insulation ratings of ordinary twisted pair riser cable or cause radiation higher than normal background radiation, Landlord reserves the right to require Tenant to appropriately insulate that equipment and the Lines therefor (including without limitation riser cables), and take such other remedial action at Tenant's sole cost and expense as Lender may require in its sole discretion to prevent such excessive electromagnetic fields, radio frequency or radiation.


52.5	Removal of Electrical and Telecommunications Wires.

52.5.1 Within thirty (30) days after the expiration or sooner termination of the Lease, Landlord may elect by written notice to Tenant to:

(a) Retain any or all Lines installed by Tenant in the risers of the Building;

(b) Remove any or all such Lines and restore the Premises and risers to their condition existing prior to the installation of the Lines ("Wire Restoration Work"). Landlord shall perform such Wire Restoration Work at Tenant's sole cost and expense; or

52.5.2 In the event Landlord elects to retain the Lines, Tenant covenants that Tenant shall have good right to surrender such Lines, free of all liens and encumbrances,

and that all Lines shall be left in their then existing condition, reasonable wear and tear excepted, properly labeled at each end and in each telecommunications/electrical closet and junction box, and in safe condition.

52.5.3 In the event Tenant fails or refuses to pay all costs of the Wire Restoration Work within ten ( 10) days of Tenant's receipt of Landlord's notice requesting Tenant's reimbursement for or payment of such costs, Landlord may apply all or any portion of Tenant's Security Deposit toward the payment of such unpaid costs relative to the Wire Restoration Work . The retention or application of such Security Deposit by Landlord pursuant to this clause does not constitute a limitation on or waiver of Landlord's right to seek further remedy under law or equity. The provisions of this clause shall survive the expiration or sooner termination of the Lease.

ARTICLE 53.

ERISA

53.1 To satisfy compliance with the Employee Retirement Income Security Act of 1974, as amended, Tenant represents and warrants to Landlord that:

(a) Tenant is not an "employee benefit plan" (as that term is defined in Section 3(3) of ERISA); and

(b) Tenant is not acquiring the leasehold estate as a plan asset subject to ERISA but for Tenant's own investment account; and

(d) Tenant is not a "party in interest" (as that term is defined in Section 3(14) of ERISA) to the Virginia Retirement System; and

(e) Tenant agrees to keep the identity of the Virginia Retirement System confidential, except to the extent that Tenant may be required to disclose such information as a result of (i) legal process, or (ii) compliance with ERISA or other Laws governing Tenant's operations.

ARTICLE 54.

EMERGENCY GENERATORS

54.1 Tenant shall have the exclusive right, at Tenant's sole cost and expense, to use the single Building emergency generator that is of the Commencement Date connected solely to the data center in the first floor of the Building (the "Generator"). Any work that may need to be performed to the Generator, including without limitation any repairs, replacements, maintenance, modifications, improvements or alterations to any such connection(s), shall be performed by Tenant, at Tenant's sole cost and expense in accordance with the applicable provisions of this Lease, including without limitation Articles 8 , 11 and 15 . Landlord shall have

no obligation to maintain, repair, replace, improve, alter, or otherwise modify the Generator from its existing state, and Tenant agrees that the Generator is being accessed and used by Tenant in its "AS-IS" condition.

54.2 Tenant shall enter into a maintenance contract with a reputable maintenance contractor approved by Landlord for the maintenance and testing of the Generator and shall provide Landlord with copies of that contract and quarterly maintenance reports within 10 days after they are received by Tenant. Tenant shall be solely responsible for payment of all costs under that maintenance contract.

54.3 Landlord does not warrant the effectiveness of the Generator and Landlord shall have no responsibility whatsoever for the failure of, or damage to any of Tenant's equipment, materials, supplies or machinery, or any damage to Tenant's business, resulting from the failure of the Generator to provide suitable or adequate back-up power to the Premises.

54.4 Except in the event of Landlord Parties' gross negligence or willful misconduct, Tenant shall be solely responsible for, and shall indemnify, defend, and hold harmless the Indemnified Parties from and against, any and all liabilities, losses, damages, costs, expenses (including reasonable attorneys' fees and expenses), causes of action, suits, claims, demands, or judgments of any nature to which any Indemnified Party incurs arising from (i) Tenant's use of the Generator, or (ii) any repairs, maintenance, modification, improvements or alterations to any connection(s) to the Generator and its connections to the electrical system serving the Premises, including without limitation those relating to injury to or death of any person, or damage to or loss of property or business.

54.5 Tenant may use and store diesel fuel in the above-ground storage tank for the Generator and may use and store diesel fuel in an above-ground storage tank for any other generator installed by Tenant with Landlord's approval pursuant to this Lease. Tenant's rights under this Section 54.5 shall be subject to the following additional terms and provisions: (a) the exercise of Tenant's rights under this Section shall be subject to Tenant's compliance with all laws and acquisition of all approvals and permits required from applicable governmental authorities; (b) the installation, maintenance, monitoring and removal of any storage tank shall be at Tenant's sole cost and expense; (c) Tenant shall comply with all laws pertaining to the operation, maintenance and monitoring of storage tanks, along with any additional requirements imposed by Landlord in connection therewith, and shall provide Landlord with evidence of such compliance in such form and at such times as Landlord requires; (d) Tenant shall maintain and repair the storage tank and shall be responsible for all reporting, monitoring, clean up and remediation activities and costs pertaining to the storage tank and materials stored therein or released therefrom; and (e) at the expiration or earlier termination of the Lease, Tenant shall remove any generator and storage tank installed by Tenant (and obtain a customary closure certificate from applicable governmental authorities in connection with such removal), and restore any damage to the Building or Common Areas that occurs in connection with such removal.

ARTICLE 55.

TENANT'S RIGHT OF FIRST REFUSAL

55.1 Landlord hereby grants to Original Tenant or a Permitted Transferee a one-time right of first refusal (the "First Refusal Right") with respect to the space on the 6th floor of the Building (the "First Refusal Space"). Tenant's right of first refusal shall be on the terms and conditions set forth in this Article 55 .

55.2 If at any time Landlord receives a good faith written offer (the "Good Faith Offer") to lease any portion of the First Refusal Space which Landlord desires to accept, then, subject to Section 55.8, below, Landlord shall deliver to Tenant a written notice (the "First Refusal Notice") setting forth the terms of such Good Faith Offer and providing Tenant with the right to exercise its First Refusal Right as set forth herein. The First Refusal Notice shall describe the space so offered to Tenant and shall set forth the "First Refusal Rent," as that term is defined in Section 55.4 below, and the other economic terms upon which Landlord is willing to lease such space to Tenant (collectively, the "Economic Terms"), which Economic Terms shall be consistent with the terms of the Good Faith Offer.

55.3 If Tenant wishes to exercise its First Refusal Right, then within ten (10) business days of delivery of the First Refusal Notice to Tenant (the "Exercise Period"), Tenant shall deliver notice to Landlord of Tenant's exercise of its First Refusal Right with respect to all of the space described in the First Refusal Notice on the terms contained in such First Refusal Notice with a copy of Tenant's then current financial statements certified as true and correct by an officer of Tenant. If Tenant does not notify Landlord prior to the expiration of the Exercise Period, then Landlord shall be free to lease all or any part of the First Refusal Space describe in the First Refusal Notice to anyone to whom Landlord desires on any terms that Landlord desires.

55.4 The Rent payable by Tenant for the First Refusal Space (the "First Refusal Rent") shall be equal to the Economic Terms set forth in the First Refusal Notice.

55.5 Tenant shall take the First Refusal Space in its "as is" condition, and the construction of improvements in the First Refusal Space shall be performed by Tenant and shall comply with the terms of Article 15 of this Lease.

55.6 If Tenant timely exercises Tenant's right to lease the First Refusal Space as set forth herein, Tenant's exercise shall be binding. Landlord and Tenant shall endeavor to execute within fifteen (15) days thereafter an amendment to this Lease for such First Refusal Space upon the terms and conditions as set forth in the First Refusal Notice and this Article 55, but failure of either Landlord or Tenant to execute that amendment shall not limit the binding nature Tenant's exercise. Notwithstanding the foregoing, Landlord, by written notice to Tenant, within ten (10) days after receipt of Tenant's exercise of its right to lease the First Refusal Space and Tenant's certified financial statements shall have the right to withdraw the First Refusal Notice if Landlord in its sole discretion determines that Tenant's financial condition is not sufficient to support the lease of such First Refusal Space. The term of the First Refusal Space shall commence upon the date of delivery of the First Refusal Space to Tenant (the "First Refusal Commencement Date"), and terminate on the date set forth in the First Refusal Notice (the "First Refusal Term"), subject to the Economic Terms agreed upon for the lease of the First Refusal Space.

55.7 The rights of Tenant contained in this Article 55 shall be personal to the Original Tenant and its Permitted Transferees and may only be exercised by the Original Tenant or its Permitted Transferees (and not any other assignee or any sublessee or other transferee of the Original Tenant's interest in this Lease). Tenant shall not have the right to lease First Refusal Space, as provided in this Article 55, if, as of the date of the attempted exercise of any First Refusal Right by Tenant, or, at Landlord's option, as of the scheduled date of delivery of such First Refusal Space to Tenant, an uncured Event of Default by Tenant exists under this Lease. In addition, Tenant's right to lease each portion of the First Refusal Space shall terminate and be of no further force or effect in the event Tenant fails to lease such portion of the First Refusal Space following Tenant's receipt of a First Refusal Notice from Landlord.

55.8 Landlord shall not be obligated to give a First Refusal Notice, and Tenant shall have no rights under this Lease, with respect to any extension of a lease of the First Refusal Space that existed as of the date of this Lease, whether the extension is pursuant to the terms of that lease or in lieu of the any right to extend contained in that lease.

ARTICLE 56.
LETTER OF CREDIT

56.1 Letter of Credit . No later than October 1, 2011, Tenant shall provide, at Tenant's sole cost and expense, a Letter of Credit (as defined below) in the Letter of Credit Required Amount (as defined in the Basic Lease Information) as additional security for the faithful performance and observance by Tenant of all of the provisions of this Lease, on the terms and conditions set forth below. Tenant's failure to deliver the Letter of Credit by that date shall be an immediate Event of Default under this Lease, without any notice or cure rights. The use, application or retention of the Letter of Credit, or any portion thereof, by Landlord shall not prevent Landlord from exercising any other right or remedy provided by this Lease or by law, it being intended that Landlord shall not first be required to proceed against the Letter of Credit and the Letter of Credit shall not operate as a limitation on any recovery to which Landlord may otherwise be entitled. As used herein the term "Letter of Credit Required Amount" initially means $2,500,000.00. Subject to the remaining terms of this Article 56, and provided the Reduction Conditions (as defined below) have been satisfied at the particular reduction effective date, Tenant shall have the right to reduce the Required Amount so that the new Required Amount shall be $2,000,000.00 effective as of the first day of the (37th) month of the Term and $1,000,000.00 effective as of the first day of the sixty-first (61st) month of the Term. If Tenant is not entitled to reduce the Required Amount as of a particular reduction effective date due to the failure of one or more of the Reduction Conditions, then any subsequent reduction(s) Tenant is entitled to hereunder shall be reduced by the amount of the reduction Tenant would have been entitled to had all of the Reduction Conditions been satisfied. If Tenant is entitled to a reduction in the Required Amount, Tenant shall provide Landlord with written notice requesting that the Required Amount be reduced as provided above (the "Reduction Notice"). The Reduction Notice must include copies of Tenant's financial statements, including its most recent 10-K filing and 10-Q filings covering at least the 12-month period ending on the most recent completed fiscal quarter prior to the date the Reduction Conditions must be

satisfied (collectively, the "Required Financial Statements") in a form reasonably acceptable to Landlord and Tenant's calculation of EBITDA Margin (as defined below) and the Interest Coverage Ratio (as defined below) based on those Required Financial Statements showing that the applicable Reduction Conditions have been satisfied. If Tenant provides Landlord with a Reduction Notice, and Tenant is entitled to reduce the Required Amount as provided herein, the reduction shall be effectuated by Tenant replacing the Letter of Credit then being held by Landlord with a new Letter of Credit in the new Required Amount or amending the then-existing Letter of Credit to that new Required Amount. The term "Reduction Conditions" means the following conditions which have been satisfied in the Required Financial Statements as determined by Landlord:


(a)	EBITDA Margin for the prior twelve months is not less than 15% .


