Zendesk, Inc. (Form: 10-Q, Received: 11/06/2014 16:19:47)

Date: November 6, 2014

/s/ Mikkel Svane

Mikkel Svane

Chief Executive Officer (Principal Executive Officer)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2014

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

For the transition period from to

Commission File Number: 001-36456

ZENDESK, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

26-4411091

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

1019 Market Street

San Francisco, California 94103

(Address of principal executive offices)

415.418.7506

(Registrant’s Telephone number, including area code)

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

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (do not check if a smaller reporting company)

Smaller reporting company

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

As of October 31, 2014, there were 72,834,725 shares of the registrant’s common stock outstanding.

ZENDESK, INC.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item 1	Financial Statements (unaudited):	4
	Condensed Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013	4
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2014 and 2013	5
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2014 and 2013	6
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4	Controls and Procedures	28
PART II — OTHER INFORMATION
Item 1	Legal Proceedings	28
Item 1A	Risk Factors	28
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 6	Exhibits	51
SIGNATURES		52

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

—	the sufficiency of our cash and cash equivalents, and marketable securities to meet our liquidity needs;

—	our ability to attract and retain customers to use our customer service platform and live chat software, and to optimize the pricing for our customer service platform and live chat software;

—	the evolution of technology affecting our platform, services, and markets;

—	our ability to innovate and provide a superior customer experience;

—	our ability to successfully expand in our existing markets and into new markets, including expanding our enterprise customer base;

—	the attraction and retention of qualified employees and key personnel;

—	worldwide economic conditions and their impact on information technology spending;

—	our ability to effectively manage our growth and future expenses, including our ability to expand, and realize economies of scale within our self-managed colocation data centers and reduce incremental personnel costs resulting from growth of customers;

—	our ability to successfully offer Zopim live chat software as a standalone service and further integrate it with our customer service platform;

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

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

—	the increased expenses and administrative workload associated with being a public company; and

—	the estimates and methodologies used in calculating our key business metrics.

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

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

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

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

ZENDESK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and shares)

	September 30,			December 31,
	2014			2013
	(Unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	80,436		$	53,725
Marketable securities		29,858			9,889
Accounts receivable, net of allowance for doubtful accounts of $355 and $282 as of September 30, 2014 and December 31, 2013, respectively		12,858			7,237
Prepaid expenses and other current assets		5,255			3,008
Total current assets		128,407			73,859
Marketable securities, noncurrent		18,007			2,225
Property and equipment, net		40,864			15,431
Goodwill and intangible assets, net		15,158			—
Other assets		1,545			1,221
Total assets	$	203,981		$	92,736

Liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	5,501		$	3,988
Accrued liabilities		10,224			4,737
Accrued compensation and related benefits		9,661			4,226
Deferred revenue		45,412			28,473
Current portion of credit facility		3,022			365
Current portion of capital leases		103			364
Total current liabilities		73,923			42,153
Deferred revenue, noncurrent		1,219			575
Credit facility, noncurrent		4,678			23,395
Other liabilities		9,539			1,520
Total liabilities		89,359			67,643
Commitments and contingencies (Note 7)
Redeemable convertible preferred stock, par value $0.01 per share, issuable in series: no shares and 24.0 million shares authorized; no shares and 23.6 million shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively		—			71,369
Stockholders’ equity (deficit):
Preferred stock, par value $0.01 per share: 5.0 million and no shares authorized as of September 30, 2014 and December 31, 2013, respectively; no shares issued and outstanding as of September 30, 2014 and December 31, 2013		—			—
Common stock, par value $0.01 per share: 400.0 million and 125.0 million shares authorized; 73.3 million and 23.7 million shares issued; 72.8 million and 23.2 million shares outstanding as of September 30, 2014 and December 31, 2013, respectively (including 0.7 million and 0.8 million shares subject to repurchase, legally issued and outstanding, as of September 30, 2014 and December 31, 2013, respectively)		721			229
Additional paid-in capital		228,968			18,591
Accumulated other comprehensive income		(39	)		10
Accumulated deficit		(114,376	)		(64,454	)
Treasury stock at cost (0.5 million shares as of September 30, 2014 and December 31, 2013)		(652	)		(652	)
Total stockholders’ equity (deficit)		114,622			(46,276	)
Total liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit)	$	203,981		$	92,736

See Notes to Condensed Consolidated Financial Statements.

ZENDESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013

Revenue	$	33,910		$	19,237		$	88,508		$	49,544
Cost of revenue ⁽¹⁾		11,684			6,327			32,410			16,878
Gross profit		22,226			12,910			56,098			32,666
Operating expenses ⁽¹⁾ :
Research and development		9,550			3,860			25,227			10,737
Sales and marketing		21,548			10,015			56,174			26,218
General and administrative		8,940			3,646			23,639			11,744
Total operating expenses		40,038			17,521			105,040			48,699
Operating loss		(17,812	)		(4,611	)		(48,942	)		(16,033	)
Other expense, net		(343	)		(102	)		(1,252	)		(312	)
Loss before provision for income taxes		(18,155	)		(4,713	)		(50,194	)		(16,345	)
Provision for (benefit from) income taxes		(236	)		42			(272	)		120
Net loss		(17,919	)		(4,755	)		(49,922	)		(16,465	)
Accretion of redeemable convertible preferred stock		—			(12	)		(18	)		(36	)
Net loss attributable to common stockholders	$	(17,919	)	$	(4,767	)	$	(49,940	)	$	(16,501	)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.25	)	$	(0.22	)	$	(1.08	)	$	(0.77	)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted		71,732			22,024			46,110			21,486

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Cost of revenue	$	591	$	77	$	1,691	$	177
Research and development		3,052		196		7,530		422
Sales and marketing		4,877		338		8,635		726
General and administrative		2,298		264		5,769		2,419

See Notes to Condensed Consolidated Financial Statements.

ZENDESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013

Net loss	$	(17,919	)	$	(4,755	)	$	(49,922	)	$	(16,465	)
Other comprehensive loss, net of tax:
Net change in unrealized gain (loss) on available-for-sale investments		(58	)		21			(66	)		—
Foreign currency translation gain (loss)		(303	)		—			17			—
Comprehensive loss	$	(18,280	)	$	(4,734	)	$	(49,971	)	$	(16,465	)

See Notes to Condensed Consolidated Financial Statements.

ZENDESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Nine Months Ended September 30,
	2014			2013
Cash flows from operating activities
Net loss	$	(49,922	)	$	(16,465	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		7,673			3,591
Share-based compensation		23,625			3,744
Other		331			144
Changes in operating assets and liabilities:
Accounts receivable		(5,104	)		(3,122	)
Prepaid expenses and other current assets		(1,960	)		(1,504	)
Other assets and liabilities		1,321			268
Accounts payable		591			955
Accrued liabilities		922			963
Accrued compensation and related benefits		5,215			1,812
Deferred revenue		17,290			10,537
Net cash provided (used) in operating activities		(18	)		923
Cash flows from investing activities
Purchases of property and equipment		(19,121	)		(5,650	)
Internal-use software development costs		(6,268	)		(3,556	)
Purchases of marketable securities		(43,006	)		(12,409	)
Proceeds from maturities of marketable securities		6,950			—
Cash paid for the acquisition of Zopim, net of cash acquired		(1,896	)		—
Net cash used in investing activities		(63,341	)		(21,615	)
Cash flows from financing activities
Proceeds from initial public offering, net of issuance costs		103,110			—
Proceeds from exercise of employee stock options		5,091			628
Proceeds from issuance of debt		3,940			1,000
Principal payments on debt		(20,000	)		—
Taxes paid related to net share settlement of equity awards		(1,750	)		—
Principal payments on capital lease obligations		(271	)		(251	)
Net cash provided by financing activities		90,120			1,377
Effect of exchange rate changes on cash and cash equivalents		(50	)		(7	)
Net increase (decrease) in cash and cash equivalents		26,711			(19,322	)
Cash and cash equivalents at the beginning of period		53,725			48,688
Cash and cash equivalents at the end of period	$	80,436		$	29,366

Supplemental cash flow data:
Cash paid for interest and income taxes	$	930		$	142

Non-cash investing and financing activities:
Issuance of common stock for the acquisition of Zopim	$	10,893		$	—
Purchases of property and equipment in accounts payable and accrued expenses	$	998		$	13
Property and equipment acquired through tenant improvement allowances	$	3,932		$	—
Share-based compensation capitalized in internal-use software development costs	$	1,856		$	118
Vesting of early exercised stock options	$	1,196		$	680

See Notes to Condensed Consolidated Financial Statements.

ZENDESK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Overview and Basis of Presentation

Company and Background

Zendesk was founded in Denmark in 2007 and reincorporated in Delaware in April 2009.

Our mission is to help organizations build successful long-term relationships with their customers. We are a software development company that provides a software-as-a-service, or SaaS, customer service platform that enables our customers to provide tailored support through multiple channels, establish effective self-service support resources, proactively serve customers through customer engagement capabilities, integrate with other applications and consolidate and analyze data from customer interactions in powerful ways. We also provide SaaS live chat software that can be utilized independently to facilitate proactive communications between organizations and their customers or integrated seamlessly into our customer service platform.

References to Zendesk, “Company”, “our”, or “we” in these notes refer to Zendesk, Inc. and its subsidiaries on a consolidated basis.

Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our final prospectus filed with the SEC on May 16, 2014 pursuant to Rule 424(b) of the Securities Act of 1933, as amended. There have been no changes to our significant accounting policies described in the prospectus that have had a material impact on our condensed consolidated financial statements and related notes.

The consolidated balance sheet as of December 31, 2013 included herein was derived from the audited financial statements as of that date. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, our comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2014.

Initial Public Offering and Share-based Compensation

In May 2014, we completed our initial public offering, or IPO, in which we issued and sold 12.8 million shares of common stock at a public offering price of $9.00 per share. We received net proceeds of $103.1 million after deducting underwriting discounts and commissions of $8.1 million and other offering expenses of $3.8 million. Upon the closing of the IPO, all shares of our then-outstanding redeemable convertible preferred stock automatically converted into an aggregate of 34.3 million shares of common stock.

All restricted stock units, or RSUs, and certain options granted to employees prior to the IPO vest upon the satisfaction of both a service condition and a performance condition. These RSUs and stock options with both a service condition and performance condition are collectively referred to as “Performance Awards” in the following discussion. The service condition for substantially all of the Performance Awards is satisfied over three or four years. The performance condition was satisfied upon the effectiveness of the registration statement related to our IPO. No share-based compensation expense had been recognized for the Performance Awards prior to the IPO. Upon the satisfaction of the performance condition, we recognized a cumulative share-based compensation expense for the portion of the Performance Awards that had met the service condition. For the three and nine months ended September 30, 2014, share-based compensation expense related to the Performance Awards recognized was $2.9 million and $9.0 million, respectively, using the accelerated attribution method. The remaining unrecognized share-based compensation expense related to the Performance Awards will be recorded over the remaining requisite service period using the accelerated attribution method, net of estimated forfeitures.

As of September 30, 2014, we had a total of $74.5 million future period share-based compensation expense related to all equity awards, net of estimated forfeitures, to be recognized over a weighted average period of 3.6 years.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reported periods. Significant items subject to such estimates and assumptions include the fair value of share-based awards, fair value of acquired intangible assets, goodwill, unrecognized tax benefits, useful lives of intangible assets and property and equipment, and the capitalization and estimated useful life of our capitalized internal-use software.

These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.

Concentrations of Risk

At September 30, 2014, there was one customer represented 17% of our total accounts receivable balance. At December 31, 2013, there were no customers that represented more than 10% of our accounts receivable balance. There were no customers that individually exceeded 10% of our revenue during the three and nine months ended September 30, 2014.

Recently Issued and Adopted Accounting Pronouncements

On May 28, 2014, the FASB issued ASU 2014-09 regarding ASC Topic 606 “ Revenue from Contracts with Customers .” This ASU provides principles for recognizing revenue to which an entity expects to be entitled for the transfer of promised goods or services to customers. This ASU will be effective for our fiscal year beginning January 1, 2017. Early adoption is not permitted. We are currently evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.

Note 2. Acquisition

On March 21, 2014, we completed the acquisition of Zopim Technologies Pte Ltd., or Zopim, a software development company that provides a SaaS live chat service. The fair value of assets acquired and liabilities assumed was based on a preliminary valuation and our estimates and assumptions are subject to change within the measurement period. The primary areas of those preliminary estimates that are not yet finalized relate to accrued liabilities and income and non-income based tax liabilities. During the nine months ended September 30, 2014, we made adjustments of $0.2 million to the preliminary purchase price allocation related to final working capital acquired. No adjustments were made to the preliminary purchase price during the three months ended September 30, 2014. The total adjusted acquisition date fair value of consideration transferred was $15.8 million ($4.9 million of cash and $10.9 million of our common stock), which included $1.1 million of cash and $2.4 million of common stock consideration held back between 12 and 18 months as partial security for standard indemnification obligations. Of the total purchase price, $9.6 million was allocated to goodwill, $6.6 million to identifiable intangible assets, and $0.4 million to net liabilities assumed. Goodwill generated from the acquisition is attributable to expected synergies from future growth and potential future monetization opportunities, and is not deductible for tax purpose. Pro forma revenue and results of operations have not been presented because the historical results of Zopim were not material to our consolidated financial statements in any period presented.

In connection with the acquisition, we also established a retention plan pursuant to which we issued RSUs for 0.9 million shares of our common stock, which vest in three annual installments from the date of acquisition, and agreed to pay cash in an aggregate amount of $3.0 million in two annual installments from the date of acquisition to Zopim employees in connection with their continued employment, which is recorded as compensation expense over the associated service periods of such employees.

Note 3. Fair Value Measurements

The following tables present information about our financial assets measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013 based on the three-tier fair value hierarchy (in thousands):

	Fair Value Measurement at
	September 30, 2014
	Level 1		Level 2		Total
Description
Corporate securities	$	—		41,140	$	41,140
Money market funds		24,820		—		24,820
U.S. treasury securities		—		2,998		2,998
Asset-backed securities		—		2,026		2,026
U.S. agency obligations		—		1,002		1,002
Commercial paper		—		699		699
Total	$	24,820	$	47,865	$	72,685
Included in cash and cash equivalents					$	24,820
Included in marketable securities					$	47,865

	Fair Value Measurement at
	December 31, 2013
	Level 1		Level 2		Total
Description
Corporate securities	$	—	$	12,114	$	12,114
Money market funds		10,836		—		10,836
Total	$	10,836	$	12,114	$	22,950
Included in cash and cash equivalents					$	10,836
Included in marketable securities					$	12,114

Gross unrealized gains or losses for cash equivalents and available-for-sale marketable securities as of September 30, 2014 and December 31, 2013 were not material. As of September 30, 2014 and December 31, 2013, there were no securities that were in an unrealized loss position for more than 12 months.

The following table classifies our available-for-sale marketable securities by contractual maturities as of September 30, 2014 and December 31, 2013 (in thousands):

	September 30, 2014		December 31, 2013
Due in one year	$	29,858	$	9,889
Due in one to five years		18,007		2,225
Total	$	47,865	$	12,114

For certain other financial instruments, including accounts receivable, accounts payable and other current liabilities, the carrying amounts approximate their fair value due to the relatively short maturity of these balances. Based on borrowing rates available to us for loans with similar terms and maturities, the carrying value of borrowings approximates fair value or Level 2 within the fair value hierarchy.

There were no transfers between fair value measurement levels during the three and nine months ended September 30, 2014.

Note 4. Property and Equipment

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

	September 30, 2014			December 31, 2013
Capitalized internal-use software	$	14,453		$	11,104
Furniture and fixtures		4,440			1,383
Hosting equipment		12,423			7,931
Computer equipment and software		3,898			1,680
Leasehold improvements		14,871			1,717
Construction in progress		6,198			341
Total		56,283			24,156
Less accumulated depreciation and amortization		(15,419	)		(8,725	)
Property and equipment, net	$	40,864		$	15,431

Depreciation expense was $1.7 million and $0.8 million for the three months ended September 30, 2014 and 2013, respectively, and $4.0 million and $1.9 million for the nine months ended September 30, 2014 and 2013, respectively.

We capitalized $3.1 million and $1.3 million in internal-use software during the three months ended September 30, 2014 and 2013, respectively, and $8.1 million and $3.7 million during the nine months ended September 30, 2014 and 2013, respectively. Included in the capitalized development costs are $0.8 million and $33,000 in share-based compensation costs for the three months ended September 30, 2014 and 2013, respectively, and $1.9 and $0.1 million for the nine months ended September 30, 2014 and 2013, respectively. Amortization expense of capitalized internal-use software totaled $0.9 million and $0.6 million for the three months ended September 30, 2014 and 2013, respectively, and $2.6 million and $1.6 million for the nine months ended September 30, 2014 and 2013, respectively. The net carrying value of capitalized internal-use software at September 30, 2014 and December 31, 2013 was $12.3 million and $6.8 million, respectively, including $5.1 million and $0.3 million in construction in progress, respectively.

Note 5. Goodwill and Purchased Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended September 30, 2014 are as follows (in thousands):

Balance as of December 31, 2013	$	—
Goodwill acquired		9,373
Goodwill adjustments		216
Balance as of September 30, 2014	$	9,589

Purchased intangible assets subject to amortization as of September 30, 2014 consist of the following (in thousands). No purchased intangible assets were recorded as of December 31, 2013.

	Cost		Accumulated Amortization			Net		Remaining Useful Life
								(In years)
Developed technology	$	5,200	$	(787	)	$	4,413		3.0
Customer relationships		1,300		(172	)		1,128		3.5
Trade name		60		(32	)		28		0.5
	$	6,560	$	(991	)	$	5,569

Amortization expense of purchased intangible assets for the three and nine months ended September 30, 2014 was $0.5 million and $1.0 million, respectively. No amortization expense was recorded for the three and nine months ended September 30, 2013.

Estimated future amortization expense as of September 30, 2014 is as follows (in thousands):

Remainder of 2014	$	471
2015		1,823
2016		1,810
2017		1,393
2018		72
2019 and thereafter		—
	$	5,569

Note 6. Credit Facility

We have a credit facility with Silicon Valley Bank consisting of a $20.0 million revolving line of credit and a $10.0 million equipment line of credit. As of December 31, 2013, outstanding balance under the revolving line of credit was $20.0 million. In June 2014 we repaid all outstanding principal and accrued interest under the revolving line of credit and as of September 30, 2014 there was no balance outstanding. As of September 30, 2014 and December 31, 2013, outstanding balance under the equipment line of credit was $7.7 million and $3.8 million, respectively.

Prior to our IPO, borrowings on the revolving line of credit bore interest at the Prime Rate plus 2.0% per annum. Upon the consummation of the IPO, the interest rate was reduced to the Prime Rate of 3.25% as of September 30, 2014. Borrowings on the revolving line of credit are subject to a borrowing base limit determined monthly based on our recurring revenue metrics from previous months and the ratio of certain current assets to current liabilities as of the previous month end. To the extent we borrow funds pursuant to the revolving line of credit, we are entitled to make interest-only payments until January 1, 2016, when the outstanding balance is due in full.

Borrowings on the equipment line of credit bear interest of 2.5% per annum. For each equipment advance, we were entitled to make interest-only payments until September 14, 2014, when the last draw against the equipment line of credit could be made. The outstanding balance as of September 14, 2014 is payable in 30 equal monthly installments, with the last payment due on March 14, 2017. We are also required to make a final payment fee of $0.3 million on March 14, 2017.

The credit facility is collateralized by substantially all of our assets, excluding our intellectual property. Our domestic subsidiary is a guarantor of the credit facility and we have pledged up to 65% of the equity in our international subsidiaries as collateral. The credit facility also imposes various covenants on us, including the delivery of financial and other information, the maintenance of our primary operating and securities accounts with the lender, the maintenance of minimum revenue targets and an agreed ratio of certain current assets to current liabilities, as well as limitations on dispositions, changes in business or management, certain mergers or consolidations, dividends and other corporate activities. As of September 30, 2014 and December 31, 2013, we were in compliance with all of the covenants contained in the credit facility.

Contractual future principal repayments in relation to the credit facility are as follows for the year ending December 31 (in thousands):

2014 (remaining 3 months)	$	749
2015		3,041
2016		3,118
2017		792
2018 and thereafter		—
	$	7,700

Note 7. Commitments and Contingencies

Leases

We lease office space under noncancelable operating leases with various expiration dates. Certain of the office space lease agreements contain rent holidays or rent escalation provisions. Rent holiday and rent escalation provisions are considered in determining the straight-line expense to be recorded over the lease term. The lease term begins on the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over the term of the lease. Rent expense was $1.7 million and $0.6 million for the three months ended September 30, 2014 and 2013, respectively, and $5.2 million and $1.5 million for the nine months ended September 30, 2014 and 2013, respectively. Deferred rent of $7.4 million and $1.0 million as of September 30, 2014 and December 31, 2013, respectively, is included in other liabilities.

We lease computer equipment from various parties under capital lease agreements that expire through March 2015. The total outstanding balance financed under capital leases was $0.1 million and $0.4 million as of September 30, 2014 and December 31, 2013, respectively. Accumulated depreciation on the leased assets was $0.9 million and $0.7 million as of September 30, 2014 and December 31, 2013, respectively. Depreciation of assets recorded under the capital leases is included in depreciation expense.

Litigation and Loss Contingencies

We accrue estimates for resolution of legal and other contingencies when losses are probable and estimable. From time to time, we may become a party to litigation and subject to claims incident to the ordinary course of business, including intellectual property claims, labor and employment claims, and threatened claims, breach of contract claims, tax, and other matters. We currently have no material pending litigation.

We are not currently aware of any litigation matters or loss contingencies that would be expected to have a material adverse effect on our business, consolidated financial position, results of operations, comprehensive loss, or cash flows.

Note 8. Common Stock and Stockholders’ Equity (Deficit)

Convertible Preferred Stock

Upon the completion of the IPO, all outstanding convertible preferred stock was converted into 34.3 million shares of common stock.

Reverse Stock Split

In April 2014, our board of directors and stockholders approved an amendment of our sixth amended and restated certificate of incorporation, as amended to effect a one-for-two reverse stock split of our common stock and a corresponding adjustment to the conversion prices of our redeemable convertible preferred stock. All share and per share information and the conversion prices of each outstanding series of our redeemable convertible preferred stock referenced throughout the condensed consolidated financial statements and notes to the condensed consolidated financial statements have been retroactively adjusted to reflect this stock split.

Common Stock Authorized

Upon the completion of the IPO, we increased the amount of common stock authorized for issuance from 125 million to 400 million common shares with a par value of $0.01 per share.

Employee Equity Plans

Employee Stock Purchase Plan

Our board of directors adopted the Employee Stock Purchase Plan, or ESPP, in February 2014, which became effective in May 2014 upon the effectiveness of the registration statement related to our IPO. The ESPP initially reserved and authorized the issuance of up to 3.6 million shares of common stock. The ESPP provides that the number of shares reserved and available for issuance under the plan will automatically increase each January, beginning on January 1, 2015, by the lesser of 1.5 million shares, 1% of the number of shares issued and outstanding on the immediately preceding December 31, or such lesser number of shares as determined by our compensation committee.

2009 Stock Option and Grant Plan

Our board of directors adopted the 2009 Stock Option and Grant Plan, or the 2009 Plan, in July 2009. The 2009 Plan was terminated in connection with our IPO, and accordingly, no shares are available for issuance under this plan. The 2009 Plan continues to govern outstanding awards granted thereunder.

2014 Stock Option and Grant Plan

Our board of directors adopted the 2014 Stock Option and Incentive Plan, or the 2014 Plan, in February 2014, which became effective in May 2014 upon the effectiveness of the registration statement related to our IPO. The 2014 Plan serves as the successor to our 2009 Plan. The 2014 Plan initially reserved and authorized the issuance of 7.5 million shares of our common stock. Additionally, shares not issued or subject to outstanding grants under the 2009 Plan rolled into the 2014 Plan, resulting in a total of 8.3 million available shares under the 2014 Plan as of the effective date. The 2014 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1, beginning on January 1, 2015, by 5% of the outstanding number of shares of our common stock on the immediately preceding December 31, or such lesser number of shares as determined by our compensation committee.

The following table summarizes our stock option and RSU award activities for the nine months ended September 30, 2014 (in thousands, except per share information):

				Options Outstanding									RSUs Outstanding
									Weighted
									Average							Weighted
	Shares						Weighted		Remaining		Aggregate					Average
	Available			Number of			Average		Contractual		Intrinsic		Outstanding			Grant Date
	for Grant			Shares			Exercise Price		Term		Value		RSUs			Fair Value
									(In years)
Outstanding — January 1, 2014		1,854			10,134		$	2.82						811		$	6.76
Increase in authorized shares		13,750
Stock options granted		(6,008	)		6,008			10.85
RSUs granted		(2,643	)											2,643			13.24
Stock options exercised		—			(1,264	)		2.17
RSUs vested		—												(234	)		8.64
Stock options forfeited or canceled		664			(664	)		3.60
RSUs forfeited or cancelled		276												(276	)		8.37
Outstanding —September 30, 2014		7,893			14,214		$	6.24		8.30	$	218,185		2,944		$	12.29

Aggregate intrinsic value represents the difference between the Company's closing stock price of its common stock and the exercise price of outstanding, in-the-money options. The Company’s closing stock price as reported on the New York Stock Exchange as of September 30, 2014 was $21.59.

During the three and nine months ended September 30, 2014 we recorded $2.8 million and $4.3 million share-based compensation expense, respectively, related to the accelerated vesting of certain stock options and RSUs.

Early Exercise of Stock Options and Purchase of Unvested Stock Awards

Certain of our stock options permit early exercise. Common stock purchased pursuant to an early exercise of stock options or unvested stock awards is not deemed to be outstanding for financial reporting purposes until those shares vest. Therefore, cash received in exchange for unvested shares is recorded as a liability and is transferred into common stock and additional paid-in capital as the shares vest. Upon termination of service, we may, at our discretion, repurchase unvested shares acquired through early exercise of stock options or purchase of unvested stock awards at a price equal to the price per share paid upon the exercise of such options or the purchase of such unvested stock awards. As of September 30, 2014 and December 31, 2013, there were 0.7 million and 0.8 million shares, respectively, outstanding as a result of the early exercise of stock options and purchase of unvested stock awards that were classified as accrued liabilities for an aggregated amount of $2.4 million and $1.4 million, respectively. There were no repurchases during the three and nine months ended September 30, 2014.

Note 9. Net Loss Per Share

We compute net loss per share of common stock in conformity with the two-class method required for participating securities. We considered all series of the redeemable convertible preferred stock to be participating securities as the holders of the preferred stock were entitled to receive a non-cumulative dividend on a pari passu basis in the event that a dividend is paid on common stock. We also consider shares of common stock issued upon the early exercise of stock options subject to repurchase to be participating securities, because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of all series of the redeemable convertible preferred stock and the holders of shares of common stock acquired upon early exercise of stock options do not have a contractual obligation to share in our losses. As such, our net losses for the three and nine months ended September 30, 2014 and 2013 were not allocated to these participating securities. Upon the closing of the IPO in May 2014, all shares of our then-outstanding redeemable convertible preferred stock automatically converted into our common stock.

Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, less the weighted-average unvested common stock subject to repurchase. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including common stock issuable upon conversion of the redeemable convertible preferred stock, outstanding share-based awards, and outstanding warrants, to the extent dilutive. Basic and diluted net loss per share was the same for each period presented as the inclusion of all potential common stock outstanding would have been anti-dilutive.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Net loss	$	(17,919	)	$	(4,755	)	$	(49,922	)	$	(16,465	)
Less: Accretion of redeemable convertible preferred stock		—			(12	)		(18	)		(36	)
Net loss attributable to common stockholders	$	(17,919	)	$	(4,767	)	$	(49,940	)	$	(16,501	)
Basic shares:
Weighted-average shares used to compute basic net loss per share		71,732			22,024			46,110			21,486
Diluted shares:
Weighted-average shares used to compute diluted net loss per share		71,732			22,024			46,110			21,486
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.25	)	$	(0.22	)	$	(1.08	)	$	(0.77	)

The anti-dilutive securities excluded from the shares used to calculate the diluted net loss per share are as follows (in thousands):

	As of September 30,
	2014		2013
Redeemable convertible preferred stock		—		34,323
Shares subject to outstanding common stock options		14,214		10,351
Shares subject to common stock warrants		—		125
Restricted stock units		2,944		554
		17,158		45,353

Note 10. Income Taxes

The effective tax rates for the three and nine months ended September 30, 2014 and 2013 were one percent. The effective tax rate differs from the statutory rate primarily as a result of not recognizing a deferred tax asset for U.S. losses due to having a full valuation allowance against U.S. deferred tax assets. The tax benefit recorded for the three and nine months ended September 30, 2014 is primarily due to recognizing deferred tax assets in foreign jurisdictions for losses and research credits. There were no material changes to the unrecognized tax benefits in the three and nine months ended September 30, 2014 and 2013.

Note 11. Geographic Information

Our chief operating decision maker reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating our financial performance. Accordingly, we have determined that we operate in a single reporting segment.

Revenue

The following table presents our revenue by geographic areas, as determined based on the billing address of our customers (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
United States	$	19,031	$	11,432	$	50,774	$	29,000
EMEA		9,704		4,993		24,565		13,236
Other		5,175		2,812		13,169		7,308
Total	$	33,910	$	19,237	$	88,508	$	49,544

Long-Lived Assets

The following table presents our long-lived assets by geographic areas (in thousands):

	As of		As of
	September 30, 2014		December 31, 2013
United States	$	23,396	$	6,466
EMEA		4,683		2,054
Other		532		135
Total	$	28,611	$	8,655

The carrying value of capitalized internal-use software and intangible assets is excluded from the balance of long-lived assets presented in the table above.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our final prospectus filed with the SEC on May 16, 2014 pursuant to Rule 424(b) of the Securities Act of 1933, as amended, or the Securities Act. As discussed in the section titled “Special Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included under Part II, Item 1A below.

Overview

Zendesk’s mission is to help organizations build successful long-term relationships with their customers. We are a software development company that provides a SaaS customer service platform that enables our customers to provide tailored support through multiple channels, establish effective self-service support resources, proactively serve customers through customer engagement capabilities, integrate with other applications, and consolidate and analyze data from customer interactions. We also provide SaaS live chat software that can be utilized independently to facilitate proactive communications between organizations and their customers or integrated seamlessly into our platform.

Our business model is designed to drive organic growth, leverage positive word-of-mouth, and remove friction from the evaluation and purchasing process. We offer a range of subscription account plans for our customer service platform and live chat software that vary in pricing per agent based on functionality and the type and amount of product support we offer. The majority of our customers find us online and subscribe to our customer service platform and live chat software directly from our websites. During the three months ended September 30, 2014, 69% of our qualified sales leads generated online and 65% of the total qualified sales leads for our customer service platform came from organic search, customer referrals, and other unpaid sources. Our largest source of qualified sales leads is free trials of our customer service platform commenced by prospects. For larger organizations, our sales team focuses on a land and expand strategy, which leverages this grassroots adoption and seeks to expand our footprint within organizations. More recently we have begun to develop a field sales team primarily responsible for lead discovery, qualification, and account management for larger organizations. Many of our existing customers to date have been small to medium sized organizations that make purchasing decisions with limited interaction with our sales or other personnel; as we continue to focus on and become more dependent on sales to larger organizations, we expect our sales cycles to lengthen and become less predictable.

For the three months ended September 30, 2014 and 2013, our revenue was $33.9 million and $19.2 million, respectively, representing a 77% growth rate. For the nine months ended September 30, 2014 and 2013, our revenue was $88.5 million and $49.5 million, respectively, representing a 79% growth rate. For the three months ended September 30, 2014 and 2013, we derived $14.9 million, or 44%, and $7.8 million, or 41%, respectively, of our revenue from customers located outside of the United States. For the nine months ended September 30, 2014 and 2013, we derived $37.7 million, or 43%, and $20.5 million, or 41%, respectively, of our revenue from customers located outside of the United States. We expect that the rate of growth in our revenue will decline as our business scales, even if our revenue continues to grow in absolute terms. For the three months ended September 30, 2014 and 2013, we generated net losses of $17.9 million and $4.8 million, respectively. For the nine months ended September 30, 2014 and 2013, we generated net losses of $49.9 million and $16.5 million, respectively. We intend to invest aggressively to drive continued growth and market leadership.

The growth of our business and our future success depends on many factors, including our ability to continue to innovate, maintain our leadership in the small and medium-sized business, or SMB, market, expand our enterprise customer base, and increase our global customer footprint. While these areas represent significant opportunities for us, we also face significant risks and challenges that we must successfully address in order to sustain the growth of our business and improve our operating results. We anticipate that we will expand our operations and headcount in the near term. The expected addition of new personnel and the investments that we anticipate will be necessary to manage our anticipated growth, including investments in leasehold improvements and related fixed assets, will make it more difficult for us to achieve profitability. Many of these investments will occur in advance of experiencing any direct benefit and will make it difficult to determine if we are allocating our resources efficiently.

We have focused on rapidly growing our business and plan to continue to invest for long-term growth. We expect to continue to make significant upfront investments in our self-managed colocation data center infrastructure and additional personnel to support our growth. The amount and timing of these upfront infrastructure investments will vary based on our estimates of projected growth and the scale of such deployments. We also expect to continue to make significant investments in our customer support organization including expanding our product support and professional services teams. Over time, we anticipate that we will gain economies of scale by utilizing added capacity within our self-managed colocation data centers and reducing the need for direct incremental personnel costs resulting from growth in our number of customers. As a result, we expect our gross margin to improve in the future, although our gross margin may fluctuate from period to period as our revenue fluctuates and as a result of the timing and amount of investments to expand our product support team, investments in additional personnel, equipment, and facilities to support our platform architecture, increased share-based compensation expenses, as well as the amortization of costs associated with capitalized internal-use software and acquired intangible assets.

We expect our operating expenses to continue to increase in absolute dollars in future periods. We have invested, and expect to continue to invest, in our software development efforts to introduce new products and broaden our customer service platform’s functionality. We plan to continue to expand our sales and marketing organizations, particularly in connection with our efforts to expand our enterprise customer base. We also expect to incur additional general and administrative costs in order to support the growth of our business and meet increased compliance requirements associated with our transition to, and operation as, a public company.

Key Business Metrics

We review a number of operating metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. We do not currently incorporate operating metrics associated with the Zopim live chat software into our measurement of customer accounts or dollar-based net expansion rate.

Number of Customer Accounts. We believe that our ability to increase our number of accounts on our customer service platform is an indicator of our market penetration, the growth of our business, and our potential future business opportunities. We define the number of customer accounts at the end of any particular period as the number of accounts on our customer service platform, exclusive of free trials or other free services, at the end of the period as identified by a unique account identifier. Use of our customer service platform by new customers requires activation of a customer account on our platform. Existing customers may also expand their utilization of our customer service platform by adding new customer accounts and a single consolidated organization or customer may have multiple customer accounts to service separate subsidiaries, divisions, or work processes. Each of these is treated as a separate customer account. An increase in the number of customer accounts generally correlates to an increase in the number of authorized agents licensed to use our platform, which directly affects our revenue and results of operations. We view this metric as a measure of our success in converting new sales opportunities. We had 48,763 customer accounts as of September 30, 2014. As the total number of customer accounts increases, we expect the rate of growth in the number of customer accounts to decline.

Dollar-Based Net Expansion Rate. Our ability to generate revenue is dependent upon our ability to maintain our relationships with our customers and to increase their utilization of our customer service platform. We believe we can achieve this by focusing on delivering value and functionality that retains our existing customers, expands the number of authorized agents associated with an existing customer account, and results in upgrades to higher-priced subscription plans. Maintaining customer relationships allows us to sustain and increase revenue to the extent customers maintain or increase the number of authorized agents licensed to use our customer service platform. We assess our performance in this area by measuring our dollar-based net expansion rate. Our dollar-based net expansion rate provides a measurement of our ability to increase revenue across our existing customer base through expansion of authorized agents associated with a customer account, and upgrades in subscription plan, as offset by churn, contraction in authorized agents associated with a customer account, and downgrades in subscription plans.

Our dollar-based net expansion rate is based upon our monthly recurring revenue for a set of customer accounts. Monthly recurring revenue for a customer account is a legal and contractual determination made by assessing the contractual terms of each customer account, as of the date of determination, as to the revenue we expect to generate in the next monthly period for that customer account, assuming no changes to the subscription and without taking into account any one-time discounts, if any, that may be applicable to such subscription. Monthly recurring revenue is not determined by reference to historical revenue, deferred revenue or any other United States generally accepted accounting principles, or GAAP, financial measure over any period. It is forward-looking and contractually derived as of the date of determination.

We calculate our dollar-based net expansion rate by dividing our retained revenue net of contraction and churn by our base revenue. We define our base revenue as the aggregate monthly recurring revenue of our customer base as of the date one year prior to the date of calculation. We define our retained revenue net of contraction and churn as the aggregate monthly recurring revenue of the same customer base included in our measure of base revenue at the end of the annual period being measured. Our dollar-based net expansion rate is also adjusted to eliminate the effect of certain activities that we identify involving the transfer of agents between customer accounts, consolidation of customer accounts, or the split of a single customer account into multiple customer accounts. While not material, we believe the failure to account for these activities would otherwise skew our dollar-based net expansion metrics associated with customers that maintain multiple customer accounts. Our dollar-based net expansion rate was 123% as of September 30, 2014. We expect our dollar-based net expansion rate to decline over time as our aggregate monthly recurring revenue grows.

Components of Results of Operations

Revenue

We derive substantially all of our revenue from subscription services, which are comprised of subscription fees from customer accounts on our customer service platform and, to a lesser extent, live chat software. Each subscription may have multiple authorized users, and we refer to each such user as an “agent.” The number of agents ranges from one to thousands for various customer accounts. While alternative terms may be negotiated in certain circumstances, our pricing is generally established on a per agent basis. We offer a range of subscription account plans that vary in pricing based on functionality and the type and, for our customer service platform, amount of product support we offer. We sell subscription services under contractual agreements that vary in length, ranging between one month and multiple years, with the majority of subscriptions having a term of either one month or one year.

Subscription fees are generally non-refundable regardless of the actual use of the service. Subscription revenue is typically affected by the number of customer accounts, number of agents, and the type of plan purchased by our customers, and is recognized ratably over the contractual term of the arrangement beginning on the date that our services are made available to our customers. Subscription services purchased online are typically paid for via a credit card on the date of purchase while subscription services purchased through our internal sales organization are generally billed with monthly, quarterly, or annual payment frequency. Due to our mixed contract lengths and billing frequencies, the annualized value of the arrangements we enter into with our customers may not be fully reflected in deferred revenue at any single point in time. Accordingly, we do not believe that the change in deferred revenue for any period is an accurate indicator of future revenue for a given period of time.

We derive an immaterial amount of revenue from implementation, voice, and training services, for which we recognize revenue upon completion.

Cost of Revenue, Gross Margin, and Operating Expenses

Cost of Revenue . Cost of revenue consists primarily of personnel costs (including salaries, benefits, and share-based compensation) for employees associated with our platform infrastructure and our product support organizations, depreciation and other expenses associated with our self-managed colocation data centers, data center costs related to hosting our platform, amortization expense associated with capitalized internal-use software, amortization expense associated with acquired intangible assets, payment processing fees, and allocated shared costs. We allocate shared costs such as rent, shared information technology costs, and employee benefit costs to all departments based on headcount. As such, allocated shared costs are reflected in cost of revenue and each operating expense category.

We currently utilize third-party managed hosting facilities located in North America, Europe, and Asia and self-managed colocation data centers in which we manage our own network equipment and systems. We currently operate out of two such self-managed colocation data centers located in California and Ireland. In order to improve our long-term cost efficiency, we intend to expand our operations in these and establish other self-managed colocation data centers over time. We also intend to consolidate hosting of our live chat software into our self-managed colocation data centers and conform the live chat software to the technical and other operational and security measures applicable to our customer service platform. In certain markets and for certain products, we may elect not to pursue our self-managed colocation strategy, depending on individual market dynamics.

We intend to continue to invest additional resources in our platform infrastructure and our product support organizations. As we continue to invest in technology innovation, we expect to have increased capitalized internal-use software costs and related amortization. We expect our investment in technology to not only expand the capability of our customer service platform and live chat software but also increase the efficiency of how we deliver our customer service platform and live chat software, enabling us to improve our gross margin over time. The level and timing of investment in these areas could affect our cost of revenue in the future.

Gross Margin. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin may fluctuate from period to period as our revenue fluctuates and as a result of the timing and amount of investments to expand our product support team, investments in additional personnel, equipment, and facilities to support our platform architecture, increased share-based compensation expenses, as well as the amortization of costs associated with capitalized internal-use software and acquired intangible assets.

Research and Development. Research and development expenses consist primarily of personnel costs (including salaries, benefits, and share-based compensation) for employees associated with our research and development organization, professional fees paid to third-party development resources, and allocated shared costs.

We focus our research and development efforts on the continued development of our customer service platform and live chat software, including the development and deployment of new features and functionality and enhancements to our software architecture. We expect that, in the future, research and development expenses will increase in absolute dollars. However, we expect our research and development expenses to decrease modestly as a percentage of our revenue over time, although this may fluctuate from period to period depending on fluctuations in revenue and the timing and extent of our research and development expenses.

Sales and Marketing. Sales and marketing expenses consist of personnel costs (including salaries, commissions, benefits, share-based compensation, and travel-related expenses) for employees associated with our sales and marketing organizations, costs of marketing activities, and allocated shared costs. Marketing activities include online lead generation, advertising, promotional events, and public and community relations, as well as product design activities designed to improve the adoption of our customer service platform and live chat software. Sales commissions and other incremental costs to acquire contracts are expensed as incurred.

We focus our sales and marketing efforts on generating awareness of our company, creating sales leads, establishing and promoting our brand, and cultivating a community of successful and vocal customers. We plan to continue investing in sales and marketing by increasing the number of direct sales employees, developing our field sales team, expanding our indirect sales channels, building brand awareness, and sponsoring additional marketing events, which we believe will enable us to add new customers and increase penetration within our existing customer base. Because we do not have a long history of expanding our sales force, we cannot predict whether, or to what extent, our revenue will increase as we expand our sales force or how long it will take for new sales personnel to become productive. We expect our sales and marketing expenses to continue to increase in absolute dollars and continue to be our largest operating expense category for the foreseeable future. We expect our sales and marketing expenses to increase modestly as a percentage of our revenue over time, although this may fluctuate from period to period depending on fluctuations in revenue and the timing and extent of our sales and marketing expenses.

General and Administrative . General and administrative expenses consist primarily of personnel costs (including salaries, benefits, and share-based compensation) for our executive, finance, legal, human resources, and other administrative employees. In addition, general and administrative expenses include fees for third-party professional services, including consulting, legal, and accounting services, and other corporate expenses and allocated shared costs.

We expect to incur incremental costs associated with supporting the growth of our business, both in terms of size and geographic expansion, and to meet the increased compliance requirements associated with our transition to, and operation as, a public company. Such costs include increases in our accounting, legal, and human resources personnel, additional consulting, legal, and audit fees, insurance costs, board of directors’ compensation and the costs of achieving and maintaining compliance with Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and other costs associated with being a public company. As a result, we expect our general and administrative expenses to continue to increase in absolute dollars for the foreseeable future. However, we expect our general and administrative expenses to decrease modestly as a percentage of our revenue over time, although this may fluctuate from period to period depending on fluctuations in revenue and the timing and extent of our general and administrative expenses.

Other Expense, Net

Other expense, net consists primarily of interest expense associated with our credit facility and transaction gains or losses on foreign currency, offset by interest income from marketable securities.

Results of Operations

The following tables set forth our results of operations for the periods presented in dollars and as a percentage of our revenue:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013

Revenue	$	33,910		$	19,237		$	88,508		$	49,544
Cost of revenue ⁽¹⁾		11,684			6,327			32,410			16,878
Gross profit		22,226			12,910			56,098			32,666
Operating expenses ⁽¹⁾ :
Research and development		9,550			3,860			25,227			10,737
Sales and marketing		21,548			10,015			56,174			26,218
General and administrative		8,940			3,646			23,639			11,744
Total operating expenses		40,038			17,521			105,040			48,699
Operating loss		(17,812	)		(4,611	)		(48,942	)		(16,033	)
Other expense, net		(343	)		(102	)		(1,252	)		(312	)
Loss before provision for income taxes		(18,155	)		(4,713	)		(50,194	)		(16,345	)
Provision for (benefit from) income taxes		(236	)		42			(272	)		120
Net loss	$	(17,919	)	$	(4,755	)	$	(49,922	)	$	(16,465	)

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Cost of revenue	$	591	$	77	$	1,691	$	177
Research and development		3,052		196		7,530		422
Sales and marketing		4,877		338		8,635		726
General and administrative		2,298		264		5,769		2,419

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013

Revenue		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenue ⁽²⁾		34.5			32.9			36.6			34.1
Gross profit		65.5			67.1			63.4			65.9
Operating expenses ⁽²⁾ :
Research and development		28.2			20.1			28.5			21.7
Sales and marketing		63.5			52.1			63.5			52.9
General and administrative		26.4			19.0			26.7			23.7
Total operating expenses		118.1			91.1			118.7			98.3
Operating loss		(52.5	)		(24.0	)		(55.3	)		(32.4	)
Other expense, net		(1.0	)		(0.5	)		(1.4	)		(0.6	)
Loss before provision for income taxes		(53.5	)		(24.5	)		(56.7	)		(33.0	)
Provision for (benefit from) income taxes		(0.7	)		0.2			(0.3	)		0.2
Net loss		(52.8	%)		(24.7	%)		(56.4	%)		(33.2	%)

(2) Includes share-based compensation expense as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Cost of revenue		1.7	%		0.4	%		1.9	%		0.4	%
Research and development		9.0			1.0			8.5			0.9
Sales and marketing		14.4			1.8			9.8			1.5
General and administrative		6.8			1.4			6.5			4.9

Revenue

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014		2013		% Change		2014		2013		% Change
	(In thousands, except percentages)
Revenue	$	33,910	$	19,237		76%	$	88,508	$	49,544		79%

Revenue increased $14.7 million, or 76%, in the three months ended September 30, 2014 compared to the same period in 2013. Of the total increase in revenue, $9.5 million, or 65%, was attributable to revenue from new customer accounts acquired from October 1, 2013 through September 30, 2014, net of churn and contraction, and $5.1 million, or 35%, was attributable to revenue from accounts existing on or before September 30, 2013, net of churn and contraction. Revenue from customer accounts that are invoiced in aggregate is treated as being generated from a single customer account. The acquisition date of customer accounts that are invoiced in aggregate is determined using the establishment date of the earliest customer account.

Revenue increased $39.0 million, or 79%, in the nine months ended September 30, 2014 compared to the same period in 2013 due to the addition of new customer accounts and the continued expansion of existing customer accounts.

Cost of Revenue and Gross Margin

Prior to the IPO, we granted RSUs and certain stock options with both a service condition and a performance condition, or Performance Awards. The service condition for substantially all of the Performance Awards is satisfied over three or four years. The performance condition was satisfied upon the effectiveness of the registration statement related to our IPO. No share-based compensation expense had been recognized for the Performance Awards prior to the IPO. Upon the satisfaction of the performance condition during the three months ended June 30, 2014, we recognized a cumulative share-based compensation expense of $6.1 million for the portion of the Performance Awards that had met the service condition. In the three and nine months ended September 30, 2014, share-based compensation expense related to the Performance Awards was $2.9 million and $9.0 million, respectively, including $0.2 million and $0.8 million in cost of revenue, $1.8 million and $4.9 million in research and development, $0.6 million and $1.9 million in sales and marketing, and $0.3 million and $1.3 million in general and administrative expenses, respectively.

