As filed with the Securities and Exchange Commission on April 26, 2019.

Registration No. 333-             
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
Slack Technologies, Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
7372
26-4400325
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
500 Howard Street
San Francisco, California 94105
(855) 980-5920
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant’s Principal Executive Offices)
 
Stewart Butterfield
Chief Executive Officer
Slack Technologies, Inc.
500 Howard Street
San Francisco, California 94105
(855) 980-5920
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
 
Copies to:
Richard A. Kline
David W. Van Horne
Sarah B. Axtell
Goodwin Procter LLP
Three Embarcadero Center
San Francisco, California 94111
(650) 752-3100
David Schellhase
Gabe Stern
Amanda Westendorf
Slack Technologies, Inc.
500 Howard Street
San Francisco, California 94105
(855) 980-5920
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box:   x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer  x
Smaller reporting company ☐
 
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
 
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
Amount to be Registered
Proposed Maximum
Offering Price Per Share
Proposed Maximum
Aggregate Offering Price
(1)
Amount of Registration Fee
Class A Common Stock, $0.0001 par value per share
 
Not applicable
$100,000,000
$12,120
(1)  
Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f)(2) of the Securities Act.
 
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 




The information in this prospectus is not complete and may be changed. The securities may not be sold until the Registration Statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion, dated          , 2019 
SLACK TECHNOLOGIES, INC.
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          Shares of Class A Common Stock
____________________________________________________________________________
This prospectus relates to the registration of the resale of up to          shares of our Class A common stock by our stockholders identified in this prospectus, or the Registered Stockholders. Unlike an initial public offering, the resale by the Registered Stockholders is not being underwritten by any investment bank. The Registered Stockholders may, or may not, elect to sell their shares of Class A common stock covered by this prospectus, as and to the extent they may determine. Such sales, if any, will be made through brokerage transactions on the New York Stock Exchange, or the NYSE. See the section titled “Plan of Distribution.” If the Registered Stockholders choose to sell their shares of Class A common stock, we will not receive any proceeds from the sale of shares of Class A common stock by the Registered Stockholders.
We have two classes of common stock, Class A common stock and Class B common stock. The rights of holders of Class A common stock and Class B common stock are identical, except voting and conversion rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to 10 votes and is convertible at any time into one share of Class A common stock. The holders of our outstanding Class B common stock hold approximately     % of the voting power of our outstanding capital stock, with our directors and executive officers and their affiliates holding approximately     %.
Prior to any sales of shares of Class A common stock, Registered Stockholders who hold Class B common stock must convert their shares of Class B common stock into shares Class A common stock.
No public market for our Class A common stock currently exists. However, our shares of Class B common stock (on an as converted basis) have a history of trading in private transactions. Based on information available to us, the low and high sales price per share of Class B common stock (on an as converted basis) for such private transactions during the year ended January 31, 2019 was $8.37 and $23.41, respectively, and during the period from February 1, 2019 through          , 2019 was $          and $          , respectively. For more information, see the section titled “Sale Price History of our Capital Stock.” Our recent trading prices in private transactions may have little or no relation to the opening public price of our shares of Class A common stock on the NYSE or the subsequent trading price of our shares of Class A common stock on the NYSE. Further, the listing of our Class A common stock on the NYSE without underwriters is a novel method for commencing public trading in shares of our Class A common stock, and consequently, the trading volume and price of shares of our Class A common stock may be more volatile than if shares of our Class A common stock were initially listed in connection with an underwritten initial public offering.
Based on information provided by the NYSE, the opening public price of our Class A common stock on the NYSE will be determined by buy and sell orders collected by the NYSE from broker-dealers. Based on such orders, the designated market maker will determine an opening price for our Class A common stock in consultation with a financial advisor pursuant to applicable NYSE rules. For more information, see the section titled “Plan of Distribution.”
We have applied to list our Class A common stock on the NYSE under the symbol “SK.” We expect our Class A common stock to begin trading on the NYSE on or about          , 2019.
We are an “emerging growth company” as defined under the federal securities laws and, as such, we have elected to comply with reduced reporting requirements for this prospectus and may elect to do so in future filings.
See the section titled “ Risk Factors ” beginning on page 13  to read about factors you should consider before buying shares of our Class A common stock.
The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
           , 2019




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TABLE OF CONTENTS
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You should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission, or the SEC. Neither we nor any of the Registered Stockholders have authorized anyone to provide any information or make any representations other than those contained in this prospectus or in any free writing prospectus we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. The Registered Stockholders are offering to sell, and seeking offers to buy, shares of their Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the Class A common stock. Our business, financial condition, results of operations, and prospects may have changed since such date.
For investors outside of the United States: Neither we nor any of the Registered Stockholders have done anything that would permit the use of or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about, and to observe any restrictions relating to, the offering of Class A common stock by the Registered Stockholders and the distribution of this prospectus outside of the United States.




ABOUT THIS PROSPECTUS
This prospectus is a part of a registration statement on Form S-1 that we filed with the SEC using a “shelf” registration or continuous offering process. Under this shelf process, the Registered Stockholders may, from time to time, sell the Class A common stock covered by this prospectus in the manner described in the section titled “Plan of Distribution.” Additionally, we may provide a prospectus supplement to add information to, or update or change information contained in, this prospectus, including the section titled “Plan of Distribution.” You may obtain this information without charge by following the instructions under the section titled “Additional Information” appearing elsewhere in this prospectus. You should read this prospectus and any prospectus supplement before deciding to invest in our Class A common stock.

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PROSPECTUS SUMMARY
This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our Class A common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, the terms “Slack,” “the company,” “we,” “us” and “our” in this prospectus refer to Slack Technologies, Inc. and its consolidated subsidiaries. Our fiscal year ends January 31.
SLACK TECHNOLOGIES, INC.
Introduction – What is Slack?
Slack is where work happens.
Around the world, over 600,000 organizations in over 150 countries have turned to Slack as the place to communicate, collaborate, and get work done. Over 10 million people inside those organizations – accountants, customer support reps, engineers, lawyers, journalists, dentists, chefs, detectives, executives, scientists, farmers, hoteliers, salespeople, and many others – collectively spend more than 50 million hours in active use of Slack in a typical week, on either a free or paid subscription plan. They do so because Slack is a new layer of the business technology stack that brings together people, applications, and data – a single place where people can effectively work together, access hundreds of thousands of critical applications and services, and find important information to do their best work.
History
We created Slack initially as an internal tool to help our own team stay on the same page, to be able to easily access conversations, decisions, data, and content that had been shared, and to tap into a variety of software applications from one place. We were frustrated with email. It created fragmented silos of inaccessible information, hidden in individual inboxes. When new members joined the team, they were cut off from the rich history of communication that occurred before they arrived. Transparency was difficult to achieve and routine communication had to be supplemented with status reports and stand-up meetings in order to keep the team coordinated.
In addition, despite the fact that email was the universal default routing mechanism for enterprise software, it was also an ineffective medium for sharing and managing the information and activity generated by that software. The notifications and simple workflows, such as approval processes, generated by customer support ticketing tools, human resources management systems, and expense trackers, disappeared into individual inboxes. Email is static and offers no direct integration with any of these tools. In short, email was a tiny window into the vast landscape of business information and software available to us collectively, and we needed to see the whole picture.
We needed a new way to work that would help us make the most of both our people and our significant investment in software. What was available was incomplete, inadequate, and unfit for our work at hand. What we needed did not exist. So we built it.
Since our public launch in 2014, it has become apparent that organizations worldwide have similar needs, and are now finding the solution with Slack. Our growth is largely due to word-of-mouth recommendations. Slack usage inside organizations of all kinds is typically initially driven bottoms-up, by end users. Despite this, we (and the rest of the world) still have a hard time explaining Slack. It’s been called an operating system for teams, a hub for collaboration, a connective tissue across the organization, and much else. Fundamentally, it is a new layer of the business technology stack in a category that is still being defined.
Slack’s Role
The most helpful explanation of Slack is often that it replaces the use of email inside the organization. Like email (or the Internet or electricity), Slack has very general and broad applicability. It is not aimed at any one specific purpose, but nearly anything that people do together at work.

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Unlike email, however, most of this activity happens in team-based channels, rather than in individual inboxes. Channels offer a persistent record of the conversations, data, documents, and application workflows relevant to a project or a topic. Membership of a channel can change over time as people join or leave a project or organization, and users benefit from the accumulated historical information in a way an employee never could when starting with an empty email inbox. Depending on the size of the organization, this might provide tens, hundreds or even thousands of times more access to information than is available to individuals working in environments where email is the primary means of communication.
Also unlike email, Slack was designed from the ground up to integrate with external software systems. Slack provides an easy way for users to share and aggregate information from other software, take action on notifications, and advance workflows in a multitude of third-party applications, over 1,500 of which are listed in the Slack App Directory. Further, Slack’s platform capabilities extend beyond integrations with third-party applications and allow for easy integrations with an organization’s internally-developed software. During the three months ended January 31, 2019, our more than 10 million daily active users included more than 500,000 registered developers. Developers have collectively created more than 450,000 third-party applications or custom integrations that were used in a typical week during the three months ended January 31, 2019. Additionally, we are currently developing low-code solutions to create integrations and workflows entirely in Slack, suitable for all users and based on a simple, non-technical user interface .
Ultimately, Slack is more than email replacement. It is a new layer of technology that brings together people, applications, and data. Just as an operating system coordinates the flow of information and resources of a computer in a centralized fashion, using Slack inside an organization creates a hub into which critical business information flows, is acted upon and transformed, and is then quickly routed to its desired destination. Slack streamlines our users’ workflows, increases the beneficial return on the time they spend communicating, and creates a powerful point of leverage for increased productivity.
Business Context
We believe Slack is positioned extremely well to benefit from the explosive proliferation of software into every aspect of business and the increased pace of disruption driven by technological change.
According to Netskope, a typical enterprise uses more than 1,000 cloud services. Many of the largest IT departments maintain thousands of enterprise applications. All of this software either automates the repetitive and often error-prone work that humans used to do or augments human effort with entirely new capabilities.
With the simpler and more routine tasks automated away, the work that remains is more sophisticated and complex. Those tasks, which most rely on human judgment, intelligence, and creativity, are both more difficult to perform and more difficult to coordinate. Organizational alignment becomes harder to achieve. Further, the increased use of highly specialized software in different functional areas leads to a fragmentation of attention and, because it is often difficult to share objects or records with non-users, impedes the flow of important information across the organization.
These challenges compound the disruptive threats companies face in increasingly dynamic environments. Technological change and increased globalization continually create new opportunities and threats, but they also accelerate second-order change in customer needs, competitors’ behavior, and overall macroeconomic conditions. This environment demands an ever-greater ability to adapt and respond . In an increasingly dynamic world, the fundamental business advantage is organizational agility the ability for individuals, teams, and organizations to maintain alignment while continually transforming to meet evolving challenges.