(b)	Interest Coverage Ratio for the prior twelve months is not less than 1.6X.


(c)	No Event of Default shall have occurred and be continuing under this Lease.

As used in this Section 56.1, the following terms shall have the following meanings.

(i) "EBITDA" means Income (Loss) before income taxes plus interest expense plus depreciation and amortization plus any write-downs of goodwill or intangibles, all as disclosed in Tenant's financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America;


(ii)	"EBITDA Margin" means EBITDA as a percentage of Revenue; and


(iii)	"Interest Coverage Ratio" means (A) EBITDA, divided by (B) interest expense. If

Tenant makes an acquisition during the period of time for which the Interest Coverage Ratio is being calculated which requires the issuance of additional debt, then the Tenant will also provide a proforma Interest Coverage Ratio calculation which assumes the debt issued for the acquisition was done so at the beginning of the 12 month period for which the Interest Coverage Ratio is being calculated .

56.2 Delivery of Letter of Credit. (a) Tenant shall cause a Letter of Credit, in the amount of the Letter of Credit Required Amount to be issued by the UC Bank (b) Tenant will cause the Letter of Credit to remain in full force and effect during the entire Term and thereafter until thirty (30) days after expiration or earlier termination of the Lease; and (c) the initial Letter of Credit will be delivered to Landlord no later than October 1, 2011. Tenant's failure to deliver the Letter of Credit by that date shall be an immediate Event of Default under this Lease, without any notice or cure rights. Tenant shall provide Landlord with a draft of the Letter of Credit prior to its issuance by the UC Bank, and in no event later than September 20, 2011. So long as no Event of Default then exists, Landlord shall return the Letter of Credit to Tenant within thirty (30) days after the Expiration Date . The specific requirements for the Letter of Credit and the rights of Landlord to make draws thereon will be as set forth in this Article 56. All of Tenant's rights and all of

Landlord's obligations under this Lease are strictly contingent on Tenant's delivering and thereafter causing the Letter of Credit to remain in full force and effect during the entire Term.

56.3 Draws on the Letter of Credit . Immediately upon, and at any time or from time to time after, the occurrence of any one or more Draw Events (as defined below), Landlord will have the unconditional right to draw on the Letter of Credit in accordance with this Article 56. Upon the payment to Landlord of the Draw Proceeds, Landlord will hold the Draw Proceeds in its own name and for its own account, without liability for interest, to use and apply any and all of the Draw Proceeds only (a) to cure any Event of Default by Tenant; (b) to pay any other sum to which Landlord becomes obligated by reason of Tenant's failure to carry out its obligations under this Lease; or (c) to compensate Landlord for any monetary loss or damage which Landlord suffers thereby arising from Tenant's failure to carry out its obligations under this Lease. In addition, if the Draw Event is the failure of Tenant to renew the Letter of Credit as required hereunder, then Landlord shall be entitled to draw the entire Letter of Credit as a cash security deposit, held as a pledge under the California Uniform Commercial Code to secure Tenant's obligations under this Lease. Among other things, it is expressly understood that the Draw Proceeds will not be considered an advance payment of Base Rent or Additional Rent or a measure of Landlord's damages resulting from any Event of Default hereunder (past, present or future). Further, immediately upon the occurrence and during the continuance of any one or more Draw Events, Landlord may, from time to time and without prejudice to any other remedy, use the Draw Proceeds (whether from a contemporaneous or prior draw on the Letter of Credit) to the extent necessary to make good any arrearages of Base Rent or Additional Rent, to pay to Landlord any and all amounts to which Landlord is entitled in connection with the pursuit of any one or more of its remedies hereunder, and to compensate Landlord for any and all other damage, injury, expense or liability caused to Landlord by any and all such Events of Default. Any delays in Landlord's draw on the Letter of Credit or in Landlord's use of the Draw Proceeds as provided in this Article 56 will not constitute a waiver by Landlord of any of its rights hereunder with respect to the Letter of Credit or the Draw Proceeds. Following any such application of the Draw Proceeds, Tenant will either pay to Landlord on demand the cash amount so applied in order to restore the Draw Proceeds to the full amount thereof immediately prior to such application or cause the Letter of Credit to be replenished to its full amount thereunder. Failure to either pay that cash amount or cause the Letter of Credit to be replenished to its full amount thereunder within five (5) business days after that application of the Draw Proceeds shall constitute an Event of Default without the right to any notice or cure period. Landlord will not be liable for any indirect, consequential, special or punitive damages incurred by Tenant arising from a claim that Landlord violated the bankruptcy code's automatic stay in connection with any draw by Landlord of any Draw Proceeds, Landlord's liability (if any) under such circumstances being limited to the reimbursement of direct costs as and to the extent expressly provided in this Section 56.3 . Nothing in this Lease or in the Letter of Credit will confer upon Tenant any property rights or interests in any Draw Proceeds; provided, however, that upon the expiration or earlier termination of this Lease, and so long as there then exist no Draw Events or Events of Default hereunder, Landlord agrees to return of any remaining unapplied balance of the Draw Proceeds then held by Landlord to Tenant, and the Letter of Credit itself (if and to the extent not previously drawn in full) to the UC Bank. Landlord may draw on the Letter of Credit and/or apply any Deposit in any order.


56.4	Applicable Definitions.

"Draw Event" means each of the following events:

(a) the occurrence of any one or more of the following which shall have also been preceded, simultaneously accompanied, or succeeded by an Event of Default under this Lease regardless of the absence of any notice of default which might otherwise be required with respect to an Event of Default if the giving of notice to Tenant about such breach by Tenant is stayed or barred due to one of the following events:


(i)	Tenant's filing of a petition under any chapter of the Bankruptcy Code, or under any

federal, state or foreign bankruptcy or insolvency statute now existing or hereafter enacted, or Tenant's making a general assignment or general arrangement for the benefit of creditors, (ii) the filing of an involuntary petition under any chapter of the Bankruptcy Code, or under any federal, state or foreign bankruptcy or insolvency statute now existing or hereafter enacted, or the filing of a petition for adjudication of bankruptcy or for reorganization or rearrangement, by or against Tenant and such filing not being dismissed within sixty (60) days, (iii) the entry of an order for relief under any chapter of the Bankruptcy Code, or under any federal, state or foreign bankruptcy or insolvency statute now existing or hereafter enacted, (iv) the appointment of a "custodian," as such term is defined in the Bankruptcy Code (or of an equivalent thereto under any federal, state or foreign bankruptcy or insolvency statute now existing or hereafter enacted), for Tenant, or the appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease and possession not being restored to Tenant within sixty (60) days, or (v) the subjection of all or substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease to attachment, execution or other judicial seizure and such subjection not being discharged within sixty (60) days;

(b) the failure of Tenant, not less than thirty (30) days prior to the stated expiration date of the Letter of Credit then in effect, to cause an extension, renewal or replacement issuance of the Letter of Credit, to be effected, which extension, renewal or replacement issuance will be made by the UC Bank, will otherwise meet all of the requirements of the initial Letter of Credit hereunder, which failure will be an Event of Default under this Lease;

(c) the failure of Tenant to make when due any payment of Base Rent, of any monthly installment of any Additional Rent, or pay any other monetary obligation within seven (7) days after the amount is due; and

(d) the payment by Landlord of any sum to cure a failure by Tenant to comply with any non-monetary obligation hereunder which Tenant has not cured within fifteen (15) days after notice thereof by Landlord (or, if Landlord is prevented from giving notice by application of the bankruptcy code's automatic stay, the payment of Landlord of any sum to cure a failure by Tenant to comply with any non-monetary obligation hereunder that Tenant has not cured within fifteen (15) days from the date of the breach).

"Draw Proceeds" means the proceeds of any draw or draws made by Landlord under the Letter of Credit, together with any and all interest accruing thereon.

“L/C Bank" means, initially, Citibank, N . A., any other United States bank having a credit rating on the date the Letter of Credit is issued that is equal to or better than the credit rating of Citibank, N . A . , as of the date of this Lease, or any other United States bank which is approved

by Landlord in Landlord's sole discretion

"Letter of Credit" means that certain one-year irrevocable letter of credit, in the Letter of Credit Required Amount, issued by the L/C Bank, as required under Section 56.2 and, if applicable, as extended, renewed, replaced or modified from time to time in accordance with this Lease, which letter of credit will be transferable and in substantially the same form as attached Exhibit H .

56.5 Transfer of Letter of Credit. The Letter of Credit shall not be mortgaged, assigned or encumbered in any manner whatsoever by Tenant. Tenant acknowledges that Landlord has the right to transfer or mortgage its interest in the Premises and the Building and in this Lease and Tenant agrees that in the event of any such transfer or mortgage, Landlord shall have the right to transfer or assign the Letter of Credit and/or the Draw Proceeds to the transferee or mortgagee, and in such event, Tenant shall look solely to such transferee or mortgagee for return of the Letter of Credit and/or the Draw Proceeds so transferred. Tenant shall pay all fees and charges of the UC Bank with respect to any transfer of the Letter of Credit . Tenant shall, within five (5) business days of request by Landlord, execute such further instruments or assurances as Landlord may reasonably deem necessary to evidence or confirm Landlord's transfer or assignment of the Letter of Credit and/or the Draw Proceeds to such transferee or mortgagee.

56.6 Letter of Credit is Not Security Deposit . Landlord and Tenant acknowledge and agree that in no event or circumstance shall the Letter of Credit, any renewal thereof or substitute therefor or the proceeds thereof be (i) deemed to be or treated as a "security deposit" within the meaning of California Civil Code Section 1950.7, (ii) subject to the terms of such Section 1950.7, or (iii) intended to serve as a "security deposit" within the meaning of such Section 1950.7. The parties hereto (A) recite that the Letter of Credit is not intended to serve as a security deposit and such Section 1950.7 and any and all other laws, rules and regulations applicable to security deposits in the commercial context ("Security Deposit Laws") shall have no applicability or relevancy thereto and (B) waive any and all rights, duties and obligations either party may now or, in the future, will have relating to or arising from the Security Deposit Laws. Notwithstanding the foregoing, to the extent California Civil Code 1950.7 in any way: (a) is determined to be applicable to this Lease or the Letter of Credit (or any proceeds thereof); or (b) controls Landlord's rights to draw on the Letter of Credit or apply the proceeds of the Letter of Credit to any amounts due under this Lease or any damages Landlord may suffer following termination of this Lease, then Tenant full and irrevocably waives the benefits and protections of Section 1950.7 of the California Civil Code, it being agreed that Landlord may recover from the Letter of Credit (or its proceeds) all of Landlord's damages under this Lease and California law including, but not limited to, any damages accruing upon the termination of this Lease in accordance with this Lease and Section 1951.2 of the California Civil Code.

56.7 Substitute Letter of Credit. In the event the UC Bank is declared insolvent by the FDIC or is closed for any reason, Tenant shall immediately provide a substitute Letter of

Credit meeting the requirements of this Article 56 from another United States Bank which is reasonably approved by Landlord.