	Three Months Ended September 30,								Nine Months Ended September 30,
	2014			2013			% Change		2014			2013			% Change
	(In thousands, except percentages)
Cost or Revenue	$	11,684		$	6,327			85%	$	32,410		$	16,878			92%
Gross Margin		65.5	%		67.1	%		—		63.4	%		65.9	%		—

Cost of revenue increased $5.4 million, or 85%, and $15.5 million, or 92%, in the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013. The overall increases were primarily due to increased employee compensation-related costs of $2.2 million and $6.9 million, increased depreciation expense and other costs associated with our self-managed colocation data centers of $0.6 million and $2.1 million, and increased hosting fees of $0.3 million and $1.0 million for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013. The increases in employee compensation-related costs were due to our substantial increase in headcount year over year and the share-based compensation expense related to the Performance Awards described above. The increases in depreciation expense and other costs associated with our self-managed colocation data centers were driven by our investments in building out and increasing capacity within our self-managed colocation data centers. Hosting fees for our platform infrastructure also increased as we increased capacity in third-party managed data centers to support our growth. Further contributing to the increase were increases in amortization expense associated with acquired intangibles of $0.4 million and $0.8 million, amortization expense associated with capitalized internal-use software of $0.3 million and $1.0 million, and allocated shared costs of $0.8 million and $2.5 million for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013.

Our gross margin decreased 1.6% and 2.5% for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013. The decreases in gross margin were primarily due to a 1.7% and 3.0% increase in employee-related compensation expense as a percentage of revenue for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013. The increases in employee-related compensation expense were driven by our investment in growing our customer support organization to support the growth of our customer base and the share-based compensation expense related to the Performance Awards described above.

Operating Expenses

Research and Development Expenses

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014		2013		% Change		2014		2013		% Change
	(In thousands, except percentages)
Research and Development	$	9,550	$	3,860		147%	$	25,227	$	10,737		135%

Research and development expenses increased $5.7 million, or 147%, and $14.5 million, or 135% in the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013. The increases were primarily due to increased employee compensation-related costs of $4.7 million and $11.6 million for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013, driven by a substantial increase in our headcount year over year and the share-based compensation expense related to the Performance Awards described above. Other expenses, including allocated shared costs, travel expenses and consulting fees, increased $1.0 million and $2.9 million for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013.

Sales and Marketing Expenses

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014		2013		% Change		2014		2013		% Change
	(In thousands, except percentages)
Sales and Marketing	$	21,548	$	10,015		115%	$	56,174	$	26,218		114%

Sales and marketing expenses increased $11.5 million, or 115%, and $30.0 million, or 114%, in the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013. The overall increases were primarily due to increased employee compensation-related costs of $8.1 million and $18.7 million, and increased marketing program costs of $1.2 million and $4.2 million for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013. The increases in employee compensation-related costs were driven by a substantial increase in our sales force year over year and the share-based compensation expense related to the Performance Awards described above. Also contributing to the increases in employee compensation-related costs were $2.7 million and $3.9 million of share-based compensation expense related to the accelerated vesting of certain stock options during the three and nine months ended September 30, 2014, respectively. The increases in marketing program costs in the three and nine months ended September 30, 2014 were primarily driven by increases in online lead generation marketing programs to drive the adoption of our customer service platform. Additionally, other expenses, including allocated shared costs, travel expenses, and consulting fees, increased $2.3 million and $7.0 million for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013.

General and Administrative Expenses

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014		2013		% Change		2014		2013		% Change
	(In thousands, except percentages)
General and Administrative	$	8,940	$	3,646		145%	$	23,639	$	11,744		101%

General and administrative expenses increased $5.3 million, or 145%, and $11.9 million, or 101%, in the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013. The overall increases were primarily due to increased employee compensation-related costs of $3.7 million and $7.4 million, and increased professional and outside services costs of $0.8 million and $2.0 million for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013. The increases in employee compensation-related costs were due to a substantial increase in headcount year over year and the share-based compensation expense related to the Performance Awards described above. The increase in share-based compensation expense for the nine months ended September 30, 2014 was partially offset by $1.7 million of share-based compensation expense recorded in the three months ended June 30, 2013 related to the accelerated vesting of certain stock options. The increases in professional and outside services costs, comprised primarily of fees related to legal and accounting services, were driven by increased level of business activities and increased compliance costs as a public company. Also contributing to the increased professional and outside services costs for the nine months ended September 30, 2014 was $0.6 million of professional services fees incurred during the three months ended March 31, 2014 in connection with the acquisition of Zopim. Additionally, other expenses, including allocated shared costs, increased $0.8 million and $2.5 million for the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013.

Other Expense, Net

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014		2013		% Change		2014		2013		% Change
	(In thousands, except percentages)
Other Expense, Net	$	343	$	102		236%	$	1,252	$	312		301%

Other expense, net increased $0.2 million, or 236%, and $0.9 million, or 301%, in the three and nine months ended September 30, 2014, respectively, compared to the same periods in 2013 primarily due to increased interest expense in connection with borrowings under our credit facility and foreign currency transaction losses.

Credit Facility

We have a credit facility with Silicon Valley Bank consisting of a $20.0 million revolving line of credit and a $10.0 million equipment line of credit. As of December 31, 2013, the outstanding balance under the revolving line of credit was $20.0 million. On June 9, 2014, we repaid all outstanding principal and accrued interest under the revolving line of credit and as of September 30, 2014 there was no outstanding balance. As of September 30, 2014 and December 31, 2013, the outstanding balance under the equipment line of credit was $7.7 million and $3.8 million, respectively.

Prior to our IPO, borrowings on the revolving line of credit bore interest at the prime rate plus 2.0%. Upon the consummation of the IPO, the interest rate was reduced to the prime rate. Borrowings on the revolving line of credit are subject to a borrowing base limit determined monthly based on our recurring revenue metrics from previous months and the ratio of certain current assets to current liabilities as of the previous month end. To the extent we borrow funds pursuant to the revolving line of credit, we are entitled to make interest-only payments until January 1, 2016, when the outstanding balance is due in full.

The credit facility is collateralized by substantially all of our assets, excluding our intellectual property. Our domestic subsidiary is a guarantor of the credit facility and we have pledged up to 65% of the equity in our international subsidiaries as collateral. The credit facility also imposes various covenants on us, including the delivery of financial and other information, the maintenance of our primary operating and securities accounts with the lender, the maintenance of minimum revenue targets and an agreed upon ratio of certain current assets to current liabilities, as well as limitations on dispositions, changes in business or management, certain mergers or consolidations, dividends and other corporate activities. As of September 30, 2014 and December 31, 2013, we were in compliance with all of the covenants contained in the credit facility.

Liquidity and Capital Resources

As of September 30, 2014, our principal sources of liquidity were cash, cash equivalents and marketable securities totaling $128.3 million, which were held for working capital purposes, as well as the available balance of our credit facility. Our cash, cash equivalents, and marketable securities are comprised primarily of corporate securities, money market funds, U.S. treasury securities, asset-backed securities, U.S. agency obligations, and commercial paper.

The following table summarizes our cash flows for the periods indicated (in thousands):

	Nine Months Ended September 30,
	2014			2013
Cash provided by (used in) operating activities	$	(18	)	$	923
Cash used in investing activities		(63,341	)		(21,615	)
Cash provided by financing activities		90,120			1,377

To date, we have financed our operations primarily through sales of equity securities. From our inception through September 30, 2014, we have received cash proceeds of $174.4 million from the sale of equity securities, net of issuance costs paid. We have also financed our operations through customer payments for subscription to our platform and borrowings under our credit facility. We believe that our existing cash, cash equivalents, and marketable securities balance together with cash generated from operations and the available balance of our credit facility will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months.

Our future capital requirements will depend on many factors including growth in our customer accounts and continued customer expansion, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, ongoing investments in our platform infrastructure, and the introduction of new and enhanced products, features and functionality. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies and intellectual property rights. We may be required to seek additional equity or debt financing in order to meet these future capital requirements. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital when desired, our business, results of operations and financial condition would be adversely affected.

In March 2014, we completed the acquisition of Zopim. The purchase price of approximately $15.8 million ($4.9 million of cash and $10.9 million of our common stock) includes $1.1 million of cash and $2.4 million of common stock consideration held back between 12 and 18 months as partial security for standard indemnification obligations and which is payable in the future under terms specified in the stock purchase agreement. In connection with the acquisition of Zopim, we established a retention plan pursuant to which we will pay up to $13.9 million in cash and equity consideration over two and three years, respectively, to Zopim employees in connection with their continued employment.

We can elect net share settlement of RSUs by withholding shares and remitting income tax on behalf of the applicable employees. During the nine months ended September 30, 2014, cash used for tax payments related to net share settlement of RSUs was $1.8 million. Beginning in the three months ending December 31, 2014, we intend to fund withholding taxes due on substantially all employee equity awards by requiring employees to sell shares of our common stock to cover taxes upon vesting of such awards (sell-to-cover), rather than our current approach of net share settlement. We expect the sell-to-cover approach to reduce our cash outflows.

Operating Activities

Our largest source of operating cash inflows is cash collections from our customers for subscription services. Our primary uses of cash from operating activities are for employee-related expenditures, hosting fees, and leased facilities.

Net cash used in operating activities in the nine months ended September 30, 2014 was $18,000, reflecting our net loss of $49.9 million, adjusted by non-cash charges including share-based compensation expense of $23.6 million, depreciation and amortization of $7.7 million, and changes in our working capital. The changes in our working capital were primarily attributable to an increase in deferred revenue of $17.3 million due to the growth in sales of our subscription services, an increase in accrued compensation liabilities of $5.2 million due to the increase in headcount and timing of the last payroll before period end, an increase of $1.5 million in accounts payable and accrued liabilities due to timing of payments and a higher level of expenses consistent with the overall growth of our business, and an increase of $1.3 million in other assets and liabilities due to deferred tax liabilities recorded in connection with the acquisition of Zopim. These sources of cash flow were partially offset by an increase in accounts receivable of $5.1 million due to timing of customer billing and the growth in sales, and an increase in prepaid expenses and other current assets of $2.0 million primarily due to increases in prepaid subscriptions for software used in our operations and prepaid insurance premiums.

Net cash provided by operating activities in the nine months ended September 30, 2013 was $0.9 million, reflecting our net loss of $16.5 million, adjusted by non-cash charges including share-based compensation expense of $3.7 million, depreciation and amortization of $3.6 million, and changes in our working capital. The changes in our working capital were primarily attributable to an increase in deferred revenue of $10.5 million due to the growth in sales of our subscription services, an increase in accounts payable and accrued liabilities of $1.9 million due to timing of payments and a higher level of expenses consistent with the overall growth of our business, and an increase in accrued compensation liabilities of $1.8 million due to the increase in headcount and timing of the last payroll before period end. These sources of cash flow were partially offset by an increase in accounts receivable of $3.1 million due to timing of customer billings and the growth in sales, and an increase in prepaid expenses and other current assets of $1.5 million primarily due to increases in prepaid subscriptions for software used in our operations.

Investing Activities

Net cash used in investing activities in the nine months ended September 30, 2014 of $63.3 million was primarily attributable to purchases of marketable securities of $43.0 million, purchases of property and equipment of $19.1 million associated with our newly leased office facilities and hosting equipment to build out our self-managed colocation data centers, capitalized software development costs of $6.3 million associated with the development of additional features and functionality of our platform, and payments of $1.9 million for the acquisition of Zopim, net of cash acquired. The use of cash in investing activities was partially offset by the maturities of marketable securities of $7.0 million.

Net cash used in investing activities in the nine months ended September 30, 2013 of $21.6 million was primarily attributable to purchases of marketable securities of $12.4 million, purchases of property and equipment of $5.7 million associated with hosting equipment to build out our self-managed colocation data centers, and capitalized software development costs of $3.6 million associated with the development of additional features and functionality of our platform.

Financing Activities

Net cash provided by financing activities in the nine months ended September 30, 2014 of $90.1 million was primarily attributable to proceeds from the IPO net of issuance costs of $103.1 million, proceeds from exercise of stock options of $5.1 million, and borrowings under our credit facility of $3.9 million, partially offset by repayment of the outstanding balance under our revolving line of credit of $20.0 million, and payments for withholding taxes related to the net share settlement of our equity awards of $1.8 million.

Net cash provided by financing activities in the nine months ended September 30, 2013 of $1.4 million was primarily attributable to borrowings under our credit facility of $1.0 million and proceeds from exercise of stock options of $0.6 million.

Critical Accounting Polices and Estimates

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

There have been no significant changes in our critical accounting policies and estimates during the nine months ended September 30, 2014 as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our final prospectus filed with the SEC in May 2014 pursuant to Rule 424(b) of the Securities Act.

Recently Issued and Adopted Accounting Pronouncements

On May 28, 2014, the Financial Accounting Statements Board, or FASB, issued ASU 2014-09 regarding ASC Topic 606 “ Revenue from Contracts with Customers .” This ASU provides principles for recognizing revenue for the transfer of promised goods or services to customers with the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU will be effective for our fiscal year beginning January 1, 2017. Early adoption is not permitted. We are currently evaluating the accounting, transition, and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.

Contractual Obligations and Other Commitments

Except as set forth in Note 7, there were no material changes in our commitments under contractual obligations, as disclosed in the Company’s audited consolidated financial statements for the year ended December 31, 2013.

Our principal commitments consist of obligations under our credit facility, capital leases for equipment and operating leases for office space, and contractual commitments for hosting and other support services.

Off-Balance Sheet Arrangements

Through September 30, 2014, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Item 3. Qualitative and Quantitative Disclosures About Market Risk

Foreign Currency Exchange Risk

We conduct transactions, particularly intercompany transactions, in foreign currencies, primarily the British Pound Sterling, Euro, Australian Dollar, Danish Krone, Singapore Dollar, Japanese Yen, Philippine peso, and Brazilian Real. Except for our Singapore subsidiary, our international subsidiaries maintain certain current asset and current liability balances that are denominated in currencies other than the functional currencies of these entities, which is the U.S. dollar. Our Singapore subsidiary’s functional currency is the Singapore Dollar. Changes in the value of foreign currencies relative to the U.S. dollar can affect our revenue and results of operations due to transactional and translational remeasurement that is reflected in our earnings. While we have primarily transacted with customers in the U.S. dollar, we have also historically transacted in foreign currencies for subscriptions to our customer service platform and expect to significantly expand the number of transactions with customers that are denominated in foreign currencies in the near future.

Foreign currency gains and losses were not significant for each of the three and nine months ended September 30, 2014 and 2013. While we have not engaged in hedging of our foreign currency transactions to date, we are currently evaluating the costs and benefits of initiating such a program and may, in the future, hedge selected significant transactions denominated in currencies other than the U.S. dollar.

Interest Rate Sensitivity

We had cash, cash equivalents and marketable securities totaling $128.3 million at September 30, 2014, of which $72.7 million was invested in corporate securities, money market funds, U.S. treasury securities, asset-backed securities, U.S. agency obligations, and commercial paper. We had cash, cash equivalents and marketable securities totaling $65.8 million as of December 31, 2013, of which $23.0 million was invested in money market funds and corporate bonds. The cash and cash equivalents are held for working capital purposes. Our investments are made for capital preservation purposes. We do not enter into investments for trading or speculative purposes.

Our cash equivalents and our portfolio of marketable securities are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates. Due in part to these factors, our future investment income may fall short of our expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. However because we classify our debt securities as “available for sale,” no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are determined to be other-than-temporary.

As of September 30, 2014 and December 31, 2013, we do not believe that an increase or decrease in interest rates of ten percent (10%) would have a material effect on the value of our cash equivalents and portfolio of marketable securities. Fluctuations in the value of our cash equivalents and portfolio of marketable securities caused by a change in interest rates (gains or losses on the carrying value) are recorded in other comprehensive income, and are realized only if we sell the underlying securities prior to maturity.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

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, among other things, infringement of their intellectual property rights. Future litigation may be necessary to defend ourselves, our partners and our customers by determining the scope, enforceability, and validity of third-party proprietary rights, or to establish our proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

Item 1A. Risk Factors

A description of the risks and uncertainties associated with our business is set forth below. You should carefully consider such risks and uncertainties, together with the other information contained in this report, and in our other public filings. If any of such risks and uncertainties actually occurs, our business, financial condition or operating results could differ materially from the plans, projections and other forward-looking statements included in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report and in our other public filings. In addition, if any of the following risks and uncertainties, or if any other risks and uncertainties, actually occurs, our business, financial condition or operating results could be harmed substantially, which could cause the market price of our stock to decline, perhaps significantly.

Risks Related to Our Business

We derive, and expect to continue to derive, substantially all of our revenue and cash flows from our customer service platform. If we fail to adapt this platform to changing market dynamics and customer preferences or to achieve increased market acceptance of our customer service platform, our business, results of operations, financial condition, and growth prospects would be harmed.

We derive, and expect to continue to derive, substantially all of our revenue and cash flows from sales of subscriptions to our customer service platform. As such, the market acceptance of this platform is critical to our success. Demand for our customer service platform is affected by a number of factors, many of which are beyond our control, such as continued market acceptance of our platform by customers for existing and new use cases, the timing of development and release of new products, features, and functionality introduced by our competitors, technological change, and growth or contraction in our addressable market. We expect that an increasing focus on customer satisfaction and the growth of various communications channels will profoundly impact the market for customer support software and blur distinctions between traditionally separate systems for customer support, marketing automation, and customer relationship management, enabling new competitors to emerge. If we are unable to meet customer demands to manage customer experiences through flexible solutions designed to address all these needs or otherwise achieve more widespread market acceptance of our customer service platform, our business, results of operations, financial condition, and growth prospects will be adversely affected.

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

We have incurred net losses in each year since our inception, including net losses of $17.9 million and $4.8 million in the three months ended September 30, 2014 and 2013, respectively, and net losses of $49.9 million and $16.5 million for the nine months ended September 30, 2014 and 2013, respectively. We had an accumulated deficit of $114.4 million at September 30, 2014. For the three months ended September 30, 2014 and 2013, our revenue was $33.9 million and $19.2million, respectively, representing a 77% growth rate. For the nine months ended September 30, 2014 and 2013, our revenue was $88.5 million and $49.5 million, respectively, representing a 79% growth rate. We expect that our revenue growth rate will decline over time. We may not be able to generate sufficient revenue to achieve and sustain profitability as we also expect our costs to increase in future periods. We expect to continue to expend substantial financial and other resources on:

—	development of our customer service platform, including investments in our research and development team, the development or acquisition of new products, features and functionality, and improvements to the scalability, availability, and security of our customer service platform;

—

our technology infrastructure, including expansion of our activities in third-party data centers in which we lease space and where we manage our own hosting and network equipment, or self-managed colocation data centers, enhancements to our network operations and infrastructure, and hiring of additional employees for our operations team;

—	sales and marketing, including a significant expansion of our direct sales organization;

—	additional international expansion in an effort to increase our customer base and sales; and

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

These investments may not result in increased revenue or growth of our business. If we fail to continue to grow our revenue, our operating results, and business would be harmed.

We have a limited operating history, which makes it difficult to evaluate our prospects and future operating results.

We incorporated and first launched our customer service platform in 2007. As a result of our limited operating history, our ability to forecast our future operating results is limited and subject to a number of uncertainties, including our ability to plan for and model future growth. Our historical revenue growth has been inconsistent, and should not be considered indicative of our future performance. Further, in future periods, our revenue could decline for a number of reasons, including any reduction in demand for our customer service platform or live chat software, increase in competition, contraction of our overall market, or our failure, for any reason, to capitalize on growth opportunities. We have encountered and will encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described herein. If our assumptions regarding these risks and uncertainties, which we use to plan our business, are incorrect or change, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, and our business could suffer.

If we are not able to develop enhancements to our customer service platform or live chat software that achieve market acceptance and that keep pace with technological developments, our business would be harmed.

Our ability to attract new customers and increase revenue from existing customers depends in large part on our ability to enhance and improve our customer service platform and live chat software and to introduce new products and services. In order to grow our business, we must develop products and services that reflect the changing nature of customer service, and expand beyond customer service to other areas of managing relationships with customers. The success of any enhancement to our customer service platform or live chat software depends on several factors, including timely completion, adequate quality testing, and market acceptance. Any new product or service that we develop may not be introduced in a timely or cost-effective manner, may contain defects, or may not achieve the market acceptance necessary to generate sufficient revenue. If we are unable to successfully develop new products or services, enhance our existing customer service platform and live chat software to meet customer requirements or otherwise gain market acceptance, our business and operating results will be harmed.

Because our customer service platform and live chat software are available over the Internet, we need to continuously modify and enhance them to keep pace with changes in Internet-related hardware, software, communications, and database technologies and standards. If we are unable to respond in a timely and cost-effective manner to these rapid technological developments and changes in standards, our customer service platform and live chat software may become less marketable, less competitive, or obsolete, and our operating results will be harmed.

If we fail to effectively manage our growth and organizational change in a manner that preserves the key aspects of our culture, our business and operating results could be harmed.

We have experienced and may continue to experience rapid growth and organizational change, which has placed, and may continue to place, significant demands on our management, operational, and financial resources. For example, our headcount has grown from 467 employees on September 30, 2013 to 750 employees on September 30, 2014. In addition, we have established subsidiaries in Denmark, the United Kingdom, Australia, Ireland, Japan, the Philippines, and Brazil since our inception in 2007, and, as a result of the acquisition of Zopim, we also have a subsidiary in Singapore. We may continue to expand our international operations into other countries in the future. We have also experienced significant growth in the number of customers, end users, transactions, and data that our customer service platform and our associated hosting infrastructure support. Finally, our organizational structure is becoming more complex and we may need to scale and adapt our operational, financial, and management controls, as well as our reporting systems and procedures to manage this complexity. We will require significant capital expenditures and the allocation of valuable management resources to grow and change in these areas without undermining our corporate culture of rapid innovation, simplicity in design, and attention to customer satisfaction that has been critical to our growth so far. If we fail to manage our anticipated growth and change in a manner that preserves the key aspects of our culture, the quality of our products and services may suffer, which could negatively affect our brand and reputation and harm our ability to retain and attract customers.

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

The market for customer service solutions is fragmented, rapidly evolving, and highly competitive, with relatively low barriers to entry. Among the small to medium sized organizations that make up a large proportion of our customers, we often compete with general use computer applications and other tools, which these organizations use to provide support and which can be deployed for little or no cost. These include shared accounts for email communication, phone banks for voice communication, and pen and paper, text editors, and spreadsheets for tracking and management. With respect to larger organizations and enterprises seeking to deploy a customer service software system, we have many competitors that are larger and which have greater name recognition, much longer operating histories, more established customer relationships, larger marketing budgets, and significantly greater resources than we do.

Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer requirements. With the introduction of new technologies, the evolution of our platform, and new market entrants, we expect competition to intensify in the future. Pricing pressures and increased competition generally could result in reduced sales, reduced margins, losses, or the failure of our platform to achieve or maintain more widespread market acceptance, any of which could harm our business.

We face competition from in-house software systems, large integrated systems vendors, and smaller companies offering alternative SaaS applications. Our competitors vary in size and in the breadth and scope of the products and services they offer. We face substantial competition from salesforce.com, Inc., Oracle Corporation, Verint Systems, Inc., and Microsoft Corporation, each of which can bundle competing products and services with other software offerings, or offer them at a low price as part of a larger sale. In addition, we compete with a number of other SaaS providers with focused customer support applications, including desk.com (a salesforce.com service), Kayako Helpdesk Pvt. Ltd., Freshdesk, Inc., Brightwurks, Inc. (Help Scout), SupportBee, Inc., and Tenmiles Technologies Pvt. Ltd. (Happy Fox), many of which offer free or significantly discounted prices for their services. For organizations seeking software to support employee service and other internal use cases, we compete with companies such as ServiceNow, Inc., BMC Software, Inc., and Hewlett-Packard Company. Further, other established SaaS providers not currently focused on customer support may expand their services to compete with us. Many of our current and potential competitors have established marketing relationships, access to larger customer bases, pre-existing customer relationships, and major distribution agreements with consultants, system integrators, and resellers. Additionally, some potential customers, particularly large organizations, have elected, and may in the future elect, to develop their own internal customer support software system. Certain of our competitors have partnered with, or have acquired, and may in the future partner with or acquire, other competitors to offer services, leveraging their collective competitive positions, which makes, or would make, it more difficult to compete with them. For all of these reasons, we may not be able to compete successfully against our current and future competitors, which would harm our business.

If the market for SaaS business software applications develops more slowly than we expect or declines, our business would be adversely affected.

The market for SaaS business software applications is less mature than the market for on-premise business software applications, and the adoption rate of SaaS business software applications may be slower among subscribers in industries with heightened data security interests or business practices requiring highly customizable application software. Our success will depend to a substantial extent on the widespread adoption of SaaS business applications in general, and of SaaS customer service applications in particular. Many organizations have invested substantial personnel and financial resources to integrate traditional on-premise business software applications into their businesses, and therefore may be reluctant or unwilling to migrate to SaaS applications. It is difficult to predict customer adoption rates and demand for our customer service platform and live chat software, the future growth rate and size of the SaaS business applications market or the entry of competitive applications. The expansion of the SaaS business applications market depends on a number of factors, including the cost, performance, and perceived value associated with SaaS, as well as the ability of SaaS providers to address data security and privacy concerns. Additionally, government agencies have adopted, or may adopt, laws and regulations regarding the collection and use of personal information obtained from consumers and other individuals, or may seek to access information on our platform, either of which may reduce the overall demand for our platform. If we or other SaaS providers experience data security incidents, loss of customer data, disruptions in delivery, or other problems, the market for SaaS business applications, including our customer service platform and live chat software, may be negatively affected. If SaaS business applications do not continue to achieve market acceptance, or there is a reduction in demand for SaaS business applications caused by a lack of customer acceptance, technological challenges, weakening economic conditions, data security or privacy concerns, governmental regulation, competing technologies and products, or decreases in information technology spending, it would result in decreased revenue and our business would be adversely affected.

If we are not successful in selling our live chat software as a standalone service or more fully integrating our Zopim live chat software with our customer service platform, our business could be harmed.

As a result of the acquisition of Zopim, we now sell the Zopim live chat software as a standalone service. The Zopim live chat software can also be integrated with our customer service platform as a means to enable live chat functionality for agents and this integration is now the primary means by which we offer chat functionality on our customer service platform.

We have limited experience selling separate products in general or live chat software in particular, and as a result, our live chat software may not gain acceptance with our customers and potential customers.

Our reliance on the Zopim live chat software as a primary means of enabling chat functionality in connection with our customer service platform may not be successful. In particular, we charge a separate subscription fee per chat-enabled agent. While we believe the Zopim live chat software represents a substantial upgrade in functionality over the chat functionality historically embedded in our customer service platform, our current or prospective customers may resist paying for functionality that, to some degree, was previously available to all agents under a single subscription to our customer service platform. If our customers do not purchase the Zopim live chat software as a standalone service or as integrated with our customer service platform, our business, revenue, and operating results could be harmed.

If our security measures are breached or unauthorized access to customer data is otherwise obtained, our customer service platform and live chat software may be perceived as insecure, we may lose existing customers or fail to attract new customers, and we may incur significant liabilities.

Use of our customer service platform and live chat software involve the storage, transmission, and processing of our customers’ proprietary data, including personal or identifying information regarding their customers or employees. Unauthorized access or security breaches of our customer service platform or live chat software could result in the loss of data, loss of business, severe reputational damage adversely affecting customer or investor confidence, regulatory investigations and orders, litigation, indemnity obligations, damages for contract breach, penalties for violation of applicable laws or regulations, and significant costs for remediation that may include liability for stolen assets or information and repair of system damage that may have been caused, incentives offered to customers or other business partners in an effort to maintain business relationships after a breach, and other liabilities. We have incurred and expect to incur significant expenses to prevent security breaches, including deploying additional personnel and protection technologies, training employees, and engaging third-party experts and consultants. Our errors and omissions insurance coverage covering certain security and privacy damages and claim expenses may not be sufficient to compensate for all liability.

We have experienced significant breaches of our security measures and our customer service platform and live chat software are at risk for future breaches as a result of third-party action, employee, vendor, or contractor error, malfeasance, or other factors. For example, in February 2013, we experienced a security breach involving unauthorized access to three of our customers’ accounts and personal information of consumers maintained in those customer accounts.

We have only been offering the Zopim live chat software since the completion of our acquisition of Zopim in March 2014. We are aware that Zopim experienced breaches of its security measures prior to the acquisition. The systems, networks, personnel, equipment, and vendors utilized to provide our live chat software are separate from those utilized in connection with our customer service platform and have not been subject to the same security reviews and assessments as those used to provide our customer service platform. Our failure to complete these assessments and implement improvements to the security measures deployed to protect our live chat software in a timely manner could increase our risk of a security breach with respect to this service, which would harm our business as a whole.

Because the techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period.

Because data security is a critical competitive factor in our industry, we make numerous statements in our privacy policies and terms of service, through our certifications to privacy standards, and in our marketing materials, providing assurances about the security of our customer service platform and live chat software including detailed descriptions of security measures we employ. Should any of these statements be untrue or become untrue, even through circumstances beyond our reasonable control, we may face claims of misrepresentation or deceptiveness by the U.S. Federal Trade Commission, state and foreign regulators, and private litigants.

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

Our continued growth depends in part on the ability of our existing and potential customers to access our customer service platform and live chat software at any time and within an acceptable amount of time. Our customer service platform and live chat software are proprietary, and we rely on the expertise of members of our engineering, operations, and software development teams for their continued performance. We have experienced, and may in the future experience, disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints due to an overwhelming number of users accessing our customer service platform or live chat software simultaneously, denial of service attacks, or other security related incidents. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. It may become increasingly difficult to maintain and improve our performance, especially during peak usage times and as our customer service platform and live chat software become more complex and our user traffic increases. If our customer service platform or live chat software is unavailable or if our users are unable to access our customer service platform or live chat software within a reasonable amount of time or at all, our business would be negatively affected. In addition, our infrastructure does not currently include the real-time mirroring of data. Therefore, in the event of any of the factors described above, or certain other failures of our infrastructure, customer data may be permanently lost. Moreover, some of our customer agreements include performance guarantees and service level standards that obligate us to provide credits or termination rights in the event of a significant disruption in our platform. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be adversely affected.

Real or perceived errors, failures, or bugs in our customer service platform or live chat software could adversely affect our operating results and growth prospects.

Because our customer service platform and live chat software are complex, undetected errors, failures, vulnerabilities, or bugs may occur, especially when updates are deployed. Our customer service platform and live chat software are often used in connection with large-scale computing environments with different operating systems, system management software, equipment, and networking configurations, which may cause errors or failures of our customer service platform, our live chat software, or other aspects of the computing environment into which they are deployed. In addition, deployment of our customer service platform or live chat software into complicated, large-scale computing environments may expose undetected errors, failures, vulnerabilities, or bugs in our customer service platform or live chat software. We have discovered and expect will continue to discover software errors, failures, vulnerabilities, and bugs in our customer service platform and live chat software, some of which have or may only be discovered and remediated after deployment to customers. Real or perceived errors, failures, or bugs in our customer service platform or live chat software could result in negative publicity, loss of or delay in market acceptance of our customer service platform or live chat software, loss of competitive position, or claims by customers for losses sustained by them. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct the problem.

Incorrect or improper implementation or use of our customer service platform or live chat software could result in customer dissatisfaction and negatively affect our business, results of operations, financial condition, and growth prospects.

Our customer service platform and live chat software are deployed in a wide variety of technology environments and into a broad range of complex workflows. Increasingly, our customer service platform and live chat software have been integrated into large-scale, complex technology environments, and specialized use cases, and we believe our future success will depend on our ability to increase use of our customer service platform and live chat software in such deployments. We often assist our customers in implementing our customer service platform and live chat software, but many customers attempt to implement even complex deployments themselves. If we or our customers are unable to implement our customer service platform or live chat software successfully, or unable to do so in a timely manner, customer perceptions of our customer service platform, our live chat software, and company may be impaired, our reputation and brand may suffer, and customers may choose not to renew or expand the use of our customer service platform or live chat software.

Our customers and third-party partners may need training in the proper use of our customer service platform or live chat software to maximize its potential. If our customer service platform or live chat software is not implemented or used correctly or as intended, inadequate performance may result. Because our customers rely on our customer service platform to manage a wide range of operations, the incorrect or improper implementation or use of our customer service platform, our failure to train customers on how to efficiently and effectively use our customer service platform, or our failure to provide adequate product support to our customers, may result in negative publicity or legal claims against us. Also, as we continue to expand our customer base, any failure by us to properly provide these services will likely result in lost opportunities for additional subscriptions to our customer service platform and live chat software.

Any failure to offer high-quality product support may adversely affect our relationships with our customers and our financial results.

In deploying and using our customer service platform and live chat software, our customers depend on our product support team to resolve complex technical and operational issues. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for product support. We also may be unable to modify the nature, scope, and delivery of our product support to compete with changes in product support services provided by our competitors. Increased customer demand for product support, without corresponding revenue, could increase costs and adversely affect our operating results. Our sales are highly dependent on our business reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality product support, or a market perception that we do not maintain high-quality product support, could adversely affect our reputation, our ability to sell our customer service platform and live chat software to existing and prospective customers, our business, operating results, and financial position.

We depend on our executive officers and other key employees and the loss of one or more of these employees or an inability to attract and retain highly skilled employees could adversely affect our business.

Our success depends largely upon the continued services of our executive officers and other key employees. We rely on our leadership team in the areas of research and development, operations, security, marketing, sales, support, general and administrative functions, and on individual contributors in our research and development and operations. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business. We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time. The loss of one or more of our executive officers, especially our Chief Executive Officer, or key employees could have an adverse effect on our business.

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

We are highly dependent upon free trials of our customer service platform and live chat software and other inbound lead generation strategies to drive our sales and revenue. If these strategies fail to continue to generate sales opportunities or do not convert into paying customers, our business and results of operations would be harmed.

We are highly dependent upon our marketing strategy of offering free trials of our customer service platform and live chat software and other inbound lead generation strategies to generate sales opportunities. These strategies may not be successful in continuing to generate sufficient sales opportunities necessary to increase our revenue. Many users never convert from the trial version to the paid version of our customer service platform or live chat software. Further, we often depend on individuals within an organization who initiate the trial versions of our customer service platform and live chat software being able to convince decision makers within their organization to convert to a paid version. Many of these organizations have complex and multi-layered purchasing requirements. To the extent that these users do not become, or are unable to convince others to become, paying customers, we will not realize the intended benefits of this marketing strategy and our ability to grow our revenue will be adversely affected.

We employ a pricing model that subjects us to various challenges that could make it difficult for us to derive sufficient value from our customers.

We generally charge our customers for their use of our customer service platform based on the number of users they enable as “agents” to provide customer service under their customer account. At the same time, we provide features and functionality within our customer service platform that enable our customers to promote customer self-service and otherwise efficiently and cost-effectively address product support requests without the need for substantial human interaction. As a result of these features, customer agent staffing requirements may be minimized and our revenue may be adversely impacted.

We separately charge for the use of our live chat software. Historically, we provided limited chat functionality within our customer service platform for no additional charge. With the integration of our live-chat software into our customer service platform, we now generally require a separate subscription to enable chat functionality in connection with our customer service platform. We do not know whether our customers or the market in general will accept this change in our pricing model and if it fails to gain acceptance our business and results of operations could be harmed.

Our terms of service prohibit the sharing of user logins and passwords. These restrictions may be improperly circumvented or otherwise bypassed by certain users and, if they are, we may not be able to capture the full value for the use of our customer service platform. We license access and use of our customer service platform and live chat software exclusively for our customers’ internal use only. If customers improperly resell or otherwise make our customer service platform or live chat software available to their customers, it may cannibalize our sales or commoditize our customer service platform and live chat software in the market. Additionally, if a customer that has received a volume discount from us offers our customer service platform to its customers in violation of our terms of service, we may experience price erosion and be unable to capture sufficient value from the use of our customer service platform or live chat software by those customers.

While our terms of service provide us the ability to enforce our terms, our customers may resist or refuse to allow us to audit their usage, in which case we may have to pursue legal recourse to enforce our rights. Any such enforcement action would require us to spend money, distract management, and potentially adversely affect our relationship with our customers.

We do not have the history with our subscription or pricing models necessary to accurately predict optimal pricing necessary to attract new customers and retain existing customers.

We have limited experience with respect to determining the optimal prices for our customer service platform and live chat software and as a result, we have in the past and expect in the future that we will need to change our pricing model from time to time. As the market for our customer service platform and live chat software matures, or as new competitors introduce new products or services that compete with ours, we may be unable to attract new customers at the same price or based on the same pricing models as we have used historically. Pricing decisions may also impact the mix of adoption among our subscription plans and negatively impact our overall revenue. Moreover, larger organizations, which are a primary focus of our direct sales efforts, may demand substantial price concessions. As a result, in the future we may be required to reduce our prices, which could adversely affect our revenue, gross margin, profitability, financial position, and cash flow.

Our financial results may fluctuate due to increasing variability in our sales cycles.

We plan our expenses based on certain assumptions about the length and variability of our sales cycle. These assumptions are based upon historical trends for sales cycles and conversion rates associated with our existing customers, many of whom to date have been small to medium-sized organizations that make purchasing decisions without interacting with our sales or other personnel. As we continue to focus on and become more dependent on sales to larger organizations, we expect our sales cycles to lengthen and become less predictable. This may adversely affect our financial results. Factors that may influence the length and variability of our sales cycle include:

—	the need to educate prospective customers about the uses and benefits of our customer service platform and live chat software;

—	the discretionary nature of purchasing and budget cycles and decisions;

—	the competitive nature of evaluation and purchasing processes;

—	evolving functionality demands;

—	announcements or planned introductions of new products, features, or functionality by us or our competitors; and

—	lengthy purchasing approval processes.

Our increasing dependence on sales to larger organizations may increase the variability of our financial results. If we are unable to close one or more expected significant transactions with these customers in a particular period, or if an expected transaction is delayed until a subsequent period, our operating results for that period, and for any future periods in which revenue from such transaction would otherwise have been recognized, may be adversely affected.

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

Our quarterly financial results may fluctuate as a result of a variety of other factors, many of which are outside of our control. If our quarterly financial results fall below the expectations of investors or any securities analysts who follow our stock, the price of our common stock could decline substantially. Some of the important factors that may cause our revenue, operating results, and cash flows to fluctuate from quarter to quarter include:

—	our ability to attract new customers, retain and increase sales to existing customers, and satisfy our customers’ requirements;

—	the number of new employees added;

—	the rate of expansion and productivity of our sales force;

—	changes in our or our competitors’ pricing policies;

—	the amount and timing of operating costs and capital expenditures related to the operations and expansion of our business;

—	new products, features, or functionalities introduced by our competitors;

—	significant security breaches, technical difficulties, or interruptions to our customer service platform or live chat software;

—	the timing of customer payments and payment defaults by customers;

—	general economic conditions that may adversely affect either our customers’ ability or willingness to purchase additional subscriptions, delay a prospective customer’s purchasing decision, reduce the value of new subscription contracts, or affect customer retention;

—	changes in the relative and absolute levels of professional services we provide;

—	changes in foreign currency exchange rates;

—	extraordinary expenses such as litigation or other dispute-related settlement payments;

—	the impact of new accounting pronouncements; and

—	the timing of the grant or vesting of equity awards to employees.

Many of these factors are outside of our control, and the occurrence of one or more of them might cause our revenue, operating results, and cash flows to vary widely. As such, we believe that quarter-to-quarter comparisons of our revenue, operating results, and cash flows may not be meaningful and should not be relied upon as an indication of future performance.

Unfavorable conditions in our industry or the global economy or reductions in information technology spending could limit our ability to grow our business and negatively affect our operating results.

Our operating results may vary based on the impact of changes in our industry or the global economy on us or our customers. The revenue growth and potential profitability of our business depend on demand for business software applications and services generally and for customer service systems in particular. In addition, our revenue is entirely dependent on the number of users of our customer service platform or live chat software at each of our customers, which in turn is influenced by the employment and hiring patterns of our customers. To the extent that weak economic conditions cause our customers and prospective customers to freeze or reduce their hiring for personnel providing service and support, demand for our customer service platform and live chat software may be negatively affected. Historically, during economic downturns there have been reductions in spending on information technology and customer service systems as well as pressure for extended billing terms and other financial concessions. If economic conditions deteriorate, our customers and prospective customers may elect to decrease their information technology and customer service budgets, which would limit our ability to grow our business and negatively affect our operating results.

Our business depends substantially on our customers renewing their subscriptions and purchasing additional subscriptions from us. Any decline in our customer retention or expansion would harm our future operating results.

In order for us to maintain or improve our operating results, it is important that our customers renew their subscriptions when the initial contract term expires and add additional authorized agents to their customer accounts. Even though the majority of our revenue is derived from subscriptions to our customer service platform that have terms longer than one month, a significant portion of the subscriptions to our customer service platform have monthly terms. Our customers have no obligation to renew their subscriptions, and our customers may not renew subscriptions with a similar contract period or with the same or a greater number of agents. Some of our customers have elected not to renew their agreements with us and we do not have enough history to accurately predict long-term customer retention.

Our customer retention may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with our customer service platform or live chat software, our product support, our prices, the prices of competing software systems, mergers and acquisitions affecting our customer base, the effects of global economic conditions, or reductions in our customers’ spending levels. Our future success is also substantially dependent on our ability to sell more subscriptions to our current customers. If our customers do not renew their subscriptions, renew on less favorable terms or fail to add more agents, our revenue may decline, and we may not realize improved operating results from our customer base.

We face a number of risks in our strategy to increasingly target larger organizations for sales of our customer service platform and live chat software and, if we do not manage these efforts effectively, our business and results of operations could be adversely affected.

As we target more of our sales efforts to larger organizations, we expect to incur higher costs and longer sales cycles and we may be less effective at predicting when we will complete these sales. In this market segment, the decision to subscribe to our customer service platform or live chat software may require the approval of more technical personnel and management levels within a potential customer’s organization than we have historically encountered, and if so, these types of sales would require us to invest more time educating these potential customers. In addition, larger organizations may demand more features and integration services. We have limited experience in developing and managing sales channels and distribution arrangements for larger organizations. As a result of these factors, these sales opportunities may require us to devote greater research and development, sales, product support, and professional services resources to individual customers, resulting in increased costs and reduced profitability, and would likely lengthen our typical sales cycle, which could strain our resources. Moreover, these larger transactions may require us to delay recognizing the associated revenue we derive from these customers until any technical or implementation requirements have been met, and larger customers may demand discounts to the subscription prices they pay for our customer service platform or live chat software. Furthermore, because we have limited experience selling to larger organizations, our investment in marketing our customer service platform to these potential customers may not be successful, which could harm our results of operations and our overall ability to grow our customer base. Following sales to larger organizations, we may have fewer opportunities to expand usage of our customer service platform or sell additional functionality, and we may experience increased subscription terminations as compared to our experience with smaller organizations, any of which could harm our results of operations.

Failure to effectively expand our sales capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our platform.

Increasing our customer base and achieving broader market acceptance of our customer service platform and live chat software will depend, to a significant extent, on our ability to effectively expand our sales and marketing operations and activities. We are substantially dependent on our online marketing efforts and on our direct sales force to obtain new customers. From September 30, 2013 to September 30, 2014, our sales and marketing organizations increased from 151 to 264 employees. We plan to continue to expand our direct sales force both domestically and internationally and to increase the proportion of our sales professionals that have experience in selling to larger organizations. We believe that there is significant competition for experienced sales professionals with the sales skills and technical knowledge that we require. Our ability to achieve significant revenue growth in the future will depend, in part, on our success in recruiting, training, and retaining a sufficient number of experienced sales professionals. New hires require significant training and time before they achieve full productivity, particularly in new sales segments and territories. Our recent hires and planned hires may not become as productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the future in the markets where we do business. Because we do not have a long history of expanding our sales force, we cannot predict whether, or to what extent, our sales will increase as we expand our sales force or how long it will take for sales personnel to become productive. Our business will be harmed if our sales expansion efforts do not generate a significant increase in revenue.

If we are unable to develop and maintain successful relationships with channel partners, our business, operating results, and financial condition could be adversely affected.

To date, we have been primarily dependent on word-of-mouth, online marketing, and our direct sales force to sell subscriptions to our customer service platform and live chat software. Although we have developed certain channel partners, such as referral partners, resellers, and integration partners, these channels have resulted in limited revenue to date. We believe that continued growth in our business is dependent upon identifying, developing, and maintaining strategic relationships with additional channel partners that can drive substantial revenue. Our agreements with our existing channel partners are non-exclusive, meaning our channel partners may offer customers the products of several different companies, including products that compete with ours. They may also cease marketing our customer service platform and live chat software with limited or no notice and with little or no penalty. We expect that any additional channel partners we identify and develop will be similarly non-exclusive and not bound by any requirement to continue to market our customer service platform or live chat software. If we fail to identify additional channel partners, in a timely and cost-effective manner, or at all, or are unable to assist our current and future channel partners in independently selling and deploying our customer service platform or live chat software, our business, results of operations, and financial condition could be adversely affected. If our channel partners do not effectively market and sell our customer service platform or live chat software, or fail to meet the needs of our customers, our reputation and ability to grow our business may also be adversely affected.

Sales by channel partners are more likely than direct sales to involve collectability concerns, in particular sales by our channel partners into developing markets, and accordingly, variations in the mix between revenue attributable to sales by channel partners and revenue attributable to direct sales may result in fluctuations in our operating results.

If we are not able to maintain and enhance our brand, our business, operating results, and financial condition may be adversely affected.

We believe that maintaining and enhancing our reputation as a differentiated and category-defining company in customer service is critical to our relationships with our existing customers and to our ability to attract new customers. The successful promotion of our brand attributes will depend on a number of factors, including our marketing efforts, our ability to continue to develop high-quality software, and our ability to successfully differentiate our customer service platform from competitive products and services. We are highly dependent upon “consumer” tactics, including an emphasis on simplicity and a sense of humor in our advertising, to build our brand and develop brand loyalty. We do not have sufficient history to know if such brand promotion activities will ultimately be successful or yield increased revenue relative to traditional enterprise software marketing strategies. In addition, independent industry analysts often provide reviews of our customer service platform, as well as products and services offered by our competitors, and perception of our platform in the marketplace may be significantly influenced by these reviews. If these reviews are negative, or less positive as compared to those of our competitors’ products and services, our brand may be adversely affected. It may also be difficult to maintain and enhance our brand in connection with sales through channel or strategic partners.

The promotion of our brand requires us to make substantial expenditures, and we anticipate that the expenditures will increase as our market becomes more competitive, as we expand into new markets, and as more sales are generated through our channel partners. To the extent that these activities yield increased revenue, this revenue may not offset the increased expenses we incur. If we do not successfully maintain and enhance our brand, our business may not grow, we may have reduced pricing power relative to competitors, and we could lose customers or fail to attract potential customers, all of which would adversely affect our business, results of operations, and financial condition.

Our international sales and operations subject us to additional risks that can adversely affect our business, operating results, and financial condition.

In the three months ended September 30, 2014 and 2013, we derived 44% and 41% of our revenue from customers located outside of the United States, respectively, and for each of the nine months ended September 30, 2014 and 2013, we derived 43% and 41% of our revenue from customers located outside of the United States, respectively. We are continuing to expand our international operations as part of our growth strategy. We currently have sales personnel and sales and product support operations in the United States and certain countries across Europe, Australia, Asia, and South America. Our sales organization outside the United States is substantially smaller than our sales organization in the United States and to date a very limited portion of our sales has been driven by resellers or other channel partners. We believe our ability to convince new customers to subscribe to our platform or to convince existing customers to renew or expand their use of our platform is directly correlated to the level of engagement we obtain with the customer. To the extent we are unable to effectively engage with non-U.S. customers due to our limited sales force capacity and limited channel partners, we may be unable to effectively grow in international markets.