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How Slack Helps
Slack is designed to allow people and teams to realize their full potential at work and, in doing so, to help organizations overcome the challenges created by their increased reliance on a proliferation of specialized software and radically reduce the communication and coordination effort required to achieve a given amount of organizational agility.
Our vision is a world where organizational agility is easy to achieve, regardless of an organization’s size
As a result of the alignment teams and organizations are able to maintain while continuously adapting to respond in increasingly dynamic environments, less effort and energy is wasted and the human beings on those teams are able to fully utilize their intelligence and creativity in pursuit of the organization’s shared objectives.
Slack makes existing software more useful and accessible
As a flexible platform for routing information of all kinds , Slack integrates horizontally with thousands of other applications, from those provided by companies like Google, Salesforce, ServiceNow, Atlassian, and Dropbox to the proprietary line-of-business applications developed by organizations for their own internal use. This functionality enables users to securely interact with all of these applications in one familiar user interface . We enable organizations that use Slack to get more out of their software investment.
Slack drives increased organizational agility
As a new layer of business technology that brings together an organization’s people, applications, and data, Slack improves organizational alignment. In a December 2018 survey that we conducted with more than a thousand U.S.-based users who had been using Slack for at least one month, which we refer to as our 2018 Survey, 87% reported that Slack improved communication and collaboration inside their organization.
Summary of Key Benefits
Working in Slack provides several key benefits to users, teams, and organizations and to our platform ecosystem:
People love using Slack and that leads to high levels of engagement. Slack is enterprise software created with an eye for user experience usually associated with consumer products. We believe that the more simple, enjoyable, and intuitive the product is, the more people will want to use it. As a result, teams benefit from the aggregated attention that happens when all members of a team are engaged in a single collaboration tool.
Slack increases an organization’s “return on communication.” Moving to channel-based communication increases accessibility of communication, which in turn increases transparency and breaks down silos. The organization benefits from increased coordination and alignment from a given amount of communication, with no additional effort in the form of status reports, update meetings, and so on.
Slack increases the value of existing software investment . Integration with Slack increases both the accessibility of information inside applications and the response times for many basic actions. Because Slack users can do virtually everything on Slack on mobile that they can do on desktop, they do not need to have dozens of work applications on their mobile devices to be able to make lightweight use of those applications on the go.
An organization’s archive of data increases in value over time. As teams continue to use Slack, they build a valuable resource of widely accessible information. Important messages are surrounded by useful context and users can see how fellow team members created and worked with the information and arrived at a decision. New employees can have instant access to the information they need to be effective whenever they join a new team or company. Finally, the content on Slack is available through powerful search and discovery tools, powered by machine learning, which improve through usage.
Slack helps organizations improve culture and employees’ feelings of empowerment. When every member of a team learns from, and contributes towards, common goals, people feel they have greater influence over

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the ultimate outcomes of their work. By keeping all team members in the information flow, we believe that Slack increases this sense that members of a team can have an impact and make a difference and that creates greater team cohesion and increases motivation.
Slack helps achieve organizational agility . Slack’s channels immerse workers directly into the dynamic and evolving communication, decision making, and data flow that defines modern work. Because workers have both more access to data updated in real time and more context for that data, they are better able to quickly react and adjust work streams in response to new business priorities or changing conditions while staying in alignment with one another.
Developers are better able to reach and deliver value to their customers . Slack has aggregated hundreds of thousands of organizations on one platform and made it easier for developers to distribute their software to any Slack-using organization. By making information from their applications available and allowing users to perform key actions through a whole new interface, developers can make their customers happier and more engaged.
We believe that whoever makes it easiest for teams to function with agility and cohesion in an ever more complex world will be the most important software company in the world. We aim to be that company.
Our Business Model
From the outset, our go-to-market strategy has centered around offering an exceptional product and level of service to organizations on Slack. We offer a self-service approach, for b oth free and paid subscriptions to Slack, which capitalizes on strong word-of-mouth adoption and customer love for our brand. Since 2016, we have augmented our approach with a direct sales force and customer success professionals who are focused on driving successful adoption and expansion within organizations, whether on a free or paid subscription plan.
We define daily active users as users who either created or consumed content in a given 24-hour period on either a free or paid subscription plan. We define an organization on Slack as a separate entity, such as a company, educational or government institution, or distinct business unit of a company, that is on a subscription plan, whether free or paid. Once an organization has three or more users on a paid subscription plan, we count them as a Paid Customer.
Our user base has grown rapidly since our launch in 2014. During the three months ended January 31, 2019, our daily active users exceeded 10 million. As of January 31, 2019, Slack had more than 600,000 organizations with three or more users, comprised of:
More than 88,000 Paid Customers, including more than 65 companies in the Fortune 100; and
More than 500,000 organizations on our Free subscription plan.
Many of our Paid Customers have thousands of active users and our largest Paid Customers have tens of thousands of employees using Slack on a daily basis.
Our users, whether on a free or paid subscription plan, are highly engaged, and their collective active use of Slack for the week ended January 31, 2019 exceeded 50 million hours. During the week ended January 31, 2019, more than 1 billion messages were sent in Slack. During this same time, on a typical workday, users at Paid Customers averaged nine hours connected to Slack through at least one device and spent more than 90 minutes actively using Slack.
Our direct sales and customer success efforts are focused on larger organizations who have a greater number of users and teams and have the potential to increase spend over time. We measure the number of Paid Customers >   $100,000 of annual recurring revenue, or ARR, as a gauge of adoption within and expansion into large enterprises. We had 575 Paid Customers >$100,000 of ARR as of January 31, 2019, which accounted for approximately 40% of our revenue in fiscal year 2019 .
We generate revenue primarily from the sale of subscriptions for Slack. Paid customers typically pay on a monthly or annual basis, based on the number of users that they have on Slack.

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Our reven ue was $105.2 million, $220.5 million, and $400.6 million in fiscal years 2017, 2018, and 2019, respectively, representing annual growth of 110% and 82%, respectively. Our growth is global with international revenue representing 34%, 34%, and 36% of total revenue in fiscal years 2017, 2018, and 2019, respectively. We continue to invest in growing our business to capitalize on our market opportunity. As a result, we incurred net losses of $146.9 million, $140.1 million, and $138.9 million in fiscal years 2017, 2018, and 2019, respectively. Our net losses have been decreasing as a percentage of revenue over time as revenue growth has outpaced the growth in operating expenses.
Expansion within organizations on Slack is a significant contributor to our growth. We measure the rate of expansion within our Paid Customer base, both sales-driven and through organic growth, by Net Dollar Retention Rate. Our Net Dollar Retention Rate was 143% as of January 31, 2019. We believe that our Net Dollar Retention Rate is a reflection of the rapid pace of adoption that often occurs as usage spreads within and across teams. We believe that all of these factors will contribute to a high lifetime value of an organization on Slack. For a definition of how we calculate Net Dollar Retention Rate and additional information about our key business metrics, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics.”
What Sets Us Apart
Singular focus
Our development, design, partnerships, customer engagement, and investments are targeted at realizing the enormity and simplicity of Slack’s singular mission: to make people’s working lives simpler, more pleasant, and more productive. We have no legacy products or competing priorities.
Scale and market leadership
The strength of our market leadership is demonstrated by the scale and growth of our users, the high level of engagement within our user base, our growth within organizations, the breadth of applications that integrate with Slack, and the size of our developer ecosystem.
Strong increasing returns dynamics
As Slack usage increases inside an organization, more value is created for each additional user who might join, as well as for all existing users. We believe shared channels between organizations will increase the value of the overall Slack network for each new organization that joins as well as for all existing network members. Slack also generates more value for developers as more users and more organizations join Slack, and users and organizations are more attracted to Slack as more apps are integrated into or built on our platform.
Customer love leading to stickiness and organic expansion
People love using Slack and many become advocates for wider use inside of their organizations. They also tend to recommend Slack when they switch jobs or join organizations that are not yet using Slack. This customer love is a source of growth that is exceptional in enterprise software.
Differentiated go-to-market strategy
Organic growth is generated as users realize the benefits of Slack. This growth enables us to attract new and prospective organizations through a highly effective self-service customer engagement model for free and paid subscription plans. We complement our self-service strategy with a focused direct sales effort and our customer success teams work to broaden adoption of Slack into wider-scale deployments.

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Customer-centricity as the fundamental tenet of our company
We build our software and user interface around the real needs of human beings. We focus maniacally on customer support for free and paid subscription plans and treat it as a critical and strategic imperative for our company. We believe people should leave every interaction with a Slack representative feeling that they have been heard, respected, and helped by a human being who truly understands Slack .
Market Opportunity
We believe everyone whose working life is mediated by email is a potential Slack user. Indeed, because of the universal need for organizational agility and the impact to current and potential organizations on Slack of getting more out of their investment in software, we further believe that the shift to Slack, or services like Slack, is inevitable. We estimate the market opportunity for Slack and other providers of workplace business technology software platforms for communication and collaboration to be $28 billion. As our market and the number of competitors in it is rapidly evolving, our estimates for the size of this market may not be reflective of the actual size of the market.
Growth Strategy
We intend to continue to grow by the following means:
Expand our user base through continuous enhancements to Slack
We will continue a relentless focus on product design and new user experience to reach more users and organizations .
Grow the number of organizations on Slack and increase our paid customers
We believe our market remains underpenetrated and we will continue to expand our marketing and sales efforts to reach more users and organizations and to increase the number of paid customers.
Increase usage within organizations on Slack
We plan to continue to grow use and users within organizations on Slack by increasing our investments in our direct sales force, customer success, and customer experience teams, along with new user education initiatives .
Enable Slack usage across existing and new business networks
Slack’s guest accounts and shared channels features facilitate secure collaboration between companies and we believe adoption of these features will grow significantly in the coming years. We expect the associated network effects will increase the value of Slack both for existing and new organizations on Slack and will be an important factor in our future growth.
Further invest in enterprise capabilities
We intend to increase investments in marketing, expand our field sales team, and continue to build product functionality in order to drive greater adoption of Slack by large organizations.
Invest in international expansion
We plan to open offices and hire sales and customer experience people in additional countries and expand our presence in countries where we already operate.
Grow our application platform and developer ecosystem
We will continue investing to expand the number of developers building applications that integrate with Slack and to make Slack work with an increasing number of third-party and internally developed custom applications .

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Leverage artificial intelligence, machine learning and advanced search
We believe that there is a significant opportunity to further streamline people’s working lives by automating workflows , and we intend to continue to invest in our research and development efforts in artificial intelligence, machine learning, and search capabilities.
Risk Factors Summary
Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors.” These risks include, but are not limited to, the following:
We have a limited operating history, which makes it difficult to forecast our revenue and evaluate our business and future prospects.
We have a history of net losses, we anticipate increasing operating expenses in the future, and we may not be able to achieve and, if achieved, maintain profitability.
We have experienced rapid growth in recent periods and our recent growth rates may not be indicative of our future growth.
If we fail to manage our growth effectively, we may be unable to execute our business plan or maintain high levels of service and customer satisfaction.
We may experience quarterly fluctuations in our results of operations due to a number of factors that make our future results difficult to predict and could cause our results of operations to fall below analyst or investor expectations.
Real or perceived errors, failures, vulnerabilities, or bugs in Slack could harm our business, results of operations, and financial condition.
The market and software categories in which we participate are competitive, new, and rapidly changing, and if we do not compete effectively with established companies as well as new market entrants our business, results of operations, and financial condition could be harmed.
If we are unable to attract new users and organizations, convert users of and organizations on our free version into paid customers, grow or maintain our Net Dollar Retention Rate, expand usage within organizations on Slack, and sell premium subscription plans or develop new features, integrations, capabilities, and enhancements that achieve market acceptance, our revenue growth and profitability will be harmed.
Our ability to introduce new f eatures, integrations, capabilities, and enhancements is dependent on adequate research and development resources. If we do not adequately fund our research and development efforts, or if our research and development investments do not translate into material enhancements to Slack, we may not be able to compete effectively and our business, results of operations, and financial condition may be harmed.
If there are interruptions or performance problems associated with the technology or infrastructure used to provide Slack, organizations on Slack may experience service outages, other organizations may be reluctant to adopt Slack, and our reputation could be harmed.
A security incident may allow unauthorized access to our systems, networks, or data or the data of organizations on Slack, harm our reputation, create additional liability, and harm our financial results.
Any actual or perceived failure by us to comply with privacy, data protection, information security, consumer privacy, data residency, or telecommunications laws, regulations, government access requests, and obligations in one or multiple jurisdictions could result in proceedings, actions, or penalties against us and could harm our business and reputation. These laws are uncertain, evolving, and interpreted and applied in different ways in different countries and, as a result, our legal obligations in different countries, and our efforts to comply with those legal obligations, may be inadequate or in conflict.