ARTICLE 57.
ALLOWANCE

57.1 So long as no Event of Default shall be existing under the Lease as of the date Tenant requests reimbursement of the Allowance (as defined below), Landlord agrees to reimburse Tenant up to, and not to exceed, the sum of $1,285,775.00 (the "Allowance") (based on a $5.00 prsf of the Premises) for costs incurred in connection with the design and construction of the permanent improvements to the Premises, including but not limited to the professional services and its fees like architects, engineers, project managers, (the "Allowance Items"). Landlord shall pay the Allowance to Tenant upon delivery to Landlord of "Tenant's Allowance Notice" (as defined below) according to the terms and conditions of this Section 57.1 . Not more frequently than once in any calendar month, Tenant may submit to Landlord a written notice indicating that Tenant has paid the cost of Allowance Items, which notice shall be accompanied by all of the following (collectively, "Tenant's Allowance Notice"): (i) copies of paid invoices for the Allowance Items, and (ii) certification that the Special Allowance Items have been delivered to and installed in the Premises, (iii) final unconditional lien releases in compliance with California law from Tenant's general contractor and all subcontractors and material suppliers, showing that full payment has been received for the construction of the Allowance Items, and (iv) copies of all building permits (if any) required by the City in connection with the construction and installation of the Allowance Items signed by the appropriate building inspector, indicating that the Allowance Items have been finally approved. The Allowance shall be available for reimbursement to Tenant during the period from June 1, 2012 through July 1, 2013 (the "Window"). Any portion of the Allowance not requested by Tenant within the Window shall be deemed forfeited by Tenant and shall no longer be available for disbursement to or for the account of Tenant. No part of the Allowance may be used as a credit against Rent or for any purpose other than construction of the Allowance Items. In addition to the foregoing conditions, Landlord's obligation to disburse the Allowance is conditioned upon Landlord's prior receipt of the Security Deposit or Letter of Credit, whichever is applicable.

Remainder of page intentionally left blank.

Signatures on following page.

IN WITNESS WHEREOF, Landlord and Tenant, acting herein through duly authorized individuals, have caused these presents to be executed as of the date first above written.

TENANT:

AVAYA INC., a Delaware corporation

By: /s/ Courtney Mezinis

Courtney Mezinis

Sr. Director Avaya Global Real Estate

Tenant's NAICS Code: 334210

LANDLORD:

THE PRUDENTIAL INSURANCE

COMPANY OF AMERICA, a New Jersey

corporation ,

By: /s/ Jeffrey D. Mills

Jeffrey D. Mills

Vice President

EXHIBIT A

THE PROJECT

EXHIBIT B

PREMISES

(See Attached)

EXHIBIT C

[INTENTIONALLY OMITTED]

EXHIBIT D

RULES AND REGULATIONS

Tenant shall faithfully observe and comply with the following Rules and Regulations:

Tenant shall faithfully observe and comply with the following Rules and Regulations. Landlord shall not be responsible to Tenant for the nonperformance of any of such Rules and Regulations by or otherwise with respect to the acts or omissions of any other tenants or occupants of the Building or the Project.

1. Tenant shall not alter any lock or install any new or additional locks or bolts on any doors or windows of the Premises without obtaining Landlord's prior written consent. Tenant shall bear the cost of any lock changes or repairs required by Tenant. Two keys will be furnished by Landlord for the Premises, and any additional keys required by Tenant must be obtained from Landlord at a reasonable cost to be established by Landlord.

2. All doors opening to public corridors shall be kept closed at all times except for normal ingress and egress to the Premises, unless electrical hold backs have been installed.

3. Landlord reserves the right to close and keep locked all entrance and exit doors of the Building during such hours as are customary for comparable buildings in the vicinity of the Building. Tenant, its employees and agents must be sure that the doors to the Building are securely closed and locked when leaving the Premises if it is after the normal hours of business for the Building. After-hours access by Tenant's authorized employees may be provided by card key access or other procedures adopted by Landlord from time to time. Landlord shall furnish to Tenant free of charge 250 access cards for each 50,000 square feet of rentable area in the Premises ("Initial Access Cards"). Tenant shall pay for the costs of all access cards in excess of the Initial Access Cards provided to Tenant's employees and all replacements of lost, stolen or damaged cards in an amount to be determined by Landlord in its reasonable discretion. Access to the Building and/or Project may be refused unless the person seeking access has proper identification or has a previously arranged pass for such access. Landlord and its agents shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building and/or Project of any person. In case of invasion, mob, riot, public excitement, or other commotion, Landlord reserves the right to prevent access to the Building and/or the Project during the continuance of same by any means it deems appropriate for the safety arid protection of life and property.

4. Landlord shall have the right to prescribe the weight, size and position of all safes and other heavy property brought into the Building. Safes and other heavy objects shall, if considered necessary by Landlord, stand on supports 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 in any case. All damage done to any part of the Building, its contents, occupants or visitors by moving or maintaining any such safe or other property shall be the sole responsibility of Tenant and any expense of said damage or injury shall be borne by Tenant.

5. Except for intra-office distribution of mail and supplies in the ordinary course, no furniture, freight, packages, supplies, equipment or merchandise will be brought into or removed from the Building or carried up or down in the elevators, except upon prior notice to Landlord, and in such manner, in such specific elevator, and between such hours as shall be designated by Landlord. Tenant shall notify Landlord in advance if Tenant needs to move any freight, supplies, furniture, fixtures or other personal property in or out of the Premises. So long as Tenant shall have provided that notice, Landlord shall allow Tenant access to the freight elevator for intervals not to exceed four hours or Landlord may elect to convert a passenger elevator for Tenant's use

in moving those items. Under no circumstances shall Tenant move any freight, supplies, furniture, fixtures or other personal property in a non-converted passenger elevator or through the building lobby. Landlord shall have the right to tow unattended vehicles at the vehicle owner's expense .

6. Landlord shall have the right to control and operate the public portions of the Building and the Project, the public facilities, the heating and air conditioning, and any other facilities furnished for the common use of tenants, in such manner as is customary for comparable buildings in the vicinity of the Building.

7. The requirements of Tenant will be attended to only upon application at the management office of the Project or at such other location as may be designated by Landlord. Employees of Landlord shall not perform any work or do anything outside their regular duties unless under special instructions from Landlord.

8. Tenant shall not disturb, solicit, or canvass any occupant of the Building or the Project and shall cooperate with Landlord or Landlord's agents to prevent same.

9. The toilet rooms, 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. 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 agents, shall have caused it.

10. Tenant shall not overload the floor of the Premises. Tenant shall not mark, drive nails or screws, or drill into the partitions, woodwork or plaster or in any way deface the Premises or any part thereof without Landlord's consent first had and obtained; provided, however, Landlord's prior consent shall not be required with respect to Tenant's placement of pictures and other normal office wall hangings on the interior walls of the Premises (but at the end of the Lease Term, Tenant shall repair any boles and other damage to the Premises resulting therefrom).

11. Except for vending machines intended for the sole use of Tenant's employees and invitees, no vending machine or machines of any description other than fractional horsepower office machines shall be installed, maintained or operated upon the Premises without the written consent of Landlord.

12. Tenant shall not use any method of heating or air conditioning other than that which may be supplied by Landlord, without the prior written consent of Landlord.

13. Tenant shall not use or keep in or on the Premises, the Building or the Project any kerosene, gasoline or other inflammable or combustible fluid or material. Tenant shall not use, keep or permit to be used or kept, any foul or noxious gas or substance in or on the Premises, or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building or the Project by reason of noise, odors, or vibrations, or interfere in any way with other tenants or those having business therewith. To the extent permitted under Article 33 of the Lease, Tenant may use small quantities of flammable materials for its research and development operations.

14. Tenant shall not bring into or keep within the Project, the Building or the Premises any animals (except service animals), birds, bicycles or other vehicles.

15. No cooking shall be done or permitted by Tenant on the Premises, nor shall the Premises be used for the bulk storage of merchandise (e.g., warehousing), for lodging or for any improper, objectionable or immoral purposes. Notwithstanding the foregoing, Underwriters' Laboratory-approved equipment and microwave ovens may be used in the Premises for heating food and brewing coffee, tea, hot chocolate and similar beverages, provided that such use is in accordance with all applicable federal, state and city laws, codes, ordinances, rules and regulations, and does not cause odors which are objectionable to Landlord and other tenants.

16. Landlord will approve where and how telephone and data cabling and wires are to be introduced to the Premises. No boring or cutting for wires shall be allowed without the consent of Landlord. The location of telephone, call boxes and other office equipment affixed to the Premises shall be subject to the approval of Landlord.

17. Landlord reserves the right to exclude or expel from the Building and/or the Project 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 these Rules and Regulations .

18. Tenant, its employees and agents shall not loiter in the entrances or corridors, nor in any way obstruct the sidewalks, lobby, halls, stairways or elevators, and shall use the same only as a means of ingress and egress for the Premises.

19. Tenant shall not waste electricity, water or air conditioning and agrees to cooperate fully with Landlord to ensure the most effective operation of the Building's heating and air conditioning system, and shall refrain from attempting to adjust any controls.

20. Tenant shall store all its trash and garbage within the interior of the Premises . No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the City of Santa Clara without violation of any law or ordinance governing such disposal. All trash, garbage and refuse disposal shall be made only through entry-ways and elevators provided or such purposes at such times as Landlord shall designate.

21. Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency.

22. Tenant shall assume any and all responsibility for protecting the Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed, when the Premises are not occupied.

23. No awnings or other projection shall be attached to the outside walls of the Building without the prior written consent of Landlord. No curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with, any window or door of the Premises without the prior written consent of Landlord. The sashes, sash doors, skylights, windows, and doors that reflect or admit light and air into the halls, passageways or other public places in the Building shall not be covered or obstructed by Tenant, nor shall any bottles, parcels or other articles be placed on the windowsills. All electrical ceiling fixtures hung in offices or spaces along the perimeter of the Building must be fluorescent and/or of a quality, type, design and bulb color approved by Landlord.

24. The washing and/or detailing of or, the installation of windshields, radios, telephones in or general work on, automobiles shall not be allowed on the Project.

25. Food vendors shall be allowed in the Building upon receipt of a written request from the Tenant. The food vendor shall service only the tenants that have a written request on file in the management office of the Project. Under no circumstance shall the food vendor display their products in a public or common area including corridors and elevator lobbies, Any failure to comply with this rule shall result in immediate permanent withdrawal of the vendor from the Building.

26. Tenant must comply with reasonable requests by Landlord concerning the informing of its employees of items of importance to the Landlord, e.g., compliance with Applicable Law, distribution of life safety information, and the like.

27. Tenant shall comply with any non-smoking ordinance adopted by any applicable governmental authority. Without limiting the generality of the foregoing, Tenant, its employees and invitees are prohibited from smoking in the Building or within twenty (20) feet of any entrances to the Building. Landlord reserves the right to designate approved smoking areas within the Project.

28. No Tenant shall install any radio or television antenna, loudspeaker, or other device on the roof or exterior walls of the Building without prior consent of Landlord except as otherwise agreed in writing. No TV or radio or recorder shall be played in such a manner as to cause a nuisance to any other Tenant.

29. Tenant shall not enter the mechanical rooms, air conditioning rooms, electrical closets, janitorial closets, or similar areas or go upon the roof of the Building, without the prior consent of Landlord.

30. Tenant shall not park or attach any bicycle or motor driven cycle on or to any part of the Premises or Building.

31. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant or tenants, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant or tenants, nor prevent Landlord from thereafter enforcing any such Rules or Regulations against any or all tenants of the Building and/or the Project. Landlord reserves the right at any time to change or rescind any one or more of these Rules and Regulations, or to make such other and further reasonable, non discriminatory Rules and Regulations as in Landlord's judgment may from time to time be necessary for the management, safety, care and cleanliness of the Premises, the Building and the Project, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants therein. Landlord shall not be responsible to Tenant or to any other person for the nonobservance of the Rules and Regulations by another tenant or other person. Tenant shall be deemed to have read these Rules and Regulations and to have agreed to abide by them as a condition of its occupancy of the Premises.

EXHIBIT E
PARKING RULES

1. Parking areas shall be used only for parking by vehicles no longer than full size, passenger automobiles, pickup trucks and sport utility vehicles. Tenant and its employees shall park automobiles within the lines of the parking spaces.

2. Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or Tenant's employees, suppliers, shippers, customers, or invitees to be loaded, unloaded, or parked in areas other than those designated by Landlord for such activities. Users of the parking area will obey all posted signs and park only in the areas designated for vehicle parking.

3. Parking stickers and parking cards, if any, shall be the property of Landlord and shall be returned to Landlord by the holder thereof upon termination of the holder's parking privileges. Landlord may require Tenant and each of its employees to give Landlord a commercially reasonable deposit when a parking card or other parking device is issued. Landlord shall not be obligated to return the deposit unless and until the parking card or other device is returned to Landlord. Tenant will pay such replacement charges as is reasonably established by Landlord for the loss of such devices. Loss or theft of parking identification stickers or devices from automobiles must be reported to the parking operator immediately. Any parking identification stickers reported lost or stolen found on any unauthorized car will be confiscated and the illegal holder will be subject to prosecution.

4. Unless otherwise instructed, every person using the parking area is required to park and, lock his own vehicle. Landlord will not be responsible for any damage to vehicles, injury to persons or loss of property, all of which risks are assumed by the party using the parking area.

5. The maintenance, washing, waxing or cleaning of vehicles in the parking structure or Common Areas is prohibited.

6. Tenant shall be responsible for seeing that all of its employees, agents and invitees comply with the applicable parking rules, regulations, laws, and agreements. Parking area managers or attendants, if any, are not authorized to make or allow any exceptions to these Parking Rules and Regulations. Landlord reserves the right to terminate parking rights for any person or entity that willfully refuses to comply with these rules and regulations.

7. Every driver is required to park his or her own car. Tenant agrees that all responsibility for damage to cars or the theft of or from cars is assumed by the driver, and further agrees that Tenant will hold Landlord harmless for any such damages or theft.

8. No vehicles shall be parked in the parking areas overnight. The parking area shall only be used for daily parking and no vehicle or other property shall be stored in a parking space.

9. Any vehicle parked by Tenant, its employees, contractors or visitors in a reserved parking space or in any area of the parking area that is not designated for the parking of such a vehicle may, at Landlord's option, and without notice or demand, be towed away by any towing company selected by Landlord, and the cost of such towing shall be paid for by Tenant (only for Tenant's vehicles) and/or the driver of said vehicle.

Landlord reserves the right at any time to reasonably change or rescind any one or more of these Rules and Regulations, or to make such other and further reasonable and nondiscriminatory Rules and Regulations as in Landlord's judgment may from time to time be necessary for the management, safety, care and cleanliness of the Project, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants therein. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant, nor prevent Landlord from thereafter enforcing any such Rules or Regulations against any or all tenants of the Project. Landlord, however, shall apply such Rules and Regulations in a nondiscriminatory manner. Tenant shall be deemed to have read these Rules and Regulations and to have agreed to abide by them.

EXHIBIT F

COMMENCEMENT DATE MEMORANDUM

With respect to that certain lease ("Lease") dated August_, 2011 between

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation ("Landlord"), and ("Tenant"), whereby Landlord leased to Tenant and Tenant leased from Landlord approximately rentable square feet of that certain office building located at , California ("Premises"), Tenant hereby acknowledges and certifies to Landlord as follows:

(1) Landlord delivered possession of the Premises to Tenant substantially complete on _

(2) The Lease commenced on ("Commencement Date") and Tenant's obligation to pay Rent commenced on ("Rent Commencement Date");


(3)	The Premises contain rentable square feet of space; and

(4) Tenant has accepted and is currently in possession of the Premises and the Premises are acceptable for Tenant's use.


(5)	Tenant's Building Percentage is


(6)	Base Rent Per Month is _

IN WITNESS WHEREOF, this Commencement Date Memorandum is executed this day of _

"Tenant"

By:

Its:

By:

Its:

EXHIBIT G

STANDARDS FOR UTILITIES AND SERVICES

The following Standards for Utilities and Services are in effect. Landlord reserves the right to adopt nondiscriminatory modifications and additions hereto:

As long as Tenant is not in default under any of the terms, covenants, conditions, provisions, or agreements of this Lease, Landlord shall:

(a) On Monday through Friday, except holidays, from 7 A.M. to 6 P.M. (and other times for a reasonable additional charge to be fixed by Landlord), ventilate the Premises and furnish air conditioning or heating on such days and hours, when in the judgment of Landlord it may be required for the comfortable occupancy of the Premises. The air conditioning system achieves maximum cooling when the window coverings are closed. Landlord shall not be responsible for room temperatures if Tenant does not keep all window coverings in the Premises closed whenever the system is in operation. Tenant agrees to cooperate fully at all times with Landlord, and to abide by all regulations and requirements which Landlord may prescribe for the proper function and protection of said air conditioning system. Tenant agrees not to connect any apparatus, device, conduit or pipe to the Building chilled and hot water air conditioning supply lines. Tenant further agrees that neither Tenant nor its servants, employees, agents, visitors, licensees or contractors shall at any time enter mechanical installations or facilities of the Building or adjust, tamper with, touch or otherwise in any manner affect said installations or facilities. The cost of maintenance and service calls to adjust and regulate the air conditioning system shall be charged to Tenant if the need for maintenance work results from either Tenant's adjustment of room thermostats or Tenant's failure to comply with its obligations under this section, including keeping window coverings closed as needed. Such work shall be charged at hourly rates equal to then current journeymen's wages for air conditioning mechanics.

(b) Landlord reserves the right to charge Tenant for the cost to Landlord of providing such after-hours heating and air-conditioning.

(c) Landlord shall furnish to the Premises electric current having the capacities shown on Exhibit G-2. Tenant agrees to reimburse Landlord monthly for the measured consumption at the average cost per kilowatt hour charged to the Building during the period as additional rent. If a separate meter is not installed, such excess cost will be established by an estimate agreed upon by Landlord and Tenant, and if the parties fail to agree, as established by an independent licensed engineer. Said estimates to be reviewed and adjusted quarterly. Landlord shall pay the cost of installation of meters with respect to the systems and equipment existing as of the date of this Lease. Tenant shall pay the cost of installation of any meters in connection with any additional systems or equipment added to the Premises after the date of this Lease. Landlord may require the installation of meters with respect to any one or more circuits serving equipment in the Premises other than typical general office equipment and personal computers. Tenant agrees not to use any apparatus or device in, or upon, or about the

office portions of the Premises which may in any way increase the amount of such services usually furnished or supplied to said office portions of the Premises, and Tenant further agrees not to connect any apparatus or device with wires, conduits or pipes, or other means by which such services are supplied, for the purpose of using additional or unusual amounts of such services without written consent of Landlord. At all times Tenant's use of electric current shall never exceed the capacity of the feeders to the Building or the risers or wiring installation.

(d) Provide chilled water for use in the Existing Supplemental Units not to exceed in the aggregate 100 tons of chilled water capacity for each full floor ofthe Premises; provided that as to any one floor, the amount of chilled water available to Tenant shall not exceed the existing capacity of the chilled water systems serving that floor. The chilled water serving the Existing Supplemental Units shall be separately metered with flow meters and Landlord shall allocate the cost of electrical service necessary to provide chilled water among the users of that chilled water based on those flow meters. The cost of providing chilled water to HVAC systems serving the Common Areas and other areas of the Building and tenant spaces other than supplemental HVAC systems, and the cost of maintaining, repairing and replacing the chiller equipment and connections thereto, shall be included in Operating Expenses. The cost of electrical service to provide chilled water for supplemental HVAC systems in the Premises shall not be included in Operating Expenses . The amount of chilled water allocated to each floor based on the current connected load is shown on Exhibit G-3, attached hereto.

(e) Water will be available in public areas for drinking and lavatory purposes only, but if Tenant requires, uses or consumes water for any purposes in addition to ordinary drinking and lavatory purposes of which fact Tenant constitutes Landlord to be the sole judge, Landlord may install a water meter and thereby measure Tenant's water consumption for all purposes. Tenant shall pay Landlord for the cost of the meter and the cost of the installation thereof and throughout the duration of Tenant's occupancy Tenant shall keep said meter and installation equipment in good working order and repair at Tenant's own cost and expense, in default of which Landlord may cause such meter and equipment to be replaced or repaired and collect the cost thereof from Tenant. Tenant agrees to pay for water consumed, as shown on said meter, as and when bills are rendered, and on default in making such payment, Landlord may pay such charges and collect the same from Tenant. Any such costs or expenses incurred, or payments made by Landlord for any of the reasons or purposes hereinabove stated shall be deemed to be additional rent payable by Tenant and collectible by Landlord as such.

(f) Provide basic janitorial service on a five (5) day week basis consistent with the services provided in Comparable Buildings.

(g) Provide non-attended automatic passenger and freight elevator service from the ground floor to the floors on which the Premises are located in common with Landlord and other occupants of the Building and their employees and invitees

(h) Landlord reserves the right to stop service of the elevator, plumbing, ventilation, air conditioning and electric systems, when necessary, by reason of accident or emergency or for repairs, alterations or improvements, in the judgment of Landlord desirable or necessary to be

made, until said repairs, alterations or improvements shall have been completed, and shall further have no responsibility or liability for failure to supply elevator facilities, plumbing, ventilating, air conditioning or electric service, when prevented from so doing by strike or accident or by any cause beyond Landlord's reasonable control, or by laws, rules, orders, ordinances, directions, regulations or requirements of any federal, state, county or municipal authority or failure of gas, oil or other suitable fuel supply or inability by exercise of reasonable diligence to obtain gas, oil or other suitable fuel. It is expressly understood and agreed that any covenants on Landlord's part to furnish any service pursuant to any of the terms, covenants, conditions, provisions or agreements of this Lease, or to perform any act or thing for the benefit of Tenant, shall not be deemed breached if Landlord is unable to furnish or perform the same by virtue of a strike or labor trouble or any other cause whatsoever beyond Landlord's control.

EXHIBIT G-1

DEDICATED UNITS (EXISTING CONNECTED CRAC AND FAN COILS UNITS IN BLDG. 4655):

5th Floor : 10-7.5 ton Williams AH030; 2- 5 ton McQuays FHZH1S20, 2000 CFM (est. total- 85 tons)

4th Floor : 9-7.5 ton Williams AH030, 3000 CFM; Fed Lab: 1-3ton Trane, BCXC & -6 Ton Trane BCXC (est. total- 76.5 tons)

3nl Floor : 9 -7.5 ton Williams AH030, 3000 CFM (est. total- 67.5 tons)

2nd Floor : 12-7.5 ton Williams AH030; 1-5 ton McQuay FHZH1S20, 2000 CFM (est. total- 95 tons)

1st Floor : 34-7.5 ton Williams AHU030 (est. total- 255 tons)

1st Floor Data Center : 4-22 ton Liebert DH315W CRAC's; (est. total- 88 tons)

1st Floor EBC : 1-8ton CRAC Liebert UH200; 1 -7.5 ton Williams, AH030 (est. total- 15.5 tons)

1st Floor data Center, UPS Room : 2-5 ton Liebert Water Cooled MCD69W3A1-4 (est. total- 10 tons); 2- 88 ton cooling towers feeding only to 1st floor data center (located on ground level ext. bldg)

Disclaimer: These numbers are not verified by a licensed Mechanical Engineer

Note All CFM Capacities are from Factory Reps, not all Fan Coil Units are shimmed for Maximum Capacity. Note all Williams AHOJO, 3000 CFM=7.5 Tons Capacity .

Note all McQuay FHZHJS20, 2000 CFM=5 Tons Capacity .

EXHIBIT G-2

Existing Electrical Capacity by Floor in Bldg. 4655

5th Floor


•	5th Floor North Panel 5DPN1 600 Amp 208/120 Volt 3 Phase 5 Wire.


•	5th Floor North Panel 5LN1 200 Amp 480/277 Volt 3 Phase 4 Wire. Lighting.