Our international operations subject us to a variety of additional risks and challenges, including:

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

—	longer payment cycles and difficulties in enforcing contracts, collecting accounts receivable, or satisfying revenue recognition criteria, especially in emerging markets;

—	increased financial accounting and reporting burdens and complexities;

—	requirements or preferences for domestic products;

—	differing technical standards, existing or future regulatory and certification requirements and required features and functionality;

—	economic conditions in each country or region and general economic uncertainty around the world;

—	compliance with foreign privacy and security laws and regulations and the risks and costs of non-compliance;

—

compliance with laws and regulations for foreign operations, including anti-bribery laws (such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. Travel Act, and the U.K. Bribery Act 2010), import and export control laws, tariffs, trade barriers, economic sanctions, and other regulatory or contractual limitations on our ability to sell our customer service platform or live chat software in certain foreign markets, and the risks and costs of non-compliance;

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

—	fluctuations in currency exchange rates and related effect on our operating results;

—	difficulties in repatriating or transferring funds from or converting currencies in certain countries;

—	communication and integration problems related to entering new markets with different languages, cultures, and political systems;

—	differing labor standards, including restrictions related to, and the increased cost of, terminating employees in some countries;

—	the need for localized software and licensing programs;

—	the need for localized language support;

—	reduced protection for intellectual property rights in some countries and practical difficulties of enforcing rights abroad; and

—	compliance with the laws of numerous foreign taxing jurisdictions, including withholding obligations, and overlapping of different tax regimes.

Any of these risks could adversely affect our international operations, reduce our international revenue, or increase our operating costs, adversely affecting our business, operating results, financial condition, and growth prospects.

Compliance with laws and regulations applicable to our international operations substantially increases our cost of doing business in foreign jurisdictions. We may be unable to keep current with changes in government requirements as they change from time to time. Failure to comply with these regulations could have adverse effects on our business. In many foreign countries it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S. or other regulations applicable to us. Although we have implemented policies and procedures designed to ensure compliance with these laws and policies, there can be no assurance that all of our employees, contractors, partners, and agents will comply with these laws and policies. Violations of laws or key control policies by our employees, contractors, partners, or agents could result in delays in revenue recognition, financial reporting misstatements, enforcement actions, disgorgement of profits, fines, civil and criminal penalties, damages, injunctions, other collateral consequences, or the prohibition of the importation or exportation of our platform and services and could adversely affect our business and results of operations.

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

We are subject to U.S. export controls, and we incorporate encryption technology into our customer service platform that is enabled through mobile applications and other software we may be deemed to export. These encryption products and the underlying technology may be exported outside of the United States only with the required export authorizations, including by license, a license exception or other appropriate government authorizations, including the filing of an encryption registration. We previously deployed mobile applications prior to obtaining the required export authorizations. Accordingly, we have not fully complied with applicable encryption controls in U.S. export administration regulations. As discussed further below, in 2013, we filed final voluntary disclosures to relevant U.S. enforcement authorities regarding our failure to obtain required export authorizations.

Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products and services to countries, governments, and persons targeted by U.S. sanctions. While we are currently taking precautions to prevent our customer service platform and live chat software from being enabled by persons targeted by U.S. sanctions, including IP blocking and periodic customer screening against U.S. government lists of prohibited persons, such measures may be circumvented.

We are aware that trials of and subscriptions to our customer service platform have been initiated by persons and organizations in countries that are the subject of U.S. embargoes. Our provision of service in these instances was likely in violation of U.S. export control and sanctions laws. We have terminated the accounts of such organizations as we have become aware of them, and in April 2013, we filed final voluntary self disclosures with the U.S. Department of Commerce’s Bureau of Industry and Security, or BIS, and the U.S. Department of Treasury’s Office of Foreign Assets Control, or OFAC, concerning prior potential violations. In May 2013, OFAC notified us that it had completed its review of these matters and closed its review with the issuance of a cautionary letter. In July 2013, BIS notified us that it had completed its review with the issuance of a warning letter. No monetary penalties or other sanctions were imposed by either agency in connection with their investigations.

We are also aware that trials and paid and unpaid subscriptions to our live chat software as delivered by Zopim, which is based in Singapore, have been initiated by persons and organizations in countries that are the subject of U.S. embargoes. Zopim also previously made available for download from the United States certain encryption-functionality software without first having obtained U.S. government authorization to export such software. In these instances, Zopim may have acted in violation of U.S. export controls and sanctions laws. Prior to and as a condition of the completion of our acquisition of Zopim, Zopim terminated the paid subscriptions of those customers believed to be located in jurisdictions subject to U.S. embargoes, screened its paid customers against applicable U.S. government lists of prohibited persons, implemented certain measures designed to prevent future unauthorized access to the service, and obtained U.S. government authorization to export its software. Zopim filed initial voluntary disclosures with OFAC and BIS on March 18, 2014 to alert these agencies of its apparent prior violations. After completion of the acquisition, we conducted an internal investigation into these prior violations and filed voluntary self-disclosures with respect to these matters in the three months ended June 30, 2014 and September 30, 2014. Since the completion of our acquisition of Zopim we have continued to enhance measures to prevent unauthorized access to the Zopim service and to implement additional methodologies by which both paid and unpaid trials and accounts that we suspect may be initiated from jurisdictions subject to U.S. embargoes are identified. Given the technical limitations in developing measures that will prevent access to internet based services from particular geographies or by particular individuals, we have previously identified and expect we will continue to identify customer accounts for our customer service platform and live chat software that we suspect originate from countries which are subject to U.S. embargoes.

If we are found to be in violation of U.S. sanctions or export control laws, it could result in fines or penalties for us and for individuals, including civil penalties of up to $250,000 or twice the value of the transaction, whichever is greater, per violation, and in the event of conviction for a criminal violation, fines of up to $1 million and possible incarceration for responsible employees and managers for willful and knowing violations. Each instance in which we provide service through our customer service platform or live chat software or in which unlicensed encryption functionality software is downloaded may constitute a separate violation of these laws.

If our channel partners fail to obtain appropriate import, export or re-export licenses or permits, we may also be adversely affected, through reputational harm as well as other negative consequences including government investigations and penalties. We presently incorporate sanctions compliance requirements in our channel partner agreements for our customer service platform. Complying with export control and sanctions regulations for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities. Failure to comply with export control and sanctions regulations for a particular sale may expose us to government investigations and penalties, which could have an adverse effect on our business, operating results, and financial condition.

In addition, various countries regulate the import of certain encryption technology, including import permitting and licensing requirements, and have enacted laws that could limit our ability to offer our platform or distribute our platform or could limit our customers’ ability to implement our platform in those countries. Changes in our customer service platform or live chat software or future changes in export and import regulations may create delays in the introduction of our customer service platform or live chat software in international markets or prevent our customers with international operations from deploying our platform globally. Any change in export or import regulations, economic sanctions or related legislation, or change in the countries, governments, persons, or technologies targeted by such regulations, could result in decreased use of our customer service platform or live chat software by, or in our decreased ability to export or sell our customer service platform or live chat software to, existing or potential customers with international operations. Any decreased use of our customer service platform or live chat software or limitation on our ability to export or sell our customer service platform or live chat software would likely adversely affect our business operations and financial results.

We recognize revenue over the term of our customer contracts. Consequently, downturns or upturns in new sales may not be immediately reflected in our operating results and may be difficult to discern.

We generally recognize subscription revenue from customers ratably over the terms of their contracts and a majority of our revenue is derived from subscriptions that have terms longer than one month. As a result, a portion of the revenue we report in each quarter is derived from the recognition of deferred revenue relating to subscriptions entered into during previous quarters. Consequently, a decline in new or renewed subscriptions with terms that are longer than monthly in any single quarter may have a small impact on our revenue results for that quarter. However, such a decline will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our customer service platform or live chat software, and potential changes in our pricing policies or rate of expansion or retention, may not be fully reflected in our results of operations until future periods. We may also be unable to reduce our cost structure in line with a significant deterioration in sales. In addition, because the majority of subscriptions to our customer service platform and live chat software are shorter than most comparable SaaS companies and because we have many variations of billing cycles, our deferred revenue may be a less meaningful indicator of our future financial results than for other SaaS companies. In addition, a significant majority of our costs are expensed as incurred, while revenue is recognized over the life of the agreement with our customer. As a result, increased growth in the number of our customers could continue to result in our recognition of more costs than revenue in the earlier periods of the terms of our agreements. Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers must be recognized over the applicable subscription term.

Certain of our operating results and financial metrics may be difficult to predict as a result of seasonality.

Although we have not historically experienced significant seasonality in terms of the number of subscriptions for our customer service platform throughout the year, we may be impacted by seasonal trends in the future, particularly as our business matures. We do not have sufficient experience in selling our live chat software to determine if demand for this service is or will be subject to seasonality. Since a large percentage of our subscriptions are monthly, customers are able to rapidly increase and decrease the number of authorized agents for whom they require a subscription quickly and easily, thereby potentially increasing the impact of seasonality on our revenue. This seasonality may be reflected to a much lesser extent, and sometimes may not be immediately apparent, in our revenue, due to the fact that we recognize subscription revenue over the term of our agreement. To the extent we experience this seasonality, it may cause fluctuations in our operating results and financial metrics, and make forecasting our future operating results and financial metrics difficult.

Our ongoing and planned investments in self-managed colocation data centers are expensive and complex, have resulted, and will result, in a negative impact on our cash flows and may negatively impact our financial results.

We have made and will continue to make substantial investments in new equipment at our self-managed colocation data centers to support our growth and provide enhanced levels of service to our customers. We made capital expenditures of $0.9 million and $1.2 million in the three months ended September 30, 2014 and 2013, respectively, and $6.0 million and $4.7 million in the nine months ended September 30, 2014 and 2013, respectively, primarily for purchases of hosting equipment for use in these data centers. We have and are continuing to transition from primarily a managed-service hosting model, where a third party manages most aspects of our hosting operations, to a self-managed colocation model, where we have more direct control over the hosting infrastructure and its operation. This has and may continue to have a negative impact on our cash flows and gross profit as we invest in capital assets to establish and expand our use of these self-managed colocation data centers and scale these facilities to expected demand. If it takes longer than we expect to fully complete this transition, the negative impact on our operating results would likely exceed our initial expectations.

Our business and growth depend in part on the success of our strategic relationships with third parties, including technology partners, channel partners, and professional services partners.

We depend on, and anticipate that we will continue to depend on, various third-party relationships in order to sustain and grow our business. We are highly dependent upon third-party technology partners for certain critical features and functionality of our platform. For example, the advanced analytics features of the higher end subscription plans of our customer service platform are highly dependent on our technology integration with GoodData, Inc. Failure of this or any other technology provider to maintain, support, or secure its technology platforms in general, and our integrations in particular, or errors or defects in its technology, could materially and adversely impact our relationship with our customers, damage our reputation and brand, and harm our business and operating results. Any loss of the right to use any of this hardware or software could result in delays or difficulties in our ability to provide our platform until equivalent technology is either developed by us or, if available, identified, obtained, and integrated.

For deployments of our customer service platform into complex technology environments and workflows, we are highly dependent on third-party implementation consultants to provide professional services to our customers. The failure of these third-party consultants to perform their services adequately may disrupt or damage the relationship between us and our customer, damage our brand, and harm our business.

Identifying, negotiating, and documenting relationships with strategic third parties such as technology partners and implementation providers require significant time and resources. In addition, integrating third-party technology is complex, costly, and time-consuming. Our agreements with technology partners and implementation providers are typically limited in duration, non-exclusive, and do not prohibit them from working with our competitors or from offering competing services. Our competitors may be effective in providing incentives to third parties to favor their products or services or to prevent or reduce subscriptions to our platform.

If we are unsuccessful in establishing or maintaining our relationships with these strategic third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our operating results would suffer. Even if we are successful, we cannot assure you that these relationships will result in improved operating results.

If we fail to integrate our customer service platform and live chat software with a variety of operating systems, software applications, and hardware that are developed by others, our customer service platform and live chat software may become less marketable, less competitive, or obsolete, and our operating results would be harmed.

Our customer service platform and live chat software must integrate with a variety of network, hardware, and software platforms, and we need to continuously modify and enhance our customer service platform and live chat software to adapt to changes in cloud-enabled hardware, software, networking, browser, and database technologies. In particular, we have developed our platform to be able to easily integrate with third-party SaaS applications, including the applications of software providers that compete with us, through the interaction of application platform interfaces, or APIs. In general, we rely on the fact that the providers of such software systems, including salesforce.com, continue to allow us access to their APIs to enable these customer integrations. To date, we have not relied on a long-term written contract to govern our relationship with these providers. Instead, we are subject to the standard terms and conditions for application developers of such providers, which govern the distribution, operation, and fees of such software systems, and which are subject to change by such providers from time to time. Our business may be harmed if any provider of such software systems:

—	discontinues or limits our access to its APIs;

—	modifies its terms of service or other policies, including fees charged to, or other restrictions on us or other application developers;

—	changes how customer information is accessed by us or our customers;

—	establishes more favorable relationships with one or more of our competitors; or

—	otherwise favors its own competitive offerings over ours.

We believe a significant component of our value proposition to customers is the ability to optimize and configure our customer service platform to communicate with these third-party SaaS applications through our respective APIs. If we are not permitted or able to integrate with these and other third-party SaaS applications in the future, demand for our customer service platform could be adversely impacted and business and operating results would be harmed. In addition, an increasing number of individuals within organizations are utilizing mobile devices to access the Internet and corporate resources and to conduct business. We have designed mobile applications to provide access to our customer service platform through these devices. If we cannot provide effective functionality through these mobile applications as required by organizations and individuals that widely use mobile devices, we may experience difficulty attracting and retaining customers. Failure of our customer service platform or live chat software to operate effectively with future infrastructure platforms and technologies could also reduce the demand for our platform, resulting in customer dissatisfaction and harm to our business. If we are unable to respond to changes in a cost-effective manner, our platform may become less marketable, less competitive, or obsolete and our operating results may be negatively impacted.

We may acquire or invest in companies, which may divert our management’s attention and result in additional dilution to our stockholders. We may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions.

We may evaluate and consider potential strategic transactions, including acquisitions of, or investments in, businesses, technologies, services, products, and other assets in the future. We also may enter into relationships with other businesses to expand our products and services, which could involve preferred or exclusive licenses, additional channels of distribution, discount pricing, or investments in other companies.

Any acquisition, including our acquisition of Zopim, investment or business relationship may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, products, personnel, or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us, their software is not easily adapted to work with our platform, or we have difficulty retaining the customers of any acquired business due to changes in ownership, management, or otherwise. For example, we only recently completed our acquisition of Zopim, and substantially all of the acquisition and integration risks remain. Acquisitions, including our acquisition of Zopim, may also disrupt our business, divert our resources, and require significant management attention that would otherwise be available for development of our existing business. Moreover, the anticipated benefits of any acquisition, investment, or business relationship may not be realized or we may be exposed to unknown risks or liabilities.

Negotiating these transactions can be time-consuming, difficult, and expensive, and our ability to complete these transactions may often be subject to approvals that are beyond our control. Consequently, these transactions, even if announced, may not be completed. For one or more of those transactions, we may:

—	issue additional equity securities that would dilute our existing stockholders;

—	use cash that we may need in the future to operate our business;

—	incur large charges or substantial liabilities;

—	incur debt on terms unfavorable to us or that we are unable to repay;

—	encounter difficulties retaining key employees of the acquired company or integrating diverse software codes or business cultures; and

—	become subject to adverse tax consequences, substantial depreciation, or deferred compensation charges.

Because our customer service platform and live chat software can be used to collect and store personal information, domestic and international privacy and data security concerns could result in additional costs and liabilities to us or inhibit sales of our customer service platform or live chat software.

Personal privacy and data security have become significant issues in the United States, Europe, and in many other jurisdictions where we offer our customer service platform or live chat software. The regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Many federal, state, and foreign government bodies and agencies have adopted, or are considering adopting, laws and regulations regarding the collection, use, and disclosure of personal information. In the United States, these include rules and regulations promulgated under the authority of federal agencies and state attorneys general and consumer protection agencies. Internationally, virtually every jurisdiction in which we operate has established its own data security and privacy legal framework with which we or our customers must comply, including the Directive 95/46/EC on the protection of individuals with regard to the processing of personal data and on the free movement of such data, or the Data Protection Directive, established in the European Union and data protection legislation of the individual member states subject to the Directive. The Data Protection Directive will likely be replaced in time with the pending European General Data Protection Regulation which may impose additional obligations and risk upon our business. In many jurisdictions enforcement actions and consequences for non-compliance are also rising.

We certify adherence to the U.S. Department of Commerce’s Safe Harbor Privacy Principles and comply with the U.S.-EU and U.S.-Swiss Safe Harbor Frameworks with respect to our customer service platform, however, it is not clear whether or for how long applicable data protection authorities in the European Union will continue to recognize such certification as a valid method of compliance with restrictions set forth in the Data Protection Directive and data protection legislation of individual member states restricting the transfer of data outside of the European Economic Area. Since our live chat software is provided by Zopim, a company organized under the laws of Singapore, certification to the U.S. Department of Commerce’s Safe Harbor Privacy Principles and compliance with the U.S.-EU and U.S.-Swiss Safe Harbor Frameworks with respect to our live chat software is not available (to the extent such safe harbor processes are still recognized). The inability to certify such compliance means that the EU Privacy Directive and other privacy regimes may impose additional obligations to obtain consent from data subjects to transfer personally identifiable information, or PII, outside of the European Union on the part of our EU-based customers that use our live chat software. Additionally, the inability to certify such compliance or otherwise provide acceptable privacy assurances may inhibit the sale and use of our live chat software in the European Union and certain other markets, which could, were it to occur, harm our business and operating results.

In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that either legally or contractually apply to us. Further, our customers may require us to comply with more stringent privacy and data security contractual requirements.

Because the interpretation and application of many privacy and data protection laws are uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our customer service platform or live chat software. If so, in addition to the possibility of fines, lawsuits, and other claims and penalties, we could be required to fundamentally change our business activities and practices or modify our customer service platform or live chat software, which could have an adverse effect on our business. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and security or data security laws, regulations and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business.

Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, and policies that are applicable to the businesses of our customers may limit the use and adoption of, and reduce the overall demand for, our customer service platform or live chat software. Privacy and data security concerns, whether valid or not valid, may inhibit market adoption of our customer service platform or live chat software, particularly in certain industries and foreign countries.

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

There is considerable patent and other intellectual property development activity in our industry. Our future success depends in part on not infringing upon the intellectual property rights of others. From time to time, our competitors or other third parties may claim that we are infringing upon their intellectual property rights, and we may be found to be infringing upon such rights. We may receive claims from third parties, including our competitors, that our customer service platform or live chat software and underlying technology infringe or violate a third party’s intellectual property rights, and we may be found to be infringing upon such rights. We may be unaware of the intellectual property rights of others that may cover some or all of our technology. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our customer service platform or live chat software, or require that we comply with other unfavorable terms. We may also be obligated to indemnify our customers or business partners in connection with any such litigation and to obtain licenses, modify our customer service platform or live chat software, or refund subscription fees, which could further exhaust our resources. In addition, we may incur substantial costs to resolve claims or litigation, whether or not successfully asserted against us, which could include payment of significant settlement, royalty or license fees, modification of our customer service platform or live chat software, or refunds to customers of subscription fees. Even if we were to prevail in the event of claims or litigation against us, any claim or litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and other employees from our business operations. Such disputes could also disrupt our customer service platform or live chat software, adversely impacting our customer satisfaction and ability to attract customers.

Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.

Our agreements with customers and other third parties may include indemnification or other provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of intellectual property infringement, damages caused by us to property or persons, or other liabilities relating to or arising from our customer service platform or live chat software or other acts or omissions. The term of these contractual provisions often survives termination or expiration of the applicable agreement. Large indemnity payments or damage claims from contractual breach could harm our business, operating results, and financial condition. From time to time, customers require us to indemnify or otherwise be liable to them for breach of confidentiality or failure to implement adequate security measures with respect to their data stored, transmitted, or processed by our customer service platform or live chat software. Although we normally contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other current and prospective customers, reduce demand for our customer service platform, and harm our business and operating results.

Our use of “open source” software could negatively affect our ability to sell our customer service platform and live chat software and subject us to possible litigation.

We use open source software in our customer service platform and live chat software and expect to continue to use open source software in the future. We may face claims from others claiming ownership of, or seeking to enforce the terms of, an open source license, including by demanding release of the open source software, derivative works or our proprietary source code that was developed using such software. These claims could also result in litigation, require us to purchase a costly license or require us to devote additional research and development resources to change our customer service platform or live chat software, any of which would have a negative effect on our business and operating results. In addition, if the license terms for the open source software we utilize change, we may be forced to reengineer our customer service platform or live chat software or incur additional costs. Although we have implemented policies to regulate the use and incorporation of open source software into our customer service platform and live chat software, we cannot be certain that we have not incorporated open source software in our customer service platform or live chat software in a manner that is inconsistent with such policies.

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

Our success and ability to compete depend in part upon our intellectual property. We currently have one issued patent and have a limited number of patent applications, none of which may result in an issued patent. We primarily rely on copyright, trade secret and trademark laws, trade secret protection, and confidentiality or license agreements with our employees, customers, partners, and others to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be inadequate.

In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. Our failure to secure, protect, and enforce our intellectual property rights could adversely affect our brand and adversely impact our business.

We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.

We have funded our operations since inception primarily through equity financings, capital lease arrangements, loans for equipment, and subscription payments by our customers for use of our customer service platform. We do not know when or if our operations will generate sufficient cash to fund our ongoing operations. In the future, we may require additional capital to respond to business opportunities, challenges, acquisitions, a decline in the level of subscriptions for our customer service platform, or unforeseen circumstances. We may not be able to timely secure additional debt or equity financing on favorable terms, or at all. Any debt financing obtained by us could involve restrictive covenants relating to financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.

We face exposure to foreign currency exchange rate fluctuations.

We conduct transactions, particularly intercompany transactions, in currencies other than the U.S. dollar. While we have primarily transacted with customers and vendors in U.S. dollars, we have transacted in foreign currencies for subscriptions to our customer service platform and expect to significantly expand the number of transactions with customers for our customer service platform and live chat software that are denominated in foreign currencies in the future. In addition, our international subsidiaries maintain net assets that are denominated in currencies other than the functional operating currencies of these entities. Accordingly, changes in the value of foreign currencies relative to the U.S. dollar can affect our revenue and operating results due to transactional and translational remeasurements that are reflected in our results of operations. As a result of such foreign currency exchange rate fluctuations, it could be more difficult to detect underlying trends in our business and results of operations. In addition, to the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors, the trading price of our common stock could be adversely affected.

We do not currently maintain a program to hedge transactional exposures in foreign currencies. However, in the future, we may use derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place. Moreover, the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments.

Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, value added or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our results of operations.

We do not collect sales and use, value added and similar taxes in all jurisdictions in which we have sales, based on our understanding that such taxes are not applicable. Sales and use, value added, and similar tax laws and rates vary greatly by jurisdiction. Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties, and interest, and we may be required to collect such taxes in the future. Such tax assessments, penalties, and interest, or future requirements may adversely affect our results of operations.

Our international operations subject us to potentially adverse tax consequences.

We generally conduct our international operations through subsidiaries and report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Our intercompany relationships are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. The relevant taxing authorities may disagree with our determinations as to the value of assets sold or acquired or income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our position were not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations. We believe that our financial statements reflect adequate reserves to cover such a contingency, but there can be no assurances in that regard.

If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.

We review our intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. As of September 30, 2014, we had recorded a total of $16.0 million of goodwill and intangible assets related to our acquisition of Zopim. An adverse change in market conditions, particularly if such change has the effect of changing one of our critical assumptions or estimates, could result in a change to the estimation of fair value that could result in an impairment charge to our goodwill or intangible assets. Any such charges may have a material negative impact on our operating results.

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

As of December 31, 2013, we had federal and state net operating loss carryforwards, or NOLs, of $52.9 million and $33.3 million, respectively, due to prior period losses. In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs to offset future taxable income. Our existing NOLs may be subject to limitations arising from previous ownership changes, and if we undergo an ownership, our ability to utilize NOLs could be further limited by Section 382 of the Code. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Code. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. For these reasons, we may not be able to realize a tax benefit from the use of our NOLs, whether or not we attain profitability.

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

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

We may not be able to generate sufficient cash to service our indebtedness.

As of September 30, 2014, we owed an aggregate principal and accrued interest amount of $7.7 million pursuant to a credit facility. Our ability to make scheduled payments or to refinance our debt obligations depends on numerous factors, including the amount of our cash balances and our actual and projected financial and operating performance. We may be unable to maintain a level of cash balances or cash flows sufficient to permit us to pay the principal, premium, if any, and interest on our existing or future indebtedness. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital, or restructure or refinance our indebtedness. We may not be able to take any of these actions, and even if we are, these actions may be insufficient to permit us to meet our scheduled debt service obligations. In addition, in the event of our breach of the credit facility, we may be required to repay any outstanding amounts earlier than anticipated.

Our credit facility contains restrictive and financial covenants that may limit our operating flexibility.

Our credit facility contains certain restrictive covenants that either limit our ability to, or require a mandatory prepayment in the event we, incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, make certain investments, pay dividends, transfer or dispose of assets, amend certain material agreements, and enter into various specified transactions. We, therefore, may not be able to engage in any of the foregoing transactions unless we obtain the consent of our lender or prepay the outstanding amount under the credit facility. The credit facility also contains certain financial covenants, including minimum revenue and cash balance requirements, and financial reporting requirements. Our obligations under the credit facility are secured by all of our property, with limited exceptions. We may not be able to generate sufficient cash flow or sales to meet the financial covenants or pay the principal and interest under the credit facility. Furthermore, our future working capital, borrowings, or equity financing could be unavailable to repay or refinance the amounts outstanding under the credit facility. In the event of a liquidation, our lender would be repaid all outstanding principal and interest prior to distribution of assets to unsecured creditors, and the holders of our common stock would receive a portion of any liquidation proceeds only if all of our creditors, including our lender, were first repaid in full.

We depend and rely upon SaaS technologies from third parties to operate our business and interruptions or performance problems with these technologies may adversely affect our business and operating results.

We rely heavily on hosted SaaS applications from third parties in order to operate critical functions of our business, including billing and order management, enterprise resource planning, and financial accounting services. If these services become unavailable due to extended outages, interruptions, or because they are no longer available on commercially reasonable terms, our expenses could increase, our ability to manage finances could be interrupted and our processes for managing sales of our platform and supporting our customers could be impaired until equivalent services, if available, are identified, obtained, and implemented, all of which could adversely affect our business.

Changes in laws and regulations related to the Internet or changes in the Internet infrastructure itself may diminish the demand for our platform, cause us to incur additional expenses or otherwise have a negative impact on our business.

The future success of our business depends upon the continued use of the Internet as a primary medium for commerce, communication, and business applications. Federal, state, or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the Internet as a commercial medium. Changes in these laws or regulations could require us to modify our platform in order to comply with these changes or substantially increase costs associated with the operation of our customer service platform and live chat software. Additionally, the adoption of any laws, regulations, or practices limiting Internet neutrality, could allow Internet service providers to block, degrade or interfere with our products or services. These laws, regulations, or practices could decrease the demand for, or the usage of, our products and services, increase our cost of doing business and adversely affect our operating results. In addition, government agencies or private organizations have imposed and may impose additional taxes, fees, or other charges for accessing the Internet or commerce conducted via the Internet. These laws or charges could limit the growth of Internet-related commerce or communications generally, or result in reductions in the demand for Internet-based platforms and services such as ours. In addition, the use of the Internet as a business tool could be adversely affected due to delays in the development or adoption of new standards and protocols to handle increased demands of Internet activity, security, reliability, cost, ease-of-use, accessibility, and quality of service. The performance of the Internet and its acceptance as a business tool has been adversely affected by “viruses,” “worms,” and similar malicious programs and the Internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure. If the use of the Internet is adversely affected by these issues, demand for our customer service platform and live chat service could decline.

Catastrophic events may disrupt our business.

Our corporate headquarters are located in San Francisco, California and we operate or utilize data centers that are located in North America, Europe, and Asia. Key features and functionality of our customer service platform are enabled by third parties that are headquartered in California and operate or utilize data centers in the United States and Europe. Additionally, we rely on our network and third-party infrastructure and enterprise applications, internal technology systems, and our website for our development, marketing, operational support, hosted services, and sales activities. In the event of a major earthquake, hurricane, or catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war, or terrorist attack, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our application development, lengthy interruptions in our platform, breaches of data security, and loss of critical data, all of which could have an adverse effect on our future operating results.

Risks Related to Ownership of Our Common Stock

Our stock price may be volatile or may decline regardless of our operating performance resulting in substantial losses for our stockholders.

The trading price of our common stock is likely to be volatile and could fluctuate widely regardless of our operating performance. The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

—	actual or anticipated fluctuations in our operating results;

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

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

—	ratings changes by any securities analysts who follow our company;

—	announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;

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

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

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

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

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

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

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

—	any major change in our board of directors or management;

—	sales of shares of our common stock by us or our stockholders;

—	lawsuits threatened or filed against us; and

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

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

Our directors, officers, and principal stockholders beneficially own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

As of September 30, 2014, our directors, officers, five percent or greater stockholders, and their respective affiliates beneficially owned in the aggregate approximately 57.6%% of our outstanding common stock. As a result, these stockholders have the ability to influence us through this ownership position. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, and approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.

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

The market price of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers and significant stockholders, a large number of shares of our common stock becoming available for sale or the perception in the market that holders of a large number of shares intend to sell their shares. As of September 30, 2014, we had approximately 72.8 million shares of our common stock outstanding. As a result of market stand-off agreements, approximately 60.0 million shares are subject to restrictions on their sale for 180 days after May 14, 2014. In addition, certain of these shares are also subject to lock-up agreements with the underwriters. Goldman, Sachs & Co. and Morgan Stanley & Co. LLC may, in their sole discretion, permit our officers, directors, employees and current stockholders who are subject to lock-up agreements to sell shares prior to the expiration of the lock-up agreements.

Additionally, the shares of common stock subject to outstanding options and restricted stock unit awards under our equity incentive plans and the shares reserved for future issuance under our equity incentive plans will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations.

The holders of an aggregate of approximately 39.2 million shares of our common stock as of September 30, 2014 have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders. We have also registered shares of common stock that we may issue under our employee equity incentive plans. These shares may be sold freely in the public market upon issuance, subject to certain market stand-off or lock-up agreements.

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

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

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

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

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

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

—	establish that our board of directors is divided into three classes, Class I, Class II, and Class III, with each class serving three-year staggered terms;

—	prohibit cumulative voting in the election of directors;

—	provide that our directors may be removed only for cause;

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

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

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any delay or prevention of a change of control transaction or changes in our management could cause the market price of our common stock to decline.

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

We are an “emerging growth company,” as defined in the federal securities laws, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We will remain an “emerging growth company” until the last day of the fiscal year following the five-year anniversary of the completion of our IPO, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the end of the second quarter of a fiscal year prior to the five-year anniversary, we would cease to be an “emerging growth company” as of the following December 31.

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

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of the exchanges and other markets upon which our common stock is listed, and other applicable securities rules and regulations. Compliance with these rules and regulations increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. We are required to disclose changes made in our internal control and procedures on a quarterly basis and we are required to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the first fiscal year beginning after the effective date of our initial public offering. However, our independent registered public accounting firm is not required to formally audit and attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the later of the year following our first annual report required to be filed with the SEC, or the date we are no longer an “emerging growth company.” As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results. Although we have already hired additional employees to assist us in complying with these requirements, we may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses.

In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs, and making some activities more time consuming. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest substantial resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from business operations to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected.

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

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

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

We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation, and expansion of our business, and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, our ability to pay cash dividends on our common stock is restricted by our current credit facility and may be prohibited or limited by the terms of our current and future debt financing arrangements. Any return to stockholders will therefore be limited to the increase, if any, of our stock price, which may never occur.

If securities or industry analysts do not continue to publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If industry analysts cease coverage of us, the trading price for our common stock would be negatively affected. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline.

Our charter documents designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or other employees.

Our certificate of incorporation and bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (A) any derivative action or proceeding brought on our behalf, (B) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (C) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws, or (D) any action asserting a claim against us governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the provisions of our certificate of incorporation described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees. Alternatively, if a court were to find these provisions of our certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, or results of operations.

Item 2. Unregistered Sales of Equity Securities

Sale of Unregistered Securities

On June 23, 2014, we issued 111,333 shares of common stock to SVB Financial Group, pursuant to the cashless net exercise of an outstanding warrant to purchase 125,000 shares of common stock at a purchase price of $1.92 per share. The number of shares issued upon the net exercise of SVB Financial Group’s warrant was reduced by 13,667 shares to effect the net exercise of the warrant in accordance with its terms. The shares of common stock issued pursuant to the cashless net exercise of the warrant were issued in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.

Use of Proceeds from Public Offerings of Common Stock

On May 14, 2014, our registration statement on Form S-1 (File No. 333-195176) was declared effective by the SEC for our IPO whereby we registered an aggregate of 12,777,777 shares of our common stock, including 1,666,666 shares of our common stock registered for sale by us upon the full exercise of the underwriters’ over-allotment option. There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the SEC on May 16, 2014 pursuant to Rule 424(b) of the Securities Act. In June 2014 we used $20.0 million of the net proceeds from the IPO to repay the outstanding balance under our revolving line of credit. We invested the remaining funds received in registered money market funds. Following the sale of the shares in connection with the closing of our initial public offering, the offering terminated.

Item 6. Exhibits.

The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Quarterly Report.

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.

	Zendesk, Inc.
Date: November 6, 2014	By:	/s/ Alan Black
		Alan Black
		Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EXHIBIT

INDEX

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit
10.1	Lease Agreement between the Registrant and 1019 Market St. Property, LLC, dated as of September 6, 2013, as amended.	Filed herewith
10.2	2014 Employee Stock Purchase Plan, as amended.	Filed herewith
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.	Filed herewith
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.	Filed herewith
32.1*	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.	Furnished herewith
32.2*	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.	Furnished herewith
101.INS	XBRL Instance Document	Filed herewith
101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith

The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

Exhibit 10.1

1019 MARKET STREET

LEASE AGREEMENT

1019 MARKET ST. PROPERTY, LLC,

a Delaware limited liability company,

as Landlord,

and

ZENDESK, INC.,

a Delaware corporation,

as Tenant

SUMMARY OF BASIC LEASE INFORMATION

This Summary of Basic Lease Information (“Summary”) is hereby incorporated into and made a part of the attached Lease Agreement. Each reference in the Lease Agreement to any term of this Summary shall have the meaning as set forth in this Summary for such term. In the event of a conflict between the terms of this Summary and the Lease Agreement, the terms of the Lease Agreement shall prevail. Any capitalized terms used herein and not otherwise defined herein shall have the meaning as set forth in the Lease Agreement.

TERMS OF LEASE (References are to the Lease Agreement)		DESCRIPTION

1. Lease Date:		September 6, 2013

2. Landlord:		1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company

3. Address of Landlord (Section 24.17):		c/o Westport Capital Partners LLC 2121 Rosecrans Ave., Suite 4325 El Segundo, California 90245 Attn: Wm. Gregory Geiger and c/o Cannae Partners 703 Market Street, Suite 400 San Francisco, California 94103 Attn: Jay Atkinson And an additional copies to: c/o Westport Capital Partners LLC 40 Danbury Rd. Wilton, Connecticut 06897 Attn: Marc Porosoff and Kennerly, Lamishaw & Rossi LLP 707 Wilshire Boulevard, Suite 1400 Los Angles, California 90017 Attn: William J. Birney, Esq.

4. Tenant:		ZENDESK, INC., a Delaware corporation

(i)

5. Address of Tenant (Section 24.17):		989 Market Street, Suite 300 San Francisco, California 94103 Attn: Ainsley Hill with a copy to: 989 Market Street, Suite 300 San Francisco, California 94103 Attn: Alan Black and a copy to: Goodwin Procter LLP 601 S. Figueroa Street, 41st Floor Los Angeles, California 90017 Attn: Douglas A. Praw, Esq. (Prior to Lease Commencement Date) And 1019 Market Street San Francisco, California 94103 Attn: Ainsley Hill with a copy to: 1019 Market Street San Francisco, California 94103 Attn: Alan Black and a copy to: Goodwin Procter LLP 601 S. Figueroa Street, 41st Floor Los Angeles, California 90017 Attn: Douglas A. Praw, Esq. (After Lease Commencement Date)

6. Premises (Article 1):		Approximately 72,933 rentable square feet of space, comprising the entire office portion of the Building located at 1019 Market Street, San Francisco, California, as depicted in the floor plans attached hereto as Exhibit A .

7. Term (Article 2).

7.1 Lease Term:		Approximately eight (8) years and five (5) months.

7.2 Lease Commencement Date:		The earliest to occur of (i) the date upon which Tenant first commences to conduct business in the Premises, (ii) the date upon which a certificate of occupancy (or its legal equivalent) is issued for the Premises by the City of San Francisco, (iii) March 5, 2014, or (iv) the date that is one hundred fifty (150) days after the Effective Date, subject to the provisions of the Tenant Work Letter, attached hereto as Exhibit B , including Landlord Caused Delay.

7.3 Lease Expiration Date:		The last day of the one hundred first (101st) full calendar month following the Lease Commencement Date.

7.4 Amendment to Lease:		Subject to Article 2 of the Lease Agreement, Landlord and Tenant may confirm the Lease Commencement Date and Lease Expiration Date in an Amendment to Lease ( Exhibit C ).

(ii)

7.5 Option Term:		One five (5) year Option Term in accordance with the Extension Option Rider attached to the Lease.

8. Base Rent (Article 3):


Months of Lease Term	Annual Base Rent		Monthly Installment of Base Rent		Annual Rental Rate per Rentable Square Foot
1 - 12*	$	3,373,151.25	$	281,095.94	$	46.25
13 - 24	$	3,474,528.12	$	289,544.01	$	47.64
25 - 36	$	3,578,822.31	$	298,235.19	$	49.07
37 - 48	$	3,686,033.82	$	307,169.49	$	50.54
49 - 60	$	3,796,162.65	$	316,346.89	$	52.05
61 - 72	$	3,910,667.46	$	325,888.96	$	53.62
73 - 84	$	4,027,360.26	$	335,613.36	$	55.22
85 - 96	$	4,148,429.04	$	345,702.42	$	56.88
97 - 101	$	4,273,144.47	$	356,095.37	$	58.59

*	Month 1 through 5 subject to abatement as provided in Section 3.2 of the Lease Agreement

9. Additional Rent (Article 4):

9.1 Expense Base Year		Calendar year 2014.

9.2 Utilities Base Year		Calendar year 2014.

9.3 Tenant’s Share of Direct Expenses and Utilities Costs		96.70% (i.e., 72,933 rentable square feet within the Premises / 75,423 rentable square feet within the Building).

10. Letter of Credit Amount:		$3,608,344.90, subject to reduction as provided in the Letter of Credit Rider.

11. Tenant Improvement Allowance:		$3,537,250.50, payable in accordance with to Exhibit B .

12. Brokers ( Section 24.23 ):		The CAC Group, representing Landlord and Cornish & Carey Commercial Newmark Knight Frank, representing Tenant

13. Effective Date		The date on which the Substantial Completion of the Storefront Work occurs in accordance with Exhibit B .

(iii)

TABLE OF CONTENTS

	Page

ARTICLE 1 REAL PROPERTY, BUILDING AND PREMISES		1

1.1 Real Property, Building and Premises		1
1.2 Condition of Premises		1
1.3 Rentable Square Feet		1

ARTICLE 2 LEASE TERM		2

ARTICLE 3 BASE RENT		2

3.1 Base Rent		2
3.2 Conditional Abatement of Base Rent		3

ARTICLE 4 ADDITIONAL RENT		3

4.1 Additional Rent		3
4.2 Definitions		4
4.3 Calculation and Payment of Additional Rent		9
4.4		9
4.5 Taxes and Other Charges for Which Tenant Is Directly Responsible		11
4.6 Late Charges		11
4.7 Tenant’s Audit Rights		11

ARTICLE 5 USE OF PREMISES		12

ARTICLE 6 SERVICES AND UTILITIES		13

6.1 Standard Tenant Services		13
6.2 Overstandard Tenant Use		14
6.3 Interruption of Use		15
6.4 Access to Premises		15
6.5 Janitorial		15
6.6 Additional Services		16

ARTICLE 7 REPAIRS		16

7.1 Tenant’s Repairs		16
7.2 Landlord’s Repairs		16
7.3 Tenant’s Right to Repair		17

ARTICLE 8 ADDITIONS AND ALTERATIONS		18

8.1 Landlord’s Consent to Alterations		18
8.2 Manner of Construction		19
8.3 Landlord’s Property		20

(iv)

ARTICLE 9 COVENANT AGAINST LIENS			20

ARTICLE 10 INDEMNIFICATION AND INSURANCE			21

10.1 Indemnification and Waiver			21
10.2 Tenant’s Compliance with Landlord’s Fire and Casualty Insurance			22
10.3 Tenant’s Insurance			22
10.4 Subrogation			23
10.5 Additional Insurance Obligations			24

ARTICLE 11 DAMAGE AND DESTRUCTION			24

11.1 Repair of Damage to Premises by Landlord			24
11.2 Landlord’s Option to Repair			25
11.3 Damage at the End of Lease Term			26
11.4 Waiver of Statutory Provisions			27
11.5 Abatement of Rent When Tenant Is Prevented From Using Premises			27

ARTICLE 12 CONDEMNATION			28

12.1 Permanent Taking			28
12.2 Temporary Taking			28

ARTICLE 13 COVENANT OF QUIET ENJOYMENT			29

ARTICLE 14 ASSIGNMENT AND SUBLETTING			29

14.1 Transfers			29
14.2 Landlord’s Consent			30
14.3 Transfer Premium			31
14.4 Landlord’s Option as to Subject Space			31
14.5 Effect of Transfer			32
14.6 Additional Transfers			32
14.7 Affiliated Companies/Restructuring of Business Organization			32

ARTICLE 15 SURRENDER; OWNERSHIP AND REMOVAL OF TRADE FIXTURES			33

15.1 Surrender of Premises			33
15.2 Removal of Tenant Property by Tenant			33

ARTICLE 16 HOLDING OVER			34

ARTICLE 17 ESTOPPEL CERTIFICATES			34

ARTICLE 18 SUBORDINATION			35

(v)

ARTICLE 19 TENANT’S DEFAULTS; LANDLORD’S REMEDIES; LANDLORD DEFAULTS			35

19.1 Events of Default by Tenant			35
19.2 Landlord’s Remedies Upon Default			36
19.3 Payment by Tenant			37
19.4 Security for Performance of Tenant’s Obligations			37
19.5 Sublessees of Tenant			38
19.6 Waiver of Default			38
19.7 Payment of Rent and Security Deposit After Default			38
19.8 Efforts to Relet			38
19.9 Waiver of Reinstatement			38
19.10 Default by Landlord			39

ARTICLE 20 SIGNS			39

20.1 Building Standard Signage			39
20.2 Exterior Signage			39
20.3 Transferability			40
20.4 Maintenance/Removal			40
20.5 Use of Exterior Portion of the Building			40

ARTICLE 21 COMPLIANCE WITH LAW			41

ARTICLE 22 ENTRY BY LANDLORD			41

ARTICLE 23 ROOFTOP RIGHTS			42

23.1 Telecommunications Equipment			42
23.2 Rooftop Deck			43

ARTICLE 24 MISCELLANEOUS PROVISIONS			43

24.1 Terms; Captions			43
24.2 Binding Effect			43
24.3 No Waiver			43
24.4 Modification of Lease			44
24.5 Transfer of Landlord’s Interest			44
24.6 Prohibition Against Recording			44
24.7 Landlord’s Title; Air Rights			44
24.8 Relationship of Parties			45
24.9 Application of Payments			45
24.10 Time of Essence			45
24.11 Partial Invalidity			45
24.12 No Warranty			45
24.13 Landlord Exculpation			45

(vi)

24.14 Entire Agreement			45
24.15 Right to Lease			46
24.16 Force Majeure			46
24.17 Notices			46
24.18 Joint and Several			47
24.19 Authority			47
24.20 Attorneys’ Fees; Landlord Bankruptcy Proceedings			47
24.21 Governing Law			47
24.22 Submission of Lease			47
24.23 Brokers			47
24.24 Independent Covenants			47
24.25 Confidentiality			48
24.26 Property Management			48
24.27 Landlord Renovations			48
24.28 Prohibited Party Transactions			49
24.29 Certified Access Specialist (CASp) Inspection			49
24.30 Consent and Approvals			49
24.31 Counterparts			50

EXHIBITS



A		FLOOR PLANS OF THE PREMISES

B		TENANT WORK LETTER

C		AMENDMENT TO LEASE

D		RULES AND REGULATIONS

E		FORM OF TENANT’S ESTOPPEL CERTIFICATE

F-1		APPROXIMATE LOCATION OF TENANT’S BUILDING EXTERIOR SIGNS

F-2		RETAIL SIGNAGE LOCATION

G		JANITORIAL SCHEDULE

H		HVAC DEPRECIATION SCHEDULE

I		PROHIBITED USES

(vii)

EXTENSION OPTION RIDER

LETTER OF CREDIT RIDER

(viii)

INDEX OF DEFINED TERMS


	Page

Abated Rent		3
Abatement Event		27
Abatement Period		3
Acceptable Changes		18
Accountant		12
Additional Rent		3
Affiliates		32
Alteration Supervision Fee		18
Alterations		18
Base Operating Expenses		12
Base Rent		2
Base, Shell, and Core		1
BOMA		1
Brokers		47
Building		1
Building Exterior Signs		39
Business Hours		15
Calendar Year		4
Claims		21
Codes		49
Comparable Buildings		1
Cost Pools		5
Damage Termination Date		26
Damage Termination Notice		26
Direct Expenses		4
Eligibility Period		27
Estimate		10
Estimate Statement		10
Estimated Excess		10
Estimated Repair Period		25
Excess		10
Excluded Claims		21
Expense Base Year		4
Expense Year		4
Force Majeure		46
Hazardous Material		13
Holidays		15
HVAC		13
Interest Rate		11
Landlord		1
Landlord Objection Notice		17
Landlord Parties		21
Landlord’s Damage Notice		25

(ix)

Laws			41
Lease Commencement Date			2
Lease Expiration Date			2
Lease Term			2
Lease Year			2
Mortgagee			35
Notices			46
Operating Expenses			4
Original Tenant			40
Outside Repair Period			17
Overlap Period			28
Premises			1
Project			1
Proposition 13			8
Real Property			1
Recapture Notice			31
Renovations			48
Rent			2
Review Period			11
Roof Deck			43
Special Use Improvements			20
Statement			10
Subject Space			29
Subsequent Year			7
Systems and Equipment			7
Tax Expenses			7
Telecommunications Equipment			42
Tenant			1
Tenant Damage Event			25
Tenant’s Share			9
Transfer Notice			29
Transfer Premium			31
Transferee			29
Transfers			29
Utilities Base Year			9
Utilities Costs			9
Work Letter			1

(x)

LEASE AGREEMENT

This Lease Agreement, which includes the preceding Summary attached hereto and incorporated herein by this reference (the Lease Agreement and Summary to be known sometimes collectively hereafter as the “ Lease ”), dated as of the date set forth in Section 1 of the Summary, is made by and between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“ Landlord ”), and ZENDESK, INC., a Delaware corporation (“ Tenant ”).