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Our listing differs significantly from an underwritten initial public offering.
The public price of our Class A common stock may be volatile, and could, upon listing on the NYSE, decline significantly and rapidly.
The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the listing of our Class A common stock on the NYSE, including our directors, executive officers and their respective affiliates, who will hold in the aggregate          % of the voting power of our capital stock upon the effectiveness of the registration statement of which this prospectus forms a part. This ownership will limit or preclude your ability to influence corporate matters, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Following our listing, sales of substantial amounts of our Class A common stock in the public markets or the perception that sales might occur, could cause the market price of our Class A common stock to decline.
Channels for Disclosure of Information
Investors, the media, and others should note that, following the effectiveness of the registration statement of which this prospectus forms a part, we intend to announce material information to the public through filings with the SEC, the investor relations page on our website, blog posts on our website, press releases, public conference calls, webcasts, our twitter feed (@SlackHQ), our Facebook page, and our LinkedIn page.
The information disclosed by the foregoing channels could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels.
Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.
Corporate Information
We were incorporated in 2009 as Tiny Spec, Inc., a Delaware corporation. Later in 2009, we changed our name to Tiny Speck, Inc. and, in 2014, we changed our name to Slack Technologies, Inc. Our principal executive offices are located at 500 Howard Street, San Francisco, California 94105, and our telephone number is (855) 980-5920. Our website address is www.slack.com. Information contained on or that can be accessed through our website does not constitute part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.
“Slack” is our registered trademark in the United States, Australia, Brazil, Canada, the European Union, Japan, Mexico, New Zealand, Russia, and South Korea. Other trademarks and trade names referred to in this prospectus are the property of their respective owners.
Emerging Growth Company
The Jumpstart Our Business Startups Act, or the JOBS Act, was enacted in April 2012 with the intention of encouraging capital formation in the United States and reducing the regulatory burden on newly-public companies that qualify as “emerging growth companies.” We are an “emerging growth company” within the meaning of the JOBS Act. As an “emerging growth company,” we intend to take advantage of certain exemptions from various public reporting requirements, including the requirement that our internal control over financial reporting be audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, certain requirements related to the disclosure of executive compensation in this prospectus and in our periodic reports and proxy statements, and the requirement that we hold a non-binding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions until we are no longer an “emerging growth company.”

8



In addition, under the JOBS Act, “emerging growth companies” can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We intend to avail ourselves of this exemption from new or revised accounting standards. Accordingly, we will not be subject to the same new or revised accounting standards as other public companies that are not “emerging growth companies.”
We will remain an “emerging growth company” until the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of the listing of our Class A common stock on the NYSE.
For certain risks related to our status as an “emerging growth company,” see the section titled “Risk Factors—Risks Related to Our Business—We are an ‘emerging growth company,’ and the reduced disclosure requirements applicable to ‘emerging growth companies’ may make our Class A common stock less attractive to investors.”

9



SUMMARY CONSOLIDATED FINANCIAL DATA AND OTHER DATA
The following tables summarize our consolidated financial data and other data. The summary consolidated statements of operations data for the years ended January 31, 2017, 2018, and 2019 and consolidated balance sheet data as of January 31, 2019 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. You should read the following summary consolidated financial data and other data below in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.
 
Year Ended January 31,
 
2017
 
2018
 
2019
 
(In thousands, except per share data)
Consolidated Statements of Operations Data:
 
 
 
 
 
Revenue
$
105,153

 
$
220,544

 
$
400,552

Cost of revenue (1)
15,517

 
26,364

 
51,301

Gross profit
89,636

 
194,180

 
349,251

Operating expenses:
 
 
 
 
 
Research and development (1)
96,678

 
141,350

 
157,538

Sales and marketing (1)
104,006

 
140,188

 
233,191

General and administrative (1)
37,455

 
56,493

 
112,730

Total operating expenses
238,139

 
338,031

 
503,459

Loss from operations
(148,503
)
 
(143,851
)
 
(154,208
)
Other income (expense), net
1,749

 
4,581

 
16,146

Loss before income taxes
(146,754
)
 
(139,270
)
 
(138,062
)
Provision for income taxes
155

 
793

 
840

Net loss
(146,909
)
 
(140,063
)
 
(138,902
)
Net income (loss) attributable to noncontrolling interest (2)
(45
)
 
22

 
1,781

Net loss attributable to Slack
(146,864
)
 
(140,085
)
 
(140,683
)
Less: Deemed dividends to preferred stockholders

 
40,883

 

Net loss attributable to Slack common stockholders
$
(146,864
)
 
$
(180,968
)
 
$
(140,683
)
Basic and diluted net loss per share:
 
 
 
 
 
Net loss per share attributable to Slack common stockholders, basic and diluted (3)
$
(1.28
)
 
$
(1.47
)
 
$
(1.16
)
Weighted-average shares used in computing net loss per share attributable to Slack common stockholders, basic and diluted (3)
114,887

 
122,865

 
121,732

Pro forma net loss per share attributable to Slack common stockholders, basic and diluted (unaudited) (3)
 
 
 
 
$
(0.27
)
Weighted-average shares used in computing pro forma net loss per share attributable to Slack common stockholders, basic and diluted (unaudited) (3)
 
 
 
 
517,493


10



__________________
(1)
Includes stock-based compensation as follows:
 
Year Ended January 31,
 
2017
 
2018
 
2019
 
(In thousands)
Cost of revenue
$
630

 
$
491

 
$
732

Research and development
34,546

 
35,260

 
9,948

Sales and marketing
9,744

 
8,044

 
2,677

General and administrative
5,171

 
4,288

 
9,775

Total stock-based compensation
$
50,091

 
$
48,083

 
$
23,132

Stock-based compensation for fiscal years 2017, 2018, and 2019 included compensation expense of $26.5 million, $0, and $14.8 million, respectively, related to secondary sales of common stock by certain of our current and former employees and $8.0 million, $39.4 million, and $0, respectively, related to cash payments attributable to tender offers and repurchases for our outstanding common stock.
(2)
Our consolidated financial statements include our majority-owned subsidiary, Slack Fund L.L.C., or Slack Fund. The ownership interest of minority investors in Slack Fund is recorded as a noncontrolling interest.
(3)
See note 10 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the method used to calculate basic and diluted net loss per share attributable to Slack common stockholders and pro forma basic and diluted net loss per share attributable to Slack common stockholders and the weighted-average number of shares used in the computation of the per share amounts.
 
As of January 31, 2019
 
Actual
 
Pro Forma (1)
 
(In thousands)
Consolidated Balance Sheet Data:
 
 
 
Cash, cash equivalents, and marketable securities
$
841,071

 
$
841,071

Working capital
650,324

 
650,324

Total assets
1,198,956

 
1,198,956

Total deferred revenue
241,873

 
241,873

Convertible preferred stock
1,392,101

 

Total stockholders’ equity
841,606

 
841,606

__________________
(1)
The pro forma column in the consolidated balance sheet data table above reflects (a) the automatic conversion of all outstanding shares of our convertible preferred stock into  373,371,712  shares of Class B common stock as if such conversion had occurred on January 31, 2019, (b) the vesting and settlement of  22,388,531 restricted stock units, or RSUs, for which the service-based condition was fully satisfied as of January 31, 2019 and for which we expect the performance vesting condition to be satisfied upon the listing and public trading of our Class A common stock on the NYSE, and (c) stock-based compensation of $157.5 million associated with outstanding RSUs as of January 31, 2019 for which we expect the performance vesting condition to be satisfied upon the listing and public trading of our Class A common stock on the NYSE. Payroll taxes and other withholding obligations have not been included in the pro forma column. For additional information, see Note 1 to our consolidated financial statements included elsewhere in this prospectus and in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Significant Impacts of Stock-Based Compensation.”
Key Business Metrics
We review the following key business metrics to measure our performance, identify trends, formulate financial projections, and make strategic decisions. We are not aware of any uniform standards for calculating these key metrics, which may hinder comparability with other companies who may calculate similarly-titled metrics in a different way.
 
As of January 31,
 
2017
 
2018
 
2019
Paid Customers
37,000

 
59,000

 
88,000

Paid Customers >$100,000
135

 
298

 
575

Net Dollar Retention Rate
171
%
 
152
%
 
143
%

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For additional information about our key business metrics, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics.”
Non-GAAP Financial Measures
In addition to our results determined in accordance with U.S. generally accepted accounting principles, or GAAP, we believe the below non-GAAP measures are useful in evaluating our operating performance . We use the below non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes.
 
Year Ended January 31,
 
2017
 
2018
 
2019
 
(In thousands)
Calculated Billings
$
143,390

 
$
289,013

 
$
516,972

 
 
 
 
 
 
Free Cash Flow
$
(114,038
)
 
$
(57,661
)
 
$
(97,239
)
Tender offer payments and repurchases deemed compensation   (1)
8,033

 
39,374

 

Adjusted Free Cash Flow
$
(106,005
)
 
$
(18,287
)
 
$
(97,239
)
__________________
(1)
In fiscal years 2017 and 2018, we made cash payments of $8.0 million and $39.4 million, respectively, attributable to tender offers and repurchases for our outstanding common stock, which was accounted for as compensation. Adjusted Free Cash Flow has been shown here as adjusted for these cash payments. We have adjusted our Free Cash Flow for these payments because we do not expect them to occur when we are a public company so we believe that this provides greater comparability across periods.
For additional information and reconciliations of the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.”

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RISK FACTORS
Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, before making a decision to invest in our Class A common stock. If any of the risks actually occur, our business, results of operations, financial condition, and prospects could be harmed. In that event, the trading price of our Class A common stock could decline, and you could lose part or all of your investment.
Risks Related to Our Business
We have a limited operating history, which makes it difficult to forecast our revenue and evaluate our business and future prospects.
We launched Slack publicly in 2014 and much of our growth has occurred in recent periods. As a result of our limited operating history, our ability to forecast our future results of operations and plan for and model future growth is limited and subject to a number of uncertainties. We have encountered and expect to continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly evolving industries, such as the risks and uncertainties described herein. Additionally, the sales cycle for the evaluation and implementation of our paid versions, Standard and Plus, which typically ranges from a single day to multiple months, and of Enterprise Grid, which typically extends for multiple months, may also cause us to experience a delay between increasing operating expenses and the generation of corresponding revenue, if any. Accordingly, we may be unable to prepare accurate internal financial forecasts or replace anticipated revenue that we do not receive as a result of delays arising from these factors, and our results of operations in future reporting periods may be below the expectations of investors. If we do not address these risks successfully, our results of operations could differ materially from our estimates and forecasts or the expectations of investors, causing our business to suffer and our Class A common stock price to decline.
We have a history of net losses, we anticipate increasing operating expenses in the future, and we may not be able to achieve and, if achieved, maintain profitability.
We have incurred significant net losses in each year since our inception, including net losses of $146.9 million , $140.1 million , and $138.9 million in fiscal years 2017, 2018, and 2019, respectively. We expect to continue to incur net losses for the foreseeable future and we may not achieve or maintain profitability in the future. Because the market for Slack, and the features, integrations, and capabilities we offer on Slack, is rapidly evolving and has not yet reached widespread adoption, it is difficult for us to predict our future results of operations or the limits of our market opportunity. We expect our operating expenses to significantly increase over the next several years as we hire additional personnel, particularly in sales and marketing, expand our partnerships, operations, and infrastructure, both domestically and internationally, continue to enhance Slack and develop and expand its features, integrations and capabilities, and expand and improve our application programming interfaces, or APIs. We also intend to continue to build and enhance Slack through both internal research and development as well as selectively pursuing acquisitions that can uniquely contribute to Slack’s capabilities. In addition, as we grow and become a public company, we will incur additional significant legal, accounting, and other expenses that we did not incur as a private company. If our revenue does not increase to offset the expected increases in our operating expenses, we will not be profitable in future periods. In future periods, our revenue growth could slow or our revenue could decline for a number of reasons, including any failure to increase the number of organizations on Slack, increase our number of paid customers, or grow or maintain our Net Dollar Retention Rate, a decrease in the growth of our overall market, our failure, for any reason, to continue to capitalize on growth opportunities, slowing demand for Slack, additional regulatory burdens, or increasing competition. As a result, our past financial performance may not be indicative of our future performance. Any failure by us to achieve or sustain profitability on a consistent basis could cause the value of our Class A common stock to decline.
We have experienced rapid growth in recent periods and our recent growth rates may not be indicative of our future growth.
We have experienced rapid growth in recent periods. Our revenue was $105.2 million , $220.5 million , and $400.6 million for the years ended January 31, 2017, 2018, and 2019, respectively, representing annual growth of 110% and 82% , respectively. In future periods, we may not be able to sustain revenue growth consistent with recent history, or at all. Further, as we operate in a new and rapidly changing category of software, widespread acceptance and use of