•	5th Floor Center Panel 5DPS2 1200 Amp 208/120 Volt 3 Phase 5 Wire.


•	5th Floor Center Panel 5LS2 400 Amp 480/277 Volt 3 Phase 3 Wire.


•	5th Floor South Panei5DPS1600 Amp 208/120 Volt 3 Phase 5 Wire.


•	5th Floor South Pane15LS1200 Amp 480/277 Volt 3 Phase 4 Wire, Lighting.

4th Floor


•	4th Floor North Pane14DPN1600 Amp 208/120 Volt 3 Phase 5 Wire.


•	4th Floor North Panel 4LN1 200 Amp 480/277 Volt 3 Phase 4 Wire Lighting.


•	4th Floor Center Panei4DPS21200 Amp 208/120 Volt 3 Phase 5 Wire.


•	4th Floor Center Panel 4LS2 400 Amp 480/277 Volt 3 Phase 3 Wire.


•	4th Floor South Pane14DPS1600 Amp 208/120 Volt 3 Phase 5 Wire.


•	4th Floor South Panel 4LS1 200 Amp 480/277 Volt 3 Phase 4 Wire Lighting.

3rd Floor


•	3rd Floor North Panel 3DPN1 600 Amp 208/120 Volt 3 Phase 5 Wire.


•	3rd Floor North Panel 3LN1 200 Amp 480/277 Volt 3 Phase 4 Wire Lighting.


•	3rd Floor Center Panel 3DPS2 1200 Amp 208/120 Volt 3 Phase 5 Wire.


•	3rd Floor Center Panel 3LS2 400 Amp 480/277 Volt 3 Phase 3 Wire.


•	3rd Floor South Panei3DPS1 600 Amp 208/120 Volt 3 Phase 5 Wire.


•	3rd Floor South Panel3LS1 200 Amp 480/277 Volt 3 Phase 4 Wire Lighting.

2nd Floor


•	2nd Floor North Panel 2DPN1 600 Amp 208/120 Volt 3 Phase 5 Wire.


•	2nd Floor North Panel 2LN1 200 Amp 480/277 Volt 3 Phase 4 Wire Lighting.


•	2nd Floor Center Panel 2DPS2 1200 Amp 208/120 Volt 3 Phase 5 Wire.


•	2nd Floor Center Panel 2LS2 400 Amp 480/277 Volt 3 Phase 3 Wire.


•	2nd Floor South Panel2DPS1 600 Amp 208/120 Volt 3 Phase 5 Wire.


•	2nd Floor South Panel2LS1200 Amp 480/277 Volt 3 Phase 4 Wire Lighting.

1st Floor


•	1st Floor North Panel1LN1 200 Amp 480/277 Volt 3 Phase 4 Wire Lighting.


•	1st Floor North Panel1LN4 400 Amp 480 Volt.


•	1st Floor North Panel1DPN1800 Amp 208/120 Volt


•	1st Floor South Panel1LS1200 Amp 480/277 Volt 3 Phase 4 Wire Lighting.


•	1st Floor South Pane11DPSI 600 Amp 208/120 Volt 3 Phase 5 Wire.


•	1st Floor Data Center Panel EMDP2 800 Amp 480/277 Volt 3 Phase 4 Wire Backed up by 500 KW 480 Volt Generator.

Disclaimer: These numbers are not verified by a Licensed Electrical Engineer Please Note all Capacities are to be calculated at 80% Per NEC Code.

EXHIBIT G-3

4555 GAP Chill Water Capacity & Connected Load



	Existing Connected Tonnage	Future Committed Tonnage By	Tenant Responsibility Tonnage	Comments
1st Floor	270.5	100	170.5	Landlord responsible to deliver 100 tons/floor; does not include data center; Tenant responsible for overage
2nd Floor	95.0	100		Landlord responsible to deliver 100 tons/floor
3rd Floor	67.5	100		Landlord responsible to deliver 100 tons/floor
4th Floor	76.5	100		Landlord responsible to deliver 100 tons/floor
5th Floor	85.0	100		Landlord responsible to deliver 100 tons/floor
6th Floor	52.5	100		Landlord responsible to deliver 100 tons/floor
	647.0	600	170.5

Two existing chillers totaling 617.8 tons available on rooftop.

EXHIBIT H

FORM OF LETTER OF CREDIT

ISSUING BANK:

CITIBANK, N.A.

C/0 IT'S SERVICER, CITICORP NORTH AMERICA, INC.

3800 CITIBANK CENTER, BUILDING B, 3RD FLOOR

TAMPA, FL 33610

BENEFICIARY:

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

Embarcadero Center, 27th Floor

San Francisco, CA 94111

Attn: PRISA II Asset Manager

LADIES AND GENTLEMEN:

WE HEREBY OPEN IN FAVOR OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, A NEW JERSEY CORPORATION, AND ITS SUCCESSORS (COLLECTIVELY, "BENEFICIARY"), AND FOR THE ACCOUNT OF , A , ("ACCOUNT PARTY"), OUR STANDBY IRREVOCABLE TRANSFERABLE LETTER OF CREDIT NO . (THE "CREDIT") FOR AN AGGREGATE AMOUNT OF U.S. DOLLARS ($ ,EFFECTIVE IMMEDIATELY AND EXPIRING AT THE OFFICE OF OUR SERVICER, CITICORP NORTH AMERICA, INC. AT 3800 CITIBANK CENTER,

BUILDING B, 3RD FLOOR, TAMPA, FLORIDA 33610, WITH OUR CLOSE OF BUSINESS ON , 2011, SUBJECT TO EXTENSION AS PROVIDED BELOW .

FUNDS ARE AVAILABLE AGAINST YOUR SIGHT DRAFT(S) DRAWN ON US, IN THE FORM OF ANNEX 1 ATTACHED HERETO, PURPORTEDLY SIGNED BY THE BENEFICIARY, PRESENTED TO THE OFFICE OF OUR SERVICER, CITICORP NORTH AMERICA, INC . AT 3800 CITIBANK CENTER, BUILDING B, 3RD FLOOR, TAMPA, FLORIDA 33610.

IN ADDITION , PRESENTATION OF SUCH DRAFT MAY ALSO BE MADE BY FAX TRANSMISSION TO FAX NO. 813-604-7187 OR SUCH OTHER FAX NUMBER IDENTIFIED BY CITIBANK IN A WRITTEN NOTICE TO YOU. TO THE EXTENT A PRESENTATION IS MADE BY FAX TRANSMISSION, YOU MUST PROVIDE TELEPHONE NOTIFICATION THEREOF TO CITIBANK (PHONE NO . 866-945-6284) PRIOR TO OR SIMULTANEOUSLY WITH THE SENDING OF SUCH FAX TRANSMISSION AND (II) SEND THE ORIGINAL OF SUCH DRAFT TO CITIBANK BY OVERNIGHT COURIER, AT THE ADDRESS PROVIDED ABOVE FOR PRESENTATION OF DOCUMENTS, PROVIDED HOWEVER, THAT CITIBANK'S RECEIPT OF SUCH TELEPHONE NOTICE OR ORIGINAL DOCUMENTS SHALL NOT BE A CONDITION TO PAYMENT HEREUNDER.

PARTIAL DRAWINGS ARE PERMITTED UNDER THIS CREDIT .

DRAFTS PRESENTED PRIOR TO 10:00 A.M. NEW YORK CITY TIME ON ANY BUSINESS DAY SHALL BE PAID BY BANK CHECK OR WIRE TRANSFER, AT BENEFICIARY'S INSTRUCTION, ON THE SAME BUSINESS DAY . DRAFTS PRESENTED AFTER 10:00 A.M . NEW YORK CITY TIME ON ANY BUSINESS DAY SHALL BE PAID BY BANK CHECK OR WIRE TRANSFER, AT BENEFICIARY'S INSTRUCTION, BY CLOSE OF BUSINESS ON THE NEXT SUCCEEDING BUSINESS DAY.

WE HEREBY ENGAGE WITH YOU THAT DRAFT(S) DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS CREDIT WILL BE DULY HONORED UPON PRESENTATION TO THE AFORESAID OFFICE .

THIS CREDIT SHALL CONSTITUTE A DIRECT DRAW CREDIT AND YOU SHALL NOT BE REQUIRED TO GIVE NOTICE TO, OR MAKE ANY PRIOR DEMAND OR PRESENTMENT TO ACCOUNT PARTY WITH RESPECT TO THE PAYMENT OF ANY SUM AS TO WIDCH A DRAW IS MADE HEREUNDER.

IT IS A CONDITION OF THE CREDIT THAT IT SHALL BE DEEMED AUTOMATICALLY RENEWED WITHOUT NOTICE FOR SUCCESSIVE ONE-YEAR PERIODS FROM THE CURRENT OR ANY FUTURE EXPIRY DATE UNLESS WE NOTIFY THE BENEFICIARY IN WRITING AT LEAST SIXTY (60) DAYS PRIOR TO EACH EXPIRY DATE THAT WE ELECT NOT TO RENEW THE CREDIT FOR ANY SUCH ADDITIONAL PERIOD . ANY SUCH NOTICE SHALL BE SENT VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE BENEFICIARY'S ADDRESS SET FORTH ABOVE OR TO SUCH OTHER ADDRESS OF BENEFICIARY AS WE HAVE RECEIVED NOTICE FROM BENEFICIARY SENT TO OUR ____________ OFFICE,__________, ATTN:_____________, ________________, BY CERTIFIED MAIL , RETURN RECEIPT REQUESTED.

OUR OBLIGATION UNDER THIS CREDIT SHALL NOT BE AFFECTED BY ANY CIRCUMSTANCES, CLAIM OR DEFENSE, REAL OR PERSONAL, IT BEING UNDERSTOOD THAT OUR OBLIGATION SHALL BE THAT OF A PRIMARY OBLIGOR AND NOT THAT OF A SURETY, GUARANTOR OR ACCOMMODATION MAKER AND WE HEREBY WAIVE ANY RIGHT TO DEFER HONORING A DRAFT.

THIS CREDIT SETS FORTH IN FULL THE TERMS OF OUR UNDERTAKING, AND SUCH UNDERTAKING SHALL NOT IN ANYWAY BE MODIFIED OR AMPLIFIED BY REFERENCE TO ANY DOCUMENT, INSTRUMENT OR AGREEMENT REFERRED TO HEREIN OR IN WHICH THIS CREDIT IS REFERRED TO OR TO WHICH THIS CREDIT RELATES, AND ANY SUCH REFERENCE SHALL NOT BE DEEMED TO INCORPORATE HEREIN BY REFERENCE ANY DOCUMENT, INSTRUMENT OR AGREEMENT .

ALL THE CHARGES, INCLUDING WITHOUT LIMITATION ANY TRANSFER FEE, SHALL BE ON ACCOUNT OF APPLICANT.

THIS CREDIT IS TRANSFERABLE WITHOUT RESTRICTION OR COST TO BENEFICIARY. IT IS CONDITION OF THIS LETTER OF CREDIT THAT IT IS

TRANSFERABLE AND MAY BE TRANSFERRED IN ITS ENTIRETY, BUT NOT IN PART, AND MAY BE SUCCESSIVELY TRANSFERRED BY YOU OR ANY TRANSFEREE HEREUNDER TO A SUCCESSOR TRANSFEREE(S). TRANSFER UNDER THIS LETTER OF CREDIT TO SUCH TRANSFEREE SHALL BE EFFECTED UPON PRESENTATION TO US OF THE ORIGINAL OF THIS LETTER OF CREDIT AND ANY AMENDMENTS HERETO ACCOMPANIED BY A REQUEST DESIGNATING THE TRANSFEREE IN THE FORM OF ANNEX "A" , ATTACHED HERETO, APPROPRIATELY COMPLETED. APPLICANT SHALL PAY OUR TRANSFER FEE OF ¼ OF 1% (MINIMUM $200.00) ON THE OUTSTANDING AMOUNT OF LETTER OF CREDIT. HOWEVER, ANY TRANSFER OF

THIS LETTER OF CREDIT IS NOT CONTINGENT ON APPLICANT'S ABILITY TO PAY THE TRANSFER FEE .