ARTICLE 1

REAL PROPERTY, BUILDING AND PREMISES

1.1 Real Property, Building and Premises . Upon and subject to the terms, covenants and conditions hereinafter set forth in this Lease, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises set forth in Section 6 of the Summary (the “ Premises ”), which Premises constitutes the entire office portion of the building (the “ Building ”) located at 1019 Market Street, San Francisco, California. The outlines of the floor plans of the Premises is set forth in Exhibit A attached hereto and incorporated herein by this reference. The Building and the land upon which the Building is situated are herein sometimes collectively referred to as the “ Real Property ” or “ Project ” Tenant is hereby granted the right to the nonexclusive use of the common corridors and hallways, stairwells, elevators, restrooms and other public or common areas located in the Building. The common areas shall be maintained and operated in a manner consistent with that provided by landlords of the similarly renovated office buildings in the mid-Market corridor of the City of San Francisco between 5th Street and 11th Street, which are institutionally owned (the “ Comparable Buildings ”) by Landlord or its designated property manager and the use thereof shall be subject to such reasonable and non-discriminatory rules, regulations and restrictions as Landlord may make from time to time Landlord reserves the right to make alterations or additions to or to change the location of elements of the Real Property and the common areas thereof. However, Landlord shall not make alterations or additions that impair Tenant’s use of, or access to, the Premises and/or the Building.

1.2 Condition of Premises . Except as expressly set forth in this Section 1.2 and in the Tenant Work Letter attached hereto as Exhibit B and incorporated herein by this reference (the “ Work Letter ”), Landlord shall not be obligated to provide or pay for any improvement, remodeling or refurbishment work or services related to the improvement, remodeling or refurbishment of the Premises, Building or Real Property, and Tenant shall accept the same in its “As Is” condition on the Lease Commencement Date.

1.3 Rentable Square Feet . For purposes hereof, the “rentable square feet” of the Premises and the Building have been calculated by Landlord pursuant to the Standard Method for Measuring Floor Area in Office Buildings, ANSI Z65.1 1996 (“ BOMA ”). The parties hereby stipulate that the Premises contain the rentable square feet set forth in Section 6.1 of the Summary, and such square footage amount is not subject to adjustment or remeasurement by Landlord or Tenant. Accordingly, there shall be no adjustment in the Base Rent or other amounts set forth in this Lease which are determined based upon rentable square feet of the Premises.

-1-

ARTICLE 2

LEASE TERM

The terms and provisions of this Lease shall be effective as of the date of this Lease except for the provisions of this Lease relating to the payment of Rent. The term of this Lease (the “ Lease Term ”) shall be as set forth in Section 7.1 of the Summary and shall commence on the date (the “ Lease Commencement Date ”) set forth in Section 7.2 of the Summary (subject, however, to the terms of the Tenant Work Letter, including any Landlord Caused Delay), and shall terminate on the date (the “ Lease Expiration Date ”) set forth in Section 7.3 of the Summary, unless this Lease is sooner terminated as hereinafter provided. For purposes of this Lease, the term “ Lease Year ” shall mean each consecutive twelve (12) month period during the Lease Term; provided , however , that the first Lease Year shall commence on the Lease Commencement Date and end and end on the last day of the eleventh month thereafter and the second and each succeeding Lease Year shall commence on the first day of the next calendar month; and further provided that the last Lease Year shall end on the Lease Expiration Date. In the event that the Lease Commencement Date is a date which is other than the date set forth in Section 7.2(iii) of the Summary, within a reasonable period of time after the date Tenant takes possession of the Premises or receives the certificate of occupancy for the Premises, Landlord shall deliver to Tenant an Amendment to Lease in the form as set forth in Exhibit C attached hereto and incorporated herein by this reference, wherein the parties shall specify such different Lease Commencement Date and the Lease Expiration Date, and which Amendment to Lease Tenant shall execute and return to Landlord within ten (10) days of receipt thereof. Notwithstanding anything herein to the contrary, in no event shall the Lease Commencement Date be a date which is later than the date set forth in Section 7.2(iii) of the Summary. Subject to Section 6.1 of the Work Letter, Landlord shall give Tenant nonexclusive access to the Premises during a period of fourteen (14) days prior to the Lease Commencement Date for the purposes of Tenant’s installing in the Premises voice and data cabling and outlets, telephone equipment and furniture, fixtures and equipment. During such access period prior to the Commencement Date, (i) Tenant covenants that Tenant, its employees, agents and contractors shall not interfere with or cause any delay in Landlord’s completion of the Landlord Work; (ii) Tenant’s access and use of the Premises prior to the Lease Commencement Date shall be subject to all provisions of this Lease; and (iii) Tenant shall not conduct any business in the Premises and none of Tenant’s employees shall office in the Premises. Such access period shall not advance the Expiration Date of this Lease.

ARTICLE 3

BASE RENT

3.1 Base Rent . Tenant shall pay, without notice or demand, to Landlord or Landlord’s agent at the management office of the Building, or at such other place as Landlord may from time to time designate in writing, in currency or a check for currency which, at the time of payment, is legal tender for private or public debts in the United States of America, pursuant to a monthly invoice sent to Tenant, base rent (“ Base Rent ”) as set forth in Section 8 of the Summary, payable in equal monthly installments as set forth in Section 8 of the Summary in advance on or before the first (1 ^st ) day of each and every month during the Lease Term, without

-2-

any setoff or deduction whatsoever. The Base Rent for the first full month of the Lease Term (after the abatement period set forth in Section 3.2 below) shall be paid at the time of Tenant’s execution of this Lease. If any rental payment date (including the Lease Commencement Date) falls on a day of the month other than the first (1 ^st ) day of such month or if any rental payment is for a period which is shorter than one month, then the rental for any such fractional month shall be a proportionate amount of a full calendar month’s rental based on the proportion that the number of days in such fractional month bears to the number of days in the calendar month during which such fractional month occurs. All other payments or adjustments required to be made under the terms of this Lease that require proration on a time basis shall be prorated on the same basis.

3.2 Conditional Abatement of Base Rent . Notwithstanding anything to the contrary contained in Section 3.1 above and provided that Tenant faithfully performs all of the terms and conditions of this Lease during the Abatement Period (as defined below), Landlord hereby agrees to abate Tenant’s obligation to pay Tenant’s monthly Base Rent (the “ Abated Rent ”) for the first five (5) full months of the Lease Term (the “ Abatement Period ”), which total amount of Abated Rent is $1,405,479.70 (i.e., 5 months x $281,095.94 per month = $1,405,479.70). During the Abatement Period, Tenant shall remain responsible for the payment of all of its other monetary obligations under this Lease. If at any time during the Abatement Period an uncured default by Tenant occurs, then the abatement of Base Rent provided for in this Section 3.1 shall immediately become void, the Base Rent payable by Tenant to Landlord shall immediately equal the amount set forth in Section 8 of the Summary without abatement, and in the event such default results in the early termination of this Lease pursuant to the provisions of Section 19.1 , then as a part of the recovery set forth in Section 19.2 below, Landlord shall be entitled to the recovery of the Abated Rent.

ARTICLE 4

ADDITIONAL RENT

4.1 Additional Rent . In addition to paying the Base Rent specified in Article 3 above, Tenant shall pay as additional rent the sum of the following: (i) Tenant’s Share (as such term is defined below) of the annual Direct Expenses which are in excess of the amount of Direct Expenses applicable to the Expense Base Year; plus (ii) Tenant’s Share of the annual Utilities Costs which are in excess of the amount of Utilities Costs applicable to the Utilities Base Year. Such additional rent, together with any and all other amounts payable by Tenant to Landlord pursuant to the terms of this Lease (including, without limitation, pursuant to Article 6 ), shall be hereinafter collectively referred to as the “ Additional Rent .” The Base Rent and Additional Rent are herein collectively referred to as the “ Rent .” All amounts due under this Article 4 as Additional Rent shall be payable for the same periods and in the same manner, time and place as the Base Rent. Without limitation on other obligations of Tenant which shall survive the expiration of the Lease Term, the obligations of Tenant to pay the Additional Rent provided for in this Article 4 shall survive the expiration of the Lease Term.

-3-

4.2 Definitions . As used in this Article 4, the following terms shall have the meanings hereinafter set forth:

4.2.1 “ Calendar Year ” shall mean each calendar year in which any portion of the Lease Term falls, through and including the calendar year in which the Lease Expiration Date.

4.2.2 “ Expense Base Year ” shall mean the year set forth in Section 9.1 of the Summary.

4.2.3 “ Direct Expenses ” shall mean “ Operating Expenses ” and “ Tax Expenses . ”

4.2.4 “ Expense Year ” shall mean each Calendar Year.

4.2.5 “ Operating Expenses ” shall mean all expenses, costs and amounts of every kind and nature which Landlord shall pay during any Expense Year because of or in connection with the ownership, management, maintenance, repair, replacement, restoration or operation of the Building and Real Property, including, without limitation, any amounts paid for: (i) the cost of operating, maintaining, repairing, renovating and managing the utility systems, mechanical systems, sanitary and storm drainage systems, any elevator systems and all other “Systems and Equipment” (as defined in Section 4.2.6 of this Lease), and the cost of supplies and equipment and maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections (except for those incurred with respect to the installation of Tenant’s or other occupant’s improvements in the Building or incurred in renovating or otherwise improving vacant space in the Building), and the cost of contesting the validity or applicability of any governmental enactments which may affect Operating Expenses, and the costs incurred in connection with implementation and operation of a transportation system management program or similar program; (iii) the cost of insurance carried by Landlord, in such amounts as Landlord may reasonably determine or as may be required by any mortgagees or the lessor of any underlying or ground lease affecting the Real Property and/or the Building; (iv) the cost of landscaping, relamping, supplies, tools, equipment and materials, and all fees, charges and other costs (including consulting fees, legal fees and accounting fees) incurred in connection with the management, operation, repair and maintenance of the Building and Real Property; (v) alarm and security services; (vi) any equipment rental agreements or management agreements (including the cost of any reasonable management fee and the fair rental value of any office space provided thereunder); (vii) wages, salaries and other compensation and benefits of all persons actually engaged in the operation, management, maintenance or security of the Building and Real Property, and employer’s Social Security taxes, unemployment taxes or insurance, and any other taxes which may be levied on such wages, salaries, compensation and benefits (but not any of Landlord’s general corporate overhead and general administrative expenses); (viii) payments under any easement, license, operating agreement, declaration, restrictive covenant, underlying or ground lease (excluding rent), or instrument pertaining to the sharing of costs by the Building or Real Property; (ix)

-4-

the cost of janitorial service for the Project, but excluding janitorial services for the premises, window cleaning, trash removal, replacement of wall and floor coverings, ceiling tiles and fixtures in lobbies, corridors, restrooms and other common or public areas or facilities, maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (x) 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 Building and Real Property; (xi) the cost of any capital improvements or other costs (I) which are intended as a labor-saving device or to materially reduce the costs associated with the operation or maintenance of the Building and Real Property, (II) made to the Building or Real Property after the Lease Commencement Date that are required under any governmental law or regulation, or (III) which are reasonably determined by Landlord to be in the best interests of the Building and/or the Real Property; provided, however, that if any such cost described in (I), (II) or (III) above, is a capital expenditure, such cost shall be amortized (including interest on the unamortized cost) over its useful life as Landlord shall reasonably determine and (x) costs of pest control, if any, undertaken by Landlord in the Common Areas, but excluding therefrom any pest control costs to the extent such work is conducted with regard to pests and vermin located in, or originating from, the retail space in the Building. If Landlord is not furnishing any particular work or service (the cost of which, if performed by Landlord, would be included in Operating Expenses) to a tenant who has undertaken to perform such work or service in lieu of the performance thereof by Landlord, Operating Expenses shall be deemed to be increased by an amount equal to the additional Operating Expenses which would reasonably have been incurred during such period by Landlord if it had at its own expense furnished such work or service to such tenant. If the Building is less than one hundred percent (100%) occupied during all or a portion of any Expense Year (including the Expense Base Year), Landlord shall make an appropriate adjustment to the variable components of Operating Expenses for such year or applicable portion thereof, employing sound accounting and management principles, to determine the amount of Operating Expenses that would have been paid had the Building been one hundred percent (100%) occupied; and the amount so determined shall be deemed to have been the amount of Operating Expenses for such year, or applicable portion thereof. Each time Landlord provides Tenant with an actual and/or estimated statement of Operating Expenses, such statement shall be itemized on a line item by line item basis, showing the applicable expense of the applicable year and the year prior to the applicable year. The parties acknowledge that Tenant is not anticipated to be conducting business in the entire Premises during the entirety of the Expense Base Year, so that a gross-up of the Operating Expenses for the Expense Base Year will likely be required pursuant to the above. Without limitation of the foregoing, for purposes of extrapolating the Operating Expenses for the Expense Base Year (notwithstanding the fact that Tenant did not conduct business in the entirety of the Premises for the entire Base Expense Year) Landlord’s gross-up of the actual Operating Expenses shall take into account the actual costs incurred for those floors of the Premises that were fully operational during the Base Expense Year and shall, based on discussions with Tenant and Landlord’s property manager, extrapolate the variable components of the Operating Expenses for the Building during the Expense Base Year based on the number of floors of the Premises that were fully operations during the Expense Base Year. For purposes of this Section Landlord shall consider a particular floor of the Premises to be fully operational if Tenant is conducting any business therefrom. (The final grammatical paragraph of Paragraph 4.7 below sets forth Tenant’s rights to audit Landlord’s calculation of the Operating Expenses for the Base Year, including the gross-up of the same pursuant to the above, as applicable).

Landlord shall have the right, from time to time, in its discretion, but with prior written notice to Tenant, to equitably allocate some or all of the Direct Expenses (and/or Utilities Costs) between the office and retail portions of the Building for purposes of determining Direct Expenses (and/or Utilities Costs) and/or the provision of various services and amenities thereto (the “ Cost Pools ”).

-5-

Notwithstanding anything to the contrary set forth in this Article 6 , when calculating Operating Expenses for the Expense Base Year, Operating Expenses shall exclude market-wide labor-rate increases due to extraordinary circumstances, including, but not limited to, boycotts and strikes and costs relating to capital improvements or expenditures.

Notwithstanding the foregoing, Operating Expenses shall not, however, include: (A) costs of leasing commissions, attorneys’ fees and other costs and expenses incurred in connection with negotiations or disputes with present or prospective tenants or other occupants of the Building; (B) costs (including permit, license and inspection costs) incurred in renovating or otherwise improving, decorating or redecorating rentable space for other tenants or vacant rentable space; (C) costs incurred due to the violation by Landlord of the terms and conditions of any lease of space in the Building; (D) costs of overhead or profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for services in or in connection with the Building to the extent the same exceeds the costs of overhead and profit increment included in the costs of such services which could be obtained from third parties on a competitive basis; (E) except as otherwise specifically provided in this Section 4.2.5 , costs of interest on debt or amortization on any mortgages, and rent payable under any ground lease of the Real Property; (F) Utilities Costs; (G) contributions to operating expense reserves and any bad debt loss, rent loss or other reserve for bad debt or rent loss; (H) any costs incurred to test, survey, clean up, contain, abate or remove any environmental or hazardous waste or materials, including without limitation, asbestos containing materials, from the Building, any other building in the Project or the common areas, or to remedy any breach or violation of any environmental laws; (I) interest, fines or penalties for any late payments by Landlord not due to the act or neglect of Tenant or its agents, contractors or employees; (J) “in-house” legal and/or account fees; (K) legal fees, late charges and penalties incurred in connection with Landlord’s noncompliance with or violation of law; (L) costs resulting from the negligence or willful misconduct of Landlord, its employees, agents and/or contractors and not reimbursed by insurance; (M) advertising and promotional expenses and costs associated with maintaining Landlord’s corporate (or other entity) existence and other overhead and administrative costs of Landlord not directly incurred in the operation and maintenance of the Building or the Project; (N)) any entertainment, dining or travel expenses of Landlord for any purpose: (O) costs incurred in connection with the making of repairs or replacements which are the obligation of any other tenant or occupant; (P) political contributions or contributions to charitable organizations; (Q) costs or fees relating to the defense of Landlord’s title to or interest in the Project, or any part thereof; (R) costs (including, without limitation, fines, penalties, interest, and costs of repairs, replacements, alterations and/or improvements) incurred in bringing the Real Property into compliance with building codes and other applicable Laws in effect as of the Lease Commencement Date and as interpreted by applicable governmental authorities as of such date, including, without limitation, any costs to correct building code violations pertaining to the Building or any other improvements to the Real Property, to the extent such violations exist as of the Lease Commencement Date under any applicable building codes in effect and as interpreted by applicable governmental authorities as of such date; (S) depreciation or amortization of the Building or its components or the common area; (T) any costs in connection with an expansion of the rentable area of the Building or adding any new Building amenities, or any costs incurred in connection with any additions to the common areas, including the purchase of additional land or other development rights; (U) the cost of any item or service for which Tenant separately reimburses Landlord or pays to third parties, or that Landlord provides selectively to one or more, but not all Tenants of the Building,

-6-

other than Tenant, whether or not Landlord is reimbursed by such other tenant(s), including, without limitation, the actual cost of any special electrical, heating, ventilation or air conditioning required by any tenant that exceeds the standard for the Building; (V) the cost of correcting defects in the initial construction in the Building or any common area; (W) the costs of leasing equipment or other items which if purchased would constitute a capital expenditure; (X) the cost of Landlord in performing work expressly provided in this Lease to be at Landlord’s expense; and (Y) any personal property taxes of Landlord for equipment or items not used directly in the operation or maintenance of the Building or the Common Area.

If, in any calendar year following the Base Year (a “ Subsequent Year ”), a new type of expense item (e.g. earthquake insurance) is included in Operating Expenses which was not included in the Base Year Operating Expenses, then the cost of such new type of item shall be added to the Base Year Operating Expenses for purposes of determining the Operating Expenses payable under this Lease for such Subsequent Year and no additional amounts shall be paid by Tenant as a result of the addition of the new type of expense item except to the extent of Tenant’s Share of amounts in excess of the Base Year amount for such item. During each Subsequent Year, the same amount shall continue to be included in the computation of Operating Expenses for the Base Year, resulting in each such Subsequent Year Operating Expenses only including the increase in the cost of such new item over the Base Year, as so adjusted. However, if in any Subsequent Year thereafter, such new item is not included in Operating Expenses, no such addition shall be made to Base Year Operating Expenses. Conversely, as reasonably determined by Landlord, when an expense item that was originally included in the Base Year Operating Expenses is, in any Subsequent Year, no longer included in Operating Expenses, then the cost of such item shall be deleted from the Base Year Operating Expenses for purposes of determining the Operating Expenses payable under this Lease for such Subsequent Year and Tenant shall be entitled to a reimbursement to the extent of any over payment pertaining to such item as provided in Section 4.3 below. The same amount shall continue to be deleted from the Base Year Operating Expenses for each Subsequent Year thereafter that the item is not included.

4.2.6 “ Systems and Equipment ” shall mean any plant, machinery, transformers, duct work, cable, wires, and other equipment, facilities, and systems designed to supply heat, ventilation, air conditioning and humidity or any other services or utilities, or comprising or serving as any component or portion of the electrical, gas, steam, plumbing, sprinkler, communications, alarm, security, or fire/life safety systems or equipment, or any other mechanical, electrical, electronic, computer or other systems or equipment which serve the Building in whole or in part.

4.2.7 “ Tax Expenses ” shall mean all federal, state, county, or local governmental or municipal taxes, fees, assessments, charges or other impositions of every kind and nature, whether general, special, ordinary or extraordinary, (including, without limitation, real estate taxes, general and special assessments, transit assessments, fees and taxes, child care subsidies, fees and/or assessments, job training subsidies, fees and/or assessments, open space fees and/or assessments, housing subsidies and/or housing fund fees or assessments, public art fees and/or assessments, leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales taxes applicable to the receipt of rent, personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property used in connection with the Real Property), which Landlord shall pay

-7-

during any Expense Year because of or in connection with the ownership, leasing and operation of the Real Property or Landlord’s interest therein. For purposes of this Lease, Tax Expenses shall be calculated as if all of the renovations and the tenant improvements in the Building were fully constructed and the Real Property, the Building, and all renovations and tenant improvements in the Building were fully assessed for real estate tax purposes.

4.2.7.1 Tax Expenses shall include, without limitation:

(i) Any tax on Landlord’s rent, right to rent or other income from the Real Property or as against Landlord’s business of leasing any of the Real Property;

(ii) Any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real property tax, it being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the voters of the State of California in the June 1978 election (“ Proposition 13 ”) and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road maintenance, refuse removal and for other governmental services formerly provided without charge to property owners or occupants. It is the intention of Tenant and Landlord that all such new and increased assessments, taxes, fees, levies, and charges and all similar assessments, taxes, fees, levies and charges be included within the definition of Tax Expenses for purposes of this Lease;

(iii) Any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Premises or the rent payable hereunder, including, without limitation, any gross income tax upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof;

(iv) Any assessment, tax, fee, levy or charge, upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises; and

(v) Any reasonable expenses incurred by Landlord in attempting to protest, reduce or minimize Tax Expenses.

4.2.7.2 In no event shall Tax Expenses for any Expense Year be less than the component of Tax Expenses included in Direct Expenses for the Expense Base Year.

4.2.7.3 Notwithstanding anything to the contrary contained in this Section 4.2.7 , there shall be excluded from Tax Expenses (i) all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, federal and state net income taxes, and other taxes to the extent applicable to Landlord’s net income (as opposed to rents, receipts or income attributable to operations at the Building or Real Property), (ii) any items included as Operating Expenses or Utilities Costs, and (iii) any items paid by Tenant under Section 4.4 of this Lease.

-8-

4.2.8 “ Tenant’s Share ” shall mean the percentage set forth in Section 9.3 of the Summary. Tenant’s Share was calculated by multiplying the number of rentable square feet of the Premises by 100 and dividing the product by the total rentable square feet in the Building. In the event either the rentable square feet of the Premises and/or the total rentable square feet of the Building is changed, Tenant’s Share shall be appropriately adjusted, and, as to the Expense Year in which such change occurs, Tenant’s Share for such year shall be determined on the basis of the number of days during such Expense Year that each such Tenant’s Share was in effect.

4.2.9 “ Utilities Base Year ” shall mean the calendar year set forth in Section 9.2 of the Summary.

4.2.10 “ Utilities Costs ” shall mean all actual charges for utilities for the Building and the Real Property, but excluding the utilities for the Premises which Tenant shall pay directly to the utility provider therefor pursuant to Article 6 below, which Landlord shall pay during any Expense Year, including, but not limited to, the costs of water, sewer and electricity and other utilities as well as related fees, assessments and surcharges (but excluding those charges (if any) for which tenants directly reimburse Landlord or otherwise pay directly to the utility company). Utilities Costs shall be calculated assuming the Building is at least one hundred percent (100%) occupied during all or any portion of an Expense Year (including the Utilities Base Year). If, during all or any part of any Expense Year, Landlord does not provide any utilities (the cost of which, if provided by Landlord, would be included in Utilities Costs) to a tenant (including Tenant) who has undertaken to provide the same instead of Landlord, Utilities Costs shall be deemed to be decreased by the amount equal to the Utilities Costs which would reasonably have been incurred during such period by Landlord if Landlord had at its own expense provided such utilities to such tenant. Utilities Costs shall include any costs of utilities which are allocated to the Real Property under any declaration, restrictive covenant, or other instrument pertaining to the sharing of costs by the Real Property or any portion thereof, including any covenants, conditions or restrictions now or hereafter recorded against or affecting the Real Property. For purposes of determining Utilities Costs incurred for the Utilities Base Year, Utilities Costs for the Utilities Base Year shall not include any one time special charges, “tap fees,” costs or fees or extraordinary charges or costs incurred in the Utilities Base Year only, including those attributable to deregulation, boycotts, embargoes, strikes or other shortages of services or fuel. In addition, if in any Expense Year subsequent to the Utilities Base Year, the amount of Utilities Costs decreases due to a reduction in the cost of providing utilities to the Real Property for any reason, including without limitation, because of deregulation of the utility industry and/or reduction in rates achieved in contracts with utilities providers, then for purposes of the Expense Year in which such decrease in Utilities Costs occurred and all subsequent Expense Years, the Utilities Costs for the Utilities Base Year shall be decreased by an amount equal to such decrease.

4.3 Calculation and Payment of Additional Rent.

4.4.1 Calculation of Excess . If for any Expense Year ending or commencing within the Lease Term, (i) Tenant’s Share of Direct Expenses for such Expense Year exceeds Tenant’s Share of Direct Expenses for the Expense Base Year and/or (ii) Tenant’s Share of

-9-

Utilities Costs for such Expense Year exceeds Tenant’s Share of Utilities Costs for the Utilities Base Year, then Tenant shall pay to Landlord, in the manner set forth in Section 4.3.2, below, and as Additional Rent, an amount equal to such excess (the “ Excess ”).

4.4.2 Statement of Actual Direct Expenses and Utilities Costs and Payment by Tenant . Landlord shall endeavor to give to Tenant on or before the first day of April following the end of each Expense Year, a statement (the “ Statement ”) which shall state the Direct Expenses and Utilities Costs incurred or accrued for such preceding Expense Year, and which shall indicate the amount, if any, of any Excess. Upon receipt of the Statement for each Expense Year ending during the Lease Term, if an Excess is present, Tenant shall pay, with its next installment of Base Rent due, the full amount of the Excess for such Expense Year, less the amounts, if any, paid during such Expense Year as “Estimated Excess,” as that term is defined in Section 4.3.3 of this Lease. The failure of Landlord to timely furnish the Statement for any Expense Year shall not prejudice Landlord from enforcing its rights under this Article 4 . Even though the Lease Term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant’s Share of the Direct Expenses and Utilities Costs for the Expense Year in which this Lease terminates, if an Excess is present, Tenant shall immediately pay to Landlord an amount as calculated pursuant to the provisions of Section 4.3.1 of this Lease. The provisions of this Section 4.3.2 shall survive the expiration or earlier termination of the Lease Term.

4.4.3 Statement of Estimated Direct Expenses and Utilities Costs . In addition, Landlord shall endeavor to give Tenant a yearly expense estimate statement (the “ Estimate Statement ”) which shall set forth Landlord’s reasonable estimate (the “ Estimate ” ) of what the total amount of Direct Expenses and Utilities Costs for the then-current Expense Year shall be and the estimated Excess (the “ Estimated Excess ”) as calculated by comparing (i) Tenant’s Share of Direct Expenses, which shall be based upon the Estimate, to Tenant’s Share of Direct Expenses for the Expense Base Year, and (ii) Tenant’s Share of Utilities Costs, which shall be based upon the Estimate, to Tenant’s Share of Utilities Costs for the Utilities Base Year. The failure of Landlord to timely furnish the Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Estimated Excess under this Article 4 . If pursuant to the Estimate Statement an Estimated Excess is calculated for the then-current Expense Year, Tenant shall pay, with its next installment of Base Rent due, a fraction of the Estimated Excess for the then-current Expense Year (reduced by any amounts paid pursuant to the last sentence of this Section 4.3.3 ). Such fraction shall have as its numerator the number of months which have elapsed in such current Expense Year to the month of such payment, both months inclusive, and shall have twelve (12) as its denominator. Until a new Estimate Statement is furnished, Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one-twelfth (1/12) of the total Estimated Excess set forth in the previous Estimate Statement delivered by Landlord to Tenant.

-10-

4.5 Taxes and Other Charges for Which Tenant Is Directly Responsible . Tenant shall reimburse Landlord upon demand for any and all taxes or assessments required to be paid by Landlord (except to the extent included in Tax Expenses by Landlord), excluding state, local and federal personal or corporate income taxes measured by the net income of Landlord from all sources and estate and inheritance taxes, whether or not now customary or within the contemplation of the parties hereto, when:

4.5.1 Said taxes are measured by or reasonably attributable to the cost or value of Tenant’s equipment, furniture, fixtures and other personal property located in the Premises, or by the cost or value of any leasehold improvements made in or to the Premises by or for Tenant, to the extent the cost or value of such leasehold improvements exceeds the cost or value of a building standard build-out as determined by Landlord regardless of whether title to such improvements shall be vested in Tenant or Landlord;

4.5.2 Said taxes are assessed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion of the Real Property; or

4.5.3 Said taxes are assessed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises.

4.6 Late Charges . If any installment of Rent or any other sum due from Tenant shall not be received by Landlord or Landlord’s designee by the due date therefor, then Tenant shall pay to Landlord a late charge equal to five percent (5%) of the amount due plus any attorneys’ fees incurred by Landlord by reason of Tenant’s failure to pay Rent and/or other charges when due hereunder; provided, that the foregoing late charge shall be revised to ten percent (10%) upon the second (2 ^nd ) time that any installment of Rent or any other sum is delinquent in any twelve (12) month period. The late charge shall be deemed Additional Rent and the right to require it shall be in addition to all of Landlord’s other rights and remedies hereunder, at law and/or in equity and shall not be construed as liquidated damages or as limiting Landlord’s remedies in any manner. In addition to the late charge described above, any Rent or other amounts owing hereunder which are not paid by the date that they are due shall thereafter bear interest until paid at a rate (the “ Interest Rate ”) equal to the lesser of (i) the “Prime Rate” or “Reference Rate” announced from time to time by the Bank of America (or such reasonable comparable national banking institution as selected by Landlord in the event Bank of America ceases to exist or publish a Prime Rate or Reference Rate), plus four percent (4%), or (ii) the highest rate permitted by applicable law.

4.7 Tenant’s Audit Rights . Within one hundred twenty (120) days after receipt of a Statement by Tenant (“ Review Period ”), if Tenant disputes the amount set forth in the Statement, Tenant’s employees or an independent certified public accountant (which accountant is a member of a nationally or regionally recognized accounting firm and is not paid on a contingency fee basis), designated by Tenant, may, after reasonable notice to Landlord and at reasonable times, inspect Landlord’s records at Landlord’s offices at the location of the Building or such other location in San Francisco County, California as may be designated by Landlord; provided, however, that notwithstanding any such timely objection, dispute, inspection, and/or audit, and as a condition precedent to Tenant’s exercise of its right of objection, dispute, inspection and/or audit as set forth in this Section 4.6 , Tenant shall not be permitted to withhold payment of, and Tenant shall timely pay to Landlord, the full amounts as required by the provisions of this Article 4 in accordance with such Statement. However, such payment may be made under protest pending the outcome of any audit which may be performed by the accountant as described below. Notwithstanding the foregoing, Tenant shall only have the right to review Landlord’s records one (1) time during any twelve (12) month period. No subtenant shall have any right to conduct an audit, and no assignee shall conduct an audit for any period during which

-11-

such assignee was not in possession of the Premises. Tenant’s failure to dispute and/or audit the amounts set forth in any Statement within the Review Period shall be deemed to be Tenant’s approval of such Statement and Tenant, thereafter, waives the right or ability to dispute the amounts set forth in such Statement. If after such inspection, but within thirty (30) days after the Review Period, Tenant notifies Landlord in writing that Tenant still disputes such amounts, a certification as to the proper amount shall be made, at Tenant’s expense (except as provided hereinbelow), by an independent certified public accountant selected by Landlord and who is a member of a nationally or regionally recognized accounting firm and is not paid on a contingency fee basis (the “ Accountant ”). Such certification shall be binding upon Landlord and Tenant. Landlord shall cooperate in good faith with Tenant and the Accountant to show Tenant and the accountant the information upon which the certification is to be based. If such certification by the Accountant proves that the Direct Expenses and Utilities Cost set forth in the Statement were overstated by more than five percent (5%), then the cost of the Accountant and the cost of such certification shall be paid for by Landlord. Promptly following the parties’ receipt of such certification, the parties shall make such appropriate payments or reimbursements, as the case may be, to each other, as are determined to be owing pursuant to such certification. Tenant agrees to keep, and to cause all of Tenant’s employees and consultants to keep, all of Landlord’s books and records and the audit, and all information pertaining thereto and the results thereof, strictly confidential, and in connection therewith, Tenant shall cause such employees, consultants to execute such reasonable confidentiality agreements as Landlord may require prior to conducting any such inspections and/or audits.

Upon written request by Tenant to Landlord at any time following the last day of the Expense Base Year and after which Landlord has completed Landlord’s calculation of Operating Expenses for the Expense Base Year (“ Base Operating Expenses ” ) (and Landlord shall use reasonable efforts to complete such calculation within one hundred fifty (150) days following the last day of the Expense Base Year), Landlord shall deliver to Tenant for Tenant’s review a Landlord’s Statement setting forth Landlord’s calculation of Base Operating Expenses, and, upon receipt of such Landlord’s Statement, Tenant shall have the right to review Landlord’s books and records related to Landlord’s statement and, if necessary, audit Landlord’s books and records, with respect to the calculation of Base Operating Expenses, with such review and/or audit to be in accordance with the provisions above in this Section 4.7 , as they apply to Tenant’s review and audit of Landlord’s Statement for a particular calendar year (including, without limitation, the procedures that apply in the event the parties disagree regarding the results of Tenant’s review or audit of Base Operating Expenses) and, once the foregoing review and/or audit process has been completed as to the Base Operating Expenses, Tenant shall not be permitted to re-evaluate the Base Operating Expenses at a later date unless additional information pertinent to the gross-up has been obtained and requires an adjustment to Landlord’s Statement for the Base Operating Expenses.

ARTICLE 5

USE OF PREMISES

Tenant shall use the Premises solely for general office purposes consistent with the character of the Building as a first-class office building (and such other incidental uses, as kitchens, dining areas, storage areas, meeting space, including on the roof deck, and showers,

-12-

and bicycle storage and parking contemplated under this Lease or as otherwise approved by Landlord), and Tenant shall not use or permit the Premises to be used for any other purpose or purposes whatsoever. By way of example and not limitation, general office use shall not include medical office use or any similar use, laboratory use, classroom use, an executive suite or similar use, any use not characterized by applicable zoning and land use restrictions as general office use, any use which would require Landlord or Tenant to obtain a conditional use permit or variance from any federal, state or local authority, or any other use not compatible, in Landlord’s sole judgment, with the Building. Tenant further covenants and agrees that it shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose contrary to the provisions of Exhibit D , attached hereto and incorporated herein by this reference, or in violation of the laws of the United States of America, the state in which the Building is located, or the ordinances, regulations or requirements of the local municipal or county governing body or other lawful authorities having jurisdiction over the Building. Tenant shall comply with all recorded covenants, conditions, and restrictions, and the provisions of all ground or underlying leases, now or hereafter affecting the Real Property. Tenant shall not use or allow another person or entity to use any part of the Premises for the storage, use, treatment, manufacture or sale of “ Hazardous Material, ” as that term is defined below, except for ordinary and general office supplies, such as copier toner, liquid paper, glue, ink and common household cleaning materials (some or all of which may constitute Hazardous Materials as defined in this Lease). As used herein, the term “ Hazardous Material ” means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the state in which the Building is located or the United States Government.

ARTICLE 6

SERVICES AND UTILITIES

6.1 Standard Tenant Services . Landlord shall provide the following services on all days during the Lease Term, in a manner consistent with that provided by landlords of the Comparable Buildings unless otherwise stated below.

6.1.1 Subject to the terms of Section 6.2 below, Landlord shall provide heat, ventilation and air conditioning (“ HVAC ”) for normal comfort for normal office use in the Premises at Landlord’s actual cost, which may include the actual charges of the HVAC, the depreciation of the HVAC equipment, pursuant to a schedule agreed upon by Tenant and Landlord, and engineer time). Tenant shall have full control over the HVAC provided to the Premises and be entitled to use HVAC on demand at the hours and periods desired by Tenant subject to the terms of Section 6.2 below.

6.1.2 Landlord shall provide adequate electrical wiring and facilities for normal general office use as determined by Landlord. Tenant shall contract for and pay directly to the utility company pursuant to the utility company’s separate meters (or to Landlord in the event that Landlord provides submeters instead of the utility company’s meters), the cost of all electricity provided to and/or consumed in the Premises. Upon request, Landlord shall replace lamps, starters and ballasts for Building standard lighting fixtures within the Premises as part of Operating Expenses.

-13-

6.1.3 Landlord shall provide city water from the regular Building outlets for drinking, lavatory, toilet, shower and kitchen purposes.

6.1.4 Landlord shall provide window washing services.

6.1.5 Landlord shall provide automatic passenger elevator service at all times.

6.1.6 Tenant shall be fully responsible for janitorial services for the Premises pursuant to Section 6.5 below. Landlord shall provide trash removal from the trash bins provided for the Building and shall provide janitorial services for the common areas, exterior of the Building, elevators, and common area restrooms, according to the Schedule attached hereto as Exhibit G .

6.1.7 Landlord shall, throughout the Lease Term, retain a reputable and licensed security services firm for the provision of security for the Building seven (7) days per week and twenty four (24) hours per day, pursuant to such security procedures, hours, rules and scheduling; provided , however , that neither Landlord nor any of the “Landlord Parties” (as defined in Section 10.1.1 below) shall be liable for, and Landlord and the Landlord Parties are hereby released from any responsibility for, any damage either to person or property or any losses, costs, expenses or claims incurred in connection with or arising from any acts or omissions of Landlord’s security personnel. After the fourth (4 ^th ) Lease Year, Landlord will review the security procedures at the Comparable Buildings. Based on this review, in Landlord’s reasonable opinion, if other buildings are providing security services less than 24 hours a day, 7 days a week, then Landlord will request an adjustment to the security services provided to the Building’s and shall present the adjustment, including the proposed hours, schedule, and procedures, in writing, for Tenant’s review and approval, which shall not be unreasonably withheld, conditioned or delayed. Landlord will reserve the right to modify the Building security services after the initial Lease Term; provided, that any changes to the security services provided during the Option Term shall be agreed to by Tenant in the lease amendment memorializing the extension of the Lease Term. As a component of the security services provided by Landlord, at Landlord’s expense, Landlord shall install a card reader security system at the Building entrances, elevators and stair corridors. Tenant shall be entitled to use the stairwells for internal connectivity between floors.

6.2 Overstandard Tenant Use . Tenant shall not, without Landlord’s prior written consent, use heat-generating machines, machines other than normal fractional horsepower office machines, or equipment or lighting other than building standard lights in the Premises, which may affect the temperature otherwise maintained by the air conditioning system or increase the water normally furnished for the Premises by Landlord pursuant to the terms of Section 6.1 of this Lease. If Tenant’s consumption of electricity shall exceed three (3) watts per usable square foot of the Premises, calculated on an annualized basis for the Business Hours (as defined below), Tenant shall pay to Landlord, concurrently with the next payment of Base Rent due Landlord, the actual cost of such excess consumption, the actual cost of the installation, operation, and maintenance of equipment which is installed in order to supply such excess consumption, and the actual cost of the increased wear and tear on existing equipment caused by such excess consumption; and Landlord may install devices to separately meter any increased use and in such event Tenant shall pay the increased cost directly to Landlord, concurrently with

-14-

the next payment of Base Rent due Landlord, including the cost of such additional metering devices. If the Building is not fully occupied by Tenant pursuant to this Lease and Tenant desires to use HVAC in the Premises during hours other than between Monday through Friday, during the period from 7:00 a.m. to 6:00 p.m. (the “ Business Hours ”), except for the date of observation of New Year’s Day, Presidents’ Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and other locally or nationally recognized holidays as designated by Landlord (collectively, the “ Holidays ”): (x) Tenant shall give Landlord such prior notice, as Landlord shall from time to time establish as appropriate, of Tenant’s desired use thereof (Tenant can give as little as two hours’ notice of its desired use); (y) Landlord shall supply such after-hours HVAC to Tenant at Landlord’s actual hourly cost, determined on a per floor basis equal the actual cost incurred by Landlord to supply such after-hours HVAC on an hourly basis; and (z) Tenant shall pay such cost to Landlord as Additional Rent within thirty (30) days after billing. Notwithstanding the foregoing, in all instances where Tenant is using HVAC in excess of eleven (11) hours per day on a floor-by-floor basis, measured weekly on an average daily basis, or on days other as described hereinabove, Tenant shall pay to Landlord (1) the increased wear and tear and depreciation on equipment to provide such after-hours HVAC, based on the depreciation schedule attached hereto as Exhibit H , and (2) any additional maintenance costs incurred by Landlord, as Additional Rent within thirty (30) days after billing.

6.3 Interruption of Use . Except as otherwise set forth in this Lease, Tenant agrees that Landlord shall not be liable for damages, by abatement of Rent or otherwise, for failure to furnish or delay in furnishing any service (including telephone and telecommunication services), or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by repairs, replacements, or improvements, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building after reasonable effort to do so, by any accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause beyond Landlord’s reasonable control; and such failures or delays or diminution shall never be deemed to constitute an eviction or disturbance of Tenant’s use and possession of the Premises or relieve Tenant from paying Rent (except as provided in Section 11.5 below) or performing any of its obligations under this Lease. Furthermore, Landlord shall not be liable under any circumstances for a loss of, or injury to, property or for injury to, or interference with, Tenant’s business, including, without limitation, loss of profits, however occurring, through or in connection with or incidental to a failure to furnish any of the services or utilities as set forth in this Article 6 .

6.4 Access to Premises . Subject to all of the terms and conditions of this Lease, including the Rules and Regulations attached hereto as Exhibit D , and all applicable Laws, Tenant shall have access to the Premises twenty-four (24) hours per day, seven (7) days per week.

6.5 Janitorial . Tenant shall be fully responsible, at Tenant’s sole cost and expense, for providing janitorial services for the Premises. Such janitorial services shall be provided by licensed contractors selected by Tenant and reasonably approved by Landlord (and if required by Landlord shall be union or non-union affiliated and shall have such other labor affiliations so as to not cause any labor disharmony at the Project, as determined by Landlord). In addition, such janitorial services shall be consistent with the operation and appearance of the Building and conform to the cleaning specifications reasonably provided from time to time by Landlord,

-15-

including, without limitation, the daily cleaning of all interior surfaces of the Premises. Landlord’s initial minimum cleaning standards and schedule for the Premises are set forth on Exhibit G attached hereto.

6.6 Additional Services . Landlord shall also have the exclusive right, but not the obligation, to provide any additional services which may be requested by Tenant, including, without limitation, locksmithing, lamp replacement, additional janitorial service, mold removal, and additional repairs and maintenance, provided that Tenant shall pay to Landlord upon billing, the sum of all costs to Landlord of such additional services plus an administration fee. Charges for any utilities or services 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.

ARTICLE 7

REPAIRS

7.1 Tenant’s Repairs . Subject to Landlord’s repair obligations in Sections 7.2 and 11.1 below, Tenant shall, at Tenant’s own expense, keep the Premises, including all improvements, fixtures and furnishings therein, in good order, repair and condition at all times during the Lease Term, which repair obligations shall include, without limitation, the obligation to promptly and adequately repair all damage to the Premises and replace or repair all damaged or broken fixtures and appurtenances. By way of example, and not limitation, Tenant shall be responsible, at Tenant’s sole expense, for repairing and/or replacing, carpet, marble, tile or other flooring, paint, wall coverings, corridor and interior doors and door hardware, telephone and computer equipment, interior glass, window treatments, ceiling tiles, shelving, cabinets, millwork and other tenant improvements. In addition, Tenant shall be responsible for the installation, maintenance and repair of all telephone, computer and related cabling from the telephone terminal room on the floor on which the Premises is located to and throughout the Premises, and Tenant shall be responsible for any loss, cost, damage, liability and expense (including attorneys’ fees) arising out of or related to the installation, maintenance, repair and replacement of such cabling. At Landlord’s option, or if Tenant fails to make such repairs, Landlord may, but need not, make such repairs and replacements, and Tenant shall pay Landlord the cost thereof, including a percentage of the cost thereof (to be uniformly established for the Building) sufficient to reimburse Landlord for all overhead, general conditions, fees and other costs or expenses arising from Landlord’s involvement with such repairs and replacements forthwith upon being billed for same.

7.2 Landlord’s Repairs . Anything contained in Section 7.1 above to the contrary notwithstanding, and subject to Articles 11 and 12 below, Landlord shall repair and maintain the structural portions of the Building, including the basic plumbing, heating, ventilating, air conditioning and electrical systems serving the Building and not located in the Premises; provided, however, if such maintenance and repairs are caused in part or in whole by the act, neglect, fault of or omission of any duty by Tenant, its agents, servants, employees or invitees, Tenant shall pay to Landlord as additional rent, the reasonable cost of such maintenance and repairs. Except as otherwise set forth in this Lease, Landlord shall not be liable for any failure to make any such repairs, or to perform any maintenance unless such failure shall persist for an unreasonable time after written notice of the need of such repairs or maintenance is given to

-16-

Landlord by Tenant. Except as otherwise set forth in this Lease, there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant’s business arising from the making of any repairs, alterations or improvements in or to any portion of the Building or the Premises or in or to fixtures, appurtenances and equipment therein. Tenant hereby waives and releases its right (if any) to make repairs at Landlord’s expense under Section 1932, Subdivision 1, and Sections 1941 and 1942 of the California Civil Code, Section 431.70 of the California Code of Civil Procedure, and under any similar law, statute, or ordinance now or hereafter in effect.

7.3 Tenant’s Right to Repair . Notwithstanding anything to the contrary set forth in this Article 7 , if Tenant provides written notice to Landlord of the need for repairs and/or maintenance which are Landlord’s obligation to perform pursuant to Section 7.2 above, and Landlord fails to undertake such repairs and/or maintenance within a reasonable period of time, given the circumstances, after receipt of such notice, but in any event not later than ten (10) business days after receipt of such notice (or such longer time as is reasonably necessary if more than ten (10) business days are reasonably required to complete such repairs and Landlord commences such repairs within such 10 business-day period and thereafter diligently attempts to complete same, but in no event longer than ninety (90) days), then Tenant may proceed to undertake such repairs and/or maintenance upon delivery of an additional five (5) business days’ notice to Landlord that Tenant is taking such required action (provided, however that neither of the notices shall be required in the event of an emergency which threatens life or where there is imminent danger to property or a possibility that a failure to take immediate action could cause an imminent and material disruption in Tenant’s normal and customary business activities within the Premises). If such repairs and/or maintenance were required under the terms of this Lease to be performed by Landlord and are not performed by Landlord prior to the expiration of such 5-business day period (the “ Outside Repair Period ”), then Tenant shall be entitled to reimbursement by Landlord of Tenant’s actual, reasonable, and documented costs and expenses in performing such maintenance and/or repairs. Such reimbursement shall be made within thirty (30) days after Landlord’s receipt of invoice of such costs and expenses, and if Landlord fails to so reimburse Tenant within such 30-day period, then Tenant shall be entitled to offset against the Rent payable by Tenant under this Lease the amount of such invoice, which shall have accrued on the amount of such invoice during the period from and after Tenant’s delivery of such invoice to Landlord through and including the earlier of the date Landlord delivers the payment to Tenant or the date Tenant offsets such amount against the Rent; provided, however, that notwithstanding the foregoing to the contrary, if (i) Landlord delivers to Tenant prior to the expiration of the Outside Repair Period described above, a written objection (the “ Landlord Objection Notice ”) to Tenant’s right to receive any such reimbursement based upon Landlord’s good faith claim that such action did not have to be taken by Landlord pursuant to the terms of this Lease, or (ii) Landlord delivers to Tenant, within thirty (30) days after receipt of Tenant’s invoice, a written objection to the payment of such invoice based upon Landlord’s good faith claim that such charges are excessive (in which case, Landlord shall reimburse Tenant, within such 30-day period, the amount Landlord contends would not be excessive), then Tenant shall not be entitled to such reimbursement or offset against Rent. Tenant, as its sole remedy, may require that such disagreement be submitted by the parties to a dispute resolution procedure mutually and reasonably agreed to by the parties, which shall be the Expedited JAMS Procedures or another reputable dispute resolution group mutually agreed upon by Landlord and Tenant or a mutually agreed upon expert acting independently; provided that any expert selected for such

-17-

procedure shall be a building manager or other building management expert with substantial experience in first-class building operations. (If Landlord and Tenant have not agreed upon the dispute resolution group or independent expert within fifteen (15) days after their agreement to submit the dispute to the dispute resolution procedure, then the parties shall be deemed to have selected JAMS as the dispute resolution group.) If the parties engage in a dispute resolution procedure pursuant to the immediately preceding sentence, the parties shall be bound by the results of such procedure. Each party shall bear one-half (1/2) of the cost of the dispute resolution procedure; provided, however, if the resolution of the dispute includes an award of costs to one of the parties, then the losing party shall pay the entire cost of the dispute resolution procedure in accordance with such resolution. In the event Tenant undertakes such repairs and/or maintenance, and such work will affect the Systems and Equipment, any structural portions of the Building, any common areas of the Real Property and/or the exterior appearance of the Building, Tenant shall use only those unrelated third party contractors used by Landlord in the Building for such work unless such contractors are unwilling or unable to perform such work at competitive prices, in which event Tenant may utilize the services of any other qualified contractor which normally and regularly performs similar work in the Comparable Buildings. Tenant shall comply with the other terms and conditions of this Lease if Tenant takes the required action, except that Tenant is not required to obtain Landlord’s consent for such repairs.