13



Slack is critical to our future growth and success. We believe our revenue growth depends on a number of factors, including, but not limited to, our ability to:
attract new users and organizations;
provide excellent customer experience;
grow or maintain our Net Dollar Retention Rate, expand usage within organizations on Slack, and sell premium versions of Slack;
convert users of and organizations on our free version into paid customers;
introduce and grow adoption of Slack in new markets outside of the United States;
expand usage of Slack between organizations through shared channels;
achieve widespread acceptance and use of Slack;
adequately expand our sales force;
expand the features and capabilities of Slack, including through the creation and use of additional integrations;
maintain the security and reliability of Slack;
comply with existing and new applicable laws and regulations;
price Slack effectively so that we are able to attract and retain paid customers without compromising our profitability;
successfully compete against established companies and new market entrants, as well as existing software tools; and
increase awareness of our brand on a global basis.
If we are unable to accomplish any of these tasks, our revenue growth will be harmed. We also expect our operating expenses to increase in future periods, and if our revenue growth does not increase to offset these anticipated increases in our operating expenses, our business, results of operations, and financial condition will be harmed, and we may not be able to achieve or maintain profitability. We have also encountered in the past, and expect to encounter in the future, risks and uncertainties frequently experienced by growing companies in rapidly evolving industries. If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our growth rates may slow and our business would suffer. Further, our rapid growth may make it difficult to evaluate our future prospects.
If we fail to manage our growth effectively, we may be unable to execute our business plan or maintain high levels of service and customer satisfaction.
We have experienced, and expect to continue to experience, rapid growth, which has placed, and may continue to place, significant demands on our management and our operational and financial resources. For example, our headcount has grown from 716 employees as of January 31, 2017 to 1,502 employees as of January 31, 2019. We have established international offices, including offices in Australia, Canada, Ireland, India, Japan, and the United Kingdom, and we plan to continue to expand our international operations into other countries in the future. We have also experienced significant growth in the number of users, organizations on Slack and integrations, and in the amount of data that Slack supports. Additionally, our organizational structure is becoming more complex as we scale our operational, financial and management controls as well as our reporting systems and procedures.
To manage growth in our operations and personnel, we will need to continue to grow and improve our operational, financial, and management controls and our reporting systems and procedures. We will require significant capital expenditures and the allocation of valuable management resources to grow and change in these areas without

14



undermining our culture, which has been central to our growth so far. Our expansion has placed, and our expected future growth will continue to place, a significant strain on our management, customer experience, research and development, sales and marketing, administrative, financial, and other resources. If we fail to manage our anticipated growth and change in a manner that preserves the key aspects of our corporate culture, the quality of Slack may suffer, which could negatively affect our brand and reputation and harm our ability to attract users, employees, and organizations, and to grow or maintain our Net Dollar Retention Rate.
In addition, as we expand our business, it is important that we continue to maintain a high level of customer service and satisfaction. As our paid customer base continues to grow, we will need to expand our account management, customer service and other personnel, our partners, our features, and our security offerings to provide personalized account management and customer service as well as personalized features, integrations and capabilities. If we are not able to continue to provide high levels of customer service, our reputation, as well as our business, results of operations, and financial condition, could be harmed.
We may experience quarterly fluctuations in our results of operations due to a number of factors that make our future results difficult to predict and could cause our results of operations to fall below analyst or investor expectations.
Our quarterly results of operations may fluctuate from quarter to quarter as a result of a number of factors, many of which are outside of our control and may be difficult to predict, including, but not limited to:
the level of demand for Slack;
our ability to grow or maintain our Net Dollar Retention Rate, expand usage within organizations on Slack, and sell premium versions of Slack;
our ability to convert users of and organizations on our free version into paid customers;
the timing and success of new features, integrations, capabilities, and enhancements by us to Slack or by our competitors to their products or any other change in the competitive landscape of our market;
our ability to achieve widespread acceptance and use of Slack;
errors in our forecasting of the demand for Slack, which could lead to lower revenue, increased costs or both;
the amount and timing of operating expenses and capital expenditures, as well as entry into operating leases, that we may incur to maintain and expand our business and operations and to remain competitive;
the timing of expenses and recognition of revenue;
security breaches, technical difficulties, or interruptions to Slack resulting in service level agreement credits;
adverse litigation judgments, other dispute-related settlement payments, or other litigation-related costs;
regulatory fines;
changes in, and continuing uncertainty in relation to, the legislative or regulatory environment;
legal and regulatory compliance costs in new and existing markets;
the number of new employees added;
the timing of the grant or vesting of equity awards to employees, directors, or consultants;
pricing pressure as a result of competition or otherwise;
seasonal buying patterns for IT spending;
fluctuations in foreign currency exchange rates;

15



costs and timing of expenses related to the acquisition of businesses, talent, technologies, or intellectual property, including potentially significant amortization costs and possible write-downs; and
general economic conditions in either domestic or international markets, including geopolitical uncertainty and instability.
Any one or more of the factors above may result in significant fluctuations in our quarterly results of operations. You should not rely on our past results as an indicator of our future performance.
The variability and unpredictability of our quarterly results of operations or other operating metrics could result in our failure to meet our expectations or those of analysts that cover us or investors with respect to revenue or other key metrics for a particular period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our Class A common stock could fall, and we could face costly lawsuits, including securities class action suits.
Real or perceived errors, failures, vulnerabilities, or bugs in Slack could harm our business, results of operations, and financial condition.
The software technology underlying and integrating with Slack is inherently complex and may contain material defects or errors, particularly when new features, integrations, or capabilities are released. Errors, failures, vulnerabilities, or bugs may occur in Slack, especially when updates are deployed or new features, integrations, or capabilities are rolled out. Slack is often used in connection with large-scale computing environments with different operating systems, system management software, integrations, equipment, and networking configurations, which may cause errors or failures, or affect other aspects of the computing environment in which Slack is used. In addition, use of Slack in complicated, large-scale computing environments may expose errors, failures, vulnerabilities, or bugs in Slack or integrations. Any such errors, failures, vulnerabilities, or bugs may not be found until after new features, integrations, or capabilities have been released to organizations on Slack. Furthermore, we will need to ensure that Slack can scale to meet the evolving needs of users and organizations on Slack, particularly as we continue to focus on larger organizations with Enterprise Grid. Real or perceived errors, failures, vulnerabilities, or bugs in Slack could result in negative publicity, loss or leaking of personal data and data of organizations on Slack, loss of or delay in market acceptance of Slack, loss of competitive position, regulatory fines or claims by organizations on Slack for losses sustained by them, all of which could harm our business, results of operations, and financial condition.
The market and software categories in which we participate are competitive, new, and rapidly changing, and if we do not compete effectively with established companies as well as new market entrants our business, results of operations, and financial condition could be harmed.
Slack is a new category of business technology in a rapidly evolving market for software, programs, and tools used by knowledge workers that is intensely competitive, fragmented, and subject to rapidly changing technology, shifting user and customer needs, new market entrants, and frequent introductions of new products and services. We also compete in various segments of the communication, collaboration, and integration software categories. Moreover, we expect competition to increase in the future from established competitors and new market entrants, including established technology companies who have not previously entered the market. Our primary competitor is currently Microsoft Corporation. Our other competitors fall into the following categories: productivity tool and email providers, such as Alphabet Inc. (including Google Inc.); unified communications providers, such as Cisco Systems Inc.; and consumer application companies who have entered the business software market, such as Facebook Inc. We also compete with smaller companies that offer niche or point products that attempt to address certain problems that Slack addresses. We further compete against existing software, programs, and tools, such as email. With the introduction of new technologies, the evolution of Slack, and new market entrants, we expect competition to intensify in the future. Established companies may not only develop their own communication and collaboration solutions, platforms for software integration, and secure repositories of information and data, but also acquire or establish product integration, distribution, or other cooperative relationships with our current competitors. For example, while we currently partner with Atlassian Corporation PLC, Google Inc., Okta, Inc., Oracle Corporation, ServiceNow, Inc., salesforce.com, inc., SAP SE, Workday, Inc., and Zoom Video Communications, Inc. , among others, they may develop and introduce products that directly or indirectly compete with Slack. New competitors or alliances among competitors may emerge and rapidly acquire significant market share due to factors such as greater brand name recognition, a larger existing user and/or