THIS CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES OF 1998 PUBLISHED BY THE INTERNATIONAL CHAMBER OF COMMERCE AND TO THE EXTENT NOT INCONSISTENT THEREWITH SHALL ALSO BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA U . S.A. (WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PROVISIONS THEREOF) INCLUDING, BUT NOT LIMITED TO, ARTICLE 5 OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT ON THE DATE OF ISSUANCE OF THIS LETTER OF CREDIT .

ANNEX I

(FORM OF SIGHT DRAFT)

DATE:

AGGREGATE AMOUNT: U.S. DOLLARS________________

TO: [NAME OF ISSUER]

AT SIGHT OF THIS DRAFT, PAY TO THE ORDER OF OURSELVES, THE AGGREGATE AMOUNT OF U.S. DOLLARS _______________(INSERT DOLLAR AMOUNT IN WORDS)________________DRAWN UNDER [NAME OF ISSUER] STANDBY IRREVOCABLE TRANSFER LETTER OF CREDIT NO. ___________________ DATED _________________

[BENEFICIARY] BY:_(SIGNATURE) _

(PRINT NAME AND TITLE) _

Annex A

Request for Full Transfer Relinquishing all Rights as Beneficiary

(This form is to be used when the Letter of Credit is to be Transferred in its entirety and , no substitution of invoices is involved and, no rights are to be retained by the undersigned Beneficiary. )

Citicorp North America Inc., Date:

As Servicer for Citibank, N.A.

3800 Citibank Center, Bldg. B, 3rd Fl.

Tampa, FL 33610

Re: L/C No.---------

Issued by: CITIBANK, N.A.

Citibank, N.A. Ref:---------

Gentlemen:

Receipt is acknowledged of the original instrument which you forwarded to us relative to the issuance of a Letter of Credit ( herein called the "Credit" ) bearing your reference number as above in favor of ourselves and/or Transferees and we hereby request you to transfer the said Letter of Credit, in its entirety, to:

whose address is

( Optional ) Please advise Beneficiary through the below indicated Advising Bank:

We are returning the original instrument to you herewith in order that you may deliver it to the Transferees together with your customary letter of transfer.

It is understood that any amendments to the Letter of Credit which you may receive are to be advised by you directly to the Transferees and that the drafts and documents of the Transferees, if issued in accordance with the conditions of the Letter of Credit, are to be forwarded by you directly to the party for whose account the credit was opened (or any intermediary) without our intervention.

( continued on page 2 )

Page 2 Request for Full Transfer Relinquishing all Rights as Beneficiary

Citibank, N.A. reference_______________

We understand that the Transfer charge is 1/4 of 1% on the amount being transferred (minimum $200.00) and in addition thereto we agree to pay to you on demand any expenses that may be incurred by you in connection with this transfer.

____We enclose our check for $_______________ to cover your charges.

( Note :Payment of charges must be in the form of a certified check if not drawn on Citibank, N.A.)

__We authorize you to charge our Citibank N.A. account No_______________

SIGNATURE GUARANTEED Sincerely yours,

The First Beneficiary's signature(s) with title(s) conforms with that on file

with us and such is/are authorized for the execution of this instrument.

________________________________ ________________________________

(Name of Bank) (Name of First Beneficiary)

________________________________ ________________________________

(Bank Address) (Telephone Number)

________________________________ ________________________________

(City, State, Zip Code) (Authorized Name and Title)

________________________________ ________________________________

(Telephone Number) (Authorized Signature)

________________________________ ________________________________

(Authorized Name and Title) (Authorized Name and Title)

( If applicable )

________________________________ ________________________________

(Authorized Signature) (Authorized Signature)

FIRST AMENDMENT TO LEASE

This First Amendment to Lease (the "Agreement") is entered into as of July_, 2012, by and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey

corporation ("Landlord"), and AVAYA INC., a Delaware corporation ("Tenant"), with respect to the following facts and circumstances:

A. Landlord and Tenant have previously entered into that certain Lease Agreement dated as of August 25 , 2011 (the "Original Lease") of certain premises more part i cularly described in the Original Lease. Capitalized terms used and not otherwise defined herein shall have the meanings given those terms in the Original L e ase .

B. Landlord and Tenant desire to amend the Original Lease on the terms and conditions provided herein.

IT I S, THEREFORE, a greed as follows:

1. The following new Article 58 is hereby added to the O r iginal Lease:

"ARTICLE 58

58 . 1 Landlord and Tenant agree in good faith , but without legal obligation, to endeavor to i mplement the Sustainability Management Plan attached hereto as Exhibit I with the aim of reducing energy and water use within the Building and the Premises and reducing and recycl i ng waste . A breach by either Landlord or Tenant of any of the provisions of the Sustainab i lity Management Plan on the part of either Land l ord or Tenant to be observed or performed shall not constitute a default under this Lease . Landlord and Tenant further agree that any plans, projects and costs in connection with implementing the Sustainability Management Plan as it relates to the Premises shall be subject to the approval of Landlo r d and Tenant, and in no event shall a decision be made without consultation and written approvals by both parties unless the matter is required by Applicable Laws."


2.	Exhib i t I attached hereto is hereby added to the Original Lease as Exhibit I.


3.	As additional consideration for this Agreement, Tenant hereby certifies that:

(a) The Original Lease (as amended he r eby) is in full force and effect.

(b) To Tenant's knowledge, there are no uncur e d defaults on the part of Land l ord or Tenant under the Original Lease .

(c) There are no existing offsets or defenses which Tenant has against the enforcement of the Original Lease (as amended hereby) by Landlord .

4. Except as specifically provided herein, the terms and conditions of the Original Lease as amended hereby are confirmed and continue in full force and effect. This Agreement shall be binding on the heirs, administrators, successors and assigns (as the case may be) of the parties hereto . This Agreement and the attached exhibits, which are hereby incorporated into and made a part of this Agreement, set forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements. Tenant agrees that neither Tenant nor its agents or any other parties acting on behalf of Tenant shall disclose any matters set forth in this Agreement or disseminate or distribute any information concerning the terms, details or conditions hereof to any person, firm or entity without obtaining the express written consent of Landlord . In the case of any inconsistency between the provisions of the Lease and this Agreement, the provisions of this Agreement shall govern and control. Submission of this Agreement by Landlord is not an offer to enter into this Agreement but rather is a solicitation for such an offer by Tenant. Landlord shall not be bound by this Agreement until Landlord has executed and delivered the same to Tenant.


5.	Landlord hereby represents and warrants to Tenant that it has dealt with no

broker , finder or similar person in connection with this Agre e ment, and Tenant hereby represents and warrants to Landlord that it has de a lt with no broker, finder or similar person in connection with this Agreement. Landlord and Tenant shall each defend , indemnify and hold the other harmless with respect to all claims, causes of action, liabilities, losses , costs and expenses (including without limitation attorneys' fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of the indemnifying party's dealings with any real estate broker, agent, finder or similar person other than Landlord's Broker and Tenant's Broker. Nothing in this Agreement shall impose any obligation on L andlord to pay a commission or fee to any party.

6. To satisfy compliance with the Employee Retirement Income Security Act of 1974 , as amended ("ERISA") , and Section 4975(c) of the Internal Revenue Code , Tenant hereby certifies that the representations and warranties in Article 53 of the Original Lease are true and correct as of the date of this Agreement.

IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.

TENANT:

AVAYA INC., a Delaware corporation

By: /s/ Courtney Mezinis
Courtney Mezinis

Sr. Director – Avaya Global Real Estate

LANDLORD:

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA , a New Jersey

corporation

By: /s/ Kristin Paul
Kristin Paul

Vice President

EXHIBIT I

Avaya Green Lease Program

AVAYA REAL ESTATE SUSTAINABILITY MANAGEMENT PLAN (SMP)

PREMISES: 4555 Great America Parkway Santa Clara, California

General Objectives :

Tenant and Landlord acknowledge their intention to operate the Building and the Premises to provide for:


•	A comfortable, p r oduct i ve and healthy indoor environment.


•	Reduced energy use and reduced production , both direct and indirect.


•	Reduced water use.


•	The effective dive r sion of construction, demolition and land - clearing waste from landfill and incineration disposal , and the recycling of tenant waste streams.


•	The us e of cleaning products certified in a ccordance with the Management Plan of Green Seal or equivalent Management Plan so as to min i mize the adverse effect of cleaning .


•	The facilitation of alternative transportation options f or occupants or visi t ors to the Bui l ding.


•	The achievement of such othe r mo r e specific targets as may be set forth in this Sustainability Management Plan or otherw i se set forth in the Lease .

Specific Implementation Goals:

Nothing set forth in the Sustainabili t y Managem e nt Plan shall be construed as requiring Landlord or Tenant to take any action that conflicts with laws, codes, rules, orders , ordinances, regulations and requirements of federa l , state, county, or municipal authorities pert a ining to the Building or the Premises.

Green Cleaning Policy

The Landlord and Tenant shall introduce the use of green cleaning materials, products, equipment, janitorial paper products and trash bags that, at minimum, comply with the Green Cleaning Management Plan and any contracts with janitorial service providers must require that the contractor complies with all applicable elements of the Sustainability Management Plan , including the Green Cleaning Management P l an.

The Green Cleaning Management Plan is as follows:


•	Cleaning products must meet or exceed Green Seal Standard GS-37 or equivalent standard.


•	Disinfectants, metal polish, floor finishes, strippers or other products not addressed by the above standard must meet or exceed Green Seal Standard GS-40 or equiva l ent standard.


•	Disposal of janitorial paper products and trash bags must meet or exceed the minimum requirements of U . S. EPA Comprehensive Procurement Guidelines for Janitorial Paper and Plastic Trash Can Liners, Green Seal Standard GS - 09, Green Seal Standard GS-01 or equivalent standard.

• Hand soaps must meet or exceed Green Seal Standard GS-41 or equivalent standard. Integrated Pest Management

Landlord and Tenant shall use Integrated Pest Management (IPM) techniques, which emphasize preventive measures to minimize the use of chemicals and pesticides and to minimize indoor air quality issues.

Solid Waste Management

Tenant shall comply with the reduction of waste generated by Building occupants that is disposed of in landfills or by incineration. Tenant shall participate in the Building ' s recycling program and that Tenant shall provide its waste and recycling manifests upon request of Landlord.

Assessment and Reporting

Landlord shall provide Tenant with copies of the following upon written request:


•	ENERGY STAR energy performance rating.


•	Copies of monthly utility bills .

Purchasing Responsibilities


•	Landlord and Tenant shall incorporate their purchasing practices to include more environmentally friendly alternatives:


•	Ongoing consumables that contain recycled materials; rapidly renewable materials; materials that are manufactured, processed, harvested, or extracted within 500 miles of the site; Forest Stewardship Council (FSC)- certified paper products, and batteries that are rechargeable .


•	Furniture that is made from recycled materials; rapidly renewable materials; materials that are manufactured, processed, harvested , or extracted within 500 miles of the site; or Forest Stewardship Council (FSC) wood .


•	Items purchased from local vendors.

Transportation and Community


•	Landlord shall provide bicycle racks for building tenants .


•	Landlord shall provide preferred parking in the garage structure for hybrid/electrica l

vehicles.

SECOND AMENDMENT TO LEASE

This Second Amendment to Lease (the "Amendment") is entered into as of March 21, 2013, by and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New

Jersey corporation ("Landlord"), and AVAYA INC., a Delaware corporation ("Tenant"), with respect to the following facts and circumstances:

A. Landlord and Tenant have previously entered into that certain Lease Agreement dated as of August 25,2011, as amended by a First Amendment to Lease dated July I, 2012 (the "Original Lease"), of certain premises more particularly described in the Original Lease. Capitalized terms used and not otherwise defined herein shall have the meanings given those terms in the Original Lease.