ARTICLE 8

ADDITIONS AND ALTERATIONS

8.1 Landlord’s Consent to Alterations . Except as provided hereinbelow, Tenant may not make any improvements, alterations, additions or changes to the Premises (collectively, the “ Alterations ”) without first procuring the prior written consent of Landlord to such Alterations, which consent shall be requested by Tenant not less than fifteen (15) business days prior to the commencement thereof. Landlord shall not unreasonably withhold or delay its consent for any Alterations, except that Landlord may withhold its consent, in its sole and absolute discretion, with respect to such Alterations which (i) affect any area, or which can be seen from any area, outside the Premises or the Building, and/or (ii) affect the structural components or Systems and Equipment of the Building. Notwithstanding anything to the contrary contained in this Section 8.1, Tenant may make non-structural interior alterations, additions or improvements to the interior of the Premises (collectively, the “ Acceptable Changes ”) without Landlord’s consent, provided that: (a) Tenant delivers to Landlord written notice of such Acceptable Changes at least ten (10) days prior to the commencement thereof; (b) the aggregate cost of all such Acceptable Changes during any twelve (12) consecutive month period does not exceed Fifty Thousand Dollars ($50,000.00); (c) such Acceptable Changes shall be performed by or on behalf of Tenant in compliance with the other provisions of this Article 8 ; (d) such Acceptable Changes do not require the issuance of a building permit or other governmental approval; (e) such Acceptable Changes do not affect any Systems and Equipment, the ground floor lobby areas of the Building, pertain to painting of the exposed brick portions of the Premises, and cannot be seen from outside the Premises; and (f) such Acceptable Changes shall be performed by qualified contractors and subcontractors which normally and regularly perform similar work in the Comparable Buildings. Tenant shall pay for all overhead, general conditions, fees, taxes and other costs and expenses of the Alterations and except for Acceptable Changes, Tenant shall pay to Landlord the Alteration Supervision Fee. The “ Alteration Supervision Fee ” shall be an

-18-

amount equal to zero percent (0%) of the costs of the Alterations if such costs are, in the aggregate, up to $49,999.99, six percent (6%) of the costs of such Alterations if such costs are, in the aggregate, between $50,000.00 and $99,999.99, five percent (5%) of the cost of the Alterations, if such costs are, in the aggregate, between $100,000.00 and $250,000.00, or four percent (4%) of the costs of such Alterations, if such costs are, in the aggregate, in excess of $250,000.00. The construction of the initial improvements to the Premises (and the Landlord supervision fee therefor) shall be governed by the terms of the Tenant Work Letter and not the terms of this Article 8 .

8.2 Manner of Construction . Landlord may impose, as a condition of its consent to all Alterations or repairs of the Premises or about the Premises, such requirements as Landlord in its reasonable discretion may deem desirable, including, but not limited to, the requirement that Tenant provide Landlord with detailed plans and specifications and an estimated budget for the proposed Alteration and that Tenant utilize for such purposes only contractors, materials, mechanics and materialmen approved by Landlord; provided , however , Landlord may impose such requirements as Landlord may determine, in its sole and absolute discretion, with respect to any work affecting the structural components of the Building or Systems and Equipment (including designating specific contractors to perform such work). Tenant shall construct such Alterations and perform such repairs in conformance with any and all applicable rules and regulations of any federal, state, county or municipal code or ordinance and pursuant to a valid building permit, issued by the city in which the Building is located, and in conformance with Landlord’s construction rules and regulations. Landlord’s approval of the plans, specifications and working drawings for Tenant’s Alterations 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. All work with respect to any Alterations must be done in a good and workmanlike manner and diligently prosecuted to completion to the end that the Premises shall at all times be a complete unit except during the period of work. In performing the work of any such Alterations, Tenant shall have the work performed in such manner as not to obstruct access to the Building or the common areas for any other tenant of the Building, and as not to obstruct the business of Landlord or other tenants in the Building, or interfere with the labor force working in the Building. If Tenant makes any Alterations, Tenant agrees to carry “Builder’s All Risk” insurance in an amount approved by Landlord covering the construction of such Alterations, and such other insurance as Landlord may require, it being understood and agreed that all of such Alterations shall be insured by Tenant pursuant to Article 10 below immediately upon completion thereof. In addition, with respect to any Alterations to be made in the Building which cost in excess of $100,000.00, Landlord may, in its discretion, require Tenant to obtain a lien and completion bond, or, at Tenant’s option, some alternate form of security reasonably satisfactory to Landlord, in an amount sufficient to ensure the lien-free completion of such Alterations and naming Landlord as a co-obligee. Upon completion of any Alterations, Tenant shall (i) cause a Notice of Completion to be recorded in the office of the Recorder of the county in which the Building is located in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, (ii) deliver to the Building management office a reproducible copy of the “as built” drawings of the Alterations, and (iii) deliver to Landlord evidence of payment, contractors’ affidavits and full and final waivers of all liens for labor, services or materials.

-19-

8.3 Landlord’s Property . All Alterations, improvements and/or fixtures (excluding Tenant’s trade fixtures, moveable furniture and personal property) which may be installed or placed in or about the Premises, from time to time, shall be at the sole cost of Tenant and shall become the property of Landlord upon expiration of the Lease Term or earlier termination of this Lease; provided, however: (i) Tenant may not remove any Tenant Improvements or Alterations paid for by Landlord with Landlord’s own funds or out of any tenant improvement allowances provided by Landlord (except any such removal made in connection with Alterations approved by Landlord); and (ii) Landlord may, by written notice delivered to Tenant concurrently with Landlord’s approval of the final working drawings for any Alterations (or for the initial tenant improvements constructed for the Premises), identify those Alterations (or initial tenant improvements for Tenant’s initial occupancy, as the case may be) which Landlord will require Tenant to remove at the expiration or earlier termination of this Lease; provided further, however, that Tenant shall in no event be required to remove any such Alterations (or initial tenant improvements, as the case may be) other than (a) any raised floors, internal stairwells, vaults and other similar special use tenant improvements, (b) the Telecommunications Equipment (as defined in Section 23.1 below) and all phone and data cabling, (c) those other improvements or alterations which are of such specialized nature or application that the same are not reasonably suited for use by a successor occupant of the Premises and (d) the Rooftop Deck (as defined in Section 23.1 below) to the extent required by the governmental approvals permitting the installation and use of the Rooftop Deck (collectively, “ Special Use Improvements ”). If Landlord requires Tenant to remove any such Alterations (or any such initial tenant improvements which are constructed for the Premises, Tenant, at its sole cost and expense, shall remove the identified Alterations and improvements on or before the expiration or earlier termination of this Lease and repair any damage to the Premises caused by such removal. If Tenant fails to complete such removal and/or to repair any damage caused by the removal of any Alterations or Special Use Improvements, Landlord may do so and may charge the actual cost thereof to Tenant.

ARTICLE 9

COVENANT AGAINST LIENS

Tenant has no authority or power to cause or permit any lien or encumbrance of any kind whatsoever, whether created by act of Tenant, operation of law or otherwise, to attach to or be placed upon the Real Property, Building or Premises, and any and all liens and encumbrances created by Tenant shall attach to Tenant’s interest only. Tenant may obtain leasehold financing and other financing secured by Tenant’s leasehold interest in the Premises and Tenant’s personal property. Any such financing obtained by Tenant shall not violate the provisions of this Article 9 or the provisions of Article 14 below. Landlord shall have the right at all times to post and keep posted on the Premises any notice which it deems necessary for protection from such liens. Tenant covenants and agrees not to suffer or permit any lien of mechanics or materialmen or others to be placed against the Real Property, the Building or the Premises with respect to work or services claimed to have been performed for or materials claimed to have been furnished to Tenant or the Premises (excluding any work performed by Landlord), and, in case of any such lien attaching or notice of any lien (excluding any liens attached as a result of work performed by Landlord), Tenant covenants and agrees to cause it to be released and removed of record (by payment, statutory bond or other lawful means) within twenty (20) days after Tenant has notice

-20-

of such lien. Notwithstanding anything to the contrary set forth in this Lease, in the event that such lien is not released and removed of record within such 20-day period, then Landlord, at its sole option, may immediately take all action necessary to release and remove such lien, without any duty to investigate the validity thereof, and all reasonable sums, costs and expenses, including reasonable attorneys’ fees and costs, incurred by Landlord in connection with such lien shall be deemed Additional Rent under this Lease and shall be paid by Landlord to Tenant within thirty (30) days after written demand by Landlord.

ARTICLE 10

INDEMNIFICATION AND INSURANCE

10.1 Indemnification and Waiver .

10.1.1 Except as expressly provided in Section 10.1.2 below, Tenant hereby assumes all risk of damage to property and injury to persons, in, on, or about the Premises from any cause whatsoever and agrees that Landlord, and its partners and subpartners, and their respective officers, agents, property managers, employees, and independent contractors (collectively, “ Landlord Parties ”) shall not be liable for, and are hereby released from any responsibility for, any damage to property or injury to persons or resulting from the loss of use thereof, which damage or injury is sustained by Tenant or by other persons claiming through Tenant. In addition, except as expressly provided in Section 10.1.2 below, Tenant shall indemnify, defend, protect, and hold harmless the Landlord Parties from any and all loss, cost, damage, expense and liability, including without limitation court costs and reasonable attorneys’ fees (collectively, “ Claims ”) incurred in connection with or arising from any cause in, on or about the Premises (including, without limitation, Tenant’s installation, placement and removal of Alterations, improvements, fixtures and/or equipment in, on or about the Premises), and any acts, omissions or negligence of Tenant or of any person claiming by, through or under Tenant, or of the contractors, agents, servants, employees, subtenants, licensees or invitees of Tenant or any such person, in, on or about the Premises, Buildings and Real Property; provided, however, such indemnity shall not include any lost profit, loss of business or other consequential damages. Notwithstanding the foregoing, prior to the Effective Date the foregoing indemnity shall apply only to the acts, omissions or negligence of Tenant.

10.1.2 Notwithstanding the foregoing to the contrary, the assumption of risk and release by Tenant set forth in Section 10.1.1 above, and Tenant’s indemnity of Landlord in Section 10.1.1 above, shall not apply to: (i) any Claims to the extent resulting from the gross negligence or willful misconduct of the Landlord Parties (collectively, the “ Excluded Claims ”); or (ii) any loss of or damage to Landlord’s property to the extent Landlord has waived such loss or damage pursuant to Section 10.4 below. In addition, Landlord shall indemnify, defend, protect and hold Tenant harmless from all such Excluded Claims, except for (A) any loss or damage to Tenant’s property to the extent Tenant has waived such loss or damage pursuant to Section 10.4 below, and (B) any lost profits, loss of business or other consequential damages. In no event shall Tenant be liable to Landlord for any special or consequential damages, except for damages expressly provided for in Article 16 of this Lease with regard to Tenant’s failure to timely surrender the Premises to Landlord as provided in Article 16. In no event shall lost rent or other damages of Landlord provided for in Article 19 below be deemed special or consequential damages.

-21-

10.1.3 The provisions of this Section 10.1 shall survive the expiration or sooner termination of this Lease.

10.2 Tenant’s Compliance with Landlord’s Fire and Casualty Insurance . Landlord shall, from and after the date hereof until the expiration of the Lease Term, maintain in effect the following insurance: (i) physical damage insurance (including a rental loss endorsement) providing coverage in the event of fire, vandalism, malicious mischief and all other risks normally covered under “special form” policies in the geographical area of the Building, covering the Building (excluding, at Landlord’s option, the property required to be insured by Tenant pursuant to Section 10.3 below) in an amount not less than one hundred percent (100%) of the full replacement value (less reasonable deductibles) of the Building, together with such other risks as Landlord may from time to time determine (provided however, that Landlord shall have the right, but not the obligation, to obtain earthquake and/or flood insurance); and (ii) commercial general liability insurance including a Commercial Broad Form Endorsement or the equivalent in the amount of at least Five Million Dollars ($5,000,000.00), against claims of bodily injury, personal injury or property damage arising out of Landlord’s operations, assumed liabilities (including the liabilities assumed by Landlord under this Lease), contractual liabilities, or use of the Building and common areas. Such coverages may be carried under blanket insurance policies. The insurers providing such insurance shall be licensed to do business in the State of California and the policies of insurance with respect to property loss or damage by fire or other casualty shall contain a waiver of subrogation as provided in Section 10.4 below. Tenant shall, at Tenant’s expense, comply as to the Premises with all insurance company requirements pertaining to the use of the Premises. If Tenant’s conduct or use of the Premises causes any increase in the premium for Landlord’s insurance policies, then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant’s expense, shall comply with all rules, orders, regulations or requirements of the American Insurance Association (formerly the National Board of Fire Underwriters) and with any similar body where applicable due to Tenant’s Alterations or use of the Premises.

10.3 Tenant’s Insurance . Tenant shall maintain the following coverages in the following amounts, from and after the Effective Date.

10.3.1 Commercial General Liability Insurance covering the insured against claims of bodily injury, personal injury and property damage arising out of Tenant’s operations, assumed liabilities or use of the Premises, including a Broad Form Commercial General Liability endorsement covering the insuring provisions of this Lease and the performance by Tenant of the indemnity agreements set forth in Section 10.1 of this Lease, for limits of liability not less than:

Bodily Injury and	$	5,000,000 each occurrence
Property Damage Liability	$	5,000,000 annual aggregate
Personal Injury Liability	$	5,000,000 each occurrence
	$	5,000,000 annual aggregate

-22-

10.3.2 Physical Damage Insurance covering (i) all office furniture, trade fixtures, office equipment, merchandise and all other items of Tenant’s property on the Premises installed by, for, or at the expense of Tenant, (ii) the Tenant Improvements, including any Tenant Improvements which Landlord permits to be installed above the ceiling of the Premises or below the floor of the Premises, and (iii) all other improvements, alterations and additions to the Premises, including any improvements, alterations or additions installed at Tenant’s request above the ceiling of the Premises or below the floor of the Premises. Such insurance shall be written on a “special form” of physical loss or damage basis, for the full replacement cost value new without deduction for depreciation of the covered items and in amounts that meet any co-insurance clauses of the policies of insurance and shall include a vandalism and malicious mischief endorsement, sprinkler leakage coverage and earthquake sprinkler leakage coverage.

10.3.3 Worker’s compensation insurance as required by law.

10.3.4 Business interruption, loss of income and extra expense insurance in amounts sufficient to pay for Tenant’s operating income, continuing expenses and extra expenses attributable to perils commonly insured against by prudent tenants or attributable to prevention of access to the Premises as a result of such perils.

10.3.5 Form of Policies . The minimum limits of policies of insurance required of Tenant under this Lease shall in no event limit the liability of Tenant under this Lease. Such insurance shall (i) name Landlord, and any other party it so specifies, as an additional insured; (ii) specifically cover the liability assumed by Tenant under this Lease, including, but not limited to, Tenant’s obligations under Section 10.1 of this Lease; (iii) be issued by an insurance company having a rating of not less than A-VII in Best’s Insurance Guide or which is otherwise acceptable to Landlord and licensed to do business in the state in which the Building is located; (iv) be primary insurance as to all claims thereunder and provide that any insurance carried by Landlord is excess and is non-contributing with any insurance requirement of Tenant; (v) provide that said insurance shall not be canceled, other than for non-payment, unless thirty (30) days’ prior written notice shall have been given to Landlord and any mortgagee or ground or underlying lessor of Landlord; and (vi) contain a cross-liability endorsement or severability of interest clause acceptable to Landlord. Tenant shall deliver certificates thereof to Landlord on or before the Lease Commencement Date and within thirty (30) days of the expiration dates thereof. If Tenant shall fail to procure such insurance, or deliver such certificate, within such time periods, Landlord may, at its option after ten (10) days written notice, in addition to all of its other rights and remedies under this Lease, and without regard to any notice and cure periods set forth in Section 19.1 , procure such policies for the account of Tenant, and the cost thereof shall be paid to Landlord as Additional Rent within ten (10) days after delivery of bills therefor.

10.4 Subrogation . Landlord and Tenant agree to have their respective insurance companies issuing property damage insurance waive any rights of subrogation that such companies may have against Landlord or Tenant, as the case may be. As long as such waivers of subrogation are contained in their respective insurance policies, or would have been contained in such insurance policies had the responsible party used commercially reasonable efforts to obtain such waivers and such waivers are routinely and customarily available, Landlord and Tenant hereby waive any right that either may have against the other on account of any loss or damage to their respective property to the extent such loss or damage is insurable under policies of

-23-

insurance for fire and all risk coverage, theft, or other similar insurance. If either party fails to carry the amounts and types of insurance required to be carried by it pursuant to this Article 10 , such failure shall be deemed to be a covenant and agreement by such party to self-insure with respect to the type and amount of insurance which such party so failed to carry, with full waiver of subrogation with respect thereto. In furtherance of the foregoing, Tenant acknowledges and agrees that notwithstanding the negligence or breach of this Lease by Landlord or its agents, neither Landlord nor its agents shall be liable under any circumstances for: (i) injury or damage to the person or goods, wares, merchandise or other property of Tenant, Tenant’s employees, contractors, invitees, customers, or any other person in or about the Premises, from any cause, (ii) any damages arising from any act or neglect of any other tenant of Landlord or from the failure of Landlord or its agents to enforce the provisions of any other lease in the Project, or (iii) injury to Tenant’s business or for any loss of income or profit therefrom. Instead, it is intended that Tenant’s sole recourse in the event of such damages or injury be to file a claim on the insurance policy(ies) that Tenant is required to maintain pursuant to the provisions of this Article 10 .

10.5 Additional Insurance Obligations . Tenant shall carry and maintain during the entire Lease Term, at Tenant’s sole cost and expense, increased amounts of the insurance required to be carried by Tenant pursuant to this Article 10, and such other reasonable types of insurance coverage and in such reasonable amounts covering the Premises and Tenant’s operations therein, as may be reasonably requested by Landlord, but in no event shall such increased amounts of insurance or such other reasonable types of insurance be in excess of that required by landlords of the Comparable Buildings for tenants of comparable financial strength and consistent with the size of the space leased by such tenants and any new insurance shall be added to the Base Year Operating Expenses in accordance with the provisions of Section 4.2.5 above; provided, further, that Tenant shall only be required to obtain any types of new insurance coverage (as opposed to increased coverage under types of insurance already required under this Lease) if such coverage is available to Tenant at commercially reasonable rates.

ARTICLE 11

DAMAGE AND DESTRUCTION

11.1 Repair of Damage to Premises by Landlord . Tenant shall promptly notify Landlord after Tenant becomes aware of any damage to the Premises resulting from fire or any other casualty. If the Premises or any common areas of the Building or Real Property serving or providing access to the Premises shall be damaged by fire or other casualty, Landlord shall promptly and diligently, subject to reasonable delays for insurance adjustment or other matters beyond Landlord’s reasonable control, and subject to all other terms of this Article 11, restore the Base, Shell, and Core of the Premises and such common areas. Such restoration shall be to substantially the same condition of the Base, Shell, and Core of the Premises and common areas prior to the casualty, except for modifications required by zoning and building codes and other laws, or any other modifications to the common areas deemed reasonably desirable by Landlord provided access to the Premises and any common restrooms serving the Premises shall not be materially impaired thereby. Notwithstanding any other provision of this Lease, upon the occurrence of any damage to the Premises, Tenant shall assign to Landlord (or to any party designated by Landlord) all insurance proceeds payable to Tenant under Tenant’s insurance

-24-

required under Sections 10.3.2(ii) and (iii) of this Lease, and Landlord shall repair any injury or damage to the Tenant Improvements and Alterations installed in the Premises and shall return such Tenant Improvements and Alterations to their original condition; provided that if the cost of such repair by Landlord (based on competitive pricing by all contractors and subcontractors and without any profit mark-up or supervision fees to Landlord) exceeds the amount of insurance proceeds received by Landlord from Tenant’s insurance carrier, as assigned by Tenant, the cost of such repairs shall be paid by Tenant to Landlord on a progress payment basis with the first such payment being due from Tenant after Landlord’s commencement of the repair of the damage. In connection with such repairs and replacements, Tenant shall, prior to the commencement of construction, submit to Landlord, for Landlord’s reasonable review and approval, all plans, specifications and working drawings relating thereto, and Landlord shall select the contractors to perform such improvement work pursuant to Landlord’s standard competitive bidding procedures. Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant’s business resulting in any way from such damage or the repair thereof; provided however, that if such fire or other casualty shall have damaged the Premises or common areas necessary to Tenant’s occupancy to such a degree that Tenant is prevented from using, and does not use, all or any part of the Premises as a result thereof and such fire or other casualty is not the result of Tenant’s gross negligence or willful misconduct, then Landlord shall allow Tenant a proportionate abatement of Rent during the time and to the extent Tenant is so prevented from using and does not use the Premises as a result thereof. Landlord shall use commercially reasonable efforts to minimize any such inconvenience, annoyance or interference to Tenant resulting from Landlord’s repair of any damage pursuant to this Section 11.1 .

11.2 Landlord’s Option to Repair . Within forty-five (45) days after Landlord becomes aware of such damage, Landlord shall notify Tenant in writing (“ Landlord’s Damage Notice ”) of the estimated time, in Landlord’s reasonable judgment, required to substantially complete the repairs of such damage (the “ Estimated Repair Period ”). Notwithstanding the terms of Section 11.1 above, Landlord may elect not to rebuild and/or restore the Premises and/or the Building and instead terminate this Lease by notifying Tenant in writing of such termination within forty-five (45) days after Landlord becomes aware of such damage, but Landlord may so elect only if the Building shall be damaged by fire or other casualty or cause, whether or not the Premises are affected and one or more of the following conditions is present: (i) repairs cannot in Landlord’s opinion, as set forth in Landlord’s Damage Notice, reasonably be completed within ten (10) months after the date of Landlord’s Damage Notice (when such repairs are made without the payment of overtime or other premiums); or (ii) the damage is not fully covered by Landlord’s insurance policies obtained or required to be obtained by Landlord pursuant to Section 10.2 above. If (a) Landlord does not elect to terminate this Lease pursuant to Landlord’s termination right as provided above, (b) the damage constitutes a Tenant Damage Event (as defined below), and (c) the repair of such damage cannot, in the reasonable opinion of Landlord, as set forth in Landlord’s Damage Notice, be completed within one year after Landlord becomes aware of such damage, then Tenant may elect to terminate this Lease by delivering written notice thereof to Landlord within thirty (30) days after Tenant’s receipt of Landlord’s Damage Notice, which termination shall be effective as of the date of such termination notice thereof to Landlord. As used herein, a “ Tenant Damage Event ” shall mean damage to all or any part of the Premises or any common areas of the Building providing access to the Premises by fire or other casualty, which damage (x) is not the result of the gross negligence or willful misconduct of Tenant or any

-25-

of Tenant’s employees, agents, contractors, licensees or invitees, (y) substantially interferes with Tenant’s use of or access to the Premises and (z) would entitle Tenant to an abatement of Rent pursuant to Section 11.1 above. In addition, in the event of a Tenant Damage Event, and if neither Landlord nor Tenant has elected to terminate this Lease as provided hereinabove, but Landlord fails to substantially complete the repair and restoration of such Tenant Damage Event within the Estimated Repair Period plus ninety (90) days, plus the number of days of delay, if any, attributable to events of “Force Majeure,” as that term is defined in Section 24.16 below, plus the number of days of delay, if any, as are attributable to the acts or omissions of Tenant or Tenant’s employees, agents, contractors, licensees or invitees, then Tenant shall have the right to terminate this Lease during the first five (5) business days of each calendar month following the end of such period until such time as the repairs to be made by Landlord are complete, by notice to Landlord (the “ Damage Termination Notice ”), effective as of a date set forth in the Damage Termination Notice (the “ Damage Termination Date ”), which Damage Termination Date shall not be less than ten (10) business days following the end of each such month. Notwithstanding the foregoing, if Tenant delivers a Damage Termination Notice to Landlord, then Landlord shall have the right to suspend the occurrence of the Damage Termination Date for a period ending thirty (30) days after the Damage Termination Date set forth in the Damage Termination Notice by delivering to Tenant, within five (5) business days of Landlord’s receipt of the Damage Termination Notice, a certificate of Landlord’s contractor responsible for the repair of the damage certifying that it is such contractor’s good faith judgment that the repairs to be made by Landlord shall be substantially completed within thirty (30) days after the Damage Termination Date. If such repairs shall be substantially completed prior to the expiration of such thirty-day period, then the Damage Termination Notice shall be of no force or effect, but if such repairs shall not be substantially completed within such 30-day period, then this Lease shall terminate upon the expiration of such thirty-day period. At any time, and from time to time, after the date of the damage, Tenant may request that Landlord inform Tenant of the reasonable opinion of Landlord’s contractor of the date of completion of Landlord’s repair work, and Landlord shall respond to such request within ten (10) business days.

11.3 Damage at the End of Lease Term . Further, in the event that the Premises or the Building are destroyed or damaged to any substantial extent during the last twelve (12) months of the Lease Term (except that, in the event that Tenant shall have exercised its option to renew pursuant to the Extension Option Rider attached to this Lease, such twelve (12) month period shall be the last twelve (12) months of the Option Term), then notwithstanding anything contained in this Article 11 , Landlord shall have the option to terminate this Lease, and to the extent such destruction or damage constitutes a Tenant Damage Event and the repair of same is reasonably expected by Landlord to require more than sixty (60) days to substantially complete, Tenant shall have the option to terminate this Lease, by giving written termination notice to the other party of the exercise of such option within thirty (30) days after the date such party becomes aware of such damage or destruction. If either Landlord or Tenant exercises any of its options to terminate this Lease as provided above in Section 11.2 above: (1) this Lease shall cease and terminate as of the date set forth in such party’s termination notice, which termination date shall be no less than thirty (30) days and no more than one hundred twenty (120) days after such termination notice is delivered to the other party; (2) Tenant shall pay the Base Rent and Additional Rent, properly apportioned up to such date of termination and subject to abatement as provided in Section 11.1 above; and (3) both parties hereto shall thereafter be freed and discharged of all further obligations hereunder, except as provided for in provisions of this Lease which by their terms survive the expiration or earlier termination of the Lease Term.

-26-

11.4 Waiver of Statutory Provisions . The provisions of this Lease, including this Article 11 , constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, the Building or any other portion of the Real Property, and any statute or regulation of the state in which the Building is located, 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, shall have no application to this Lease or any damage or destruction to all or any part of the Premises, the Building or any other portion of the Real Property.

11.5 Abatement of Rent When Tenant Is Prevented From Using Premises . In the event that Tenant is prevented from using, and does not use, the Premises or any portion thereof as a result of (i) any failure by Landlord to provide any of the essential utilities and services to the Premises required to be provided by Landlord under Section 6.1 of this Lease, (ii) any failure by Landlord to provide access to the Premises (including, without limitation, as a result of any Renovations undertaken by Landlord pursuant to Section 24.27 below), or (iii) any failure by Landlord to perform Landlord’s repair obligations pursuant to Section 7.2 above, and such failure is not the result of the negligence or willful misconduct of Tenant or any of Tenant’s employees, agents, contractors, licensees or invitees (such event shall be known as a “ Abatement Event ”), then Tenant shall give Landlord notice of such Abatement Event. If such Abatement Event continues for five (5) consecutive business days after Landlord’s receipt of any such notice from Tenant (“ Eligibility Period ”), then the Rent shall be abated or reduced, as the case may be, during such time after the Eligibility Period that Tenant continues to be so prevented from using, and does not use, the Premises or a portion thereof, in the proportion that the usable area of the portion of the Premises that Tenant is prevented from using, and does not use, bears to the total usable area of the Premises; provided, however, in the event that Tenant is prevented from using, and does not use, a portion of the Premises for a period of time in excess of the Eligibility Period, and the remaining portion of the Premises is not sufficient to allow Tenant to effectively conduct its business therein, and if Tenant does not conduct its business from such remaining portion, then for such time after expiration of the Eligibility Period during which Tenant is so prevented from effectively conducting its business therein, then Rent shall be abated for such time as Tenant continues to be so prevented from using, and does not use, the Premises. If, however, Tenant re-occupies any portion of the Premises during such period, the Rent allocable to such re-occupied portion, based on the proportion that the usable area of such re-occupied portion of the Premises bears to the total usable area of the Premises, shall be payable by Tenant from the date Tenant re-occupies such portion of the Premises. Except as expressly provided in this Section 11.5 , nothing contained herein shall be interpreted to mean that Tenant is excused from paying Rent due hereunder. Notwithstanding the foregoing provisions of this Section 11.5 to the contrary which limits Tenant’s right to abatement for only those time periods which follow the Eligibility Period, (A) to the extent Tenant is specifically entitled to abatement without regard to the Eligibility Period because of an eminent domain taking and/or because of a casualty damage or destruction pursuant to the provisions of this Article 11 or Article 12 below, then the Eligibility Period shall not be applicable, and (B) the Eligibility Period shall also not be applicable following the occurrence of any other Abatement

-27-

Event described above which is not an eminent domain taking or a casualty damage or destruction, to the extent and for the number of days that Landlord is reimbursed from the proceeds of rental interruption insurance purchased by Landlord as part of Operating Expenses. Further, if Tenant’s right to abatement occurs during a free rent period (for these purposes, free rent shall be deemed to include half rent, etc.) which arises after the Lease Commencement Date, Tenant’s free rent period shall be extended for the number of days that the abatement period overlapped the free rent period (“ Overlap Period ”). Landlord shall have the right to extend the Expiration Date for a period of time equal to the Overlap Period if Landlord sends a notice to Tenant of such election within ten (10) days following the end of the extended free rent period. To the extent Tenant has prepaid Rent (as it does each month since Rent is due on the first day of each month) and Tenant is subsequently entitled to an abatement, such prepaid, and subsequently abated, Rent should be refunded to, and paid by Landlord to, Tenant within thirty (30) days after the end of the appropriate month.

ARTICLE 12

CONDEMNATION

12.1 Permanent Taking . If the whole or any part of the Premises or Building shall be taken by power of eminent domain or condemned by any competent authority for any public or quasi-public use or purpose, or if any adjacent property or street shall be so taken or condemned, or reconfigured or vacated by such authority in such manner as to require the use, reconstruction or remodeling of any part of the Premises or Building, or if Landlord shall grant a deed or other instrument in lieu of such taking by eminent domain or condemnation, Landlord shall have the option to terminate this Lease upon ninety (90) days’ notice, provided such notice is given no later than one hundred eighty (180) days after the date of such taking, condemnation, reconfiguration, vacation, deed or other instrument. If more than twenty-five percent (25%) of the rentable square feet of the Premises is taken, or if access to the Premises is substantially impaired, Tenant shall have the option to terminate this Lease upon ninety (90) days’ notice, provided such notice is given no later than one hundred eighty (180) days after the date of such taking. Landlord shall be entitled to receive the entire award or payment in connection therewith, except that Tenant shall have the right to file any separate claim available to Tenant for any taking of Tenant’s personal property and fixtures belonging to Tenant and removable by Tenant upon expiration of the Lease Term pursuant to the terms of this Lease, and for moving expenses, so long as such claim does not diminish the award available to Landlord, its ground lessor with respect to the Real Property or its mortgagee, and such claim is payable separately to Tenant. All Rent shall be apportioned as of the date of such termination, or the date of such taking, whichever shall first occur. If any part of the Premises shall be taken, and this Lease shall not be so terminated, the Base Rent and Tenant’s Share of Direct Expenses and Utilities Costs shall be proportionately abated. Tenant hereby waives any provision of California law that conflicts with the foregoing provisions of this Article 12 including, without limitation, Sections 1265.110-1265.160 of the California Code of Civil Procedure.

12.2 Temporary Taking . Notwithstanding anything to the contrary contained in this Article 12 , in the event of a temporary taking of all or any portion of the Premises for a period of one hundred and eighty (180) days or less, then this Lease shall not terminate but the Base Rent and Tenant’s Share of Direct Expenses and Utilities Costs shall be abated for the period of such taking in proportion to the ratio that the amount of rentable square feet of the Premises taken bears to the total rentable square feet of the Premises. Landlord shall be entitled to receive the entire award made in connection with any such temporary taking.

-28-

ARTICLE 13

COVENANT OF QUIET ENJOYMENT

Landlord covenants that Tenant, on paying the Rent, charges for services and other payments herein reserved and on keeping, observing and performing all the other terms, covenants, conditions, provisions and agreements herein contained on the part of Tenant to be kept, observed and performed, shall, during the Lease Term, peaceably and quietly have, hold and enjoy the Premises subject to the terms, covenants, conditions, provisions and agreements hereof without interference by any persons lawfully claiming by or through Landlord. The foregoing covenant is in lieu of any other covenant express or implied.

ARTICLE 14

ASSIGNMENT AND SUBLETTING

14.1 Transfers . Except as provided in Section 14.7 below, Tenant shall not, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed, assign, mortgage, pledge, hypothecate, encumber, or permit any lien to attach to, or otherwise transfer, this Lease or any interest hereunder, permit any assignment or other such foregoing transfer of this Lease or any interest hereunder by operation of law, sublet the Premises or any part thereof, or permit the use of the Premises by any persons other than Tenant and its employees (all of the foregoing are hereinafter sometimes referred to collectively as “ Transfers ” and any person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a “ Transferee ”). If Tenant shall desire Landlord’s consent to any Transfer, Tenant shall notify Landlord in writing, which notice (the “ Transfer Notice ”) shall include (i) the proposed effective date of the Transfer, which shall not be less than thirty (30) days nor more than one hundred eighty (180) days after the date of delivery of the Transfer Notice, (ii) a description of the portion of the Premises to be transferred (the “ Subject Space ”), (iii) all of the terms of the proposed Transfer, the name and address of the proposed Transferee, and a copy of all existing and/or proposed documentation pertaining to the proposed Transfer, including all existing operative documents to be executed to evidence such Transfer or the agreements incidental or related to such Transfer, (iv) current financial statements of the proposed Transferee certified by an officer, partner or owner thereof, and (v) such other information as Landlord may reasonably require. Any Transfer made without Landlord’s prior written consent shall, at Landlord’s option, be null, void and of no effect, and shall, at Landlord’s option, constitute a default by Tenant under this Lease. Each time Tenant requests Landlord’s consent to a proposed Transfer, whether or not Landlord shall grant consent, within thirty (30) days after written request by Landlord, as Additional Rent hereunder, Tenant shall pay to Landlord Seven Hundred Fifty Dollars ($750.00) for Landlord’s review and processing fees, and, in addition, Tenant shall reimburse Landlord for any reasonable out-of-pocket legal fees incurred by Landlord in connection with Tenant’s proposed Transfer.

-29-

14.2 Landlord’s Consent . Landlord shall not unreasonably withhold its consent to any proposed Transfer of the Subject Space to the Transferee on the terms specified in the Transfer Notice. Notwithstanding the foregoing, Tenant hereby waives Tenant’s rights (if any) under Section 1995.310 of the California Civil Code and agrees that it shall be reasonable under this Lease and under any applicable law for Landlord to withhold consent to any proposed Transfer where one or more of the following apply, without limitation as to other reasonable grounds for withholding consent:

14.2.1 Landlord has sued or been sued by the proposed Transferee or has otherwise been involved in a legal dispute with the proposed Transferee or one of its affiliates;

14.2.2 The Transferee engages in any of the Prohibited Uses (as defined below), either within the Premises or, with regard to the Prohibited Uses listed as items 3 and 10 on Exhibit I hereto, in any other locations or online;

14.2.3 The Transferee intends to use the Subject Space for purposes which are not permitted under this Lease;

14.2.4 The Transferee is either a governmental agency or instrumentality thereof;

14.2.5 The Transfer will result in more than a reasonable and safe number of occupants per floor within the Subject Space; and

14.2.6 In the event that Landlord has recaptured any portion of the Premises pursuant to Section 14.4 below, then from and after such date, it shall be reasonable for Landlord to withhold its consent if either the proposed Transferee, or any person or entity which directly or indirectly, controls, is controlled by, or is under common control with, the proposed Transferee, (i) occupies space in the Building at the time of the request for consent, (ii) is negotiating with Landlord to lease space in the Building at such time, or (iii) has negotiated with Landlord during the six (6)-month period immediately preceding the Transfer Notice, and in each instance Landlord has adequate available space in the Building to reasonably meet such tenant’s space requirements.

If Landlord consents to any Transfer pursuant to the terms of this Section 14.2 (and does not exercise any recapture rights Landlord may have under Section 14.4 of this Lease), Tenant may within six (6) months after Landlord’s consent, but not later than the expiration of said six-month period, enter into such Transfer of the Premises or portion thereof, upon substantially the same terms and conditions as are set forth in the Transfer Notice furnished by Tenant to Landlord pursuant to Section 14.1 of this Lease, provided that if there are any changes in the terms and conditions from those specified in the Transfer Notice (i) such that Landlord would initially have been entitled to refuse its consent to such Transfer under this Section 14.2 , or (ii) which would cause the proposed Transfer to be more favorable to the Transferee than the terms set forth in Tenant’s original Transfer Notice, Tenant shall again submit the Transfer to Landlord for its approval and other action under this Article 14 (including Landlord’s right of recapture, if any, under Section 14.4 of this Lease). Tenant’s sole remedy in the event that Landlord shall wrongfully withhold consent to or disapprove any assignment or sublease shall be to obtain an order by a court of competent jurisdiction that Landlord grant such consent; in no event shall Landlord be liable for damages with respect to its granting or withholding consent to any proposed assignment or sublease.

-30-

14.3 Transfer Premium . Except as otherwise provided in Section 14.7 below, if Landlord consents to a Transfer, as a condition thereto which the parties hereby agree is reasonable, Tenant shall pay to Landlord fifty percent (50%) of any “Transfer Premium,” as that term is defined in this Section 14.3 , received by Tenant from such Transferee. “ Transfer Premium ” shall mean all rent, additional rent and other consideration received from such Transferee in excess of the Rent, Additional Rent and other consideration payable by Tenant under this Lease on a per rentable square foot basis if less than all of the Premises is transferred, after deducting the actual, reasonable and documented expenses incurred by Tenant for (i) any changes, alterations and improvements made to the Premises, and/or any tenant improvement allowance provided by Tenant to the Transferee, in connection with the Transfer, (ii) any brokerage commissions and advertising expenses in connection with the Transfer, (iii) reasonable legal fees incurred by Tenant in negotiating the Transfer and obtaining Landlord’s consent thereto, (iv) costs of advertising the space for sublease or assignment, (v) unamortized cost of initial and subsequent improvements to the Premises by Tenant, and (vi) any other costs actually paid in assigning or subletting the Subject Space. The Transfer Premium shall not apply to any assignment or sublease to an Affiliate pursuant to the provisions of Section 14.7 below. “Transfer Premium” shall also include, but not be limited to, key money and bonus money paid by Transferee to Tenant in connection with such Transfer, and any payment in excess of fair market value for services rendered by Tenant to the Transferee in connection with such Transfer. For purposes of calculating Transfer Premium during the Abatement Period, the Base Rent shall be equal to $46.25 per rentable square of the Subject Space. Throughout the Lease Term, Tenant shall have the right to modify Base Rent for potential Transfer to full service by adding $4.00 per rentable square of the Subject Space without paying a Transfer Premium to Landlord to cover such gross-up expenses.

14.4 Landlord’s Option as to Subject Space . Notwithstanding anything to the contrary contained in this Article 14 , in the event that (i) the Subject Space of the proposed Transfer pertains to more than thirty-nine percent (39%) of the rentable area of the Premises and (ii) the term of the proposed Transfer is longer than eighty percent (80%) of the remaining Lease Term (including the Option Term, if Tenant has exercised such Option pursuant to the Extension Option Rider), then Landlord shall have the option, by giving written notice to Tenant (the “ Recapture Notice ”) within thirty (30) days after receipt of any Transfer Notice, to recapture the Subject Space. Such Recapture Notice shall cancel and terminate this Lease with respect to the Subject Space as of the date stated in the Transfer Notice as the effective date of the proposed Transfer until the last day of the term of the Transfer as set forth in the Transfer Notice. If Landlord provides its Recapture Notice to Tenant, Tenant has thirty (30) days in which to rescind the Transfer Notice and shall retain the Subject Space without a Transfer. If this Lease shall be canceled with respect to less than the entire Premises, the Rent reserved herein shall be prorated on the basis of the number of rentable square feet retained by Tenant in proportion to the number of rentable square feet contained in the Premises, and this Lease as so amended shall continue thereafter in full force and effect, and upon request of either party, the parties shall execute written confirmation of the same. If Landlord declines, or fails to elect in a timely manner to recapture the Subject Space under this Section 14.4 , then, provided Landlord has consented to the proposed Transfer, Tenant shall be entitled to proceed to transfer the Subject Space to the proposed Transferee, subject to provisions of the last paragraph of Section 14.2 of this Lease.

-31-

14.5 Effect of Transfer . If Landlord consents to a Transfer, (i) the terms and conditions of this Lease shall in no way be deemed to have been waived or modified, (ii) such consent shall not be deemed consent to any further Transfer by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord, promptly after execution, an original executed copy of all documentation pertaining to the Transfer in form reasonably acceptable to Landlord, and (iv) no Transfer relating to this Lease or agreement entered into with respect thereto, whether with or without Landlord’s consent, shall relieve Tenant or any guarantor of the Lease from liability under this Lease. Landlord or its authorized representatives shall have the right at all reasonable times to audit the books, records and papers of Tenant relating to any Transfer, and shall have the right to make copies thereof. If the Transfer Premium respecting any Transfer shall be found understated, Tenant shall, within thirty (30) days after demand, pay the deficiency and Landlord’s costs of such audit.

14.6 Additional Transfers . Except as provided in Section 14.7 below, for purposes of this Lease, the term “Transfer” shall also include (i) if Tenant is a partnership, the withdrawal or change, voluntary, involuntary or by operation of law, of fifty percent (50%) or more of the partners, or transfer of twenty-five percent or more of partnership interests, within a twelve (12)-month period, or the dissolution of the partnership without immediate reconstitution thereof, and (ii) if Tenant is a closely held corporation (i.e., whose stock is not publicly held and not traded through an exchange or over the counter), (A) the dissolution, merger, consolidation or other reorganization of Tenant, (B) the sale or other transfer of more than an aggregate of fifty percent (50%) of the voting shares of Tenant (other than to immediate family members by reason of gift or death), within a twelve (12) month period or (C) 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.

14.7 Affiliated Companies/Restructuring of Business Organization . The assignment or subletting by Tenant of all or any portion of this Lease or the Premises to, or the use of the Premises by, (i) any person or entity which controls, is controlled by or under common control with Tenant (with control being defined as ownership, directly or indirectly, of at least fifty percent (50%) of the voting stock of such entity), or (ii) any entity which purchases all or substantially all of the assets of Tenant, or (iii) any entity into which Tenant is merged or consolidated (all such persons or entities described in (i), (ii) and (iii) being sometimes hereinafter referred to as “ Affiliates ”) shall not be deemed a Transfer under this Article 14 , and thus shall not be subject to Landlord’s right to receive any Transfer Premium pursuant to Section 14.3 above, or Landlord’s recapture right in Section 14.4 above, provided that:

(a) any such Affiliate was not formed as a subterfuge to avoid the obligations of this Article 14 ;

(b) Tenant gives Landlord at least ten (10) days’ prior notice of any such assignment or sublease to an Affiliate;

-32-

(c) Any such Affiliate has, as of the effective date of any such assignment or sublease a tangible net worth and net income, in the aggregate, computed in accordance with generally accepted accounting principles (but excluding goodwill as an asset), which is equal to or greater than Tenant as of the effective date of any such assignment or sublease and sufficient to meet the obligations of Tenant under the assignment or sublease;

(d) any such assignment or sublease shall be subject and subordinate to all of the terms and provisions of this Lease, and such assignee, if applicable, shall assume, in a written document delivered to Landlord upon or prior to the effective date of such assignment, all the obligations of Tenant under this Lease arising after the effective date of such assignment, including, without limitation, the provisions of Article 5 of the Lease regarding the use of the Premises; and

(e) Tenant shall remain fully liable for all obligations to be performed by Tenant under this Lease.

Notwithstanding anything hereinabove contained, Tenant acknowledges and agrees that Landlord’s consent shall be required, and may be withheld in Landlord’s sole discretion, if the proposed Transferee (or any Affiliate of such Transferee) is a person or entity that has previously defaulted under a lease or other agreement with Landlord or any Affiliate of Landlord, or against which Landlord or such Landlord Affiliate has entered into adversarial litigation, arbitration, mediation or other dispute resolution/settlement proceedings.

ARTICLE 15

SURRENDER; OWNERSHIP AND REMOVAL OF TRADE FIXTURES

15.1 Surrender of Premises . No act or thing done by Landlord or any agent or employee of Landlord during the Lease Term shall be deemed to constitute an acceptance by Landlord of a surrender of the Premises unless such intent is specifically acknowledged in a writing signed by Landlord. The delivery of keys to the Premises to Landlord or any agent or employee of Landlord shall not constitute a surrender of the Premises or effect a termination of this Lease, whether or not the keys are thereafter retained by Landlord, and notwithstanding such delivery Tenant shall be entitled to the return of such keys at any reasonable time upon request until this Lease shall have been properly terminated. The voluntary or other surrender of this Lease by Tenant, whether accepted by Landlord or not, or a mutual termination hereof, shall not work a merger, and at the option of Landlord shall operate as an assignment to Landlord of all subleases or subtenancies affecting the Premises.

15.2 Removal of Tenant Property by Tenant . Upon the expiration of the Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject to the provisions of this Article 15 , quit and surrender possession of the Premises to Landlord in as good order and condition as when Tenant took possession and as thereafter improved by Landlord and/or Tenant, reasonable wear and tear and repairs which are specifically made the responsibility of Landlord hereunder excepted. Upon such expiration or termination, subject to the terms of Section 8.3 above, Tenant shall, without expense to Landlord, remove or cause to be removed

-33-

from the Premises all debris and rubbish, and such items of furniture, equipment, telephone, computer and any satellite cabling, free-standing cabinet work, and other articles of personal property owned by Tenant or installed or placed by Tenant at its expense in the Premises, and such similar articles of any other persons claiming under Tenant, as Landlord may, in its sole discretion, require to be removed, and Tenant shall repair at its own expense all damage to the Premises and Building resulting from such removal.