16



customer base, superior product offerings, a larger or more effective sales organization, and significantly greater financial, technical, marketing, and other resources and experience. We also compete with niche companies that offer specific point solutions in the communication, collaboration and data use markets, normally focused on specific industries, geographies, or specific use cases, which attempt to address certain of the problems that Slack addresses. In addition, with the recent increase in large merger and acquisition transactions in the technology industry, particularly transactions involving cloud-based technologies, there is a greater likelihood that we will compete with other large technology companies in the future. We expect this trend to continue as companies attempt to strengthen or maintain their market positions in an evolving industry. Companies resulting from these possible consolidations may create more compelling product offerings and be able to offer more attractive pricing options, making it more difficult for us to compete effectively.
Many of our existing competitors have, and some of our potential competitors could have, substantial competitive advantages such as greater brand name recognition and longer operating histories, larger sales and marketing budgets and resources, broader distribution, and established relationships with independent software vendors, partners, and customers, greater customer experience resources, greater resources to make acquisitions, lower labor, and development costs, larger and more mature intellectual property portfolios, and substantially greater financial, technical and other resources. Such competitors with greater financial and operating resources may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer requirements.
In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products or incorporate functionality into existing products to gain business in a manner that discourages users from purchasing Slack, including through selling at zero or negative margins, product bundling, or closed technology platforms. Potential customers may also prefer to purchase from their existing suppliers rather than a new supplier regardless of product performance or features. These larger competitors often have broader product lines and market focus and will therefore not be as susceptible to downturns in a particular market. Our competitors may also seek to repurpose their existing offerings to provide software, programs, and tools used by knowledge workers with subscription models. Further, some current and potential customers, particularly large organizations, have elected, and may in the future elect, to develop or acquire their own software, programs, and tools used by knowledge workers that would reduce or eliminate the demand for Slack.
Conditions in our market could also change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation, and it is uncertain how our market will evolve. New start-up companies that innovate and large competitors that are making significant investments in research and development may invent similar or superior products and technologies that compete with Slack. These competitive pressures in our market or our failure to compete effectively may result in price reductions, fewer customers, reduced revenue, gross profit, and gross margins, increased net losses, and loss of market share. Any failure to meet and address these factors could harm our business, results of operations, and financial condition.
If we are unable to attract new users and organizations, convert users of and organizations on our free version into paid customers, grow or maintain our Net Dollar Retention Rate, expand usage within organizations on Slack, and sell premium subscription plans or develop new features, integrations, capabilities, and enhancements that achieve market acceptance, our revenue growth and profitability will be harmed.
To increase our revenue and achieve and maintain profitability, we must add new users and organizations, convert users of and organizations on our free version into paid customers, grow or maintain our Net Dollar Retention Rate, expand usage within organizations on Slack, and sell premium subscription plans. We encourage organizations on our free version to upgrade to paid versions of Slack and paid customers of Standard to upgrade to our premium subscription plans, Plus or Enterprise Grid, through in-product prompts and notifications, by recommending additional features and by providing customer support that explains the additional capabilities of our paid and premium plans. Additionally, we seek to expand within organizations on Slack by adding new users, having organizations on our Free or Standard subscription plan upgrade to our premium plans, or expanding the use of Slack into other departments within an organization already on Slack. We often see enterprise decision-makers deciding to adopt Slack after noticing substantial organic adoption by individuals and teams within the organization. While we have experienced significant growth in the number of users on Slack, we do not know whether we will continue to achieve similar user growth rates in the future. Numerous factors, however, may impede our ability to add new users and organizations, convert users of and

17



organizations on our free version into paid customers, grow and maintain our Net Dollar Retention Rate, expand usage within organizations on Slack, and sell premium subscription plans, including our inability to convert organizations using our free version into paid customers, failure to attract and effectively train new sales and marketing personnel, especially as we increase our sales efforts, failure to retain and motivate our current sales and marketing personnel, failure to develop or expand relationships with partners, failure to successfully deploy new features, integrations, and capabilities for organizations on Slack and provide quality customer experience, or failure to ensure the effectiveness of our marketing programs. Additionally, increasing our sales to large organizations requires increasingly sophisticated and costly sales efforts targeted at senior management and other personnel. If our efforts to sell to large organizations and organizations of all sizes are not successful or do not generate additional revenue, our business would suffer. See also “—Failure to effectively develop and expand our direct sales capabilities could harm our ability to increase the number of organizations on Slack and achieve broader market acceptance of Slack.”
Our ability to attract new users and organizations and increase revenue from existing paid customers depends in large part on our ability to continually enhance and improve Slack and the features, integrations, and capabilities we offer, and to introduce compelling new features, integrations, and capabilities that reflect the changing nature of our market in order to maintain and improve the quality and value of Slack, which depends on our ability to continue investing in research and development and in our ongoing efforts to improve and enhance Slack. The success of any enhancement to Slack depends on several factors, including timely completion and delivery, competitive pricing, adequate quality testing, integration with existing technologies, and overall market acceptance. Any new features, integrations, and capabilities that we develop may not be introduced in a timely or cost-effective manner, may contain errors, failures, vulnerabilities, or bugs, or may not achieve the market acceptance necessary to generate significant revenue. We must also convince developers to adopt and build on Slack. We believe that these developer-built integrations facilitate greater usage and customization of Slack and the features, integrations, and capabilities enhance user experience. If these developers stop developing on or supporting Slack, we will lose the benefits that have contributed to the growth in the number of organizations and users on Slack, and our business, results of operations, and financial condition could be harmed. If we are unable to successfully develop new features, integrations, and capabilities to enhance Slack to meet requirements of organizations on Slack, especially as we continue to grow and enhance Enterprise Grid, or otherwise gain widespread market acceptance, our business, results of operations, and financial condition would be harmed.
Moreover, our business is subscription based, and organizations are not obligated to and may not renew their subscriptions after their existing subscriptions expire. Many of our subscriptions are sold for a one-year term, though some organizations choose a month-to-month subscription plan or multi-year subscription plan. While many of our subscriptions provide for automatic renewal, organizations have no obligation to renew a subscription after the expiration of the term, and we cannot ensure that organizations will renew subscriptions with a similar contract period, with the same or greater number of users, or for the same subscription plan or upgrade to Plus or Enterprise Grid. With our fair billing practices, we may also not earn as much revenue as anticipated if the actual numbers of users in a paid customer decreases during the subscription period. Organizations may or may not renew their subscriptions as a result of a number of factors, including their satisfaction or dissatisfaction with Slack or services, our pricing or pricing structure, the pricing or capabilities of the products and services offered by our competitors, the effects of economic conditions, or reductions in our paid customers’ spending levels. In the past, few of our paid customers have elected to downgrade or not to renew agreements with us, but it is difficult to accurately predict long-term Net Dollar Retention Rates. If organizations do not renew their subscriptions, renew on less favorable terms or fail to add more users, or if we fail to upgrade organizations on our Free or Standard subscription plan to our premium subscription plans, Plus and Enterprise Grid, or expand within organizations on Slack, our revenue may decline or grow less quickly than anticipated, which would harm our business, results of operations, and financial condition.
Additionally, organizations can and do subscribe to multiple subscription plans simultaneously for a variety of reasons. For example, many of our customers are large enterprises with distributed procurement processes where different buyers, departments or affiliates make their own purchasing decisions based on distinct product features or separate budgets. Companies who are existing Slack customers may also acquire another organization that is already on a Slack subscription plan or complete a reorganization or spin-off transaction that results in an organization subscribing to multiple subscription plans. If organizations that subscribe to multiple subscription plans decide not to consolidate all of their subscription plans into an Enterprise Grid subscription for the entire organization or decide to downgrade to lower priced or free subscription plans, our revenue may decline or grow less quickly than anticipated,

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which would harm our business, results of operations, and financial condition. Having organizations on multiple subscription plans also makes it more difficult to accurately predict long-term Net Dollar Retention Rates.
Our ability to introduce new f eatures, integrations, capabilities, and enhancements is dependent on adequate research and development resources. If we do not adequately fund our research and development efforts, or if our research and development investments do not translate into material enhancements to Slack, we may not be able to compete effectively and our business, results of operations, and financial condition may be harmed.
To remain competitive, we must continue to develop new features, integrations, capabilities, and enhancements to Slack. This is particularly true as we further expand and diversify our capabilities to address additional applications and markets. For example, in September 2017, we introduced a new beta feature, shared channels, which facilitates secure collaboration between companies . Maintaining adequate research and development resources, such as the appropriate personnel and development technology, to meet the demands of the market is essential. If we are unable to develop features, integrations, and capabilities internally due to certain constraints, such as employee turnover, lack of management ability, or a lack of other research and development resources, our business may be harmed.
Moreover, research and development projects can be technically challenging and expensive. The nature of these research and development cycles may cause us to experience delays between the time we incur expenses associated with research and development and the time we are able to offer compelling features, integrations, capabilities, and enhancements and generate revenue, if any, from such investment. Additionally, anticipated demand for a feature, integration, capability, or enhancement we are developing could decrease after the development cycle has commenced, and we would nonetheless be unable to avoid substantial costs associated with the development of any such feature, integration, capability, or enhancement. If we expend a significant amount of resources on research and development and our efforts do not lead to the successful introduction or improvement of features, integrations, and capabilities that are competitive, it would harm our business, results of operations, and financial condition.
Further, many of our competitors expend a considerably greater amount of funds on their respective research and development programs, and those that do not may be acquired by larger companies that would allocate greater resources to our competitors’ research and development programs. Our failure to maintain adequate research and development resources or to compete effectively with the research and development programs of our competitors would give an advantage to such competitors and may harm our business, results of operations, and financial condition.
If there are interruptions or performance problems associated with the technology or infrastructure used to provide Slack, organizations on Slack may experience service outages, other organizations may be reluctant to adopt Slack, and our reputation could be harmed.
Our continued growth depends, in part, on the ability of existing and potential organizations on Slack to access Slack 24 hours a day, seven days a week, without interruption or degradation of performance. We have in the past and may in the future experience disruptions, data loss, outages, and other performance problems with our infrastructure due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints, denial-of-service attacks, ransomware attacks, or other security-related incidents. In some instances, we may not be able to identify the cause or causes of these performance problems immediately or in short order. We may not be able to maintain the level of service uptime and performance required by organizations on Slack, especially during peak usage times and as our user traffic and number of integrations increase. For example, we have experienced intermittent connectivity issues and product issues in the past, including those that have prevented many organizations on Slack and their users from accessing Slack for a period of time. If Slack is unavailable or if organizations are unable to access Slack within a reasonable amount of time, or at all, our business would be harmed. Since organizations on Slack rely on Slack to communicate, collaborate, and access and complete their work, which in many cases includes entire organizations that complete substantially all of their work functions on Slack, any outage on Slack would impair the ability of organizations on Slack and their users to perform their work, which would negatively impact our brand, reputation, and customer satisfaction, and could give rise to legal liability under our service level agreements with paid customers.
Moreover, we depend on services from various third parties to maintain our infrastructure, including Amazon Web Services, or AWS. If a service provider fails to provide sufficient capacity to support Slack or otherwise experiences service outages, such failure could interrupt access to Slack by users and organizations, which could adversely affect

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their perception of Slack’s reliability and our revenue and harm the businesses of organizations on Slack. Any disruptions in these services, including as a result of actions outside of our control, would significantly impact the continued performance of Slack. In the future, these services may not be available to us on commercially reasonable terms, or at all. Any loss of the right to use any of these services could result in decreased functionality of Slack until equivalent technology is either developed by us or, if available from another provider, is identified, obtained, and integrated into our infrastructure. If we do not accurately predict our infrastructure capacity requirements, organizations on Slack could experience service shortfalls. We may also be unable to 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.
Any of the above circumstances or events may harm our reputation, cause organizations on Slack to terminate their agreements with us, impair our ability to obtain subscription renewals from organizations on Slack, impair our ability to grow the base of users and organizations on Slack, subject us to financial penalties and liabilities under our service level agreements with our paid customers, and otherwise harm our business, results of operations, and financial condition.
A security incident may allow unauthorized access to our systems, networks, or data or the data of organizations on Slack, harm our reputation, create additional liability, and harm our financial results.
Increasingly, companies are subject to a wide variety of attacks on their systems on an ongoing basis. In addition to threats from traditional computer “hackers,” malicious code (such as malware, viruses, worms, and ransomware), employee theft or misuse, password spraying, phishing, credential stuffing, and denial-of-service attacks, we also face threats from sophisticated organized crime, nation-state, and nation-state supported actors who engage in attacks (including advanced persistent threat intrusions) that add to the risks to Slack, our internal systems and our partners’ systems, as well as the systems of organizations on Slack and the information that they store and process. Third parties may attempt to fraudulently induce employees, users, or organizations into disclosing sensitive information such as user names, passwords, or other information or otherwise compromise the security of our internal electronic systems, networks, and/or physical facilities in order to gain access to our data or the data of organizations on Slack, which could result in significant legal and financial exposure, a loss of confidence in the security of Slack, interruptions or malfunctions in our operations, and, ultimately, harm to our future business prospects and revenue. Users or organizations on Slack may also disclose or lose control of their API keys, secrets, or passwords, or use the same or similar secrets or passwords on third parties’ systems, which could lead to unauthorized access to their accounts and data within Slack (arising from, for example, an independent third-party data security incident that compromises those API keys, secrets, or passwords). Further, if a channel is shared between paid customers or workspaces, the above risks, vulnerabilities, and threats may be “inherited” or transferred from one paid customer or workspace to another. Despite significant efforts to create security barriers to such threats, it is virtually impossible for us to entirely mitigate these risks, especially where they are attributable to the behavior of independent third parties beyond our control. The security measures we have implemented or integrated into Slack and our internal systems and networks (including measures to audit third-party and custom applications), which are designed to detect unauthorized activity and prevent or minimize security breaches, may not function as expected or may not be sufficient to protect Slack and our internal systems and networks against certain attacks. For instance, for a period of approximately four days in March 2015, a security incident occurred in which unauthorized third parties had access to information maintained by us that included user names, email addresses, encrypted passwords, and information that users may have optionally added to their profiles, such as phone numbers. We are not aware of any material impact on any organizations that resulted from the incident. In addition, techniques used to sabotage or to obtain unauthorized access to systems and networks in which data is stored or through which data is transmitted change frequently and generally are not recognized until launched against a target. As a result, it may not be possible for us to anticipate these techniques or implement adequate preventative measures to prevent an electronic intrusion into our systems and networks and we may be required to expend significant capital and financial resources to protect against such threats or to alleviate problems caused by breaches in systems, network, or data security. Our board of directors has primary responsibility for overseeing cybersecurity risk management. For more information, see “Management—Role of Board of Directors in Risk Oversight.”
The storage, transmittal, and use of data by organizations on Slack concerning, among others, their employees, contractors, customers, and partners is essential to their use of Slack, which stores, transmits, and processes their sensitive and proprietary information, including business strategies, financial and operational data, personal or