B. Landlord and Tenant desire to amend the Original Lease on the terms and conditions provided herein.

IT IS, THEREFORE, agreed as follows:


I.	The following new Article 59 is hereby added to the Lease:

"ARTICLE 59.
TENANT'S ROOFTOP RIGHTS

59.1 Right to Install and Maintain Rooftop Equipment . During the Term of this Lease and subject to the terms of this Article 59, Tenant may install on the roof of the Building telecommunications antennae, microwave dishes or other communication equipment, as necessary for the operation of Tenant's business within the Premises, including any cabling or wiring necessary to connect this rooftop equipment to the Premises (collectively, the "Rooftop Equipment"). If Tenant wishes to install any Rooftop Equipment, Tenant shall first notify Landlord in writing, which notice shall fully describe the Rooftop Equipment, including, without limitation, its purpose, weight, size and desired location on the roof of the Building and its intended method of connection to the Premises. All of Tenant's Rooftop Equipment must be located within a total aggregate area not to exceed 4 square feet, at locations reasonably approved by Landlord prior to any installation. Landlord hereby consents to the installation of Rooftop Equipment consisting of one (I) antennae and/or satellite dish (the "Initial Rooftop Equipment"). Landlord also reserves the right to restrict the number and size of dishes, antennae and other Rooftop Equipment in addition to the Initial Rooftop Equipment installed on the roof of the Building in its sole discretion.

Additional Charges for Rooftop Equipment . Tenant will be solely responsible, at Tenant's sole expense, for the installation, maintenance, repair and removal of the Rooftop Equipment, and Tenant shall at all times maintain the Rooftop Equipment in good

condition and repair. Commencing on April I, 2013, Tenant shall pay a rental charge for Tenant's right to use the rooftop pursuant to the terms of this Article 59 for the Initial Rooftop Equipment in the amount of $250.00 per month (the "Roof Use Fee") throughout the Term of the Lease whether or not Tenant actual installs

THIRD AMENDMENT TO LEASE

This Third. Amendment to Lease (the "Amendment") is entered into as of September 27, 2013, by and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,

New Jersey corporation ("Landlord"), and AVA YA INC., a Delaware corporation ("Tenant"), with respect to the following facts and circumstances:

A. Landlord and Tenant have previously entered into that certain Lease Agreement dated as of August 25,2011, as amended by a First Amendment to Lease dated July I, 2012, and a Second Amendment to Lease dated March 21, 2013 (the "Original Lease"), of certain premises more particularly described in the Original Lease. Capitalized terms used and not otherwise defined herein shall have the meanings given those terms in the Original Lease.

B. Landlord and Tenant desire to amend the Original Lease on the terms and conditions provided herein.

IT IS, THEREFORE, agreed as follows:

I. The following new Section 6.8 is hereby added to the Lease:

"6.8 Tenant shall have the right, at Tenant's expense, to provide security personnel in the common lobby area of the Building (the "Lobby Security Personnel") on the terms and conditions provided in this Section 6.8. The Lobby Security Personnel provided by Tenant may only be on duty between the hours of 6:00 a.m. and 6:00p.m. Monday through Friday. Tenant shall be fully responsible for all costs of providing the Lobby Security Personnel. The vendor providing the Lobby Security Personnel must be approved by Landlord, which approval shall not be unreasonably withheld. The Lobby Security Personnel provided by Tenant (a) must comply with the Rules and Regulations and such additional rules and regulations as Landlord may establish from time to time with respect to vendor services, (b) must comply with all Applicable Laws, (c) may not possess firearms and (d) shall not create any material security risk to the Building or materially adversely affect the rights of other tenants in the Project. If at any time Landlord determines that the Lobby Security Personnel are failing to comply with the requirements of this Section 6.8, Landlord may elect to require Tenant to use an alternative vendor to provide the Lobby Security Personnel or Landlord may elect to enter into a direct contract with a vendor to provide the Lobby Security Personnel. If Landlord elects to provide Lobby Security Personnel, the cost of providing that Lobby Security Personnel shall be paid entirely by Tenant within thirty (30) days after Landlord's delivery of an invoice therefor from time to time and Tenant shall not have the right to independently provide Lobby Security Personnel. Landlord may at any time elect to cease to provide the Lobby Security Personnel and, if Landlord makes that election, Tenant shall again have the right to provide Lobby Security Personnel in accordance with this Section 6.8. Landlord shall not be liable in any manner to Tenant or any of its employees agents, contractors, licensees, sublessees, or invitees for any acts (including criminal acts) of others, or for any direct, indirect, or consequential damages, or any injury or damage to, or interference with, Tenant's business, including, but not

limited to, loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, or other loss or damage, bodily injury or death, related to any circumvention or other failure of any access control or security services (including without limitation any Lobby Security Personnel) which Landlord or Tenant elects to provide, or on account of Landlord's or Tenant's election not to provide any access control or security service or services, or for the failure of any access control or security services to prevent bodily injury, death, or property damage, or loss, or to apprehend any person suspected of causing such injury, death, damage or loss."

2. As additional consideration for this Amendment, Tenant hereby certifies to the best of its knowledge that:

(a) The Original Lease (as amended hereby) is in full force and effect.

(b) There are no uncured defaults on the part of Landlord or Tenant under the Original Lease.

(c) There are no existing offsets or defenses which Tenant has against the enforcement of the Original Lease (as amended hereby) by Landlord.

3. Except as specifically provided herein, the terms and conditions of the Original Lease as amended hereby are confirmed and continue in full force and effect. This Amendment shall be binding on the heirs, administrators, successors and assigns (as the case may be) of the parties hereto. This Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements. Under no circumstances shall Tenant be entitled to any Rent abatement, improvement allowance, leasehold improvements, or other work to the Premises, or any similar economic incentives that may have been provided Tenant in connection with entering into the Lease, unless specifically set forth in this Amendment. Tenant agrees that neither Tenant nor its agents or any other parties acting on behalf of Tenant shall disclose any matters set forth in this Amendment or disseminate or distribute any information concerning the terms, details or conditions hereof to any person, firm or entity without obtaining the express written consent of Landlord. In the case of any inconsistency between the provisions of the Lease and this Amendment, the provisions of this Amendment shall govern and control. Submission of this Amendment by Landlord is not an offer to enter into this Amendment but rather is a solicitation for such an offer by Tenant. Landlord shall not be bound by this Amendment until Landlord has executed and delivered the same to Tenant.

4. To satisfy compliance with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975(c) of the Internal Revenue Code, Tenant hereby certifies that the representations and warranties in Article 53 of the Original Lease are true and correct as of the date of this Agreement.

IN WITNESS WHEREOF, this Amendment has been executed as of the date first above written.

TENANT:

AVAYA INC., a Delaware corporation

By: /s/ Safeo Cobeij

Safeo, Cobeij, Senior Director

LANDLORD:

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation

By: /s/ Jeffrey D. Mills

Jeffrey D. Mills
Vice President

EXHIBIT B

Depiction of Subleased Premises/Floor Plan

[See Attached]

EXHIBIT C

Subtenant Improvements

Exhibit 10.37

LANDLORD CONSENT TO SUBLEASE

THIS LANDLORD CONSENT TO SUBLEASE (“ Consent Agreement ”) is entered into as of December 18, 2015, by and among THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation (“ Landlord ”), AVAYA INC., a Delaware corporation (“ Sublandlord ”), and TELENAV, INC., a Delaware corporation (“ Subtenant ”).

RECITALS:

Landlord, as landlord, and Sublandlord, as tenant, are parties to that certain Lease Agreement dated August 25, 2011 (as the same may have been amended, the “ Lease ”), pursuant to which Landlord has leased to Sublandlord certain premises containing approximately 257,155 rentable square feet (the “ Premises ”) comprised of the following: (i) approximately 41,900 rentable square feet described as Suite No. 100; (ii) approximate 52,268 rentable square feet described as Suite No. 200, (iii) approximate 54,635 rentable square feet described as Suite No. 300, (iv) approximate 53,717 rentable square feet described as Suite No. 400, and (v) approximate 54,635 rentable square feet described as Suite No. 500, of the building located at 4655 Great America Parkway, Santa Clara, California (the “ Building ”).

Sublandlord and Subtenant have entered into that certain Sublease dated as of November 11, 2015 attached hereto as Exhibit A (the “ Sublease ”) pursuant to which Sublandlord has agreed to sublease to Subtenant certain premises described as follows: Suite No. 300 of the Building, comprising approximately 54,635 rentable square feet (the “ Sublet Premises ”) constituting a part of the Premises.


C.	Sublandlord and Subtenant have requested Landlord’s consent to the Sublease.


D.	Landlord has agreed to give such consent upon the terms and conditions contained in this Consent Agreement.

NOW THEREFORE , in consideration of the foregoing preambles which by this reference are incorporated herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord hereby consents to the Sublease subject to the following terms and conditions, all of which are hereby acknowledged and agreed to by Sublandlord and Subtenant:


1.	Sublease Agreement . Sublandlord and Subtenant hereby represent that a true and complete copy of the Sublease is attached hereto and made a part hereof as Exhibit A , and Sublandlord and Subtenant agree that the Sublease with respect to Landlord and/or the Sublet Premises shall not be modified without Landlord’s prior written consent, which consent shall not be unreasonably withheld.

Representations . Sublandlord hereby represents and warrants that Sublandlord (i) has full power and authority to sublease the Sublet Premises to Subtenant, (ii) has not transferred or conveyed its interest in the Lease to any person or entity collaterally or otherwise, and (iii) has full power and authority to enter into the Sublease and this Consent Agreement. Subtenant hereby represents and warrants that Subtenant has full power and authority to enter into the Sublease and this Consent Agreement.


3.	Indemnity and Insurance . Subtenant hereby assumes, with respect to Landlord, all of the indemnity and insurance obligations of the Sublandlord under the Lease with respect to the Sublet Premises, provided that the foregoing shall not be construed as relieving or releasing Sublandlord from any

Exhibit 10.37

such obligations. Notwithstanding the foregoing, to the extent the same is legally permissible, Sublandlord may satisfy such insurance obligation for itself and on behalf of Subtenant.

No Release . Nothing contained in the Sublease or this Consent Agreement shall be construed as relieving or releasing Sublandlord from any of its obligations under the Lease, it being expressly understood and agreed that Sublandlord shall remain liable for such obligations notwithstanding anything contained in the Sublease or this Consent Agreement or any subsequent assignment(s), sublease(s) or transfer(s) of the interest of the tenant under the Lease. Sublandlord shall be responsible for the collection of all rent due it from Subtenant, and for the performance of all the other terms and conditions of the Sublease, it being understood that Landlord is not a party to the Sublease and, notwithstanding anything to the contrary contained in the Sublease, is not bound by any terms, provisions, representations or warranties contained in the Sublease, including, without limitation, Section 29 of the Sublease, and is not obligated to Sublandlord or Subtenant for any of the duties and obligations contained therein.

Administrative Fee . Sublandlord shall pay to Landlord the sum equal to Landlord’s reasonable attorneys’ fees, incurred in consideration for Landlord’s review of the Sublease and the preparation and delivery of this Consent Agreement, pursuant to Section 18.3 of the Lease. Landlord shall notify Sublandlord of such amount and Sublandlord shall pay such amount to Landlord, as Additional Rent under the Lease, within ten (10) days of such notice from Landlord.


6.	No Transfer . Subtenant shall not further sublease the Sublet Premises, assign its interest as the Subtenant under the Sublease or otherwise transfer its interest in the Sublet Premises or the Sublease to any person or entity without the written consent of Landlord, which Landlord may withhold in its sole discretion.