ARTICLE 16

HOLDING OVER

If Tenant holds over after the expiration of the Lease Term hereof, with or without the express or implied consent of Landlord, such tenancy shall be from month-to-month only, and shall not constitute a renewal hereof or an extension for any further term, and in such case Base Rent shall be payable at a monthly rate equal to (i) for the first two (2) months of the holdover, one hundred fifty percent (150%) of the Base Rent applicable during the last rental period of the Lease Term under this Lease and (ii) for the remainder of the holdover period, two hundred percent (200%) of the Base Rent applicable during the last rental period of the Lease Term under this Lease. Such month-to-month tenancy shall be subject to every other term, covenant and agreement contained herein. Landlord hereby expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or other termination of this Lease. The provisions of this Article 16 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law. If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord harmless from all loss, costs (including reasonable attorneys’ fees) and liability resulting from such failure, including, without limiting the generality of the foregoing, any claims made by any succeeding tenant founded upon such failure to surrender, and any lost profits to Landlord resulting therefrom.

ARTICLE 17

ESTOPPEL CERTIFICATES

Within ten (10) business days following a request in writing by a party, the other party shall execute and deliver to the requesting party an estoppel certificate, which shall be substantially in the form of Exhibit E , attached hereto (or such other commercially reasonable form as may be reasonably required by any prospective mortgagee or purchaser of the Project, or any portion thereof, if Landlord is the requesting party), indicating therein any exceptions thereto that may exist at that time, and shall also contain any other information reasonably requested by the requesting party. Failure of a party to execute and deliver such estoppel certificate within such 10-business day period, where such failure continues for an additional five (5) business days after a subsequent notice of such failure is delivered by the requesting party to such party, shall constitute an acknowledgment by such party that statements included in the estoppel certificate delivered to such party by the requesting party made in connection with a proposed sale or financing by Landlord or proposed Transfer by Tenant, as the case may be, are true and correct, without exception.

-34-

ARTICLE 18

SUBORDINATION

This Lease is subject and subordinate to all present and future ground or underlying leases of the Real Property and to the lien of any mortgages or trust deeds, now or hereafter in force against the Real Property and the Building, if any, and to all renewals, extensions, modifications, consolidations and replacements thereof, and to all advances made or hereafter to be made upon the security of such mortgages or trust deeds, unless the holders of such mortgages or trust deeds, or the lessors under such ground lease or underlying leases, require in writing that this Lease be superior thereto. Notwithstanding any contrary provision of this Article 18, a condition precedent to the subordination of this Lease to any future mortgage, deed of trust, ground or underlying lease is that Landlord shall obtain for the benefit of Tenant a commercially reasonable subordination, non-disturbance and attornment agreement from the mortgagee, beneficiary or lessor (collectively, a “ Mortgagee ”) under such future instrument. Tenant covenants and agrees in the event any proceedings are brought for the foreclosure of any such mortgage, or if any ground or underlying lease is terminated, to attorn, without any deductions or set-offs whatsoever, to the purchaser upon any such foreclosure sale, or to the lessor of such ground or underlying lease, as the case may be, if so requested to do so by such purchaser or lessor, and to recognize such purchaser or lessor as the lessor under this Lease. Tenant shall, within ten (10) business days of request by Landlord, execute such further commercially reasonable instruments or assurances as Landlord may reasonably deem necessary to evidence or confirm the subordination or superiority of this Lease to any such mortgages, trust deeds, ground leases or underlying leases. Tenant waives the provisions of any current or future statute, rule or law which may give or purport to give Tenant any right or election to terminate or otherwise adversely affect this Lease and the obligations of the Tenant hereunder in the event of any foreclosure proceeding or sale. Landlord represents and warrants to Tenant that as of the Lease Date, there are no other deeds of trust or ground leases encumbering the Real Property.

ARTICLE 19

TENANT’S DEFAULTS; LANDLORD’S REMEDIES; LANDLORD DEFAULTS

19.1 Events of Default by Tenant . All covenants and agreements to be kept or performed by Tenant under this Lease shall be performed by Tenant at Tenant’s sole cost and expense and without any reduction of Rent. The occurrence of any of the following shall constitute a default of this Lease by Tenant:

19.1.1 Any failure by Tenant to pay any Rent or any other charge required to be paid under this Lease, or any part thereof, when due, where such failure shall continue for a period of three (3) days after written notice thereof from Landlord; or

19.1.2 Any failure by Tenant to observe or perform any other provision, covenant or condition of this Lease to be observed or performed by Tenant where such failure continues for thirty (30) days after written notice thereof from Landlord to Tenant; provided however, that if the nature of such default is such that the same cannot reasonably be cured within a 30 day period, Tenant shall not be deemed to be in default if it diligently commences such cure within such period and thereafter diligently proceeds to rectify and cure said default as soon as possible but in no event longer than ninety (90) days; or

-35-

19.1.3 Abandonment or vacation of the Premises by Tenant. Abandonment is herein defined to include, but is not limited to, any absence by Tenant from the Premises for twenty (20) days or longer while in default of any provision of this Lease.

19.1.4 Any failure by Tenant to execute and deliver any statement described in Article 18 requested by Landlord, where such failure continues for five (5) business days after delivery of written notice of such failure by Landlord to Tenant.

Any notice given pursuant to this Section 15.1 shall be in lieu of, and not in addition to, any notice required under Section 1161 of the California Code of Civil Procedure, or any similar or successor statute.

19.2 Landlord’s Remedies Upon Default . Upon the occurrence of any such default by Tenant, Landlord shall have, in addition to any other remedies available to Landlord at law or in equity, the option to pursue any one or more of the following remedies, each and all of which shall be cumulative and nonexclusive, without any notice or demand whatsoever.

19.2.1 Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim for damages therefor; and Landlord may recover from Tenant the following:

(i) The worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus

(ii) The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental 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 for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus

(iv) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, specifically including but not limited to, brokerage commissions and advertising expenses incurred, expenses of remodeling the Premises or any portion thereof for a new tenant, whether for the same or a different use, and any special concessions made to obtain a new tenant; and

-36-

(v) (v) 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 applicable law.

The term “ rent ” as used in this Section 19.2 shall be deemed to be and to mean all sums of every nature required to be paid by Tenant pursuant to the terms of this Lease, whether to Landlord or to others. As used in Paragraphs 19.2.1(i) and (ii) , above, the “worth at the time of award” shall be computed by allowing interest at the Interest Rate set forth in Section 4.5 of this Lease. As used in Paragraph 19.2.1(iii) above, the “worth at the time of award” shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).

19.2.2 Landlord shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue 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). Accordingly, if Landlord does not elect to terminate this Lease on account of any default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all rent as it becomes due.

19.2.3 Landlord may, but shall not be obligated to, make any such payment or perform or otherwise cure any such obligation, provision, covenant or condition on Tenant’s part to be observed or performed (and may enter the Premises for such purposes). Any such actions undertaken by Landlord pursuant to the foregoing provisions of this Section 19.2.3 shall not be deemed a waiver of Landlord’s rights and remedies as a result of Tenant’s failure to perform and shall not release Tenant from any of its obligations under this Lease. Tenant shall have no right of self-help to perform repairs or any other obligation of Landlord, and shall have no right to withhold, set-off, or abate Rent. Without limitation of the preceding sentence, Tenant hereby waives Tenant’s rights (if any) under Section 1932, Subdivision 1, and Section 1942 of the California Civil Code, Section 431.70 of the California Code of Civil Procedure, and similar laws.

19.3 Payment by Tenant . Tenant shall pay to Landlord, within fifteen (15) days after delivery by Landlord to Tenant of statements therefor: (i) sums equal to expenditures reasonably made and obligations incurred by Landlord in connection with Landlord’s performance or cure of any of Tenant’s obligations pursuant to the provisions of Section 19.2.3 above; and (ii) sums equal to all expenditures made and obligations incurred by Landlord in collecting or attempting to collect the Rent or in enforcing or attempting to enforce any rights of Landlord under this Lease or pursuant to law, including, without limitation, all legal fees and other amounts so expended. Tenant’s obligations under this Section 19.3 shall survive the expiration or sooner termination of the Lease Term.

19.4 Security for Performance of Tenant’s Obligations . Notwithstanding any security deposit held by Landlord pursuant to Article 20 , Tenant hereby agrees that in the event of a default by Tenant, Landlord shall be entitled to seek and obtain a writ of attachment and/or a temporary protective order and Tenant hereby waives any rights or defenses to contest such a writ of attachment and/or temporary protective order on the basis of California Code of Civil Procedure Section 483.010 or any other related statute or rule.

-37-

19.5 Sublessees of Tenant . Whether or not Landlord elects to terminate this Lease on account of any default by Tenant, as set forth in this Article 19 , Landlord shall have the right to terminate any and all subleases, licenses, concessions or other consensual arrangements for possession entered into by Tenant and affecting the Premises or may, in Landlord’s sole discretion, succeed to Tenant’s interest in such subleases, licenses, concessions or arrangements. In the event of Landlord’s election to succeed to Tenant’s interest in any such subleases, licenses, concessions or arrangements, Tenant shall, as of the date of notice by Landlord of such election, have no further right to or interest in the rent or other consideration receivable thereunder.

19.6 Waiver of Default . No waiver by Landlord of any violation or breach by Tenant of any of the terms, provisions and covenants herein contained shall be deemed or construed to constitute a waiver of any other or later violation or breach by Tenant of the same or any other of the terms, provisions, and covenants herein contained. Forbearance by Landlord in enforcement of one or more of the remedies herein provided upon a default by Tenant shall not be deemed or construed to constitute a waiver of such default. The acceptance of any Rent hereunder by Landlord following the occurrence of any default, whether or not known to Landlord, shall not be deemed a waiver of any such default, except only a default in the payment of the Rent so accepted.

19.7 Payment of Rent and Security Deposit After Default . If Tenant fails to pay Base Rent, Tenant’s Share of Direct Expenses or any other monetary obligation due hereunder on the date it is due, then after Tenant’s third failure to pay any monetary obligation on the date it is due, at Landlord’s option, all monetary obligations of Tenant hereunder shall thereafter be paid by cashier’s check, and Tenant shall, upon demand, provide Landlord with an additional security deposit equal to three (3) months’ Base Rent. If Landlord has required Tenant to make said payments by cashier’s check or to provide an additional security deposit, Tenant’s failure to make a payment by cashier’s check or to provide the additional security deposit shall be a default hereunder.

19.8 Efforts to Relet . For the purposes of this Article 19 , Tenant’s right to possession shall not be deemed to have been terminated by efforts of Landlord to relet the Premises, by its acts of maintenance or preservation with respect to the Premises, or by appointment of a receiver to protect Landlord’s interests hereunder. If Landlord elects to terminate this Lease pursuant to Section 19.2.1 above following Tenant’s default, Landlord shall use commercially reasonable efforts to mitigate its damages to the extent required by applicable Laws. The foregoing enumeration is not exhaustive, but merely illustrative of acts which may be performed by Landlord without terminating Tenant’s right to possession.

19.9 Waiver of Reinstatement . Tenant hereby waives all rights under California Code of Civil Procedure Sections 1174 and 1179 and California Civil Code Section 3275 providing for relief from forfeiture and any other right now or hereafter existing to redeem the Premises or reinstate this Lease after termination pursuant to this Article 19 or by order or judgment of any court or by any legal process.

-38-

19.10 Default by Landlord . Landlord shall be in default under this Lease if (i) Landlord fails to perform any of its obligations hereunder and said failure continues for a period of thirty (30) days after written notice thereof from Tenant to Landlord; provided that if such failure cannot reasonably be cured within said 30-day period, Landlord shall be in default hereunder only if Landlord fails to commence the cure of said failure within said 30-day period, or having commenced the curative action within said 30-day period, fails to diligently pursue same, and (ii) each Mortgagee of whose identity Tenant has been notified in writing shall have failed to cure such default within thirty (30) days (or such longer period of time as may be specified in any written agreement between Tenant and Mortgagee regarding such matter) after receipt of written notice from Tenant of Landlord’s failure to cure within the time periods provided above. In the event of an uncured default by Landlord under the Lease, Tenant shall use reasonable efforts to mitigate its damages and losses arising from any such default and Tenant may pursue any and all remedies available to it at Law or in equity, provided, however, in no event shall Tenant claim a constructive or actual eviction or that the Premises have become unsuitable or uninhabitable prior to a default and failure to cure by Landlord and its Mortgagee under this Lease and, further provided, in no event shall Tenant be entitled to receive more than its actual direct damages, it being agreed that Tenant hereby waives any claim it otherwise may have for special or consequential damages.

ARTICLE 20

SIGNS

20.1 Building Standard Signage . Landlord shall provide space on the Building directory on the ground floor lobby of the Building for a listing identifying Tenant’s name and suite numbers in a location and with a design reasonably acceptable to Landlord and Tenant. Landlord shall also install signage identifying Tenant’s name: (a) either (i) on the entry door to the Premises located on each floor of the Building or (ii) on one (1) of the walls adjacent to such entry door; and (b) in any common elevator lobbies of the Building. All such signage described in this Section 20.1 shall use Building standard materials and lettering and shall otherwise be subject to Landlord’s reasonable approval. Landlord shall pay for the cost of the initial installation of such signage, and Tenant shall pay for the cost of any changes thereto.

20.2 Exterior Signage . Tenant shall not place, affix or maintain any signs, advertising placards, names, insignia, trademarks, descriptive material or any other similar item or items in, on or attached to the storefront, the glass panes and supports of the windows, the door, the roof or the demising walls of the Premises except as Landlord shall approve in writing in accordance with the provisions of this Section 20.2 . Subject to Tenant obtaining the approval of all applicable governmental entities and Tenant’s compliance with all applicable Laws and the terms of this Article 20 , Tenant shall have the right to install, at Tenant’s cost, one (1) sign displaying Tenant’s logo and Tenant’s name, “Zendesk” on (i) the Market Street elevation of the Building, (ii) the East elevation of the Building and (iii) the West elevation of the Building, each in the approximate location depicted on Exhibit F-1 attached hereto and labeled “office” or “Zendesk”, as applicable (the “ Building Exterior Signs ”). Regardless of whether any such items are depicted on Exhibit F-1 attached hereto, the graphics, materials, color, design, lettering, lighting, size, specifications, manner of affixing and exact location of the Building Exterior Signs shall be subject to Landlord’s reasonable approval. Tenant shall pay for all costs and expenses related to

-39-

the Building Exterior Signs, including, without limitation, costs of the design, construction, installation, maintenance, insurance, utilities, repair and replacement of the Building Exterior Signs. Tenant shall install and maintain the Building Exterior Signs in compliance with all Laws and subject to the applicable provisions of Articles 8 and 9 above.

20.3 Transferability . The rights granted to Tenant under this Article 20 are personal to the original tenant executing this Lease (the “ Original Tenant ”) and any Affiliate to which Tenant’s entire interest in this Lease has been assigned pursuant to Section 14.7 (but any name change on the Building Exterior Signs to reflect such Affiliate assignee shall be subject to Landlord’s approval, which approval shall not be unreasonably withheld or delayed) and may not be exercised or used by or assigned to any other person or entity.

20.4 Maintenance/Removal . Should the Building Exterior Signs require maintenance, repairs or replacement as determined in Landlord’s reasonable judgment, Landlord shall have the right to provide written notice thereof to Tenant and Tenant shall cause such repairs, replacement and/or maintenance to be performed within fifteen (15) days after receipt of such notice from Landlord, at Tenant’s sole cost and expense; provided, however, if such repairs, replacement and/or maintenance are reasonably expected to require longer than fifteen (15) days to perform, Tenant shall commence such repairs, replacement and/or maintenance within such fifteen (15) day period and shall diligently prosecute such repairs, replacement and maintenance to completion. Should Tenant fail to perform such maintenance, repairs or replacement within the periods described in the immediately preceding sentence, Landlord shall have the right to cause such work to be performed and to charge Tenant as Additional Rent for the costs of such work. Upon the expiration or earlier termination of this Lease, Tenant shall, at Tenant’s sole cost and expense, cause the Building Exterior Signs to be removed, and Tenant shall repair all damage occasioned thereby and restore the affected areas to their original condition prior to the installation of Building Exterior Sign, normal wear and tear excepted. If Tenant fails to remove such signage and repair and restore the affected areas as provided in the immediately preceding sentence, within fifteen (15) days following the expiration or earlier termination of this Lease, then Landlord may perform such work, and all costs and expenses incurred by Landlord in so performing such work shall be reimbursed by Tenant to Landlord within fifteen (15) days after Tenant’s receipt of invoice therefor. The immediately preceding sentence shall survive the expiration or earlier termination of this Lease. Tenant shall be responsible for maintaining insurance on the Building Exterior Signs as part of the insurance required to be carried by Tenant pursuant to Section 10.2 above.

20.5 Use of Exterior Portion of the Building . Landlord agrees that except for bona fide identity signage and/or logos installed on the Building for the benefit of bona fide tenants in the Building, Landlord shall not grant any rights to any tenant or other third party to utilize the exterior surfaces (or any material portion thereof) of the Building for the purpose of advertising, promoting or identifying a person, sign, cause, project, product, service or the like by the placement of a billboard or similar advertising on the walls of the Building. Further, Landlord shall use reasonable efforts to inform Tenant of the type and location of the signage for the retail tenant at the Building. Any retail signage for the Building may only be placed within the area depicted and labeled “Retail” on Exhibit F-2 attached hereto.

-40-

ARTICLE 21

COMPLIANCE WITH LAW

On and after the Lease Commencement Date, Landlord shall be responsible for ensuring that all common areas, including restrooms, are in compliance with all Laws (as defined below). Tenant shall not do anything or suffer anything to be done in or about the Premises or Buildings which will in any way conflict with any federal, state or local laws, statutes, ordinances or other governmental rules, regulations or requirements now in force or which may hereafter be enacted or promulgated, including, without limitation the Americans with Disabilities Act of 1990 (collectively, the “ Laws ”). At its sole cost and expense, Tenant shall promptly comply with all such Laws, including, without limitation, the making of any alterations and improvements to the Premises. Notwithstanding the foregoing to the contrary, Landlord shall be responsible for making all alterations and improvements required by applicable Laws with respect to the items which are Landlord’s responsibility to repair and maintain pursuant to Section 7.2 of this Lease (i.e., the structural portions of the Building, the exterior windows of the Building, the roof of the Building (other than the portions upon which Telecommunications Equipment and/or the Roof Deck are situated), the Base, Shell and Core components of the Building and the common areas of the Building and Real Property); provided , however , that Tenant shall reimburse Landlord, within thirty (30) days after invoice, for the costs of any such improvements and alterations and other compliance costs to the extent necessitated by or resulting from (i) any Alterations installed by or on behalf of Tenant (including, without limitation, the installation of the Telecommunications Equipment and/or the Roof Deck), (ii) any specific act, omission or negligence of tenant or Tenant’s agents, contractors, employees or licensees, and/or (iii) Tenant’s specific manner of use of the Premises (as distinguished from general office use). The judgment of any court of competent jurisdiction or the admission of Tenant in any judicial action, regardless of whether Landlord is a party thereto, that Tenant has violated any of said Laws, shall be conclusive of that fact as between Landlord and Tenant.

ARTICLE 22

ENTRY BY LANDLORD

Landlord reserves the right at all reasonable times and upon at least 48 hours’ advance written notice to Tenant (except no such notice shall be required in emergencies) to enter the Premises to: (i) inspect them; (ii) show the Premises to prospective purchasers, or mortgagees, or to the ground or underlying lessors and, during the last year of the Lease Term, to prospective tenants; (iii) post reasonable and customary notices of nonresponsibility; and/or (iv) alter, improve or repair the Premises or the Building if necessary to comply with current building codes or other applicable laws, or for structural alterations, repairs or improvements to the Building which Landlord is required to perform under this Lease. Notwithstanding anything to the contrary contained in this Article 22 , Landlord may enter the Premises at any time to (a) perform regularly scheduled services required of Landlord; and (b) perform any covenants of Tenant which Tenant fails to perform. Any such entries shall be without the abatement of Rent and shall include the right to take such reasonable steps as required to accomplish the stated purposes. Subject to Landlord’s indemnity of Tenant in Section 10.1.2 above, Tenant hereby waives any claims for damages or for any injuries or inconvenience to or interference with

-41-

Tenant’s business, lost profits, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby. For each of the above purposes, Landlord shall at all times have a key with which to unlock all the doors in the Premises, excluding Tenant’s vaults, safes and special security areas designated in advance by Tenant. In an emergency, Landlord shall have the right to use any means that Landlord may deem proper to open the doors in and to the Premises. Any entry into the Premises in the manner hereinbefore described shall not be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an actual or constructive eviction of Tenant from any portion of the Premises. Notwithstanding anything to the contrary set forth above, Landlord agrees to use commercially reasonable efforts to minimize interference with Tenant’s use of and access to the Premises as a result of Landlord’s exercise of its entry rights under this Article 22 .

ARTICLE 23

ROOFTOP RIGHTS

23.1 Telecommunications Equipment . Notwithstanding the terms and provisions of the Lease to the contrary, if Tenant requires the use of telecommunications services, including, without limitation, satellite service, Internet access, credit card verification or other data transmission equipment (collectively, the “ Telecommunications Equipment ”), then upon fifteen (15) days advance written notice to Landlord and subject to available capacity and Tenant’s compliance with all applicable Laws and Landlord’s requirements for property and roof maintenance and repair, Tenant shall have the non-exclusive right to place such Telecommunications Equipment on the roof of the Building in a location approved by Landlord. The Telecommunications Equipment and Tenant’s right to use the roof of the Building for the installation of such equipment shall be for Tenant’s sole use and such right may not be transferred, assigned, subleased or otherwise alienated by Tenant to a third party telecommunications carrier or other third party that does not occupy space in the Premises. Tenant agrees that Tenant shall not sell the use of the Telecommunications Equipment to provide services to any party other than Tenant and its subtenant(s)’ employees and clients in connection with its business, or to transmit to any other location other than the Premises. The installation of the Telecommunications Equipment shall constitute work and shall be performed in accordance with and subject to the provisions of Article 8 above, and the portion of the roof of the Building affected by the Telecommunications Equipment shall be deemed to be a portion of the Premises (provided, however, that no Rent or Additional Rent shall be charged for the use of the roof); consequently, all of the provisions of the Lease with respect to Tenant’s obligations hereunder shall apply to the installation, use and maintenance of the Telecommunications Equipment, including without limitation, provisions relating to compliance with requirements as to insurance, indemnity, repairs and maintenance. The cost of the Telecommunications Equipment and all costs of installing, maintaining and removing the Telecommunications Equipment shall be borne solely by Tenant. Upon the expiration of the Lease Term or upon any earlier termination of this Lease, Tenant shall, at Tenant’s sole cost and expense and subject to the control of and direction from Landlord, remove the Telecommunications Equipment, repair and damage caused thereby, and restore the roof to the condition existing prior to the installation of the Telecommunications Equipment, reasonable wear and tear excepted.

-42-

23.2 Rooftop Deck . Subject to Tenant’s compliance with all applicable Laws and this Section 23.2 , Tenant shall have the right to use a portion of the roof of the Building to install a deck (the “ Roof Deck ”) for the sole purpose of providing outside lounge space and meeting space for Tenant’s employees, invitees, guests, and visitors, and for receptions. Tenant shall not be entitled to use the Roof Deck for any other purpose whatsoever. Landlord makes no representation that necessary permits and approvals to install the Roof Deck can be obtained or that Tenant’s use of the Roof Deck is permitted by governmental laws, rules and regulations. The installation of the Roof Deck, if at all, shall be made after the completion of the Tenant Improvements and shall constitute an Alteration to be performed by Tenant, at Tenant’s sole cost and expense, in accordance with and subject to the provisions of Article 8 above. The portion of the roof of the Building where the Roof Deck is situated shall be deemed to be a portion of the Premises; consequently, all of the provisions of the Lease with respect to Tenant’s obligations hereunder shall apply to the installation, use, maintenance and cleaning of the Roof Deck, including without limitation, provisions relating to compliance with requirements as to insurance, indemnity, repairs and maintenance; provided, however, Tenant shall not be required to pay any Base Rent or Additional Rent for the use of the Roof Deck nor shall such area be included with any rentable area calculations for purposes of this Lease. Landlord may require that Tenant install, at Tenant’s expense, safety fencing or other perimeter boundary improvements to separate the Roof Deck from the remaining areas of the roof. The cost of installing and maintaining the Roof Deck shall be borne solely by Tenant. Tenant shall be responsible for all taxes and charges imposed for any of Tenant’s personal property in the Roof Deck and shall comply with all rules and regulations promulgated by Landlord with regard to Tenant’s use of the Roof Deck. Tenant shall not make any alterations to the Roof Deck without the prior written consent of Landlord, which consent may be withheld by Landlord in its sole and absolute discretion. Unless required as part of the governmental approvals for the installation and use of the Roof Deck, Tenant shall not be required to remove the Roof Deck at the expiration or earlier termination of this Lease.

ARTICLE 24

MISCELLANEOUS PROVISIONS

24.1 Terms; Captions . The necessary grammatical changes required to make the provisions hereof apply either to corporations or partnerships or individuals, men or women, as the case may require, shall in all cases be assumed as though in each case fully expressed. The captions of Articles and Sections are for convenience only and shall not be deemed to limit, construe, affect or alter the meaning of such Articles and Sections.

24.2 Binding Effect . Each of the provisions of this Lease shall extend to and shall, as the case may require, bind or inure to the benefit not only of Landlord and of Tenant, but also of their respective successors or assigns, provided this clause shall not permit any assignment by Tenant contrary to the provisions of Article 14 of this Lease.

24.3 No Waiver . No waiver of any provision of this Lease shall be implied by any failure of a party to enforce any remedy on account of the violation of such provision, even if such violation shall continue or be repeated subsequently, any waiver by a party of any provision of this Lease may only be in writing, and no express waiver shall affect any provision other than

-43-

the one specified in such waiver and that one only for the time and in the manner specifically stated. No receipt of monies by Landlord from Tenant after the termination of this Lease shall in any way alter the length of the Lease Term or of Tenant’s right of possession hereunder or after the giving of any notice shall reinstate, continue or extend the Lease Term or affect any notice given Tenant prior to the receipt of such monies, it being agreed that after the service of notice or the commencement of a suit or after final judgment for possession of the Premises, Landlord may receive and collect any Rent due, and the payment of said Rent shall not waive or affect said notice, suit or judgment.

24.4 Modification of Lease . Should any current or prospective mortgagee or ground lessor for the Building require a modification or modifications of this Lease, which modification or modifications will not cause an increased cost or expense to Tenant or in any other way materially and adversely change the rights and obligations of Tenant hereunder, then and in such event, Tenant agrees that this Lease may be so modified and agrees to execute whatever documents are required therefor and deliver the same to Landlord within ten (10) business days following the request therefor. Should Landlord or any such current or prospective mortgagee or ground lessor require execution of a short form of Lease for recording, containing, among other customary provisions, the names of the parties, a description of the Premises and the Lease Term, Tenant agrees to execute such short form of Lease and to deliver the same to Landlord within ten (10) business days following the request therefor.

24.5 Transfer of Landlord’s Interest . Tenant acknowledges that Landlord has the right to transfer all or any portion of its interest in the Real Property, the Building and/or in this Lease, and Tenant agrees that in the event of any such transfer, Landlord shall automatically be released from all liability under this Lease and Tenant agrees to look solely to such transferee for the performance of Landlord’s obligations hereunder after the date of transfer; provided that the transferee has executed an assignment and assumption agreement that provides that the transferee assumes all of the obligations of Landlord. The liability of any transferee of Landlord shall be limited to the interest of such transferee in the Real Property and Building and such transferee shall be without personal liability under this Lease, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. Tenant further acknowledges that Landlord may assign its interest in this Lease to a mortgage lender as additional security, subject to the provisions of Article 18 above, including the delivery of a commercially reasonable subordination, non-disturbance and attornment agreement from the Mortgagee, and agrees that such an assignment shall not release Landlord from its obligations hereunder and that Tenant shall continue to look to Landlord for the performance of its obligations hereunder.

24.6 Prohibition Against Recording . Except as provided in Section 24.4 of this Lease, neither this Lease, nor any memorandum, affidavit or other writing with respect thereto, shall be recorded by Tenant or by anyone acting through, under or on behalf of Tenant, and the recording thereof in violation of this provision shall make this Lease null and void at Landlord’s election.

24.7 Landlord’s Title; Air Rights . Landlord’s title is and always shall be paramount to the title of Tenant. Nothing herein contained shall empower Tenant to do any act which can, shall or may encumber the title of Landlord; provided, however, that Landlord shall not construct any improvements in its airspace during the pendency of this Lease. No rights to any view or to light or air over any property, whether belonging to Landlord or any other person, are granted to Tenant by this Lease.

-44-

24.8 Relationship of Parties . Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint-venturer or any association between Landlord and Tenant, it being expressly understood and agreed that neither the method of computation of Rent nor any act of the parties hereto shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant.

24.9 Application of Payments . Landlord shall have the right to apply payments received from Tenant pursuant to this Lease, regardless of Tenant’s designation of such payments, to satisfy any obligations of Tenant hereunder, in such order and amounts as Landlord, in its sole discretion, may elect.

24.10 Time of Essence . Time is of the essence of this Lease and each of its provisions.

24.11 Partial Invalidity . If any term, provision or condition contained in this Lease shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, provision or condition to persons or circumstances other than those with respect to which it is invalid or unenforceable, shall not be affected thereby, and each and every other term, provision and condition of this Lease shall be valid and enforceable to the fullest extent possible permitted by law.

24.12 No Warranty . In executing and delivering this Lease, Tenant has not relied on any representation, including, but not limited to, any representation whatsoever as to the amount of any item comprising Additional Rent or the amount of the Additional Rent in the aggregate or that Landlord is furnishing the same services to other tenants, at all, on the same level or on the same basis, or any warranty or any statement of Landlord which is not expressly set forth in Article 4 or in one or more of the Exhibits attached hereto.

24.13 Landlord Exculpation . It is expressly understood and agreed that notwithstanding anything in this Lease to the contrary, and notwithstanding any applicable law to the contrary, the liability of Landlord and the Landlord Parties hereunder (including any successor landlord) and any recourse by Tenant against Landlord or the Landlord Parties shall be limited solely and exclusively to an amount which is equal to the interest of Landlord in the Building, and neither Landlord, nor any of the Landlord Parties shall have any personal liability therefor, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant.

24.14 Entire Agreement . It is understood and acknowledged that there are no oral agreements between the parties hereto affecting this Lease and this Lease supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements and understandings, if any, between the parties hereto or displayed by Landlord to Tenant with respect to the subject matter thereof, and none thereof shall be used to interpret or construe this Lease. This Lease and any side letter or separate agreement executed by Landlord and Tenant in connection with this Lease and dated of even date herewith contain all of the terms, covenants, conditions, warranties

-45-

and agreements of the parties relating in any manner to the rental, use and occupancy of the Premises, shall be considered to be the only agreement between the parties hereto and their representatives and agents, and none of the terms, covenants, conditions or provisions of this Lease can be modified, deleted or added to except in writing signed by the parties hereto. All negotiations and oral agreements acceptable to both parties have been merged into and are included herein. There are no other representations or warranties between the parties, and all reliance with respect to representations is based totally upon the representations and agreements expressly contained in this Lease.

24.15 Right to Lease . Landlord reserves the absolute right to effect such other tenancies in the Building as Landlord in the exercise of its sole business judgment shall determine to best promote the interests of the Building; provided, however, that Landlord shall not enter into a lease permitting any tenant to engage in any of the uses set forth on Exhibit I attached hereto (the “ Prohibited Uses ”). Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant, type of use or number of tenants shall, during the Lease Term, occupy any space in the Building.

24.16 Force Majeure . Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, inability to obtain services, labor, or materials or reasonable substitutes therefor, governmental actions, civil commotions, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, delay due to changes in any Laws (including, without limitation, the ADA), or the interpretation thereof, or delay attributable to lightning, earthquake, fire, storm, hurricane, tornado, flood, washout, explosion, or any other similar industry-wide or Building-wide cause beyond the reasonable control of the party from whom performance is required, or any of its contractors or other representative, except with respect to the obligations imposed with regard to Rent and other charges to be paid by Tenant pursuant to this Lease and except with respect to Tenant’s obligations under the Tenant Work Letter (collectively, the “ Force Majeure ”), notwithstanding anything to the contrary contained in this Lease, shall excuse the performance of such party for a period equal to any such prevention, delay or stoppage and, therefore, if this Lease specifies a time period for performance of an obligation of either party, that time period shall be extended by the period of any delay in such party’s performance caused by a Force Majeure.

24.17 Notices . All notices, demands, statements or communications (collectively, “ Notices ”) given or required to be given by either party to the other hereunder shall be in writing, shall be sent by United States certified or registered mail, postage prepaid, return receipt requested, by nationally recognized overnight courier service or delivered personally (i) to Tenant at the appropriate address set forth in Section 5 of the Summary, or to such other place as Tenant may from time to time designate in a Notice to Landlord; or (ii) to Landlord at the addresses set forth in Section 3 of the Summary, or to such other firm or to such other place as Landlord may from time to time designate in a Notice to Tenant. Any Notice will be deemed given on the date it is mailed as provided in this Section 24.17 or upon the date personal delivery is made. If Tenant is notified of the identity and address of Landlord’s mortgagee or ground or underlying lessor, Tenant shall give to such mortgagee or ground or underlying lessor written notice of any default by Landlord under the terms of this Lease by registered or certified mail, and such mortgagee or ground or underlying lessor shall be given a reasonable opportunity to cure such default prior to Tenant’s exercising any remedy available to Tenant.

-46-

24.18 Joint and Several . If there is more than one Tenant, the obligations imposed upon Tenant under this Lease shall be joint and several. In such event it is agreed that any one of the named Tenants shall be empowered to execute any amendment to this Lease, or other document ancillary thereto and bind all of the named Tenants, and Landlord may rely on the same as if all of the named Tenants had executed such document.

24.19 Authority . If Tenant is a corporation or partnership, each individual executing this Lease on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in the state in which the Building is located and that Tenant has full right and authority to execute and deliver this Lease and that each person signing on behalf of Tenant is authorized to do so.

24.20 Attorneys’ Fees; Landlord Bankruptcy Proceedings . If Landlord or Tenant brings an action to enforce the terms hereof or declare rights hereunder, the prevailing party in any such action, or appeal thereon, shall be entitled to its reasonable attorneys’ fees and court costs to be paid by the losing party as fixed by the court in the same or separate suit, and whether or not such action is pursued to decision or judgment. The attorneys’ fee award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys’ fees and court costs reasonably incurred in good faith. Landlord shall be entitled to reasonable attorneys’ fees and all other costs and expenses incurred in the preparation and service of notices of default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such default. Landlord and Tenant agree that attorneys’ fees incurred with respect to defaults and bankruptcy are actual pecuniary losses within the meaning of Section 365(b)(1)(B) of the Bankruptcy Code or any successor statute.

24.21 Governing Law . This Lease shall be construed and enforced in accordance with the laws of the state in which the Building is located.

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

24.23 Brokers . Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Lease, excepting only the real estate brokers or agents specified in Section 13 of the Summary (the “ Brokers ”), and that they know of no other real estate broker or agent who is entitled to a commission in connection with this Lease. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including without limitation reasonable 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 or agent other than the Brokers.

24.24 Independent Covenants . This Lease shall be construed as though the covenants herein between Landlord and Tenant are independent and not dependent and Tenant hereby expressly waives the benefit of any statute to the contrary and agrees that if Landlord fails to perform its obligations set forth herein, Tenant shall not be entitled to make any repairs or

-47-

perform any acts hereunder at Landlord’s expense or to any setoff of the Rent or other amounts owing hereunder against Landlord; provided , however , that the foregoing shall in no way impair the right of Tenant to commence a separate action against Landlord for any violation by Landlord of the provisions hereof so long as notice is first given to Landlord and any holder of a mortgage or deed of trust covering the Building, Real Property or any portion thereof, of whose address Tenant has theretofore been notified, and an opportunity is granted to Landlord and such holder to correct such violations as provided above.

24.25 Confidentiality . Tenant and Landlord each acknowledge that the content of this Lease and any related documents are confidential information. Tenant and Landlord shall each keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than such party’s financial, legal, and space planning consultants. In addition, Landlord shall be permitted to disclose the contents of this Lease and any related documents to its lenders, partners, investors, prospective investors, and prospective purchasers. Each party shall be relieved of its obligations to hold confidential information in strict confidence with respect to any portion of such confidential information that: (i) is or later falls within the public domain without breach of this Lease; (ii) was known to, or independently developed by, such party prior to disclosure by the other party; (iii) becomes known to such party from a third party not owing any obligation of confidence to such party; (iv) such party is subject to banking, insurance or other regulation, or requirements of the Securities Exchange Commission, that would require confidential information to be disclosed to examiners or auditors, government officials, or other parties in accordance with Laws.

24.26 Property Management . Landlord shall engage a property manager that has experience in managing properties similar to the Building in its improved condition.

24.27 Landlord Renovations . 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, Building, Real Property, or any part thereof and that no representations or warranties respecting the condition of the Premises, the Building or the Real Property have been made by Landlord to Tenant, except as specifically expressly set forth in this Lease or in Exhibit B attached to this Lease. However, Tenant acknowledges that Landlord may from time to time, at Landlord’s sole option, renovate, improve, alter, or modify (collectively, the “ Renovations ”) the Building, Premises, and/or Real Property, including without limitation, the common areas, systems and equipment, roof, and structural portions of the same, which Renovations may include, without limitation, (i) modifying the common areas and tenant spaces to comply with applicable laws and regulations, including regulations relating to the physically disabled, seismic conditions, and building safety and security, and (ii) installing new carpeting, lighting, and wall coverings in the Building common areas, and in connection with such Renovations, Landlord may, among other things, erect scaffolding or other necessary structures in the Building, limit or eliminate access to portions of the Real Property, including portions of the common areas, or perform work in the Building, which work may create noise, dust or leave debris in the Building. Tenant hereby agrees that such Renovations and Landlord’s actions in connection with such Renovations shall in no way constitute a constructive eviction of Tenant nor entitle Tenant to any abatement of Rent (except to the extent provided under Section 11.5 above). Landlord shall have no responsibility or for any reason be liable to Tenant for any direct or indirect injury to or interference with Tenant’s business arising from the Renovations, nor

-48-

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 Landlord’s actions in connection with such Renovations, or for any inconvenience or annoyance occasioned by such Renovations or Landlord’s actions in connection with such Renovations except to the extent provided under Section 11.5 above. All Renovations that are performed during the Business Hours and are reasonably anticipated to disturb Tenant’s use or enjoyment of the Premise shall be done only after Tenant has provided its prior written consent, which shall not be unreasonably withheld or delayed, and provided that Landlord delivers to Tenant detailed information about the nature of the Renovations, including the scope of the Renovations, the times during which construction work will take place, the schedule for the construction, and location of the Renovations. Notwithstanding the foregoing, Tenant’s consent shall not be required with respect to any Renovations that are necessitated for Landlord to comply with its obligations under Article 21 above, but Landlord shall in such event, except in the event of an emergency, provide Tenant with detailed information about the nature of such Renovations, including the scope of the applicable Renovations, the times during which construction work will take place, the schedule for the construction, and location of the applicable Renovations.

24.28 Prohibited Party Transactions . Tenant represents and warrants to Landlord that (1) Tenant is not acting, directly or indirectly, for or on behalf of any person, group, entity, or nation named by any Executive Order or the United States Treasury Department as a terrorist, “Specially Designated National,” “Blocked Person,” or other banned or blocked person, entity, nation, or transaction pursuant to any law, order, rule, or regulation that is enforced or administered by the Office of Foreign Assets Control; and (2) Tenant is not engaged in this transaction, directly or indirectly on behalf of, or instigating or facilitating this transaction, directly or indirectly on behalf of, any such person, group, entity or nation. Tenant agrees to defend, indemnify, and hold harmless Landlord from and against any and all claims, damages, losses, risks, liabilities, and expenses (including reasonable attorney’s fees and costs) arising or related to any breach of the foregoing representation and warranty.

24.29 Certified Access Specialist (CASp) Inspection . Please be advised that the Premises has not undergone an inspection by a Certified Access Specialist (CASp). Since compliance with the Americans with Disabilities Act of 1990, the California Building Code and similar legislation and/or codes, all as amended or supplemented from time to time (collectively referred to herein as the “ Codes ”) is dependent upon Tenant’s specific use of the Premises and Tenant’s intended leasehold improvements and alterations, Landlord makes no warranty or representation as to whether or not the Premises complies with the Codes except as otherwise expressly set forth in this Lease. See also Senate Bill No. 1186, California Civil Code §1938 and §55.53, as amended or supplemented from time to time.

24.30 Consent and Approvals . Any time the consent or approval of Landlord or Tenant is required under this Lease, such consent or approval shall not be unreasonably withheld, conditioned or delayed, and whenever this Lease grants Landlord or Tenant the right to take action, exercise discretion, establish rules and regulations or make an allocation or other determination, Landlord and Tenant shall act reasonably and in good faith. Notwithstanding the foregoing, (i) Landlord shall be entitled to grant or withhold its consent or approval or exercise its discretion in its sole and absolute discretion with respect to (A) matters which could affect the

-49-

common areas of the Real Property or the exterior appearance of the Building or Real Property, (B) actions taken by Landlord pursuant to Article 19 of this Lease, or (C) matters which could have an adverse effect on the structural components or Systems and Equipment of the Building, and (ii) Landlord and Tenant shall grant or withhold its consent or exercise its discretion with respect to matters for which there is a standard of consent or approval or discretion specifically set forth in this Lease in accordance with such specific standards.

24.31 Counterparts . This Lease may be executed in counterparts, all of which, when taken together, shall constitute a fully executed original.

LANDLORD AND TENANT ACKNOWLEDGE THAT THEY HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD AND TENANT WITH RESPECT TO THE PREMISES. TENANT ACKNOWLEDGES THAT IT HAS BEEN GIVEN THE OPPORTUNITY TO HAVE THIS LEASE REVIEWED BY ITS LEGAL COUNSEL PRIOR TO ITS EXECUTION. PREPARATION OF THIS LEASE BY LANDLORD OR LANDLORD’S AGENT AND SUBMISSION OF SAME TO TENANT SHALL NOT BE DEEMED AN OFFER BY LANDLORD TO LEASE THE PREMISES TO TENANT OR THE GRANT OF AN OPTION TO TENANT TO LEASE THE PREMISES. THIS LEASE SHALL BECOME BINDING UPON LANDLORD ONLY WHEN FULLY EXECUTED BY BOTH PARTIES AND WHEN LANDLORD HAS DELIVERED A FULLY EXECUTED ORIGINAL OF THIS LEASE TO TENANT. THE DELIVERY OF A DRAFT OF THIS LEASE TO TENANT SHALL NOT CONSTITUTE AN AGREEMENT BY LANDLORD TO NEGOTIATE IN GOOD FAITH, AND LANDLORD EXPRESSLY DISCLAIMS ANY LEGAL OBLIGATION TO NEGOTIATE IN GOOD FAITH.

[SIGNATURES APPEAR ON THE IMMEDIATELY FOLLOWING PAGE.]

-50-

IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed the day and date first above written.


“Landlord”:	1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company

	By:	1019 Market St. Holdings III, LLC, a Delaware limited liability company Its Managing Member

		By:	/s/ W. Greg Geiger
			Printed Name: W. Greg Geiger
			Title: Authorized Signer

		By:	/s/ Sean Armstrong
			Printed Name: Sean Armstrong
			Title: Authorized Signer

“Tenant”:	ZENDESK, INC., a Delaware corporation

		By:	/s/ Mikkel Svane
			Printed Name: Mikkel Svane
			Title: CEO and President

		By:	/s/ John Geschke
			Printed Name: John Geschke
			Title: General Counsel and Secretary

***

If Tenant is a corporation, the authorized officers must sign on behalf of the corporation and indicate the capacity in which they are signing. The Lease must be executed by the president or vice president and the secretary or assistant secretary, unless the bylaws or a resolution of the board of directors shall otherwise provide, in which event, the bylaws or a certified copy of the resolution, as the case may be, must be attached to this Lease.

Signature Page

EXHIBIT A

OUTLINE OF FLOOR PLANS OF PREMISES

Exhibit A to that certain Lease Agreement dated as of September 6, 2013, between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“ Landlord ”), and ZENDESK, INC., a Delaware corporation (“ Tenant ”).

The Outline of the Floor Plan of Premises comprising this Exhibit A is attached hereto as the immediately following page and is incorporated herein by this reference.

EXHIBIT B

TENANT WORK LETTER

This Tenant Work Letter (“ Tenant Work Letter ”) shall set forth the terms and conditions relating to the initial construction of Tenant Improvements (as defined in Section 2.1 below) in the Premises. This Tenant Work Letter is essentially organized chronologically and addresses the issues of the construction of the Tenant Improvements, in sequence, as such issues will arise during the actual construction of the Tenant Improvements in the Premises. All references in this Tenant Work Letter to Sections of “ this Lease ” shall mean the relevant portion of the Lease Agreement to which this Tenant Work Letter is attached as Exhibit B and of which this Tenant Work Letter forms a part.

SECTION 1

GENERAL CONSTRUCTION OF THE PREMISES

1.1 Delivery of Base, Shell and Core . Prior to the Effective Date, Landlord shall construct (a) the base, shell, and core (i) of the Premises and (ii) of the floors of the Building on which the Premises are located, including, without limitation, certain finishes in and to the 5th Floor, (b) certain additional improvements to the Building and its facade (collectively, the “ Base , Shell , and Core ”), all as further specified in the plans and specifications described on Schedule 1 attached hereto (the “ Project Plans ”) copies of which have been provided or made available to Tenant. Tenant represents and warrants that it has had an opportunity to review and inspect the Project Plans and the Building, including, without limitation, the Premises as improved pursuant to the Project Plans, and by executing the Lease, Tenant accepts the Building and the Base, Shell and Core, except for those items listed on Schedule 3 attached hereto (the “ Storefront Work ”), in its current “As-Is” condition existing as of the Lease Date and the Lease Commencement Date, subject to Landlord’s obligations with regard to the Compliance Condition set forth in this Section 1.1 . Landlord shall install in the Premises certain “ Tenant Improvements ” (as defined below) pursuant to the provisions of this Tenant Work Letter. Except for the Tenant Improvement work described in this Tenant Work Letter and except for the Tenant Improvement Allowance set forth below, Landlord shall not be obligated to make any other alterations or improvements to the Premises, the Building or the Real Property. On the Lease Commencement Date, Landlord shall deliver the Base, Shell and Core, the Tenant Improvements and the Systems and Equipment in good working order and condition and in compliance with all Laws (herein the “ Compliance Condition ”). In the event that as of the Lease Commencement Date (x) the Base, Shell and Core, the Tenant Improvements and/or the Systems and Equipment are not in the Compliance Condition or and (y) Tenant delivers to Landlord written notice of the existence of the Compliance Condition (the “ Non-Compliance Notice ”) by the date which is one hundred eighty (180) days after the Lease Commencement Date (the “ Non-Compliance Outside Date ”), then Landlord shall, at Landlord’s sole cost and expense which expense shall not be included in Additional Rent, do that which is necessary to put the applicable components of the Base, Shell and Core, the Tenant Improvements and/or the Systems and Equipment described in the Non-Compliance Notice into the Compliance Condition within a reasonable period of time after Landlord’s receipt of the Non-Compliance Notice or such shorter period as is required by Law; provided, further, that to the extent any such work is required or triggered by Tenant’s proposed

Exhibit B

-1-

use of the Premises or the Tenant Improvements to be constructed therein, then Landlord shall perform such work, but Tenant shall pay Landlord for the cost of such work within thirty (30) days after invoice by Landlord or (as to the interior area of the Premises only) Tenant shall perform such work at Tenant’s sole cost and expense. If Tenant fails to deliver the Non-Compliance Notice to Landlord on or prior to the Non-Compliance Outside Date, Landlord shall have no obligation to perform the work described in the foregoing provisions of this Section 1; provided that Landlord shall remain responsible for making all alterations and improvements which are Landlord’s responsibility to make pursuant to Section 7.2 and Article 21 of the Lease.