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identifying information, and other related data. Security breaches impacting Slack or integrations on Slack could result in a risk of loss, unavailability, or unauthorized disclosure of this information, which, in turn, could lead to litigation, governmental audits, and investigations and possible liability (including regulatory fines), damage our relationships with existing users and organizations on Slack, and have a negative impact on our ability to attract new users and organizations and to grow or maintain our Net Dollar Retention Rate. Furthermore, any such breach, including a breach of the systems or networks of our partners or organizations on Slack, could compromise our systems or networks, creating system disruptions or slowdowns and exploiting security vulnerabilities of our networks or the networks of our partners and organizations on Slack, and the information stored on our network or the networks of our partners and organizations on Slack could be accessed, publicly disclosed, altered, lost, or stolen, which could subject us to liability and cause us financial harm. In addition, a breach of the security measures of one of our partners could result in the destruction, modification, or exfiltration of confidential corporate information, or other data that may provide additional avenues of attack. These breaches, or any perceived breach, of our systems or networks or the systems of our partners or organizations on Slack, whether or not any such breach is due to a vulnerability in Slack, may also undermine confidence in Slack or our industry and result in damage to our reputation, negative publicity, loss of users, organizations on Slack, partners, and sales, increased costs to remedy any problem, and costly litigation or regulatory fines.
We maintain errors, omissions, and cyber liability insurance policies covering certain security and privacy damages. However, we cannot be certain that our coverage will be available or adequate for all liabilities that might actually be incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. Further, if a high-profile security breach occurs with respect to another software company with communication, collaboration, data collection, and integrations, our users and potential users could lose trust in the security of such solutions providers generally, which could adversely impact our ability to attract organizations to Slack or grow or maintain our Net Dollar Retention Rate.
Any actual or perceived failure by us to comply with privacy, data protection, information security, consumer privacy, data residency, or telecommunications laws, regulations, government access requests, and obligations in one or multiple jurisdictions could result in proceedings, actions, or penalties against us and could harm our business and reputation. These laws are uncertain, evolving, and interpreted and applied in different ways in different countries and, as a result, our legal obligations in different countries, and our efforts to comply with those legal obligations, may be inadequate or in conflict.
The use and storage of data, files, and information by organizations on Slack concerning, among others, their employees, contractors, customers, and partners is essential to their use of Slack. We have implemented various features, integrations, and capabilities as well as contractual obligations intended to enable and encourage organizations on Slack to comply with applicable privacy and security requirements in their collection, use, and transmittal of data using Slack, but these features do not ensure their compliance and may not be effective against all potential privacy concerns. In addition, we are subject to certain contractual obligations regarding the collection, use, storage, transfer, disclosure, and/or processing of personal data.
Around the world, there are numerous lawsuits and regulatory proceedings in process against various technology companies that process personal data. If those lawsuits or regulatory proceedings are successful, it could increase the likelihood that we may be exposed to liability for our own policies and practices concerning the processing of personal data and could hurt our business. Privacy, security, or data protection concerns, whether or not valid, may inhibit market adoption of Slack. For instance, Slack currently only utilizes AWS data centers located in the United States but certain organizations, or categories of organizations, may limit their adoption or use of Slack unless we also utilize local AWS data centers, such as data centers in Europe, Asia, and Latin America. Additionally, concerns about privacy, security, or data protection may result in the adoption of new legislation that restricts the implementation of technologies like ours or requires us to make modifications to Slack, which could significantly limit the adoption and deployment of our technologies or result in significant expense to us. Many jurisdictions have enacted or are considering enacting privacy and/or data security legislation, including laws and regulations applying to the collection, use, storage, transfer, disclosure, and/or processing of personal data. Such laws may include data residency or data localization requirements, which generally require that certain types of data collected within a certain country be stored and processed within that country and/or data export restrictions, or international transfer laws which prohibit or impose conditions upon the transfer of such data from one country to another. In addition, some jurisdictions have recently enacted or are currently considering enacting laws requiring online service providers to be able to decrypt encrypted content stored as part of

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their service, which may limit deployment and adoption of Slack. The costs of compliance with, and other burdens imposed by, such laws and regulations that are applicable to the operations of organizations on Slack may limit the use and adoption of Slack and reduce overall demand for Slack. Moreover, the existence and need to comply with such privacy and data security laws could impact our ability to offer Slack in certain markets without taking additional compliance steps (including the use of local data centers) or in general. Further, these privacy and data security related laws and regulations are evolving and may result in increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions and impose regulatory challenges on our business. For instance, evolving and changing definitions of what constitutes “Personal Information” and “Personal Data” within the European Union, the United States, and elsewhere, especially relating to classification of IP addresses, machine, or device identification numbers, location data, and other information, may limit or inhibit our ability to operate or expand our business.
Although we continually work to comply with federal, state, and foreign laws and regulations, industry standards, contractual obligations, and other legal obligations that apply to us, such laws, regulations, standards, and obligations are evolving and may be modified, interpreted, and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another, other requirements or legal obligations, our practices, or the features of Slack. In particular, as a U.S. company we may be obliged to disclose data pursuant to governmental requests under U.S. law. This requirement may make our platform less attractive to users and organizations. Further, compliance with such U.S. governmental requests may be inconsistent with local laws in other countries to which we and organizations on Slack are subject.
Any failure or perceived failure by us to comply with federal, state, or foreign laws or regulations, industry standards, Internet accessibility standards, contractual obligations, or other legal obligations, or any actual or suspected security incident, whether or not resulting in unauthorized access to, or acquisition, release, or transfer of personal or other data, may result in governmental enforcement actions and prosecutions, private litigation, fines, and penalties, or adverse publicity and could cause organizations on Slack to lose trust in us, which could have an adverse effect on our reputation and business. For example, fines of up to the greater of €20.0 million and 4% of our global turnover can be imposed for breaches of the E.U.’s General Data Protection Regulation. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable laws, regulations, policies, industry standards, contractual obligations, or other legal obligations could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business.
We also expect that there will continue to be new proposed laws, regulations, Internet accessibility standards, and industry standards concerning privacy, data protection, and information security in the United States, the European Union, and other jurisdictions, and we cannot yet determine the impact such future laws, regulations, and standards may have on our business. For example, in June 2018 the State of California enacted the California Consumer Privacy Act, which takes effect on January 1, 2020 and will broadly define personal information, give California residents expanded privacy rights and protections and provide for civil penalties for violations and a private right of action for data breaches. In addition to government activity, privacy advocacy groups, and technology and other industries are considering various new, additional, or different self-regulatory standards that may place additional burdens on us. Future laws, regulations, standards, and other obligations, and changes in the interpretation of existing laws, regulations, standards, and other obligations could impair the ability of us or organizations on Slack to collect, use, or disclose information relating to consumers, which could decrease demand for Slack, increase our operating expenses, and impair our ability to maintain and grow the base of users and organizations on Slack and our revenue. Similarly, such laws could require changes to our technology, operations, and practices. New laws, amendments to, or re-interpretations of existing laws and regulations, industry standards, contractual obligations, and other obligations may require us to incur additional costs and restrict our business operations. Such laws and regulations may require companies to implement privacy and security policies, permit users to access, correct, and delete personal data stored or maintained by such companies, inform individuals of security breaches that affect their personal information, and, in some cases, obtain individuals’ consent to use personal data for certain purposes. If we, or the third parties on which we rely, fail to comply with federal, state, and foreign data privacy laws and regulations, our ability to successfully operate our business and pursue our business goals could be harmed.
Failure by us to comply with applicable laws and regulations, or to protect such data, could result in enforcement actions against us, including fines and public censure, claims for damages by organizations on Slack and other affected

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persons, damage to our reputation, and loss of goodwill (both in relation to existing and prospective organization on Slack), any of which could harm our business, results of operations, and financial condition.
Since many of the features of Slack involve the processing of personal data or other data of organizations on Slack and their employees, contractors, customers, partners, and others, any inability to adequately address privacy concerns, even if such concerns are unfounded, or to comply with applicable privacy or data security laws, regulations, and policies, could result in liability to us, damage to our reputation, inhibition of sales and to our business. Addressing these concerns could increase the length of our sales cycles. For example, cultural norms around privacy and employee expectations vary country to country and can drive a need to localize or customize certain features of Slack in order to address such varied privacy concerns, which can add cost and time to our development and sales cycles. In some markets, such as Germany, organizations as well as their employees through works councils, must both determine whether Slack is adopted, and organization and employee expectations around privacy do not always align. As a result, concerns by employees with respect to the protection of their privacy rights could affect adoption of Slack.
We publicly post our privacy policies and practices concerning our processing, use and disclosure of the personal data provided to us by users, organizations, and website visitors. Our publication of our privacy policies and other statements we publish that provide promises and assurances about privacy and security can subject us to potential state and federal action, as well as enforcement action in other countries (particularly the European Union) if they are found to omit necessary information, be deceptive, or misrepresentative of our practices. If Slack is perceived to cause, or is otherwise unfavorably associated with, violations of privacy or data security requirements, it may subject us or organizations on Slack to public criticism and potential legal liability. Existing and potential privacy laws and regulations concerning privacy and data security and increasing sensitivity of consumers to unauthorized processing of personal data may create negative public reactions to technologies and products such as ours. This, in turn, may reduce the value of Slack and slow or eliminate the growth of our business.
We may face particular privacy, data security, and data protection risks in Europe particularly due to the new European General Data Protection Regulation.
In relation to transfers of Personal Data out of the European Economic Area, or the EEA, and Switzerland to the United States, we are currently registered for both the E.U.-U.S. and the Swiss-U.S. Privacy Shield programs. There are concerns about the future of Privacy Shield as a data transfer mechanism as it continues to be subject to legal challenges, which, if successful, would require us to ensure that we had alternative data transfer mechanisms. In the interim, if we are investigated by a European data protection authority or the U.S. Federal Trade Commission, or the FTC, and found to have failed to comply with the Privacy Shield programs, we may face fines and other penalties. Any such investigation or charges by European and/or Swiss data protection authorities and/or the FTC could have a negative effect on our existing business and on our ability to attract new users and organizations and to grow or maintain our Net Dollar Retention Rate.
We also use model contractual clauses (or standard contractual clauses) to transfer, and to enable organizations on Slack to transfer, personal data out of Europe. The validity of model clauses is also the subject of litigation. If the E.U.-U.S. Privacy Shield program or the European Commission decisions underpinning the model contractual clauses are invalidated, we will be required to identify and implement other methods to enable compliant data transfers from the EEA and Switzerland to the United States. Such methods may be more costly or not available to us.
Depending on the evolving legal framework, we may find it necessary to establish systems to maintain Personal Data originating from the European Union in the EEA, which may involve substantial expense and may cause us to need to divert resources from other aspects of our business, all of which may adversely affect our business.
In addition, data protection regulation is an area of increased focus and changing requirements. The European Union adopted the General Data Protection Regulation 2016/679, or GDPR, that took effect on May 25, 2018, largely replacing the current data protection laws of each E.U. member state. The GDPR applies to any organization with an establishment in the European Union for data processing purposes as well as to those outside the European Union if they process Personal Data of individuals in the European Union in connection with offering them goods or services or monitoring their behavior. The GDPR enhances data protection obligations for processors and controllers of Personal Data, including, for example, expanded disclosures about how Personal Data is to be used, limitations on retention of information, mandatory data breach notification requirements, and additional obligations on service providers (such