Lease . The parties agree that the Sublease is subject and subordinate to the terms of the Lease, and all terms of the Lease, other than Sublandlord’s obligation to pay Monthly Rent, are incorporated into the Sublease. In no event shall the Sublease or this Consent Agreement be construed as granting or conferring upon the Sublandlord or the Subtenant any greater rights than those contained in the Lease nor shall there be any diminution of the rights and privileges of the Landlord under the Lease, nor shall the Lease be deemed modified in any respect. Nothing set forth in this Consent Agreement shall be construed as a consent or approval by Landlord of any alterations, additions or improvements that Subtenant intends to perform pursuant to the Sublease and any such alterations, additions or improvements, including, without limitation, the “Subtenant Improvements” referenced in Section 38 of the Sublease, are subject to the prior approval of Landlord, and full compliance with the terms of the Lease, including without limitation, Article 15 of the Lease. Without limiting the generality of the foregoing, Landlord shall have the right to require Tenant to remove any alterations, additions or improvements installed in the Sublet Premises in accordance with the terms of Section 16.2 of the Lease. It is hereby acknowledged and agreed that any provisions in the Sublease which limit the manner in which Sublandlord may amend the Lease are binding only upon Sublandlord and Subtenant as between such parties. Landlord shall not be bound in any manner by such provisions and may rely upon Sublandlord’s execution of any agreements amending or terminating the Lease subsequent to the date hereof notwithstanding any contrary provisions in the Sublease.


8.	Parking and Services . Any parking rights granted to Subtenant pursuant to the Sublease shall be satisfied out of the parking rights, if any, granted to Sublandlord under the Lease. Sublandlord hereby authorizes Subtenant, as agent for Sublandlord, to obtain services and materials for or related to the Sublet Premises, and Sublandlord agrees to pay for such services and materials as additional

Exhibit 10.37

rent under the Lease upon written demand from Landlord. However, as a convenience to Sublandlord, Landlord may bill Subtenant directly for such services and materials, or any portion thereof, in which event Subtenant shall pay for the services and materials so billed upon written demand, provided that: (a) such billing shall not relieve Sublandlord from its primary obligation to pay for such services and materials, and (b) Subtenant shall reimburse Sublandord in accordance with Section 15 of the Sublease, and indemnify and hold Sublandlord harmless in accordance with Section 8(d) of the Sublease.

Attornment . If the Lease or Sublandlord's right to possession thereunder terminates for any reason prior to expiration of the Sublease, Subtenant agrees, at the written election of Landlord, to attorn to Landlord upon the then executory terms and conditions of the Sublease for the remainder of the term of the Sublease. In the event of any such election by Landlord, Landlord will not be (a) liable for any rent paid by Subtenant to Sublandlord more than one month in advance, or any security deposit paid by Subtenant to Sublandlord, unless same has been transferred to Landlord by Sublandlord; (b) liable for any act or omission of Sublandlord under the Lease, Sublease or any other agreement between Sublandlord and Subtenant or for any default of Sublandlord under any such documents which occurred prior to the effective date of the attornment; (c) subject to any defenses or offsets that Subtenant may have against Sublandlord which arose prior to the effective date of the attornment; (d) bound by any changes or modifications made to the Sublease without the written consent of Landlord; (e) obligated in any manner with respect to the transfer, delivery, use or condition of any furniture, equipment or other personal property in the Sublet Premises which Sublandlord agreed would be transferred to Subtenant or which Sublandlord agreed could be used by the Subtenant during the term of the Sublease; or (f) liable for the payment of any improvement allowance, or any other payment, credit, offset or amount due from Sublandlord to Subtenant under the Sublease. If Landlord does not elect to have Subtenant attorn to Landlord as described above, the Sublease and all rights of Subtenant in the Sublet Premises shall terminate upon the date of termination of the Lease or Sublandlord’s right to possession thereunder. It is all parties' expressed intent that, should the Lease terminate for any reason whatsoever, including the voluntary surrender of same by Sublandlord and the acceptance thereof by Landlord, then the Sublease shall terminate. This provision is entered into with full knowledge of the case of Buttner v. Kasser (1912) 19 Cal.App. 755, and it is the parties' express intent that the holding of Buttner and similar cases shall not apply to the Sublease. The terms of this Section 9 supercede any contrary provisions in the Sublease.

10.

Payments Under the Sublease . If at any time Sublandlord is in default under the terms of the Lease, Landlord shall have the right to contact Subtenant and require Subtenant to pay all rent due under the Sublease directly to Landlord until such time as Sublandlord has cured such default. Subtenant agrees to pay such sums directly to Landlord if requested by Landlord, and Sublandlord agrees that any such sums paid by Subtenant shall be deemed applied against any sums owed by Subtenant under the Sublease. Any such sums received by Landlord from Subtenant shall be received by Landlord on behalf of Sublandlord and shall be applied by Landlord to any sums past due under the Lease, in such order of priority as required under the Lease or, if the Lease is silent in such regard, then in such order of priority as Landlord deems appropriate. The receipt of such funds by Landlord shall in no manner be deemed to create a direct lease or sublease between Landlord and Subtenant. If Subtenant fails to deliver its Sublease payments directly to Landlord as required herein following receipt of written notice from Landlord as described above, then Landlord shall have the right to remove any signage of Subtenant, at Subtenant’s cost, located outside the Premises or in the Building lobby or elsewhere in the Building and to pursue any other rights or remedies available to Landlord at law or in equity.

Exhibit 10.37

11.

Excess Rent . If Landlord is entitled to any excess rent from Sublandlord pursuant to the terms of the Lease, then, in addition to all rent otherwise payable by Sublandlord to Landlord under the Lease, Sublandlord shall also pay to Landlord the portion of the excess rent to which Landlord is entitled under the Lease, in the manner described in the Lease. Landlord’s failure to bill Sublandlord for, or to otherwise collect, such sums shall in no manner be deemed a waiver by Landlord of its right to collect such sums in accordance with the Lease.

12.

ERISA . Sublandlord and Subtenant each hereby represents, warrants and covenants to Landlord that, as of the date hereof and throughout the term of the Lease, it is not (i) an “employee benefit plan” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), that is subject to Title I of ERISA, (ii) a “plan” as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended (the “ Code ”), that is subject to Section 4975 of the Code, or (iii) an entity deemed to hold “plan assets” of any such employee benefit plan or plan. In addition, Sublandlord and Subtenant each represents, warrants and covenants to Landlord that it is not a “governmental plan” as defined in Section 3(32) of ERISA and is not subject to State statutes regulating investments of and fiduciary obligations with respect to government plans which would be violated by the transactions contemplated by the Lease or this Consent Agreement.

13.

Authority . Each signatory of this Consent Agreement represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting. Neither Sublandlord nor Subtenant is, and shall not during the term of the Lease become, a person or entity with whom Landlord is restricted from doing business under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, H.R. 3162, Public Law 107-56 (commonly known as the “ USA Patriot Act ”) and Executive Order Number 13224 on Terrorism Financing, effective September 24, 2001 and regulations promulgated pursuant thereto (collectively, “ Anti-Terrorism Laws ”), including without limitation persons and entities named on the Office of Foreign Asset Control Specially Designated Nationals and Blocked Persons List (collectively, “ Prohibited Persons ”). Neither Sublandlord nor Subtenant is currently engaged in any transactions or dealings, or otherwise associated with, any Prohibited Persons in connection with the use or occupancy of the Sublet Premises. Sublandlord and Subtenant will not, during the Term of the Lease, engage in any transactions or dealings, or be otherwise associated with, any Prohibited Persons in connection with the use or occupancy of the Sublet Premises. Sublandlord’s or Subtenant’s breach of any representation or covenant set forth in this Section shall constitute a breach of the Lease, entitling Landlord to any and all remedies hereunder, or at law or in equity (including the right to terminate the Lease, if required by law, without affording Sublandlord or Subtenant notice or cure period ).


14.	CASp . Pursuant to California Civil Code Section 1938, Landlord hereby notifies Subtenant that as of the date of this Consent, the Sublet Premises has not undergone inspection by a “Certified Access Specialist” to determine whether the Sublet Premises meet all applicable construction-related accessibility standards under California Civil Code Section 55.53.

15.

Limitation of Landlord’s Liability . Redress for any claim against Landlord under this Consent Agreement shall be limited to and enforceable only against and to the extent of Landlord’s interest in the Building. The obligations of Landlord under this Consent Agreement, if any, are not intended to be and shall not be personally binding on, nor shall any resort be had to the private properties of, any of its or its investment manager’s trustees, directors, officers, partners, beneficiaries, members, stockholders, employees, or agents, and in no case shall Landlord be liable to Sublandlord and/or

Exhibit 10.37

Subtenant hereunder for any lost profits, damage to business, or any form of special, indirect or consequential damages.


16.	Waiver of Subrogation . Landlord hereby agrees that Section 13.4 of the Lease is intended to benefit Subtenant as well as Sublandlord and that the waivers of recovery rights and subrogation rights as provided in Section 13.4 of the Lease shall apply as between Landlord and Subtenant to the same extent as between Landlord and Sublandlord.

17.

Monument Signage . Notwithstanding the terms of Section 32.4.3 of the Lease making Sublandlord’s signage rights under Section 32.4 personal to Sublandlord, Landlord agrees that Subtenant shall be allowed to place Subtenant’s identifying signage on the Building’s existing monument sign, subject to the requirements and conditions of the Lease and in accordance with Section 37 of the Sublease including, without limitation, Landlord’s right to consent to the size of such sign. Without limiting the foregoing, any such Subtenant signage shall be constructed and installed (at no cost to Landlord) by Landlord’s signage vendor and may utilize space on the monument sign of an area comprising up to two (2) of the six (6) glass plates currently allocated to Tenant (and Tenant may continue to use the remaining area comprising an area covering four (4) glass plates).

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Exhibit 10.37

IN WITNESS WHEREOF , Landlord, Sublandlord and Subtenant have executed this Consent Agreement as of the date set forth above.



	LANDLORD:

	THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation by its authorized Signatory, Harvest Properties, Inc., a California corporation By: /s/ Jeffrey D. Mills Name: Jeffrey D. Mills Title: Vice President Dated: December 18, 2015

	SUBLANDLORD:
	AVAYA INC., a Delaware corporation By: /s/ James M. Chinco Jr. Name: James M. Chinco Jr. Title: EVP, Business Operations Dated: December 16, 2015
	SUBTENANT:
	TELENAV, INC., a Delaware corporation By: /s/Michael Strambi Name: Michael Strambi Title: Chief Financial Officer Dated: December 16, 2015

Exhibit 10.37

EXHIBIT A - SUBLEASE AGREEMENT

attached to and made a part of the Consent Agreement dated as of December 18, 2015
between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation, as Landlord, AVAYA INC., a Delaware corporation, as Sublandlord and

TELENAV, INC., a Delaware corporation, as Subtenant

Exhibit 31.1

CERTIFICATION OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER

PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dr. HP Jin, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Telenav, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


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


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


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


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


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


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


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



Date:	February 9, 2016	By:	/s/ Dr. HP JIN
			DR. HP Jin
			President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael Strambi, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Telenav, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


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


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


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


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


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


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


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



Date:	February 9, 2016	By:	/s/ MICHAEL STRAMBI
			Michael Strambi
			Chief Financial Officer

Exhibit 32.1

CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. § 1350, AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Dr. HP Jin, the president and chief executive officer of Telenav, Inc. (the “Company”), certify for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge,

(i) the Quarterly Report of the Company on Form 10-Q for the three months ended December 31, 2015 (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

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



Date:	February 9, 2016	By:	/s/ Dr. HP JIN
			Dr. HP Jin
			President and Chief Executive Officer

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. § 1350, AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Michael Strambi, the chief financial officer of Telenav, Inc. (the “Company”), certify for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge,

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



Date:	2/9/2016	By:	/s/ MICHAEL STRAMBI
			Michael Strambi
			Chief Financial Officer