1.2 Termination Right . If Landlord fails to cause the Substantial Completion of the Storefront Work to occur by the date that is one hundred fifty (150) days after the Lease Date (the “ Outside Date ”), as such date may be extended as provided hereinbelow, then the sole remedy of Tenant for such failure shall be the right to deliver a notice to Landlord (a “ Termination Notice ”) electing to terminate this Lease effective upon the date occurring five (5) business days following Landlord’s receipt of the Termination Notice (the “ Termination Effective Date ”). The effectiveness of any such Termination Notice delivered by Tenant to Landlord shall be governed by the terms of this Section 1.2. The Termination Effective Date and the Outside Date shall be extended to the extent of any delays beyond the reasonable control of Landlord, including any delay or delays caused by “Force Majeure,” as that term is defined in Section 24.16 of the Lease. Upon any termination of this Lease as set forth in this Section 1.2, Landlord and Tenant shall be relieved from any and all liability to each other resulting hereunder except that Landlord shall return to Tenant any prepaid rent. Tenant’s rights to terminate this Lease, as set forth in this Section 1.2, shall be Tenant’s sole and exclusive remedy at law or in equity for the failure of the Substantial Completion of the Storefront Work to occur as set forth above. Upon the occurrence of the Substantial Completion of the Storefront Work, Tenant’s rights to terminate this Lease, as set forth in this Section 1.2, shall be null and void.

SECTION 2

TENANT IMPROVEMENTS

2.1 Tenant Improvement Allowance . Tenant shall be entitled to a one-time tenant improvement allowance (the “ Tenant Improvement Allowance ”) in the amount of up to, but not exceeding Forty-Eight Dollars ($48.50) per rentable square foot of the Premises (i.e., up to Three Million Five Hundred Thirty-seven Thousand Two Hundred Fifty and 50/100ths Dollars ($3,537,250.50), based on 72,933 rentable square feet in the Premises), for the costs relating to the initial design and construction of Tenant’s improvements which are permanently affixed to the Premises (the “ Tenant Improvements ”) over and above the items included in the Base, Shell, and Core. Tenant shall not be responsible for nor shall Tenant fund any construction to the Base, Shell, and Core and to any of the structural components of the Building. In no event shall Landlord be obligated to make disbursements pursuant to this Tenant Work Letter in a total amount which exceeds the Tenant Improvement Allowance. Tenant shall not be entitled to receive any cash payment or credit against Rent or otherwise for any portion of the Tenant Improvement Allowance which is not used to pay for the Tenant Improvement Allowance Items (as such term is defined below); provided, however, upon the completion of the Tenant Improvements, and provided that Tenant completed the Tenant Improvements in a manner substantially consistent with the Final Space Plans, as amended from time to time by mutual

Exhibit B

-2-

consent of Landlord and Tenant, to the extent that any portion of the Tenant Improvement Allowance is unused, then Tenant shall have the right, exercisable by written notice to Landlord (the “ Unused Allowance Exercise Notice ”), to elect to use such unused amount of the Tenant Improvement Allowance (the “ Unused Allowance Amount ”), if any, to receive a credit against consecutive future installments of Base Rent next coming due under the Lease immediately following the Abatement Period, and for no other purpose. Notwithstanding anything in this Section 2.1 to the contrary, in no event shall the aggregate of any Base Rent credit received by Tenant exceed the amount of the Unused Allowance Amount.

2.2 A llowable Items Eligible for Disbursement from the Tenant Improvement Allowance . Except as otherwise set forth in this Tenant Work Letter, the Tenant Improvement Allowance shall be disbursed by Landlord (each of which disbursement shall be made pursuant to Landlord’s standard disbursement process), only for the following items and costs (collectively, the “ Tenant Improvement Allowance Items ”):

2.2.1 payment of the fees of the “ Architect ” and the “ Engineers ,” as those terms are defined in Section 3.1 of this Tenant Work Letter, Tenant’s project coordinator, construction consultant or similar consultant providing actual and direct services to Tenant with respect to the construction of the Tenant Improvements; provided, however, that only an amount not to exceed $7.00 per rentable square foot of the Premises (i.e., up to Five Hundred Ten Thousand Five Hundred Thirty-One Dollars ($510,531.00)) may be deducted from the Tenant Improvement Allowance to pay for such fees, and payment of the fees incurred by, and the cost of documents and materials supplied by, Landlord and Landlord’s consultants in connection with the preparation and review of the “Construction Drawings,” as that term is defined in Section 3.1 of this Tenant Work Letter and such work as may be undertaken by such consultants;

2.2.2 the payment of plan check, permit and license fees relating to construction of the Tenant Improvements, including, any utility connection fees or subcharges assessed based upon Tenant’s use of the Premises;

2.2.3 the cost of construction of the Tenant Improvements, including, without limitation, contractors’ fees and general conditions, testing and inspection costs, costs of utilities, trash removal, parking and hoists, and the costs of after-hours freight elevator usage;

2.2.4 the cost of any changes in the Base, Shell and Core when such changes are required by the Construction Drawings (including if such changes are due to the fact that such work is prepared on an unoccupied basis), such cost to include all direct architectural and/or engineering fees and expenses incurred in connection therewith;

2.2.5 the cost of any changes to the Construction Drawings or Tenant Improvements required by applicable laws and building codes (collectively, “ Code ”);

2.2.6 sales and use taxes and Title 24 fees;

2.2.7 the Landlord Supervision Fee, as that term is defined in Section 4.3.2 of this Tenant Work Letter; and

Exhibit B

-3-

2.2.8 All other costs to be expended by Landlord in connection with the construction of the Tenant Improvements.

2.2.9 [Intentionally deleted]

2.3 Disbursement of the Tenant Improvement Allowance . During the design and construction of the Tenant Improvements, Landlord shall make monthly disbursements of the Tenant Improvement Allowance for Tenant Improvement Allowance Items for the benefit of Tenant and shall authorize the release of monies for the benefit of Tenant pursuant to Landlord’s standard disbursement process; provided, however, that Landlord shall have no obligation to disburse any portion of the Tenant Improvement Allowance until after Landlord’s receipt of (i) an application and certification for payment of the “Contractor,” as that term is defined in Section 4.1 of this Tenant Work Letter, showing the schedule, by trade of percentage of completion of the Tenant Improvements in the Premises, detailing the portion of the work completed and the portion not completed, (ii) appropriate executed progress mechanics’ lien releases which comply with the applicable provisions of California Civil Code Sections 8132¬8138 (although Landlord (and not Tenant) shall be responsible for obtaining such lien releases, and in connection therewith Landlord shall use commercially reasonable efforts to promptly obtain such lien releases), (iii) if there is an Over-Allowance Amount required to be paid by Tenant pursuant to Section 4.3 below for such disbursement, Landlord shall only be required to make a disbursement equal to Landlord’s pro rata share of the Tenant Improvement Allowance and only after Tenant has paid its pro rata share of the Over-Allowance Amount. For purposes hereof, Landlord’s pro rata share for each such disbursement amount of the Tenant Improvement Allowance shall equal the percentage resulting from dividing the Tenant Improvement Allowance (less sums already disbursed for any Non-Construction Allowance Items, as defined below), by the total cost of the Tenant Improvement Allowance Items (less sums already disbursed for any Non-Construction Allowance Items) as estimated in the Cost Proposal (defined below) delivered pursuant to Section 4.2 (as may be revised from time to time), and Tenant’s pro rata share for each such disbursement of the Over-Allowance Amount shall equal the Over-Allowance Amount divided by such total cost of the Tenant Improvement Allowance Items (less sums already disbursed for any Non-Construction Allowance Items, as defined below). Notwithstanding the foregoing, with respect to fees and expenses of the Architect or Engineers or any other pre-construction items for which the payment scheme set forth in items (i) and (ii) of the immediately preceding sentence is not applicable (collectively, the “ Non-Construction Allowance Items ”), Landlord shall make disbursements of the Tenant Improvement Allowance therefor on a monthly basis following Landlord’s receipt of invoices and other reasonable evidence that Tenant has incurred the cost for the applicable Non-Construction Allowance Items (unless Landlord has received a preliminary notice in connection with such costs, in which event conditional lien releases must be submitted in connection with such costs) and such other information and documentation reasonably required by Landlord.

2.4 Other Terms . Landlord shall only be obligated to make disbursements from the Tenant Improvement Allowance following the occurrence of the Effective Date and to the extent costs are incurred by Tenant for Tenant Improvement Allowance Items. All Tenant Improvement Allowance Items for which the Tenant Improvement Allowance has been made available shall be deemed Landlord’s property under the terms of the Lease, as amended, provided that Landlord, at the time of Landlord’s approval of the Final Working Drawings (defined in Section 3.3

Exhibit B

-4-

below), may require that Tenant, at Tenant’s expense, at the end of the Lease Term, remove such non-general office Tenant Improvements (including any vertical (not horizontal) cabling, wiring and/or conduit installed by or on behalf of Tenant) from the Premises and repair any damage to the Premises and Building caused by such removal in accordance with the terms of the Lease, as amended.

SECTION 3

CONSTRUCTION DRAWINGS

3.1 Selection of Architect/Construction Drawings . Tenant shall retain Blitz Architecture, or such other architect as may be reasonably approved by Landlord and Tenant, (the “ Architect ”) to prepare the Construction Drawings. Tenant shall retain engineering consultants designated by Tenant, subject to the reasonable approval of Landlord (the “ Engineers ”) to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC, lifesafety, and sprinkler work in the Premises. The plans and drawings to be prepared by Architect and the Engineers hereunder shall be known collectively as the “ Construction Drawings .” All Construction Drawings shall comply with the drawing format and specifications determined by Landlord, and shall be subject to Landlord’s approval. Landlord shall approve, or disapprove, the Construction Drawings, or such portion as has from time to time been submitted, within five business (5) days after receipt of same or designate by notice given within such time period to Tenant the specific changes reasonably required to be made to the Construction Drawings in order to correct any issues and shall return the Construction Drawings to Tenant. Tenant shall make the changes necessary in order to correct any such issue and shall return the Construction Drawings to Landlord, which Landlord shall approve, or disapprove, within three (3) business days after Landlord receives the revised Construction Drawings. This procedure shall be repeated until all of the Construction Drawings are approved by Landlord and written approval has been delivered to and received by Tenant. Tenant and Architect shall verify, in the field, the dimensions and conditions as shown on the relevant portions of the base building plans, and Tenant and Architect shall be solely responsible for the same, and Landlord shall have no responsibility in connection therewith. Landlord’s review of the Construction Drawings as set forth in this Section 3 , shall be for its sole purpose and shall not imply Landlord’s review of the same, or obligate Landlord to review the same, for quality, design, Code compliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord’s space planner, architect, engineers, and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings.

3.2 Final Space Plan . On or before the date set forth in Schedule 2 , attached hereto, Tenant and Architect shall prepare the final space plan for Tenant Improvements in the Premises (the “ Final Space Plan ”), which Final Space Plan shall include a layout and designation of all offices, rooms and other partitioning, their intended use, and equipment to be contained therein, and shall deliver the Final Space Plan to Landlord for Landlord’s approval. Tenant shall submit to Landlord the Space Plan for Landlord’s review and approval. Within five (5) business days after Landlord receives the Space Plan, Landlord shall either approve or disapprove the Space

Exhibit B

-5-

Plan for reasonable and material reasons (which shall be limited to the following: (i) adverse effect on the Building; (ii) possible damage to the Systems and Equipment; (iii) non¬compliance with applicable codes; (iv) effect on the exterior appearance of the Building, (v) reduction of the scope of the Tenant Improvements resulting in a failure to construct Tenant Improvements in the entire Premises (for the avoidance of doubt, it shall be reasonable for Landlord to disapprove a change to the Final Space Plan if such change contemplates the elimination of Tenant’s construction of certain floor(s) within the Premises), or (vi) unreasonable interference with the normal and customary business operations of other tenants in the Building (each, a “ Design Problem ”)) and return the Space Plan to Tenant. In such event, Landlord shall require, and Tenant shall make the changes necessary in order to correct the Design Problems and shall return the Space Plan to Landlord, which Landlord shall approve or disapprove within three (3) business days after Landlord receives the revised Space Plan. This procedure shall be repeated until the Space Plan is finally approved by Landlord and written approval has been delivered to and received by Tenant. The Space Plan may be submitted by Tenant in one or more stages and at one or more times, and the time periods for Landlord’s approval shall apply with respect to each such portion submitted.

3.3 Final Working Drawings . On or before the date set forth in Schedule 2, Tenant, Architect and the Engineers shall complete the architectural and engineering drawings for the Premises, and Architect shall compile a fully coordinated set of architectural, structural, mechanical, electrical and plumbing working drawings in a form which is complete to allow subcontractors to bid on the work and to obtain all applicable permits (collectively, the “ Final Working Drawings ”), and shall submit the same to Landlord for Landlord’s approval. Landlord shall approve, or disapprove, the Final Working Drawings, or such portion as has from time to time been submitted, within five business (5) days after receipt of same or designate by notice given within such time period to Tenant the specific changes reasonably required to be made to the Final Working Drawings in order to correct any issues and shall return the Final Working Drawings to Tenant. Tenant shall make the changes necessary in order to correct any such issue and shall return the Final Working Drawings to Landlord, which Landlord shall approve within three (3) business days after Landlord receives the revised Final Working Drawings.

3.4 Approved Working Drawings . On or before the date set forth therefor in Schedule 2 , Tenant shall cause the Architect to submit the Final Working Drawings approved by Landlord (the “ Approved Working Drawings ”) to the applicable local governmental agency for all applicable building permits necessary to allow “Contractor,” as that term is defined in Section 4.1 of this Tenant Work Letter, to commence and fully complete the construction of the Tenant Improvements (collectively, the “ Permits ”), and, in connection therewith, Tenant shall coordinate with Landlord in order to allow Landlord, at Landlord’s option, to take part in all phases of the permitting process, and shall supply Landlord, as soon as possible, with all plan check numbers and dates of submittal. Landlord shall cooperate with Tenant in executing permit applications and performing other ministerial acts reasonably necessary to enable Tenant to obtain any such permit or certificate of occupancy. No changes, modifications or alterations in the Approved Working Drawings may be made without the prior written consent of Landlord.

3.5 Time Deadlines . Tenant shall cooperate with Architect, the Engineer, and Landlord to complete all phases of the Construction Drawings and the permitting process and to receive the permits, and with Contractor, for approval of the “ Cost Proposal ,” as that term is

Exhibit B

-6-

defined in Section 4.2 , below, in accordance with the dates set forth in Schedule 2 . Tenant shall meet with Landlord on a weekly basis to discuss Tenant’s progress in connection with the same. Certain of applicable dates for approval of items, plans and drawings as described in this Section 3 , Section 4 , below, and in this Tenant Work Letter are set forth and further elaborated upon in Schedule 2 (the “ Time Deadlines ”), attached hereto. Tenant agrees to comply with the Time Deadlines.

SECTION 4

CONSTRUCTION OF THE TENANT IMPROVEMENTS

4.1 Contractor . Following the parties’ approval of the Approved Working Drawings, Landlord shall submit the Approved Working Drawings for competitive bidding to at least three (3) contractors from a list approved by Landlord and Tenant in their respective reasonable discretion, but which list shall include Howard S. Wright. The contractor with the lowest sealed fixed price qualified bid shall be selected by Landlord, unless otherwise mutually approved by Tenant and Landlord, and shall serve as the general contractor (the “ Contractor ”) to construct the Tenant Improvements. Once the Contractor is selected, the Contractor shall submit the Approved Working Drawings for competitive bidding to at least three (3) subcontractors per trade selected by the Contractor and Landlord. The subcontractor bids shall be submitted promptly to Landlord and a reconciliation shall be performed by Landlord to adjust inconsistent or incorrect assumptions so that a like-kind comparison can be made and a low bidder determined for such subcontract. The subcontractors with the lowest qualified bids per trade shall be selected, unless otherwise mutually approved by Tenant and Landlord. Notwithstanding anything to the contrary contained in this Tenant Work Letter: (a) Landlord and the Contractor shall not be required to solicit bids from subcontractors relating to the structural, mechanical, electrical, plumbing, HVAC, life safety and sprinkler work of the Tenant Improvements (it being agreed that Landlord shall be entitled to designate and select such subcontractors without going through a bidding process, but in such case, the costs charged by such subcontractors shall not exceed generally competitive rates); (b) Landlord may require the Contractor bid certain trades to union affiliated subcontractors, and (c) Landlord may require Contractor to use union affiliated subcontractors for certain trades irrespective of whether such subcontractors were the lowest bidder for such trade.

4.2 Cost Proposal . After the Approved Working Drawings are signed by Landlord and Tenant, Landlord shall provide Tenant with a cost proposal in accordance with the Approved Working Drawings, which cost proposal shall include, as nearly as possible, the cost of all Tenant Improvement Allowance Items to be incurred by Tenant in connection with the construction of the Tenant Improvements (the “ Cost Proposal ”). Notwithstanding the foregoing, portions of the cost of the Tenant Improvements may be delivered to Tenant as such portions of the Tenant Improvements are priced by Contractor (on an individual item-by-item or trade-by-trade basis), even before the Approved Working Drawings are completed (the “ Partial Cost Proposal ”). Tenant shall approve and deliver the Cost Proposal to Landlord within five (5) business days of the receipt of the same (or, as to a Partial Cost Proposal, within five (5) business days of receipt of the same). The date by which Tenant must approve and deliver the Cost Proposal, or the last Partial Cost Proposal to Landlord, as the case may be, shall be known hereafter as the “ Cost Proposal Delivery Date .” The total of all Partial Cost Proposals, if any, shall be known as the Cost Proposal.

Exhibit B

-7-

4.3 Construction of Tenant Improvements by Landlord’s Contractor under the Supervision of Landlord .

4.3.1 Over-Allowance Amount . On the Cost Proposal Delivery Date, Tenant shall deliver to Landlord cash in an amount (the “ Over-Allowance Amount ”) equal to the difference, if any, between (i) the amount of the Cost Proposal and (ii) the amount of the Tenant Improvement Allowance (less any portion thereof already disbursed by Landlord, or in the process of being disbursed by Landlord, on or before the Cost Proposal Delivery Date). The Over-Allowance Amount shall be disbursed by Landlord prior to the disbursement of any then remaining portion of the Tenant Improvement Allowance, and such disbursement shall be pursuant to the same procedure as the Tenant Improvement Allowance. In the event that, after the Cost Proposal Date, any revisions, changes, or substitutions shall be made to the Construction Drawings or the Tenant Improvements, any additional costs which arise in connection with such revisions, changes or substitutions shall be added to the last Proposal and shall be paid by Tenant to Landlord immediately upon Landlord’s request to the extent such additional costs increase any existing Over-Allowance Amount or result in an Over-Allowance Amount.

4.3.2 Cost Increases . In the event that the cost of the Tenant Improvements increases following Tenant’s approval of the Cost Proposal due to the requirements of any governmental agency imposed with respect to the construction of the Tenant Improvements or due to any other circumstances, Tenant shall pay to Landlord the amount of such increase within five (5) business days of Landlord’s written notice; provided, however, that Landlord shall first apply toward such increase any remaining balance in the Tenant Improvement Allowance.

4.3.3 Change Orders . In the event that Tenant requests any changes to the Approved Working Drawings, Landlord shall not unreasonably withhold its consent to any such changes so long as such changes do not constitute a Design Problem and will not materially delay the Substantial Completion of the Tenant Improvements, and shall grant its consent to such changes within one (10) business day after Landlord’s receipt of the same, provided, that the changes do not create any design problems. If such changes increase the costs to Landlord of constructing the Tenant Improvements shown on the Approved Working Drawings, Landlord shall provide Tenant with invoices documenting and evidencing such increased costs, and Tenant shall pay Landlord for such increases prior to the commencement of such work. The costs charged by Landlord to Tenant pursuant to this Section shall be an amount equal to the actual construction costs incurred by Landlord to implement the requested changes and revise the Approved Working Drawings.

4.3.4 Landlord Supervision . After Landlord selects the Contractor, Landlord shall independently retain Contractor to construct the Tenant Improvements in accordance with the Approved Working Drawings and the Cost Proposal and Landlord shall supervise the construction by Contractor, and Tenant shall pay a construction supervision and management fee (the “ Landlord Supervision Fee ”) to Landlord in an amount (a) equal to the product of (i) three percent (3%) and (ii) an amount equal to the Tenant Improvement Allowance; and (b) equal to the product of (i) two percent (2%) and (ii) the amount of costs of the hard Tenant Improvements in excess of the Tenant Improvement Allowance, if any, including, without limitation, hard costs to be paid from the Over-Allowance Amount.

Exhibit B

-8-

4.3.5 Contractor’s Warranties and Guarantees . Landlord hereby assigns to Tenant all warranties and guarantees by Contractor relating to the Tenant Improvements, which assignment shall be on a non-exclusive basis such that the warranties and guarantees may be enforced by Landlord and/or Tenant, and Tenant hereby waives all claims against Landlord relating to, or arising out of the construction of, the Tenant Improvements.

4.3.6 Tenant’s Indemnity; Landlord’s Covenants . From and after the Effective Date, Tenant hereby indemnifies Landlord for any loss, claims, damages or delays arising from the actions of Architect and the Engineers on the Premises or in the Building. Within ten (10) days after completion of construction of the Tenant Improvements, Landlord shall cause Contractor and Architect to cause a Notice of Completion to be recorded in the office of the Recorder of the County in which the Building is located in accordance with Section 8182 of the Civil Code of the State of California or any successor statute and furnish a copy thereof to Landlord upon recordation. In addition, Landlord, following the Substantial Completion of the Premises, shall have prepared and delivered to the Building management office, with a copy to Tenant, a copy of the “as built” plans and specifications (including all working drawings) for the Tenant Improvements.

SECTION 5

SUBSTANTIAL COMPLETION;

LEASE COMMENCEMENT DATE

5.1 Substantial Completion . For purposes of this Lease, “ Substantial Completion ” of the Premises shall mean (1) Landlord has substantially completed the Tenant Improvements in accordance with the Approved Working Drawings (with the exception of any punch-list items which will not materially and adversely interfere with Tenant’s ability to commence its business operations in the Premises), such that Tenant can install its freestanding work stations, fixtures, furniture, equipment, and telecommunication and cabling systems and to move into the Premises; (2) Landlord has obtained a certificate of occupancy for the Building and Premises, or its equivalent; and (3) Tenant has been delivered complete and uninterrupted access to the Premises (and other required portions of the Building) sufficient to allow Tenant to install its freestanding work stations, fixtures, furniture, equipment, and telecommunication and cabling systems and to move into the Premises. For purposes of this Lease, “Substantial Completion” of the Storefront Work shall mean that Landlord has substantially completed the Storefront Work in accordance with the Project Plans (with the exception of any minor punch-list items which will not materially and adversely interfere with Landlord’s ability to commence construction of the Tenant Improvements and do not otherwise constitute structural components of the Base, Shell and Core). Landlord shall promptly notify Tenant in writing of the Substantial Completion of the Storefront Work (and the occurrence of the Effective Date), and within two (2) days of such notice, Landlord shall cause its contractor to inspect the Premises with a representative of Tenant and complete a punch list of unfinished items to the Storefront Work. Authorized representatives for Landlord and Tenant shall execute said punch list to indicate their approval thereof. The items listed on such punch list shall be completed by the Contractor within thirty (30) days after the approval of such punch list or as soon thereafter as reasonably practicable.

Exhibit B

-9-

5.2 Landlord Delays . If Tenant contends that a Landlord Caused Delay has occurred (as defined below), Tenant shall notify Landlord in writing within five (5) business days of each of (i) the date upon which such Landlord Caused Delay becomes known to Tenant, Architect, or Contractor and (ii) the date upon which such Landlord Caused Delay ends (the “ Delay Termination Date ”). Tenant’s failure to deliver both of such notices to Landlord within the required time period shall be deemed to be a waiver by Tenant of the contended Landlord Caused Delay to which such notices would have related. If such actions, inaction or circumstances described in the notice set forth in clause (i) above (the “ Delay Notice ”) are not cured by Landlord within five (5) business days following Landlord’s receipt of the Delay Notice and if such actions, inaction or circumstances otherwise qualify as a Landlord Caused Delay, then a Landlord Caused Delay shall be deemed to have occurred commencing as of the date of Landlord’s receipt of the Delay Notice and ending as of the Delay Termination Date.

5.2.1 Abatement of Base Rent for a Landlord Caused Delay . The Lease Commencement Dates shall occur as provided in Section 7.2 of Summary attached to the Lease; provided that the one hundred fifty (150) day component of the Lease Commencement Date (as set forth in Section 7.2 of the Summary) shall be extended on a day-for-day basis for each day of Landlord Caused Delay which actually delays the Substantial Completion of the Tenant Improvements.

5.2.2 Definition of Landlord Caused Delay . The term “ Landlord Caused Delay ” as used in the Lease or this Agreement shall mean any delay in the design of the Tenant Improvements or Tenant’s move-in into the Premises during the move-in period which is due to any act or omission of Landlord (wrongful, negligent or otherwise), its agents or contractors (including acts or omissions while acting as agent or contractor for Tenant). The term Landlord Delay shall include, but shall not be limited to any: (1) delay in the giving of authorizations or approvals by Landlord, including, but not limited to the approval of the Construction Drawings; (2) delay attributable to the acts or failures to act, whether willful, negligent or otherwise, of Landlord, its agents or contractors; (3) delay attributable to the interference of Landlord, its agents or contractors with the design of the Tenant Improvements or the failure or refusal of any such party to permit Tenant, its agents or contractors, access to and priority use of the Building or any Building facilities or services, including freight elevators, passenger elevators, and loading docks, which access and use are required for the orderly and continuous performance of the work necessary for Tenant to complete its move-in into the Premises during the move-in period; (4) delay attributable to Landlord giving Tenant incorrect or incomplete Project Plans, or revisions made to such Project Plans subsequent to the delivery of such items to Tenant (collectively, “ Incomplete Plans ”) in either case, in addition to such delay being deemed a Landlord Delay, any increased costs incurred by Landlord as a result of such Incomplete Plans shall not be deducted from the Tenant Improvement Allowance; (6) delay attributable to Landlord’s failure to allow Tenant sufficient access to the Building and/or the Premises during the move-in period to move into the Premises over one (1) weekend; (7) delay by Landlord in administering and paying when due the Tenant Improvement Allowance; and (8) delay caused by the failure of the Base Core and Shell to comply with the ADA (in which case, in addition to such delay being deemed a Landlord Delay, any increased costs incurred by Landlord as a result

Exhibit B

-10-

of such non-compliance shall not be deducted from the Tenant Improvement Allowance). In no event shall Tenant’s remedies or entitlements for the occurrence of a Landlord Delay be abated, deferred, diminished or rendered inoperative because of a prior, concurrent, or subsequent delay resulting from any action or inaction of Tenant.

5.2.3 Determination of Landlord Caused Delay . If Tenant contends that a Landlord Caused Delay has occurred, Tenant shall notify Landlord in writing within two (2) business days of each of (i) the date upon which such Landlord Caused Delay becomes known to Tenant, Architect, or Contractor and (ii) the date upon which such Landlord Caused Delay ends (the “ Delay Termination Date ”). Tenant’s failure to deliver both of such notices to Landlord within the required time period shall be deemed to be a waiver by Tenant of the contended Landlord Caused Delay to which such notices would have related. If such actions, inaction or circumstances described in the notice set forth in clause (i) above (the “ Delay Notice ”) are not cured by Landlord within two (2) business days following Landlord’s receipt of the Delay Notice and if such actions, inaction or circumstances otherwise qualify as a Landlord Caused Delay, then a Landlord Caused Delay shall be deemed to have occurred commencing as of the date of Landlord’s receipt of the Delay Notice and ending as of the Delay Termination Date.

5.3 Inspection . After the Tenant Improvements to the Premises are Substantially Completed (excepting punch list items) and prior to Tenant’s move-in into the Premises (“ First Time ”), and within thirty (30) days after Tenant’s move-in period (“ Second Time ”), in each case following two (2) days’ advance written notice from Tenant to Landlord, Landlord shall cause the Contractor to inspect the Premises with a representative of Tenant and complete a punch list of unfinished items to the Tenant Improvements. Authorized representatives for Landlord and Tenant shall execute said punch list to indicate their approval thereof. The items listed on such punch list shall be completed by the Contractor within thirty (30) days after the approval of such punch list or as soon thereafter as reasonably practicable.

SECTION 6

MISCELLANEOUS

6.1 Tenant’s Entry Into the Premises Prior to Substantial Completion . Subject to the terms hereof and provided that Tenant and its agents do not interfere with, or delay, Contractor’s work in the Building and the Premises, at Landlord’s reasonable discretion, Contractor shall allow Tenant access to the Premises prior to the Substantial Completion of the Premises for the purpose of Tenant installing overstandard equipment or fixtures (including Tenant’s data and telephone equipment) in the Premises. Prior to Tenant’s entry into the Premises as permitted by the terms of this Section 6.1 , Tenant shall submit a schedule to Landlord and Contractor, for their approval, which schedule shall detail the timing and purpose of Tenant’s entry. In connection with any such entry, Tenant acknowledges and agrees that Tenant’s employees, agents, contractors, consultants, workmen, mechanics, suppliers and invitees shall fully cooperate, work in harmony and not, in any manner, interfere with Landlord or Landlord’s Contractor, agents or representatives in performing work in the Building and the Premises, or interfere with the general operation of the Building and/or the Real Property. If at any time any such person representing Tenant shall not be cooperative or shall otherwise cause or threaten to cause any such disharmony or interference, including, without limitation, labor disharmony, and Tenant

Exhibit B

-11-

fails to immediately institute and maintain corrective actions as directed by Landlord, then Landlord may revoke Tenant’s entry rights upon twenty-four (24) hours’ prior written notice to Tenant. Tenant acknowledges and agrees that any such entry into and occupancy of the Premises or any portion thereof by Tenant or any person or entity working for or on behalf of Tenant shall be deemed to be subject to all of the terms, covenants, conditions and provisions of the Lease, excluding only the covenant to pay Rent (until the occurrence of the Lease Commencement Date). Tenant further acknowledges and agrees that Landlord shall not be liable for any injury, loss or damage which may occur to any of Tenant’s work made in or about the Premises in connection with such entry or to any property placed therein prior to the Lease Commencement Date, the same being at Tenant’s sole risk and liability. Tenant shall be liable to Landlord for any damage to any portion of the Premises, including the Tenant Improvement work, caused by Tenant or any of Tenant’s employees, agents, contractors, consultants, workmen, mechanics, suppliers and invitees. In the event that the performance of Tenant’s work in connection with such entry causes extra costs to be incurred by Landlord or requires the use of any Building services, Tenant shall promptly reimburse Landlord for such extra costs and/or shall pay Landlord for such Building services at Landlord’s standard rates then in effect. In addition, Tenant shall hold Landlord harmless from and indemnify, protect and defend Landlord against any loss or damage to the Building or Premises and against injury to any persons caused by Tenant’s actions pursuant to this Section 6.1 . Notwithstanding the foregoing or anything in this Tenant Work Letter to the contrary, prior to the Effective Date the foregoing liability and indemnity shall apply only to Tenant’s actions pursuant to this Section 6.1 . In addition, should any of Tenant’s agents, contractors, consultants, workmen, mechanics, suppliers and invitees desire to enter the Premises or Building prior to the Effective Date, prior to any such entry such agents, contractors, consultants, workmen, mechanics, suppliers and invitees shall enter into a access agreement, in form and substance reasonably acceptable to Landlord, whereby such agents, contractors, consultants, workmen, mechanics, suppliers and invitees agree to hold Landlord harmless from and indemnify, protect and defend Landlord against any loss or damage to the Building or Premises and against injury to any persons caused by such party’s actions.

6.2 Tenant’s Representative . Tenant has designated AINSLEY HILL (Telephone No.: (415) 940-7897 ext. 328, E-Mail: ahill@zendesk.com) as its sole representative with respect to the matters set forth in this Tenant Work Letter, who shall have full authority and responsibility to act on behalf of the Tenant as required in this Tenant Work Letter.

6.3 Landlord’s Representative . Landlord has designated ERIC CLAPP (Telephone No.: (310) 294-1239, E-Mail: eclapp@westportcp.com) as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Tenant Work Letter.

6.4 Time of the Essence in This Tenant Work Letter . Unless otherwise indicated, all references herein to a “number of days” shall mean and refer to calendar days. In all instances where Tenant is required to approve or deliver an item, if no written notice of approval is given or the item is not delivered within the stated time period, at Landlord’s sole option, at the end of said period the item shall automatically be deemed approved or delivered by Tenant and the next succeeding time period shall commence.

Exhibit B

-12-

6.5 Tenant’s Lease Default . Notwithstanding any provision to the contrary contained in the Lease, if an event of default by Tenant as described in Section 19.1 of the Lease or any uncured default by Tenant under this Tenant Work Letter has occurred at any time on or before the Substantial Completion of the Premises, then (i) in addition to all other rights and remedies granted to Landlord pursuant to the Lease, at law or in equity, Landlord shall have the right to withhold payment of all or any portion of the Tenant Improvement Allowance and/or Landlord may cause Contractor to cease the construction of the Premises, and (ii) all other obligations of Landlord under the terms of this Tenant Work Letter shall be forgiven until such time as such default is cured pursuant to the terms of the Lease. In addition, if the Lease is terminated prior to the Lease Commencement Date, for any reason due to a default by Tenant as described in Section 19.1 of the Lease or under this Tenant Work Letter, in addition to any other remedies available to Landlord under the Lease, at law and/or in equity, Tenant shall pay to Landlord, as Additional Rent under the Lease, within five (5) days of receipt of a statement therefor, any and all costs incurred by Landlord (including any portion of the Tenant Improvement Allowance disbursed by Landlord) and not reimbursed or otherwise paid by Tenant through the date of such termination in connection with the Tenant Improvements to the extent planned, installed and/or constructed as of such date of termination, including, but not limited to, any costs related to the removal of all or any portion of the Tenant Improvements and restoration costs related thereto.

6.6. Tenant’s Early Occupancy Rights . Notwithstanding anything to the contrary in this Tenant Work Letter or any other provision of this Lease, but subject to the provisions of this grammatical paragraph, Tenant may require that Landlord accelerate the construction of the Tenant Improvements on two (2) floors of the Premises (the “ Early Access Floors ”) in order to accommodate Tenant’s desire to commence business in those floors prior to Substantial Completion of the Tenant Improvements for the entire Premises. The particular floors that will constitute the Early Access Floor shall be subject to Landlord’s reasonable approval. All costs arising from the acceleration of construction on the Early Access Floors shall be at Tenant’s expense (although the Tenant Improvement Allowance may be applied to such costs) [subject to Tenant’s Construction Period Maximum Liability set forth in Section 4.3.4. above.] Promptly following the identification of the Early Access Floors, Landlord and Tenant shall amend the Time Deadlines to reflect the revised construction schedule. Without limitation of the foregoing, any delays in the Substantial Completion of the Tenant Improvements on floors other than the Early Access Floors caused by the acceleration of the construction on the Early Access Floors shall be attributed to Tenant and shall not be deemed a Landlord Caused Delay. After Substantial Completion of the Early Access Floors, Tenant may have access to such floors and may commence doing business therefrom. Tenant shall be bound to all of the terms of the Lease with respect to the Early Access Floors as of the date Tenant commence occupancy therein and shall pay Base Rent for the Early Access Floors based on the below schedule (provided, that Tenant’s presence on the Early Access Floors does not trigger the Abatement Period as set forth in Section 3.2 of the Lease and does not trigger the Lease Commencement Date). Prior to commencing occupancy of the Early Access Floors, Tenant shall deliver to Landlord the insurance certificates required under Section 10.3 of the Lease.

Exhibit B

-13-

Rent Schedule for Early Access Floors:


Floor		Monthly Installment of Base Rent
B		$36,603.02
G		$17,933.44
2		$38,059.90
3		$37,308.33
4		$37,555.00
5		$37,805.52
6		$37,878.75
7		$37,951.98

By way of example, if Tenant occupies the third (3rd) and fourth (4th) floors as Early Access Floors, then Tenant’s total monthly Base Rent for such floors would be $74,863.33 per month.

Exhibit B

-14-

SCHEDULE 1 TO TENANT WORK LETTER

DESCRIPTION OF PROJECT PLANS

1). Storefront and Window Renovations –

a). Storefront & Window Renovation, prepared by Petra Structural Engineers, Dated 8.22.13.

b). Storefront & Window Renovation, prepared by Studio TMT Architects, Dated 8.29.3

c). Eastern Outfitting Building Exterior & Structural Alterations—Specifications, Prepared by Studio TMT Architects, Dated 1.22.13.

d). PCO #18 between Howard S. Wright and Weber Electric. Restoration of Marquee Lighting, Dated 3.26.13.

2). Mechanical, Electrical, Plumbing and Fire As-Built Drawings -

a). Mechanical Shell As-Built Drawings, Prepared by AMI, Dated 8.19.13.

b). Mechanical As-Built Drawings—5th Floor TI, Prepared by AMI, Dated 8.19.13.

c). Electrical As-Built Drawings—Complete Building, Prepared by Weber Electric, Dated 3.8.13

d). Plumbing As-Built Drawings—Complete Building, Prepared by Ayoob Mechanical, Inc., Dated 8.23.13.

e). Fire Sprinkler As-Built Drawings, Prepared by AAA Fire Protection, Dated 2.7.13.

3). 5th Floor Market Ready Tenant Improvement -

a). Tenant Improvement Drawings, Prepared by Studio TMT, Dated 5.28.13.

b).Tenant Improvement Drawings, Prepared by Studio TMT, Dated 5.13.13.

4). Interior Core Improvements -

a). Interior Core Improvement Drawings, Prepared by Studio TMT, Dated 12.5.12.

b). Eastern Outfitting Building Exterior & Structural Alterations—Specifications, Prepared by Studio TMT Architects, Dated 12.14.13.

c). Minor Permit Submittal—1017-1019 Location, Prepared by KC Glass, Dated 11.27.13

d). Elevator Cab Finish Submittal, Prepared by Howard S. Wright, Dated 6.25.13

5). Interior and Structural Alterations -

a). Interior Floor Alterations, Prepared by Studio TMT, Dated 2.19.13.

b). Eastern Outfitting Building Exterior & Structural Alterations—Specifications, Prepared by Studio TMT Architects and Petra Structural Engineers, Dated 1.22.13.

Schedule 1 to Tenant

Work Letter

-1-

SCHEDULE 2 TO TENANT WORK LETTER

TIME DEADLINES


Dates		Actions to be Performed

1. October 28, 2013		Final Space Plan to be completed by Tenant and delivered to Landlord.

2. February 24, 2014		Tenant to deliver Final Working Drawings to Landlord.

3. March 3, 2014		Tenant to submit Approved Working Drawings to the City of San Francisco for all applicable building permits.

Schedule 2 to Tenant

Work Letter

-1-

SCHEDULE 3 TO TENANT WORK LETTER

DESCRIPTION OF STOREFRONT WORK

(All based on the Minor Permit to Alter set of drawings)

Market Street -

•

Extend 2nd floor decking to meet new storefront assembly.

•

Erect steel frame work for new storefront system at 1st and 2nd floor.

•

Install new aluminum storefront system, doors and glazing.

•

Install replacement light bulbs on Market Street window mullions, floors 3 thru 7.

•

Repair Terra Cotta and Sheet Metal per Page and Turnbull Specifications.

•

Install new stone surround at Market Street storefront.

Stevenson Street -

•

Cut low wall at Stevenson Elevation to accommodate new glass line at 1st floor, which will run from floor level to underside of 2nd floor decking.

•

Install new storefront system and glazing to match floors above.

•

Paint to match above.

•

Install 3 wall mounted light fixtures on exterior.

Schedule 3 to Tenant

Work Letter

-1-

EXHIBIT C

AMENDMENT TO LEASE

This AMENDMENT TO LEASE (“ Amendment ”) is made and entered into effective as of , 20 , by and between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“ Landlord ”), and ZENDESK, INC., a Delaware corporation (“ Tenant ”)

R E C I T A L S :

A. Landlord and Tenant entered into that certain Lease Agreement dated as of September 6, 2013 (the “ Lease ”) pursuant to which Landlord leased to Tenant and Tenant leased from Landlord certain “Premises”, within the Building located at 1019 Market Street, San Francisco, California.

B. Except as otherwise set forth herein, all capitalized terms used in this Amendment shall have the same meaning given such terms in the Lease.

C. Landlord and Tenant desire to amend the Lease to confirm the commencement and expiration dates of the term, as hereinafter provided.

NOW, THEREFORE , in consideration of the foregoing Recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Confirmation of Dates . The parties hereby confirm that the term of the Lease commenced as of (the “ Lease Commencement Date ”) for a term of approximately one hundred one (101) months ending on (unless sooner terminated as provided in the Lease.

2. No Further Modification . Except as set forth in this Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect.

IN WITNESS WHEREOF, this Amendment to Lease has been executed as of the day and year first above written.

“Landlord”:

1019 MARKET ST. PROPERTY, LLC ,

a Delaware limited liability company

By:

1019 Market St. Holdings III, LLC,

a Delaware limited liability company

Its Managing Member


By:
		Printed Name:


		Title:

Exhibit C

-1-


By:
		Printed Name:


		Title:


“Tenant”:	ZENDESK, INC. , a Delaware corporation

	By:
		Printed Name:
		Title:

	By:
		Printed Name:
		Title:

Exhibit C

-2-

EXHIBIT D

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 said Rules and Regulations by or otherwise with respect to the acts or omissions of any other tenants or occupants of the Building.

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. Any tenant, its employees, agents or any other persons entering or leaving the Building at any time when it is so locked, or any time when it is considered to be after normal business hours for the Building, may be required to sign the Building register when so doing. Access to the Building may be refused unless the person seeking access has proper identification or has a previously arranged pass for access to the Building. 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 of any person. In case of invasion, mob, riot, public excitement, or other commotion, Landlord reserves the right to prevent access to the Building during the continuance of same by any means it deems appropriate for the safety and 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. Other than furniture, packages, supplies, and equipment delivered in the ordinary course of Tenant’s business, 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 provide Landlord with not less than 24 hours prior notice of the need to utilize an elevator for any such purpose, so as to provide Landlord with a reasonable period to schedule such use and to install such padding or take such other actions or prescribe such procedures as are appropriate to protect against damage to the elevators or other parts of the Building.

Exhibit D

-1-

6. Landlord shall have the right to control and operate the public portions of the Building, the public facilities, the HVAC, 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 Building or at such office location 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 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, nor 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.

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 HVAC 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 or the Building 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 by reason of noise, odors, or vibrations, or interfere in any way with other tenants or those having business therein.

14. Tenant shall not bring into or keep within the Building or the Premises any animals, birds, fish or reptiles. Bicycles, but no other electric or motorized vehicles may be kept in the Building in the areas designated by Landlord.

15. 16. Landlord will approve where and how telephone and telegraph 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.

Exhibit D

-2-

17. Landlord reserves the right to exclude or expel from the Building any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of 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 HVAC 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 in which the Building is located 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 for 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 Real Property.

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 Building’s management office. 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.

Exhibit D

-3-

26. Tenant must comply with requests by the Landlord concerning the informing of their employees of items of importance to the Landlord.

27. Tenant shall comply with any non-smoking ordinance adopted by any applicable governmental authority.

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. The Rules and Regulations shall not supersede any provision of the Tenant’s Lease and to the extent of any inconsistency between Tenant’s Lease and the Rules and Regulations, the Lease shall govern. Any of the Rules and Regulations that 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 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 and Building, 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 D

-4-

EXHIBIT E

FORM OF ESTOPPEL CERTIFICATE

The undersigned, as Tenant/Landlord under that certain Lease Agreement (the “ Lease ”) made and entered into as of , and between , a as Landlord, and the undersigned as Tenant, for Premises on the ( ) floor(s) of the Building located at hereby certifies as follows:

1. Attached hereto as Exhibit A is a true and correct copy of the Lease and all amendments and modifications thereto. The documents contained in Exhibit A represent the entire agreement between the parties as to the Premises.

2. The undersigned has commenced occupancy of the Premises described in the Lease, currently occupies the Premises, and the Lease Term commenced on .

3. The Lease is in full force and effect and has not been modified, supplemented or amended in any way except as provided in Exhibit A .

4. Tenant has not transferred, assigned, or sublet any portion of the Premises nor entered into any license or concession agreements with respect thereto except as follows:

5. The Lease Term expires on .

6. All conditions of the Lease to be performed by Landlord necessary to the enforceability of the Lease have been satisfied and Landlord is not in default thereunder.

7. No rental has been paid in advance and no security has been deposited with Landlord except as provided in the Lease.

8. To Tenant’s actual knowledge (without inquiry or investigation), as of the date hereof, there are no existing defenses or offsets that the undersigned has, which preclude enforcement of the Lease by Landlord.

9. All monthly installments of Base Rent, all Additional Rent and all monthly installments of estimated Additional Rent have been paid when due through . The current monthly installment of Base Rent is $ .

10. The undersigned acknowledges that this Estoppel certificate may be delivered to Landlord’s prospective mortgagee, or a prospective purchaser, and acknowledges that it recognizes that if same is done, said mortgagee, prospective mortgagee, or prospective purchaser will be relying upon the statements contained herein in making the loan or acquiring the property of which the Premises are a part, and in accepting an assignment of the Lease as collateral security, and that receipt by it of this certificate is a condition of making of the loan or acquisition of such property.

Exhibit E

-1-

11. If Tenant is a corporation or partnership, each individual executing this Estoppel Certificate on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in the state in which the Building is located and that Tenant has full right and authority to execute and deliver this Estoppel Certificate and that each person signing on behalf of Tenant is authorized to do so.

Executed at on the day of , .


“Tenant”:
	a

	By:
		Printed Name:
		Title:

	By:
		Printed Name:
		Title:

Exhibit E

-2-

EXHIBIT F-1

APPOXIMATE LOCATION OF TENANT’S BUILDING EXTERIOR SIGNS

Exhibit F-1 to that certain Lease Agreement dated as of September 6, 2013, between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“ Landlord ”), and ZENDESK, INC., a Delaware corporation (“ Tenant ”).

The depictions of the approximate locations of Tenant’s Building Exterior Signs comprising this Exhibit F-1 are attached hereto as the immediately following pages and is incorporated herein by this reference.

Exhibit F-1

-1-

EXHIBIT F-2

RETAIL SIGNAGE LOCATION

Exhibit F-2 to that certain Lease Agreement dated as of September 6, 2013, between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“ Landlord ”), and ZENDESK, INC., a Delaware corporation (“ Tenant ”).

The depictions of the Retail Signage Location comprising this Exhibit F-2 are attached hereto as the immediately following pages and is incorporated herein by this reference.