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as any third parties to whom we may transfer Personal Data). Non-compliance with the GDPR can trigger fines of up to the greater of €20 million and 4% of our global revenue. Given the breadth and depth of changes in data protection obligations, compliance has caused us to expend significant resources, and such expenditures are likely to continue into the future as we continue our compliance efforts and respond to new interpretations and enforcement actions. In addition, separate E.U. laws and regulations (and member states’ implementations thereof) govern the protection of consumers and of electronic communications and these are also evolving. A draft of the new ePrivacy Regulation extends the strict opt-in marketing rules with limited exceptions to business-to-business communications, alters rules on third-party cookies, web beacons, and similar technology and significantly increases penalties. This law, as well as related changes to the European Union’s telecommunications regime, could subject us to additional privacy obligations of the sort that have historically been imposed primarily on telecommunication service providers. We cannot yet determine the impact that such future laws, regulations, and standards may have on our business. Such laws and regulations are often subject to differing interpretations and may be inconsistent among jurisdictions. Further, the obligations imposed by E.U. data protection and related laws may conflict with the obligations imposed by other legal regimes, such as U.S. laws concerning government access to data. We may incur substantial expense in complying with the new obligations to be imposed by the GDPR, and we may be required to make significant changes in our business operations and product development, all of which may adversely affect our revenues and our business overall.
If we are unable to ensure that Slack interoperates with a variety of software applications that are developed by others, including our partners, Slack may become less competitive and our results of operations may be harmed.
Slack must integrate with a variety of network, hardware, and software platforms, and we need to continuously modify and enhance Slack to adapt to changes in hardware, software, networking, browser, and database technologies. In particular, we have developed Slack to be able to easily integrate with third-party applications, including the applications of software providers that compete with us as well as our partners, through the interaction of APIs. In general, we rely on the providers of such software systems to allow us access to their APIs to enable these user integrations. We are typically subject to 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 software or APIs;
modifies its terms of service or other policies, including fees charged to, or other restrictions on us or other application developers;
changes how information is accessed by us, our users, or organizations on Slack;
establishes more favorable relationships with one or more of our competitors; or
develops or otherwise favors its own competitive offerings over ours.
We believe a significant component of our value proposition to users and organizations is the ability to improve and interface with these third-party applications through APIs on and directly in Slack. Third-party services and products are constantly evolving, and we may not be able to modify Slack to assure its compatibility with that of other third parties following development changes. In addition, some of our competitors may be able to disrupt the operations or compatibility of Slack with their products or services, or exert strong business influence on our ability to, and terms on which we, operate Slack. For example, we currently directly compete with several large technology companies whose applications interface with Slack, including Google and Microsoft. As our respective products evolve, we expect this level of competition to increase. Should any of our competitors modify their products or standards in a manner that degrades the functionality of Slack or gives preferential treatment to competitive products or services, whether to enhance their competitive position or for any other reason, the interoperability of Slack with these products could decrease and our business, results of operations, and financial condition could be harmed. If we are not permitted or able to integrate with these and other third-party applications in the future, demand for Slack would be harmed and our business, results of operations, and financial condition would be harmed.
We also depend on our ecosystem of developers to create applications that will integrate with Slack. Our reliance on this ecosystem of developers creates certain business risks relating to the quality and security of the applications

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built using our APIs, service interruptions of Slack from these applications, lack of service support for these applications, possession of intellectual property rights associated with these applications, and privacy concerns around the transfer of data to these applications. We may not have the ability to control or prevent these risks. As a result, issues relating to these applications could adversely affect our business, brand, and reputation.
Further, we have created mobile applications and mobile versions of Slack to respond to the increasing number of people who access the Internet through mobile devices and access cloud-based software applications through mobile devices, including smartphones and handheld tablets or laptop computers. If these mobile applications do not perform well, our business may suffer. We are also dependent on third-party application stores that may prevent us from timely updating Slack; building new features, integrations, and capabilities; or charging for access. We distribute the mobile Slack application via smartphone and tablet application stores managed by Apple and Google, among others. Certain of these companies are now, and others may in the future become, competitors of ours, and could stop allowing or supporting access to Slack through their products, could allow access for us only at an unsustainable cost, or could make changes to the terms of access in order to make Slack less desirable or harder to access, for competitive reasons. In addition, Slack interoperates with servers, mobile devices, and software applications predominantly through the use of protocols, many of which are created and maintained by third parties. We, therefore, depend on the interoperability of Slack with such third-party services, mobile devices, and mobile operating systems, as well as cloud-enabled hardware, software, networking, browsers, database technologies, and protocols that we do not control. Any changes in such technologies that degrade the functionality of Slack or give preferential treatment to competitive services could adversely affect adoption and usage of Slack. Also, we may not be successful in developing or maintaining relationships with key participants in the mobile industry or in ensuring that Slack operates effectively with a range of operating systems, networks, devices, browsers, protocols, and standards. If we are unable to effectively anticipate and manage these risks, or if it is difficult for users and organizations on Slack to access and use Slack, our business, results of operations, and financial condition may be harmed.
Because we recognize subscription revenue over the subscription term, downturns or upturns in new sales and renewals are not immediately reflected in full in our results of operations.
We recognize revenue from subscriptions to Slack on a straight-line basis over the term of the contract subscription period beginning on the date access to Slack is granted, provided all other revenue recognition criteria have been met. Our subscription arrangements generally have monthly or annual contractual terms. As a result, much of the revenue we report each quarter is the recognition of deferred revenue from recurring subscriptions and related support services contracts entered into during previous quarters. Consequently, a decline in new or renewed recurring subscription contracts in any one quarter will not be fully reflected in revenue in that quarter, but will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in new or renewed sales of our recurring subscriptions are not reflected in full in our results of operations until future periods. By contrast, a significant majority of our costs are expensed as incurred, which occurs as soon as a user starts using Slack. As a result, an increase in paid customers could result in our recognition of more costs than revenue in the earlier portion of the subscription term, and we may not attain profitability in any given period.
Our financial results may fluctuate due to increasing variability in our sales cycles as a substantial portion of our sales efforts are targeted at large organizations.
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 organizations on Slack, which may not be indicative of future trends or results. As we continue to expand our efforts on sales to larger organizations, we expect our average sales cycles to lengthen and become less predictable, which may harm or cause unpredictable fluctuations in our financial results. Factors that may influence the length and variability of our sales cycle include, among other things:
the need to raise awareness about the uses and benefits of Slack, particularly our paid versions;
the need to allay privacy and security concerns or develop required enhancements;
the discretionary nature of purchasing and budget cycles and decisions;

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the competitive nature of evaluation and purchasing processes;
announcements or planned introductions of new features, integrations, and capabilities by us or our competitors; and
often lengthy purchasing approval processes.
Our increasing focus on sales to larger organizations may further increase the variability of our financial results. To achieve acceptance of Slack by additional large organizations, we may need to engage with senior management and other personnel and not just gain acceptance of Slack from employees, who are often the initial adopters of Slack. As a result, sales efforts targeted at large organizations involve greater costs, longer sales cycles, greater competition, and less predictability in completing some of our sales. In the large organization market, an organization’s decision to use Slack, expand the use of Slack, and/or upgrade to a paid version of Slack can sometimes be an enterprise-wide decision, in which case, we typically provide designated account and customer success teams, greater levels of user and customer education to familiarize potential users and organizations with the use and benefits of Slack, as well as the design and implementation of special enterprise-specific integrations. In addition, larger organizations may demand more customization, integration, support services, and features. As a result of these factors, these sales opportunities may require us to devote greater sales support, research and development, customer experience, and professional services resources to these organizations, resulting in increased costs, lengthened sales cycle, and diversion of our own sales and professional services resources to a smaller number of larger organizations. Further, we have limited experience in selling and marketing to larger organizations, and we may not be able to successfully execute our sales and marketing strategy targeted at such large organizations. Moreover, these larger transactions may require us to delay revenue recognition on some of these transactions until the technical or implementation requirements have been met. If we are unable to close one or more expected significant transactions with large organizations in a particular period, or if an expected transaction is delayed until a subsequent period, our results of operations for that period, and for any future periods in which revenue from such transaction would otherwise have been recognized, may be harmed.
If we fail to adapt to rapid technological change, our ability to remain competitive could be impaired.
The industry in which we compete is characterized by rapid technological change, frequent introductions of new products and features, and evolving industry standards and regulatory requirements. Our ability to attract new users and organizations and increase revenue from organizations on Slack will depend in significant part on our ability to anticipate industry standards and trends and continue to enhance Slack and introduce new features, integrations, and capabilities on a timely basis to keep pace with technological developments. If we are unable to provide enhancements and new features and integrations for Slack, develop new features, integrations, and capabilities that achieve market acceptance, or innovate quickly enough to keep pace with rapid technological developments, our business could be harmed. We must also keep pace with changing legal and regulatory regimes that affect Slack and our business practices. We may not be successful in developing modifications, enhancements, and improvements; in bringing them to market quickly or cost-effectively in response to market demands; or at modifying Slack to remain compliant with applicable legal and regulatory requirements.
If we fail to offer high-quality customer experience, our business and reputation will suffer.
While we have designed Slack to be easy to adopt and use, once organizations and their users begin using Slack, those organizations rely on our support services to resolve any related issues. High-quality user and customer education and customer experience has been key to our brand and is important for the successful marketing and sale of Slack, for the conversion of organizations on our free version into paid customers, and for growth or maintenance of our Net Dollar Retention Rate. The importance of high-quality customer experience will increase as we expand our business and pursue new organizations. For instance, if we do not help organizations on Slack quickly resolve issues and provide effective ongoing customer experience at the individual user and organization levels, our ability to sell our paid versions to organizations on our free version would suffer and our reputation with existing or potential users and organizations may be harmed. Further, our sales are highly dependent on our business reputation and on positive recommendations from existing users and organizations on Slack. Any failure to maintain high-quality customer experience, or a market perception that we do not maintain high-quality customer experience, could harm our reputation, our ability to sell Slack to existing and prospective organizations, and our business, results of operations, and financial condition.