Exhibit F-2

-1-

EXHIBIT G TO LEASE

JANITORIAL SCHEDULE

Janitorial Specifications

1019 Market Street

Tenant Premises

Office Areas

Nightly (five days/week):

Sweep non-carpeted areas with chemically treated dust mop

Empty all waste paper containers, spot clean, replace liners

Clean telephone handsets

Turn off lights ASAP each night

Remove all trash from floors, return waste baskets and chairs to proper positions

Spot mop any spillage off non-carpeted areas

Every other night:

Vacuum all carpeted areas

Carpet sweep any visible debris on non-vacuuming days

Weekly:

Dust all horizontal surfaces including ledges, window sills, pictures, shelves and furniture

Spot clean doors, door frames, and counters

Spot clean around light switches

Spot clean partition door glass

Clean telephone handsets

Monthly:

Perform high dusting beyond normal reach

Quarterly:

Scrub, re-seal and refinish all VCT flooring

Thoroughly vacuum upholstered furniture

Edge vacuum all carpeted areas

Exhibit G

-1-

Conference Rooms

Nightly (five days/week):

Polish table tops

Empty all waste paper containers

Vacuum carpets

Spot clean walls

Arrange chairs in an orderly manner

Weekly:

Dust tables, chairs and cabinets

Monthly:

Vacuum all chairs

Kitchenettes, Coffee Bars & Vending Areas

Nightly (five days/week):

Clean table tops

Clean sinks and counter tops

Clean chairs as required to maintain a neat appearance

Damp mop non-carpeted areas

Empty all waste containers and replace liners

Spot clean outside of refrigerators

Wipe clean exterior surface of cabinets and drawers

Tenant Restrooms

Nightly (five days/week):

Empty and wipe out all waste paper containers

Empty feminine dispensers and replace liner

Clean and polish all metal and mirrors

Clean and polish all dispensers

Clean and disinfect wash basins, urinals, and toilets including both top and underside of toilet seat

Spot clean tile walls and toilet partitions (inside/outside)

Spot clean walls around wash basins

Clean floors with germicidal solution

Refill soap, towels, tissue, and seat covers

10.

Check all fixtures, flush valves, etc. and report non-working or leaking items to Maintenance and Engineering

Weekly:

Dust all low reach and high reach areas including but not limited to structural ledges, mirror tops and ledges, A/C diffusers, return air grills and light fixtures

Monthly:

Wash down all partitions inside and outside

Exhibit G

-2-

Bimonthly (6 times a year):

Machine scrub floors INCLUDING corners and cove base

Landlord Responsibilities for Common Area

Entrance Lobbies

Nightly (five days/week):

Sweep and spot clean tile flooring

Damp mop all spillage

Vacuum carpets

Spot clean carpets

Dust ledges within reach

Dust all horizontal surfaces

Empty all waste containers, spot clean, and replace liners

Spot clean walls

Clean chrome and painted hand rails

10.

Clean entrance door glass, frames, and thresholds

11.

Police sidewalks immediately outside entrance areas

12.

Spot clean all glass including low partitions, mirrors and the corridor side of all windows and glass to tenant premises

13.

Thoroughly clean all door thresholds of dirt and debris

14.

Spot clean and dust directory board glass and ledges

Weekly:

Dust all high ledges

Edge vacuum all carpets

Damp sponge clean all baseboards

Vacuum all chairs and sofas

Monthly:

Dust and vacuum air supply and exhaust diffusers

Machine scrub guard station

Freight Car Lobbies

Nightly (five days/week):

Damp mop and spot clean VCT flooring if applicable

Monthly :

Machine scrub, re-seal and refinish floors

Exhibit G

-3-

Passenger Elevator Cleaning

Nightly (five days/week):

Clean elevator cab floor

Vacuum and clean all elevator thresholds

Wipe down walls

Polish stainless steel doors

Monthly:

Clean elevator cab lights

Clean entire cab ceiling

Clean and polish all wood surfaces

Polish elevator thresholds with #000—steel wool

Clean carpet in elevator lobby floors

Exterior

Windows

Exterior portion of windows washed twice per year

Sidewalks

Power washed between at least two times per month

Exhibit G

-4-

EXHIBIT H TO LEASE

HVAC DEPRECIATION SCHEDULE


25		years

52		weeks per year

55		Hours per week

71,500		- Useful Life in terms of hours

(		$290,000 Central Plant Replacement +(# of Heat Pumps * $80,000) ) / Overtime Hours

$290,000		Central Plant $20,000 Heat Pump Cost

40		# of Heat Pumps

$15.24		Cost Per Hour of Overtime HVAC assuming 40 Heat Pumps (5 per floor)

Exhibit H

-1-

EXHIBIT I TO LEASE

PROHIBITED USES

A facility for any use which is illegal or would reasonably be determined to cause a threat of imminent harm to persons or property, constitutes a public or private nuisance or emits an obnoxious odor, noise, or sound which can be heard or smelled (in either event to more than a de minimus extent) outside of the Building.

2.	Any medical marijuana facility, or similar use whether it is styled as a collective or otherwise.

Establishment providing nude or topless entertainment or wait-staff, or any establishment selling or exhibiting pornographic materials (including, without limitation, adult books or videos). Materials shall be considered “adult” or “pornographic” under this paragraph if the same are not available for sale or rental to children under 18 years old because they explicitly deal with or depict sexuality). Any company or business that engages in the business of providing any of the foregoing materials or services at locations other than the Building shall also be prohibited.

3.	Any operation primarily used as a storage warehouse operation (except incidental to Tenant’s primary retail business) and any assembling, manufacturing, distilling, refining, smelting, agricultural, or mining operation.

4.	Any pawn shop, “second hand” store, schlock store, or “surplus” store.

Any fire sale, bankruptcy sale (unless pursuant to a court order) or auction house operation (but this provision shall not restrict the absolute freedom of an occupant to determine its own selling prices nor shall it preclude the conduct of any seasonal sales, promotional or clearance sales or legitimate going out of business sales in compliance with applicable Laws).

6.	Any central laundry, dry cleaning plant, or laundromat; including, nominal supportive facilities for on-site service oriented to pickup and delivery by the ultimate consumer.

7.	Any bar, pub, tavern or night club, where the sale of beer, wine and/or alcohol is more than 70% of the facilities annual revenue.

Any flea market, amusement, video arcade, children’s play center (including, without limitation, any business primarily providing physical play activities for children, kiddie rides or games), pinball, computer or other gamerooms, pool or billiard hall, dance or music hall, disco or nightclub or any other facility operated solely for entertainment purposes, such as a “laser tag” or “virtual reality” theme operation.

9.	Any training or educational facility.

10.	Any gambling facility or operation, including but not limited to: off-track or sports betting parlor; table games such as blackjack or poker; slot machines, video poker/blackjack keno machines or similar devices; or bingo hall.

Exhibit I

-1-

11.	Any tattoo parlor.

12.	Any house of worship

13.	Any liquor store (provided, however, that the foregoing shall not be deemed to prohibit the sale of beer, wine and/or alcohol by any occupant ancillary to its primary use of the premises, or the sale of beer, wine or alcohol for on-premises consumption at any restaurant or bar permitted hereunder).

Exhibit I

-2-

EXTENSION OPTION RIDER

1. This EXTENSION OPTION RIDER (this “ Extension Rider ”) is made and entered into by and between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“ Landlord ”), and ZENDESK, INC., a Delaware corporation (“ Tenant ”), and is dated as of the date of the Lease Agreement (“ Lease ”) by and between Landlord and Tenant to which this Extension Rider is attached. The agreements set forth in this Extension Rider shall have the same force and effect as if set forth in the Lease. To the extent the terms of this Extension Rider are inconsistent with the terms of the Lease, the terms of this Extension Rider shall control.

1. Option Right . Landlord hereby grants Tenant one (1) option to extend the Lease Term for a period of five (5) years (the “ Option Term ”), which option shall be exercisable only by written Exercise Notice (as defined below) delivered by Tenant to Landlord as provided below. Upon the proper exercise of such option to extend, the Lease Term shall be extended for the Option Term.

2. Option Rent . The annual Base Rent payable by Tenant during the Option Term (the “ Option Rent ”) shall be equal to the Fair Market Rental Rate for the Premises. As used herein, the “ Fair Market Rental Rate ” shall mean the annual Base Rent at which non-affiliated parties from new, non-expansion, non-renewal and non-equity tenants, as of the commencement of the Option Term, will be leasing non-sublease, non-equity, unencumbered space comparable in size, location, and quality to the Premises for a comparable term, with comparable tenant improvement allowances, if any, and other generally applicable conditions of tenancy, which comparable space is located in the Building and in other comparable recently renovated office buildings located in the area bordered by Market Street to the north, 3rd Street to the east, Brannan Street to the south, and 11th Street to the west, including buildings located immediately on both sides of each of the aforementioned streets, in San Francisco, California (the “ Market Area ”), taking into consideration all base rent and other out-of-pocket concessions generally being granted at such time for such comparable space for the Option Term (including, without limitation, any tenant improvement allowance provided for such comparable space, with the amount of such tenant improvement allowance to be provided for the Premises during the Option Term to be determined after taking into account the age, quality and layout of the tenant improvements in the Premises as of the commencement of the Option Term). All other terms and conditions of the Lease shall apply throughout the Option Term; however, Tenant shall, in no event, have the option to extend the Lease Term beyond the Option Term described in Section 1 above.

3. Exercise of Option. The option contained in this Extension Rider shall be exercised by Tenant, if at all, only in the following manner: (i) Tenant shall deliver written notice (“ Interest Notice ”) to Landlord not more than fifteen (15) months nor less than twelve (12) months prior to the expiration of the initial Lease Term stating that Tenant may be interested in exercising its option; (ii) Landlord, after receipt of Tenant’s notice, shall deliver notice (the “ Option Rent Notice ”) to Tenant within thirty (30) days after Landlord’s receipt of the Interest Notice setting forth Landlord’s determination of the Option Rent; and (iii) if Tenant wishes to exercise such option, Tenant shall, on or before the date (the “ Exercise Date ”) which is thirty (30) days after Tenant’s receipt of the Option Rent Notice, exercise the option by delivering written notice (“ Exercise Notice ”) thereof to Landlord. Concurrently with Tenant’s delivery of

-1-

the Exercise Notice, Tenant may object, in writing, to Landlord’s determination of the Fair Market Rental Rate set forth in the Option Rent Notice, in which event such Fair Market Rental Rate shall be determined pursuant to Section 4 below. Tenant’s failure to deliver the Exercise Notice on or before the Exercise Date, shall be deemed to constitute Tenant’s waiver of its extension right hereunder. If Tenant timely delivers the Exercise Notice but fails to timely object in writing to Landlord’s determination of the Fair Market Rental Rate set forth in the Option Rent Notice, Tenant shall be deemed to have accepted Landlord’s determination of the Option Rent and the following provisions of Section 4 shall not apply.

4. Determination of Fair Market Rental Rate. In the event Tenant timely and appropriately objects in writing to the Fair Market Rental Rate initially determined by Landlord in the Option Rent Notice, Landlord and Tenant shall thereafter attempt in good faith to agree upon such Fair Market Rental Rate, using their best good faith efforts. If Landlord and Tenant fail to reach agreement on such Fair Market Rental Rate within twenty (20) days following Tenant’s objection to such Fair Market Rental Rate (the “ Outside Agreement Date ”) then each party shall submit to the other party a separate written determination of the Option Rent within ten (10) business days after the Outside Agreement Date, and such determinations shall be submitted to arbitration in accordance with Sections 4.1 through 4.7 below. If Landlord’s and Tenant’s determinations do not differ by an amount in excess of five (5%) percent, the two determinations shall be averaged and the resulting figure shall be conclusively deemed to be the Fair Market Rental Rate. If the two determinations differ by an amount in excess of five (5%) percent, then such determinations shall be submitted to arbitration in accordance with Sections 4.1 through 4.7 below. Failure of Tenant or Landlord to submit a written determination of the Option Rent within such ten (10) business day period shall conclusively be deemed to be the non-determining party’s approval of the Option Rent submitted within such ten (10) business day period by the other party.

4.1 Landlord and Tenant shall each appoint one (1) appraiser who shall by profession be a real estate appraiser who shall have been active over the five (5) year period ending on the date of such appointment in the appraisal of office buildings in Market Area. The determination of the appraisers shall be limited solely to the issue of whether Landlord’s or Tenant’s submitted Fair Market Rental Rate is the closer to the actual Fair Market Rental Rate as determined by the appraisers, taking into account the requirements with respect thereto set forth in Section 2 above. Each such appraiser shall be appointed within thirty (30) days after the Outside Agreement Date.

4.2 The two (2) appraisers so appointed shall, within ten (10) days of the date of the appointment of the last appointed appraiser, agree upon and appoint a third appraiser who shall be qualified under the same criteria set forth hereinabove for qualification of the initial two (2) appraisers.

4.3 The three (3) appraisers shall, within thirty (30) days of the appointment of the third appraiser, reach a decision as to which of Landlord’s or Tenant’s submitted Fair Market Rental Rate is closer to the actual Fair Market Rental Rate and shall select such closer determination as the Fair Market Rental Rate and notify Landlord and Tenant thereof.

4.4 The decision of the majority of the three (3) appraisers shall be binding upon Landlord and Tenant.

-2-

4.5 If either Landlord or Tenant fails to appoint an appraiser within the time period specified in Section 4.1 hereinabove, the appraiser appointed by one of them shall reach a decision, notify Landlord and Tenant thereof, and such appraiser’s decision shall be binding upon Landlord and Tenant.

4.6 If the two (2) arbitrators fail to agree upon and appoint a third arbitrator within the time period provided in Section 4.3 above, then the parties shall mutually select the third arbitrator. If Landlord and Tenant are unable to agree upon the third arbitrator within ten (10) days, then either party may, upon at least five (5) days prior written notice to the other party, request the Presiding Judge of the San Francisco County Superior Court, acting in his private and nonjudicial capacity, to appoint the third arbitrator. Following the appointment of the third arbitrator, the panel of arbitrators shall within thirty (30) days thereafter reach a decision as to whether Landlord’s or Tenant’s submitted Option Rent shall be used and shall notify Landlord and Tenant thereof.

4.7 Each party shall pay the fees and expenses of the appraiser appointed by or on behalf of it, and each shall pay one-half of the fees and expenses of the third appraiser, if any.

5. Suspension of Right to Extend Lease Term . Notwithstanding anything in the foregoing to the contrary, at Landlord’s option, and in addition to all of Landlord’s remedies under the Lease, at law or in equity, the right to extend the Lease Term hereinabove granted to Tenant shall not be deemed to be properly exercised if, as of the date Tenant delivers the Exercise Notice or as of the end of the initial Lease Term, Tenant is in default under this Lease. In addition, Tenant’s right to extend the Lease Term is personal to the Original Tenant, and any Affiliate to which Tenant’s entire interest in this Lease has been assigned pursuant to Section 14.7 of the Lease, and may not be assigned or exercised, voluntarily or involuntarily, by or to, any person or entity other than the Original Tenant, or such Affiliate assignee, as the case may be, and shall only be available to and exercisable by the Tenant, or such Affiliate assignee, when the Original Tenant, or such Affiliate assignee, is in actual and physical possession of the entire Premises.

[SIGNATURES APPEAR ON THE IMMEDIATELY FOLLOWING PAGE.]

-3-

IN WITNESS WHEREOF, Landlord and Tenant have caused this Extension Rider to be executed the day and date of the Lease.


“Landlord”:	1019 MARKET ST. PROPERTY, LLC , a Delaware limited liability company

	By:	1019 Market St. Holdings III, LLC, a Delaware limited liability company Its Managing Member

		By:	/s/ W. Greg Geiger
			Printed Name: W. Greg Geiger
			Title: Authorized Signer

		By:	/s/ Sean Armstrong
			Printed Name: Sean Armstrong
			Title: Authorized Signer


“Tenant”:	ZENDESK, INC. , a Delaware corporation

		By:	/s/ Mikkel Svane
			Printed Name: Mikkel Svane
			Title: CEO and President

		By:	/s/ John Geschke
			Printed Name: John Geschke
			Title: General Counsel and Secretary

Signature Page

LETTER OF CREDIT RIDER

This LETTER OF CREDIT RIDER (this “ LC Rider ”) is made and entered into by and between by and between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“ Landlord ”), and ZENDESK, INC., a Delaware corporation (“ Tenant ”), and is dated as of the date of the Lease Agreement (“ Lease ”) by and between Landlord and Tenant to which this Extension Rider is attached. The agreements set forth in this LC Rider shall have the same force and effect as if set forth in the Lease. To the extent the terms of this LC Rider are inconsistent with the terms of the Lease, the terms of this LC Rider shall control.

1. Concurrently upon execution of the Lease, Tenant shall deliver to Landlord, as collateral for the full and faithful performance by Tenant of all of its obligations under the Lease and for all losses and damages Landlord may suffer as a result of any default by Tenant under the Lease, subject to Tenant’s rights to notice and cure pursuant to Article 19 of the Lease, an irrevocable and unconditional negotiable letter of credit (the “ Letter of Credit ”), in the form attached hereto as Exhibit 1 and containing the terms required herein, payable in the County of San Francisco, California, running in favor of Landlord issued by a solvent bank under the supervision of the Superintendent of Banks of the State of California, or a National Banking Association, in the amount of THREE MILLION SIX HUNDRED EIGHT THOUSAND THREE HUNDRED FORTY-FOUR AND 90/100 DOLLARS ($3,608,344.90) (“ LC Amount ”), as the same may be reduced pursuant to Paragraph 5 below. Should Tenant fail to deliver the original Letter of Credit to Landlord by September 10, 2013, such failure shall constitute an immediate event of default under the Lease without further notice or cure rights. The Letter of Credit shall be (i) at sight and irrevocable, (ii) subject to the terms of this LC Rider, maintained in effect, whether through replacement, renewal or extension, for the entire period from the date of execution of this Lease through the date which is sixty (60) days after the Lease Expiration Date (subject, however, to the reduction and termination provisions of Paragraph 5 below), and Tenant shall deliver a new Letter of Credit or certificate of renewal or extension to Landlord at least fifteen (15) days prior to the expiration of the Letter of Credit, without any action whatsoever on the part of Landlord, (iii) subject to the International Standby Practices 1998, International Chamber of Commerce Publication No. 590, and (iv) fully assignable by Landlord in connection with a transfer of Landlord’s interest in the Lease and permit partial draws. In addition to the foregoing, the form and terms of the Letter of Credit (and the bank issuing the same) shall be acceptable to Landlord, in Landlord’s reasonable discretion, and shall provide, among other things, in effect that: (A) Landlord, or its then managing agent, shall have the right to draw down an amount up to the face amount of the Letter of Credit upon the presentation to the issuing bank of Landlord’s (or Landlord’s then managing agent’s) of a written statement certifying that such amount is due to Landlord under the terms and conditions of the Lease, it being understood that if Landlord or its managing agent be a corporation, partnership or other entity, then such statement shall be signed by an officer (if a corporation), a general partner (if a partnership), or any authorized party (if another entity); (B) the Letter of Credit will be honored by the issuing bank without inquiry as to the accuracy thereof and regardless of whether the Tenant disputes the content of such statement; and (C) in the event of a transfer of Landlord’s interest in the Building, Landlord shall transfer the Letter of Credit, in whole or in part (or cause a substitute letter of credit to be delivered, as applicable) to the transferee and thereupon the Landlord shall, without any further agreement between the parties, be released by Tenant from all liability therefor, and it is agreed that the provisions hereof shall apply to every transfer or assignment of the whole or any portion of said Letter of Credit to a new Landlord. The bank issuing the Letter of Credit shall at all times remain solvent and open for business.

-1-

2. If, as result of any application or use by Landlord of all or any part of the Letter of Credit (or any “Cash Collateral,” as that term is defined, below), the amount of the Letter of Credit and Cash Collateral shall collectively be less than the LC Amount, Tenant shall, within ten (10) days thereafter, provide Landlord with either (i) cash (the “Cash Collateral” ) to be held and applied by Landlord as collateral in the same manner as if Landlord held such amount as part of the Letter of Credit, or (ii) additional letter(s) of credit in an amount equal to the deficiency (or a replacement letter of credit in the total amount of the LC Amount) and any such additional (or replacement) letter of credit shall comply with all of the provisions of this LC Rider, and if Tenant fails to comply with the foregoing, the same shall constitute an uncurable default by Tenant. Tenant further covenants and warrants that it will neither assign nor encumber the Letter of Credit or Cash Collateral, as the case may be, or any part thereof and that neither Landlord nor its successors or assigns will be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. Without limiting the generality of the foregoing, if the Letter of Credit expires earlier than the date which is sixty (60) days after the Lease Expiration Date and the conditions for the release of the Letter of Credit set forth in Paragraph 5 , below, have not been satisfied, and Tenant has not provided Landlord with cash in lieu of the entire LC amount then outstanding pursuant to Paragraph 1 above, Landlord will accept Cash Collateral, a renewal letter of credit or substitute letter of credit (such renewal or substitute letter of credit or Cash Collateral to be in effect and delivered to Landlord, as applicable, not later than fifteen (15) days prior to the expiration of the Letter of Credit), which with respect to any letter of credit shall be irrevocable and automatically renewable as above provided through the date which is sixty (60) days after the Lease Expiration Date upon the same terms as the expiring Letter of Credit or such other terms as may be acceptable to Landlord in its reasonable discretion. In the event that Tenant provides Cash Collateral pursuant to the foregoing provisions of this Paragraph 2 , Landlord shall have no obligation to maintain such Cash Collateral in a separate account, and Tenant shall not be entitled to receive any interest accruing thereon. However, if Cash Collateral is not timely delivered or the Letter of Credit is not timely renewed or a substitute Letter of Credit is not timely received, or if Tenant fails to maintain the Letter of Credit and/or the Cash Collateral in the amount and in accordance with the terms set forth in this LC Rider, Landlord shall have the right to present the Letter of Credit to the bank in accordance with the terms of this LC Rider, and the entire sum evidenced thereby shall be paid to and held by Landlord as Cash Collateral for performance of all of Tenant’s obligations under the Lease and for all losses and damages Landlord may suffer as a result of any default by Tenant under the Lease, subject to Tenant’s rights to notice and cure pursuant to Article 19 of the Lease.

3. If there shall occur a default under the Lease as set forth in Article 19 of the Lease and such default remains uncured beyond the applicable notice and cure periods set forth in Article 19 , Landlord may, but without obligation to do so, draw upon the Letter of Credit and/or utilize the Cash Collateral, in part or in whole, to cure any default of Tenant and/or to compensate Landlord for any and all damages of any kind or nature sustained or which may be sustained by Landlord resulting from Tenant’s default. Tenant agrees not to interfere in any way with payment to Landlord of the proceeds of the Letter of Credit, either prior to or following a “draw” by Landlord of any portion of the Letter of Credit, regardless of whether any dispute exists between Tenant and Landlord as to Landlord’s right to draw from the Letter of Credit. No condition or term of the Lease shall be deemed to render the Letter of Credit conditional to justify the issuer of the Letter of Credit in failing to honor a drawing upon such Letter of Credit in a timely manner.

-2-

4. Landlord and Tenant acknowledge and agree that in no event or circumstance shall the Letter of Credit or any renewal thereof or substitute therefor or Cash Collateral 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 and/or Cash Collateral, as the case may be, 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.

5. Notwithstanding anything to the contrary set forth in this LC Rider, but subject to the provisions of Paragraphs 5(a) and (b) below, it is hereby agreed that the LC Amount shall be reduced by and to the amounts on the dates set forth on the schedule below:


Reduction Date	Amount of Reduction		Revised LC Amount
First day of 37th month of initial Lease Term	$	601,390.82	$	3,006,954.08
First day of 49th month of initial Lease Term	$	601,390.82	$	2,405,563.27
First day of 61st month of initial Lease Term	$	601,390.82	$	1,804,172.45

Further, in the event that Tenant successfully completes an initial public offering of stock in Tenant through the New York Stock Exchange or other nationally recognized stock exchange that raises a minimum of One Hundred Million Dollars ($100,000,000) in gross proceeds for Tenant in the primary offering, then it is hereby agreed that the LC Amount shall be reduced by and to the amounts on the dates set forth on the schedule below:


Reduction Date	Amount of Reduction		Revised LC Amount
First day of 25th month of initial Lease Term	$	902,086.23	$	2,706,258.68
First day of 36th month of initial Lease Term	$	902,086.23	$	1,804,172.45

(a) Notwithstanding the foregoing provisions of this Paragraph 5 to the contrary, there shall be no reduction in the LC Amount, or waiver of the Letter of Credit requirement and/or return of the Letter of Credit to Tenant, at any time while Tenant is in default of any of its obligations under the Lease.

(b) Any such reductions in the LC Amount pursuant this Paragraph 5 shall be accomplished through an amendment or replacement Letter of Credit, to be provided by Tenant to Landlord at Tenant’s sole cost and expense.

[SIGNATURES APPEAR ON THE IMMEDIATELY FOLLOWING PAGE.]

-3-

IN WITNESS WHEREOF , Landlord and Tenant have caused this Letter of Rider to be executed the day and date of the Lease.


“Landlord”:	1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company

	By:	1019 Market St. Holdings III, LLC, a Delaware limited liability company Its Managing Member

		By:	/s/ W. Greg Geiger
			Printed Name: W. Greg Geiger
			Title: Authorized Signer

		By:	/s/ Sean Armstrong
			Printed Name: Sean Armstrong
			Title: Authorized Signer

“Tenant”:	ZENDESK, INC. , a Delaware corporation

	By:	/s/ Mikkel Svane
		Printed Name: Mikkel Svane
		Title: CEO and President

	By:	/s/ John Geschke
		Printed Name: John Geschke
		Title: General Counsel and Secretary

Signature Page

AMENDMENT TO LEASE

This AMENDMENT TO LEASE (“Amendment”) is made and entered into effective as of May 9, 2014, by and between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“Landlord”), and ZENDESK, INC., a Delaware corporation (“Tenant”)

R E C I T A L S :

A. Landlord and Tenant entered into that certain Lease Agreement dated as of September 6, 2013 (the “Lease”) pursuant to which Landlord leased to Tenant and Tenant leased from Landlord certain “Premises”, within the Building located at 1019 Market Street, San Francisco, California.

B. Except as otherwise set forth herein, all capitalized terms used in this Amendment shall have the same meaning given such terms in the Lease.

C. Landlord and Tenant desire to amend the Lease to confirm the commencement and expiration dates of the term, as hereinafter provided.

NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Confirmation of Dates . The parties hereby confirm that the term of the Lease commenced as of March 5, 2014 (the “Lease Commencement Date”) for a term of approximately one hundred one (101) months ending on August 31, 2022 (unless sooner terminated as provided in the Lease.

2. No Further Modification . Except as set forth in this Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect.

IN WITNESS WHEREOF, this Amendment to Lease has been executed as of the day and year first above written.

“Landlord”:	1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company

	By:	1019 Market St. Holdings III, LLC, a Delaware limited liability company Its Managing Member

		By:	/s/ W. Greg Geiger
			Printed Name: W. Greg Geiger
			Title: Authorized Signer

		By:	/s/ Peter Aronson
			Printed Name: Peter Aronson
			Title: Authorized Signer

“Tenant”:	ZENDESK, INC.,
	a Delaware corporation

	By:	/s/ John Geschke
		Printed Name: John Geschke
		Title: SVP, General Counsel

	By:	/s/ Alan Black
		Printed Name: Alan Black
		Title: CFO

- 2-

SECOND AMENDMENT TO LEASE

This SECOND AMENDMENT TO LEASE (“Amendment”) is made and entered into effective as of September 18, 2014, by and between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“Landlord”), and ZENDESK, INC., a Delaware corporation (“Tenant”) .

R E C I T A L S :

A. Landlord and Tenant entered into that certain Lease Agreement dated as of September 6, 2013, as amended by that certain Amendment to Lease effective as of May 9, 2014 (collectively, the “Lease”) pursuant to which Landlord leased to Tenant and Tenant leased from Landlord certain “Premises”, within the Building located at 1019 Market Street, San Francisco, California.

B. Except as otherwise set forth herein, all capitalized terms used in this Amendment shall have the same meaning given such terms in the Lease.

C. Landlord and Tenant desire to amend the Lease to provide that Landlord assume responsibility for payment of certain utilities subject to reimbursement by Tenant, as set forth below.

NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Utility Charges . Notwithstanding Section 6.1.2 of the Lease to the contrary, Landlord shall contract for and pay directly for electrical service to the Premises; provided, however, Tenant shall promptly reimburse to Landlord, as Additional Rent, 100% of the cost of such electrical service to the Premises; provided, further, that such reimbursement shall be deemed to be a direct payment by Tenant of such electrical service for purposes of Section 4.2.10 of the Lease, such that the cost of such electrical service shall be excluded from the definition of “Utility Costs”.

2. No Further Modification . Except as specifically set forth in this Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect. In the event of any conflict between the terms and conditions of the Lease and the terms and conditions of this Amendment, the terms and conditions of this Amendment shall prevail.

3. Counterparts: Facsimile and Electronic Execution . This Amendment may be executed in counterparts, all of which shall constitute the same Amendment, notwithstanding that all parties to this Amendment are not signatories to the same or original counterpart. Delivery of an executed counterpart of this Amendment by facsimile or electronic mail shall be equally as effective as delivery of an original executed counterpart. Any party delivering an executed counterpart of this Amendment by facsimile or electronic mail also shall deliver an original executed counterpart of this Amendment, but the failure to deliver an original executed

counterpart shall not affect the validity, enforceability and binding effect of this Amendment. Signature and acknowledgement pages may be detached from the counterparts and attached to a single copy of this Amendment to physically form one (1) document.

4. Voluntary Consent; Reasonable Terms . Landlord and Tenant have carefully read and reviewed this Amendment and, by affixing their respective signatures hereto, each acknowledge their informed and voluntary consent to the terms of this Amendment. The parties hereby agree that, at the time of this Amendment is executed, the terms of this Amendment are commercially reasonable and effectuate the intent and purpose of Landlord and the Tenant with respect to the matters addressed herein.

[SIGNATURE PAGE TO AMENDMENT FOLLOWS]

IN WITNESS WHEREOF, this Amendment to Lease has been executed as of the day and year first above written.

“Landlord”:	1019 MARKET ST. PROPERTY, LLC, Delaware limited liability company

	By:	1019 Market St. Holdings III, LLC, a Delaware limited liability company Its Managing Member

		By:	/s/ W. Greg Geiger
			Printed Name: W. Greg Geiger
			Title: Authorized Signer

		By:	/s/ Sean Armstrong
			Printed Name: Sean Armstrong
			Title: Authorized Signer

“Tenant”:	ZENDESK, INC., a Delaware corporation

	By:	/s Alan Black
		Alan Black (Sep 18, 2014)
		Printed Name: Alan Black
		Title: Chief Financial Officer

	By:	/s/ John Geschke
		John Geschke (Sep 18, 2014)
		Printed Name: John Geschke
		Title: General Counsel

Exhibit 10.2

ZENDESK, INC.

2014 EMPLOYEE STOCK PURCHASE PLAN

The purpose of the Zendesk, Inc. 2014 Employee Stock Purchase Plan (the “Plan”) is to provide eligible employees of Zendesk, Inc. (the “Company”) and each Designated Company (as defined in Section 11) with opportunities to purchase shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”). 3,625,000 shares of Common Stock in the aggregate have been approved and reserved for this purpose, plus on January 1, 2015 and each January 1 thereafter, the number of shares of Common Stock reserved and available for issuance under the Plan shall be cumulatively increased by the lesser of 1,500,000 shares, one percent of the number of shares of Common Stock issued and outstanding on the immediately preceding December 31, and such lesser number of shares of common stock determined by the Administrator.

The Plan includes two components: a Code Section 423 Component (the “423 Component”) and a non-Code Section 423 Component (the “Non-423 Component”). It is intended for the 423 Component to constitute an “employee stock purchase plan” within the meaning of Section 423(b) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) and the 423 Component shall be interpreted in accordance with that intent (although the Company makes no undertaking or representation to maintain such qualification). In addition, this Plan authorizes the grant of options under the Non-423 Component that does not qualify as an “employee stock purchase plan” under Section 423 of the Code because of deviations necessary to permit participation in the Plan by employees who are foreign nationals or employed outside of the United States while complying with applicable foreign laws. Except as otherwise provided herein, the Non-423 Component will operate and be administered in the same manner as the 423 Component.

1. Administration . The Plan will be administered by the Compensation Committee of the Board of Directors and/or such other person or persons (the “Administrator”) appointed by the Company’s Board of Directors (the “Board”) for such purpose. The Administrator has authority at any time to: (i) adopt, alter and repeal such rules, guidelines and practices for the administration and operation of the Plan and for its own acts and proceedings as it shall deem advisable, including to accommodate the specific requirements of local laws and procedures for jurisdictions outside of the United States. (ii) interpret the terms and provisions of the Plan; (iii) make all determinations it deems advisable for the administration of the Plan; (iv) decide all disputes arising in connection with the Plan; and (v) otherwise supervise the administration of the Plan. All interpretations and decisions of the Administrator shall be binding on all persons, including the Company and the Participants. No member of the Board or individual exercising administrative authority with respect to the Plan shall be liable for any action or determination made in good faith with respect to the Plan or any option granted hereunder.

2. Offerings . The Company will make one or more offerings to eligible employees to purchase Common Stock under the Plan (“Offerings”) consisting of one or more Purchase Periods. Unless otherwise determined by the Administrator, the initial Offering will begin on the Registration Date and will end on the date that is eighteen months following the Registration Date (“the Initial Offering”). Unless otherwise determined by the Administrator, subsequent Offerings will be eighteen months long and begin every six months on dates determined by the Administrator. The Administrator may, in its discretion, designate a different period for any Offering, provided that no Offering shall exceed 27 months in duration. Unless the Administrator otherwise determines, each Offering will be divided into three equal Purchase Periods.

3. Eligibility . All individuals classified as employees on the payroll records of the Company and each Designated Company are eligible to participate in any one or more of the Offerings under the Plan, provided that as of the first day of the applicable Offering (the “Offering Date”) they have completed at least 30 days of employment, unless the exclusion of employees who do not meet this requirement is not permissible under applicable law. Notwithstanding any other provision herein, individuals who are not contemporaneously classified as employees of the Company or a Designated Company for purposes of the Company’s or applicable Designated Company’s payroll system are not considered to be eligible employees of the Company or any Designated Company and shall not be eligible to participate in the Plan. In the event any such individuals are reclassified as employees of the Company or a Designated Company for any purpose, including, without limitation, common law or statutory employees, by any action of any third party, including, without limitation, any government agency, or as a result of any private lawsuit, action or administrative proceeding, such individuals shall, notwithstanding such reclassification, remain ineligible for participation. Notwithstanding the foregoing, the exclusive means for individuals who are not contemporaneously classified as employees of the Company or a Designated Company on the Company’s or Designated Company’s payroll system to become eligible to participate in this Plan is through an amendment to this Plan, duly executed by the Company, which specifically renders such individuals eligible to participate herein.

4. Participation .

(a) Participants on Effective Date . Each eligible employee as of the Registration Date shall be deemed to be a Participant at such time. If an eligible employee is deemed to be a Participant pursuant to this Section 4(a), such individual shall be deemed not to have authorized payroll deductions or other contributions and shall not purchase any Common Stock hereunder unless he or she thereafter authorizes payroll deductions or other contributions by submitting an enrollment form (in the manner described in Section 4(c)) within 90 days after the commencement of the Initial Offering. If such a Participant does not authorize payroll deductions or other contributions by submitting an enrollment form by such deadline (or such other deadline as determined by the Administrator), that Participant will be deemed to have withdrawn from the Plan.

(b) Participants in Subsequent Offerings . An eligible employee who is not a Participant on any Offering Date may participate in such Offering by submitting an enrollment form in a manner determined by the Company at least 15 business days before the Offering Date (or by such other deadline as shall be established by the Administrator for the Offering).

(c) Enrollment . The enrollment form will (a) state a whole percentage (unless the Administrator determines in advance of an Offering to require that a fixed amount be specified in lieu of a percentage) to be contributed from an eligible employee’s Compensation (as defined in Section 11) per pay period, (b) authorize the purchase of Common Stock in each Offering in accordance with the terms of the Plan and (c) specify the exact name or names in which shares of Common Stock purchased for such individual are to be issued pursuant to Section 10. An employee who does not enroll in accordance with these procedures will be deemed to have waived the right to participate. Unless a Participant files a new enrollment form or withdraws from the Plan, such Participant’s contributions and purchases will continue at the same percentage of Compensation for future Offerings, provided he or she remains eligible.

(d) Notwithstanding the foregoing, participation in the Plan will neither be permitted nor be denied contrary to the requirements of the Code and any applicable law.

5. Employee Contributions . Each eligible employee may authorize payroll deductions at a minimum of 1 percent up to a maximum of 15 percent of such employee’s Compensation for each pay period; provided, however, that if payroll deductions are not permitted or problematic under applicable law or for administrative reasons, the Company, in its discretion, may allow eligible employees to contribute to the Plan by other means. The Company will maintain book accounts showing the amount of payroll deductions or other contributions made by each Participant for each Purchase Period. No interest will accrue or be paid on payroll deductions or other contributions, unless required under applicable law.

6. Contribution Changes . Except in the event of a Participant increasing his or her contributions from 0 percent during the Initial Offering as specified in Section 4(a) or as may be determined by the Administrator in advance of an Offering, a Participant may not increase or decrease his or her contributions during any Offering, but may increase or decrease his or her contributions with respect to the next Offering (subject to the limitations of Section 5) by filing a new enrollment form at least 15 business days before the next Offering Date (or by such other deadline as shall be established by the Administrator for the Offering). The Administrator may, in advance of any Offering, establish rules permitting a Participant to increase, decrease or terminate his or her contributions during an Offering.

7. Withdrawal . A Participant may withdraw from participation in the Plan by delivering a written notice of withdrawal in a manner determined by the Administrator. The Participant’s withdrawal will be effective as of the next business day. Following a Participant’s withdrawal, the Company will promptly refund such individual’s entire account balance under the Plan to him or her (after payment for any Common Stock purchased before the effective date of withdrawal). Partial withdrawals are not permitted. Such an employee may not begin participation again during the remainder of the Offering, but may enroll in a subsequent Offering in accordance with Section 4.

8. Grant of Options . On each Offering Date, the Company will grant to each eligible employee who is then a Participant in the Plan an option (“Option”) to purchase on the last day of a Purchase Period (an “Exercise Date”), at the Option Price hereinafter provided for, the lowest of (a) a number of shares of Common Stock determined by dividing such Participant’s accumulated contributions on such Exercise Date by the lower of (i) 85 percent of the Fair Market Value of the Common Stock on the Offering Date, or (ii) 85 percent of the Fair Market Value of the Common Stock on the Exercise Date, (b) 3,000 shares; or (c) such other lesser maximum number of shares as shall have been established by the Administrator in advance of the Offering; provided, however, that such Option shall be subject to the limitations set forth in the Plan. Each Participant’s Option shall be exercisable only to the extent of such Participant’s accumulated payroll deductions on the Exercise Date. The purchase price for each share purchased under each Option (the “Option Price”) will be 85 percent of the Fair Market Value of the Common Stock on the Offering Date or the Exercise Date, whichever is less.

Notwithstanding the foregoing, no Participant may be granted an option hereunder if such Participant, immediately after the option was granted, would be treated as owning stock possessing 5 percent or more of the total combined voting power or value of all classes of stock of the Company or any Parent or Subsidiary (as defined in Section 11). For purposes of the preceding sentence, the attribution rules of Section 424(d) of the Code shall apply in determining the stock ownership of a Participant, and all stock which the Participant has a contractual right to purchase shall be treated as stock owned by the Participant. In addition, no Participant may be granted an Option which permits his or her rights to purchase stock under the Plan, and any other employee stock purchase plan of the Company and its Parents and Subsidiaries, to accrue at a rate which exceeds $25,000 of the fair market value of such stock (determined on the option grant date or dates) for each calendar year in which the Option is outstanding at any time. The purpose of the limitation in the preceding sentence is to comply with Section 423(b)(8) of the Code and shall be applied taking Options into account in the order in which they were granted.

9. Exercise of Option and Purchase of Shares . Each employee who continues to be a Participant in the Plan on an Exercise Date shall be deemed to have exercised his or her Option on such date and shall acquire from the Company such number of whole shares of Common Stock reserved for the purpose of the Plan as his or her accumulated contributions on such date will purchase at the Option Price, subject to any other limitations contained in the Plan; provided that, with respect to the Initial Offering, the exercise of each Option shall be conditioned on the closing of the Company’s Initial Public Offering on or before the first Exercise Date. Any amount remaining in a Participant’s account after the purchase of shares on an Exercise Date of an Offering solely by reason of the inability to purchase a fractional share will be carried forward to the next Purchase Period and, if such Exercise Date is the final Exercise Date of an Offering, will be carried forward to the next Offering; any other balance remaining in a Participant’s account at the end of an Offering will be refunded to the Participant promptly.

If a Participant has more than one Option outstanding under the Plan, unless he or she otherwise indicates in agreements or notices delivered hereunder: (i) each agreement or notice delivered by that Participant shall be deemed to apply to all of his or her Options under the Plan, and (ii) an Option with a lower Option Price (or an earlier granted Option, if different Options have identical Option Prices) shall be exercised to the fullest possible extent before an Option with a higher Option Price (or a later granted Option if different Options have identical Option Prices) shall be exercised.

10. Issuance of Certificates . Certificates, or book entries for uncertificated shares, representing shares of Common Stock purchased under the Plan may be issued only in the name of the employee or, if permitted by the Administrator, in the name of the employee and another person of legal age as joint tenants with rights of survivorship, or in the name of a broker authorized by the employee to be his, her or their, nominee for such purpose.

11. Definitions . The term “Affiliate” means any entity that is directly or indirectly controlled by the Company which does not meet the definition of a Subsidiary below, as determined by the Administrator, whether now or hereafter existing.

The term “Compensation” means the amount of total cash compensation, prior to salary reduction pursuant to Sections 125, 132(f) or 401(k) of the Code, including base pay, overtime, commissions, and incentive or bonus awards, but excluding allowances and reimbursements for expenses such as relocation allowances or travel expenses, income or gains on the exercise of Company stock options, and similar items. The Administrator shall have the discretion to determine the application of this definition to Participants outside the United States.

The term “Designated Company” means any present or future Affiliate or Subsidiary (as defined below) that has been designated by the Board to participate in the Plan. The Board may so designate any Affiliate or Subsidiary, or revoke any such designation, at any time and from time to time, either before or after the Plan is approved by the stockholders and may further designate such companies as participating in the 423 Component or the Non-423 Component. For purposes of the 423 Component, only Subsidiaries may be Designated Companies.

The term “Fair Market Value of the Common Stock” on any given date means the fair market value of the Common Stock determined in good faith by the Administrator; provided , however , that if the Common Stock is admitted to quotation on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”), NASDAQ Global Market or another national securities exchange, the determination shall be made by reference to the closing price on such date. If there is no closing price for such date, the determination shall be made by reference to the last date preceding such date for which there is a closing price. Notwithstanding the foregoing, if the date for which Fair Market Value of the Common Stock is determined is the first day when trading prices for the Common Stock are reported on NASDAQ or another national securities exchange, the Fair Market Value of the Common Stock shall be the “Price to the Public” (or equivalent) set forth on the cover page for the final prospectus relating to the Company’s Initial Public Offering.

The term “Initial Public Offering” means the the first offer and sale by the Company of its Common Stock in an underwritten, firm-commitment public offering.

The term “Parent” means a “parent corporation” with respect to the Company, as defined in Section 424(e) of the Code.

The term “Participant” means an individual who is eligible as determined in Section 3 and who has complied with the provisions of Section 4.

The term “Purchase Period” means a period of time specified within an Offering beginning on the Offering Date or on the next day following an Exercise Date within an Offering and ending on an Exercise Date. An Offering may consist of one or more Purchase Periods.

The term “Registration Date” means the date the registration statement on Form S-1 that is filed by the Company with respect to the Initial Public Offering is declared effective by the Securities and Exchange Commission.

The term “Subsidiary” means a “subsidiary corporation” with respect to the Company, as defined in Section 424(f) of the Code.

12. Rights on Termination of Employment . Unless otherwise required by applicable law, if a Participant’s employment terminates for any reason before the Exercise Date for any Offering, no contributions will be taken from any pay due and owing to the Participant and the balance in the Participant’s account will be paid to such Participant or, in the case of such Participant’s death, if permitted by the Administrator, to his or her designated beneficiary as if such Participant had withdrawn from the Plan under Section 7. An employee will be deemed to have terminated employment, for this purpose, if the corporation that employs him or her, having been a Designated Company, ceases to be an Affiliate or Subsidiary, as applicable, or if the employee is transferred to any corporation other than the Company or a Designated Company. An employee will not be deemed to have terminated employment for this purpose, if the employee is on an approved leave of absence for military service or sickness or for any other purpose approved by the Company, if the employee’s right to reemployment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Administrator otherwise provides in writing.

13. Optionees Not Stockholders . Neither the granting of an Option to a Participant nor the deductions from his or her pay or other contributions shall deem such Participant to be a holder of the shares of Common Stock covered by an Option under the Plan until such shares have been purchased by and issued to him or her.

14. Rights Not Transferable . Rights under the Plan are not transferable by a Participant other than by will or the laws of descent and distribution, and are exercisable during the Participant’s lifetime only by the Participant.

15. Application of Funds . All funds received or held by the Company under the Plan may be combined with other corporate funds and may be used for any corporate purpose, unless otherwise required under applicable law.

16. Adjustment in Case of Changes Affecting Common Stock . In the event of a subdivision of outstanding shares of Common Stock, the payment of a dividend in Common Stock or any other change affecting the Common Stock, the number of shares approved for the Plan and the share limitation set forth in Section 8 shall be equitably or proportionately adjusted to give proper effect to such event.

17. Amendment of the Plan . The Board may at any time and from time to time amend the Plan in any respect, except that without the approval within 12 months of such Board action by the stockholders, no amendment shall be made increasing the number of shares approved for the Plan or making any other change that would require stockholder approval in order for the 423 Component of the Plan, as amended, to qualify as an “employee stock purchase plan” under Section 423(b) of the Code.

18. Insufficient Shares . If the total number of shares of Common Stock that would otherwise be purchased on any Exercise Date plus the number of shares purchased under previous Offerings under the Plan exceeds the maximum number of shares issuable under the Plan, the shares then available shall be apportioned among Participants in proportion to the amount of payroll deductions accumulated on behalf of each Participant that would otherwise be used to purchase Common Stock on such Exercise Date.

19. Termination of the Plan . The Plan may be terminated at any time by the Board. Upon termination of the Plan, all amounts in the accounts of Participants shall be promptly refunded. The Plan shall automatically terminate on the ten year anniversary of the Registration Date.

20. Governmental Regulations . The Company’s obligation to sell and deliver Common Stock under the Plan is subject to obtaining all governmental approvals required in connection with the authorization, issuance, or sale of such stock.

21. Governing Law . This Plan and all Options and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the State of Delaware, applied without regard to conflict of law principles.

22. Issuance of Shares . Shares may be issued upon exercise of an Option from authorized but unissued Common Stock, from shares held in the treasury of the Company, or from any other proper source.

23. Tax Withholding . Participation in the Plan is subject to any minimum required tax withholding on income of the Participant in connection with the Plan. Each Participant agrees, by entering the Plan, that the Company and its Affiliates and Subsidiaries shall have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant, including shares issuable under the Plan.

24. Notification Upon Sale of Shares . Each Participant who is subject to tax in the United States with respect to his or her participation in the Plan agrees, by entering the Plan, to give the Company prompt notice of any disposition of shares purchased under the Plan where such disposition occurs within two years after the date of grant of the Option pursuant to which such shares were purchased.

25. Effective Date and Approval of Shareholders . The Plan shall take effect on the Registration Date, subject to approval by the holders of a majority of the votes cast at a meeting of stockholders at which a quorum is present or by written consent of the stockholders.

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a) OR 15d-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mikkel Svane, certify that:

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

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

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

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

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

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

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

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

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

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

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a) OR 15d-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Alan Black, certify that:

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

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

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Zendesk, Inc. for the quarterly period ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Mikkel Svane, as Chief Executive Officer of Zendesk, Inc., hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge, the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Zendesk, Inc.

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Zendesk, Inc. for the quarterly period ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Alan Black, as Chief Financial Officer of Zendesk, Inc., hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge, the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Zendesk, Inc.