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In addition, as we continue to grow our operations and reach a larger and increasingly global customer and user base, we need to be able to provide efficient customer support that meets the needs of organizations on Slack globally at scale. The number of organizations on Slack has grown significantly and that will put additional pressure on our support organization. In order to meet these needs, we have relied in the past, and will continue to rely on, third-party contractors and self-service product support to resolve common or frequently asked questions, which supplement our customer experience teams. If we are unable to provide efficient product support globally at scale, including through the use of third-party contractors and self-service support, our ability to grow our operations may be harmed and we may need to hire additional support personnel, which could harm our results of operations.
Failure to effectively develop and expand our direct sales capabilities could harm our ability to increase the number of organizations on Slack and achieve broader market acceptance of Slack.
Our ability to increase the number of organizations on Slack, grow usage within larger organizations on Slack, and achieve broader market acceptance of Slack among large organizations will depend to a significant extent on our ability to expand our sales operations, particularly our direct sales efforts targeted at C-suite executives and business unit leaders . We plan to continue expanding our direct sales force, both domestically and internationally, in order to reach these large organizations. This expansion will require us to invest significant financial and other resources to train and grow our direct sales force, in order to complement our self-service go-to-market approach . Our business will be harmed if our efforts do not generate a corresponding increase in revenue. We may not achieve anticipated revenue growth from expanding our direct sales force if we are unable to hire and develop talented direct sales personnel, if our new direct sales personnel are unable to achieve desired productivity levels in a reasonable period of time or if we are unable to retain our existing direct sales personnel. We believe that there is significant competition for sales personnel with the skills and technical knowledge that we require. Our ability to achieve revenue growth will depend, in large part, on our success in recruiting, training, and retaining sufficient numbers of sales personnel to support our growth.
Certain estimates of market opportunity included in this prospectus may prove to be inaccurate.
This prospectus includes our internal estimates of the addressable market for Slack. Market opportunity estimates, whether obtained from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The estimates and forecasts in this prospectus relating to the size of our target market, market demand and adoption, capacity to address this demand, and pricing may prove to be inaccurate. The addressable market we estimate may not materialize for many years, if ever, and even if the markets in which we compete meet the size estimates in this prospectus, our business could fail to grow at similar rates, if at all.
Adverse general economic and market conditions and reductions in IT spending may reduce demand for Slack, which could harm our revenue, results of operations, and cash flows.
Our revenue, results of operations, and cash flows depend on the overall demand for and use of Slack. Concerns about the systemic impact of a recession (in the United States or globally), energy costs, geopolitical issues, or the availability and cost of credit could lead to increased market volatility, decreased consumer confidence, and diminished growth expectations in the U.S. economy and abroad, which in turn could result in reductions in IT spending by existing and prospective organizations. Prolonged economic slowdowns may result in organizations on Slack requesting us to renegotiate existing contracts on less advantageous terms to us than those currently in place or defaulting on payments due on existing contracts or not renewing at the end of the contract term.
Organizations on Slack may merge with other entities who use alternative software that addresses one or more of the problems that Slack solves and, during weak economic times, there is an increased risk that one or more of our paid customers will file for bankruptcy protection, either of which may harm our revenue, profitability, and results of operations. We also face risk from international paid customers that file for bankruptcy protection in foreign jurisdictions, particularly given that the application of foreign bankruptcy laws may be more difficult to predict. In addition, we may determine that the cost of pursuing any claim may outweigh the recovery potential of such claim. As a result, broadening or protracted extension of an economic downturn could harm our business, revenue, results of operations, cash flows, and financial condition.

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If we fail to maintain our brand cost-effectively, our ability to expand the number of organizations on Slack will be impaired, our reputation may be harmed, and our business, results of operations, and financial condition may suffer.
We believe that developing and maintaining awareness of our brand is critical to achieving widespread acceptance of Slack and is an important element in attracting new organizations to Slack. Furthermore, we believe that the importance of brand recognition will increase as competition in our market increases. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts and on our ability to ensure that Slack remains high-quality, reliable, and useful at competitive prices.
Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brand. If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract new organizations to Slack or to grow or maintain our Net Dollar Retention Rate to the extent necessary to realize a sufficient return on our brand-building efforts, and our business, results of operations, and financial condition could suffer. In January 2019, we launched our new brand campaign. Such rebranding may not be as successful as our current brand and may not achieve its intended results. Furthermore, in connection with the development and implementation of our rebranding campaign, we have spent, and continue to expect to spend, additional time and costs, including those associated with advertising and marketing efforts. If we are unable to effectively implement our rebranding campaign, our business, results of operations, and financial condition could suffer.
In addition, independent industry analysts often provide reviews of Slack, as well as the products offered by our competitors, and perception of the relative value of Slack 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, our brand may be harmed.
One of our marketing strategies is to offer a free version of Slack, and we may not be able to realize the benefits of this strategy.
We offer a free version of Slack to promote initial usage, brand and product awareness, and organic adoption. Historically, not all users of and organizations on our free version convert to one of our paid versions. Our marketing strategy depends in part on users of and/or organizations on the free version of Slack convincing others within their organizations to use Slack and to drive the conversion to purchasing subscriptions to Standard, Plus, or Enterprise Grid. To the extent that some of these users and organizations do not become, or lead others to become, paid customers, we will not realize the intended benefits of this marketing strategy, which incurs costs as we must pay to host our free version, and our ability to grow our business may be harmed and our results of operations and financial condition could suffer.
We derive, and expect to continue to derive, substantially all of our revenue from a single product.
We derive, and expect to continue to derive, substantially all of our revenue from a single product – Slack. As such, the continued growth in market demand for and market acceptance of Slack is critical to our continued success. Demand for Slack is affected by a number of factors, many of which are beyond our control, such as continued market acceptance, the timing of development, and release of competing new products; the development and acceptance of new features, integrations, and capabilities; price or product changes by us or our competitors; technological changes and developments within the markets we serve; growth, contraction, and rapid evolution of our market; and general economic conditions and trends. If we are unable to continue to meet demands of organizations on Slack or trends in preferences or to achieve more widespread market acceptance of Slack, our business, results of operations, and financial condition could be harmed. Changes in preferences of users or organizations on Slack for software may have a disproportionately greater impact on us than if we offered multiple products. In addition, some current and potential organizations, particularly large organizations, may develop or acquire their own tools or software or continue to rely on traditional tools and software, such as email, which would reduce or eliminate the demand for Slack. If demand for Slack declines for any of these or other reasons, our business could be adversely affected.

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Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovative approach, creativity, and teamwork fostered by our culture and our business could be harmed.
We believe that an important contributor to our success has been our corporate culture, which we believe creates an environment that drives and perpetuates our strategy to create a better, more productive way to work. As we continue to grow, including geographically, and develop the infrastructure of a public company, we may find it difficult to maintain our corporate culture. Any failure to preserve our culture could harm our future success, including our ability to retain and recruit personnel, innovate and operate effectively, and execute on our business strategy.
Interruptions or delays in the services provided by third-party data centers or Internet service providers could impair Slack and our business could suffer.
We currently serve organizations on Slack from third-party data centers operated by AWS. Any damage to or failure of our systems generally would prevent us from operating our business. We rely on the Internet and, accordingly, depend upon the continuous, reliable, and secure operation of Internet servers, related hardware and software, and network infrastructure. We host Slack using AWS data centers, a provider of cloud infrastructure services. Our operations depend on protecting the virtual cloud infrastructure hosted in AWS by maintaining its configuration, architecture, and interconnection specifications, as well as the information stored in these virtual data centers and which third-party Internet service providers transmit. Furthermore, we have no physical access or control over the services provided by AWS. Although we have disaster recovery plans that utilize multiple AWS locations, the data centers that we use are vulnerable to damage or interruption from human error, intentional bad acts, earthquakes, floods, fires, severe storms, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures, and similar events, many of which are beyond our control, any of which could disrupt our service, destroy user content, or prevent us from being able to continuously back up or record changes in our users’ content. In the event of significant physical damage to one of these data centers, it may take a significant period of time to achieve full resumption of our services, and our disaster recovery planning may not account for all eventualities. Further, a prolonged AWS service disruption affecting Slack for any of the foregoing reasons could damage our reputation with current and potential organizations, expose us to liability, cause us to lose organizations on Slack, or otherwise harm our business. We may also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the AWS services we use. Damage or interruptions to these data centers could harm our business. Moreover, negative publicity arising from these types of disruptions could damage our reputation and may adversely impact use of Slack. We may not carry sufficient business interruption insurance to compensate us for losses that may occur as a result of any events that cause interruptions in our service. Further, the contractual commitments that we provide to organizations on Slack with regard to data privacy are limited by the commitments that AWS has provided us.
AWS enables us to order and reserve server capacity in varying amounts and sizes distributed across multiple regions. AWS provides us with computing and storage capacity pursuant to an agreement that continues until terminated by either party. In some cases, AWS may terminate the agreement for cause upon 30 days’ notice. Termination of the AWS agreement may harm our ability to access data centers we need to host Slack or to do so on terms as favorable as those we have with AWS.
Slack is accessed by a large number of organizations and users, and as we continue to expand the number of users and organizations on Slack and integrations available to organizations on Slack, we may not be able to scale our technology to accommodate the increased capacity requirements, which may result in interruptions or delays in service. In addition, the failure of AWS data centers or third-party Internet service providers to meet our capacity requirements could result in interruptions or delays in access to Slack or impede our ability to scale our operations. In the event that our AWS service agreements are terminated, or there is a lapse of service, interruption of Internet service provider connectivity or damage to such facilities, we could experience interruptions in access to Slack as well as delays and additional expense in arranging new facilities and services.
Our growth depends, in part, on the success of our strategic relationships with third parties.
To grow our business and build out our application ecosystem, we anticipate that we will continue to depend on relationships with third parties. Identifying partners, and negotiating and documenting relationships with them, requires significant time and resources. Further, our competitors may be effective in providing incentives to third parties to favor their products or services over Slack. If we are unsuccessful in establishing or maintaining our relationships with third

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parties, if any existing or future partners fail to successfully implement or support Slack integrations, or if they partner with our competitors and devote greater resources to implement and support the products and solutions of competitors, our ability to compete in the marketplace, or to grow our revenue, could be impaired, and our results of operations may suffer. Even if we are successful, we cannot assure you that these relationships will result in increased usage of Slack or increased revenue.
We rely on software and services from other parties. Defects in, or the loss of access to, software or services from third parties could increase our costs and adversely affect the quality of Slack.
We rely on technologies from third parties to operate critical functions of our business, including cloud infrastructure services provided by AWS and customer relationship management services. Our business would be disrupted if any of the third-party software or services we utilize, or functional equivalents thereof, were unavailable due to extended outages or interruptions or because they are no longer available on commercially reasonable terms or prices. In each case, we would be required to either seek licenses to software or services from other parties and redesign Slack or certain aspects of Slack to function with such software or services or develop these components ourselves, which would result in increased costs and could result in delays in launches and releases of new features, integrations, capabilities or enhancements until equivalent technology can be identified, licensed, or developed, and integrated into Slack. Furthermore, we might be forced to limit the features available in Slack. These delays and feature limitations, if they occur, could harm our business, results of operations, and financial condition.
If we fail to adequately protect our proprietary rights, our competitive position could be impaired and we may lose valuable assets, generate reduced revenue, and incur costly litigation to protect our rights.
Our success is dependent, in part, upon protecting our proprietary information and technology. We rely on a combination of patents, copyrights, trademarks, service marks, trade secret laws, and contractual restrictions to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized third parties to copy Slack, or certain aspects of Slack, and use information that we regard as proprietary to create products that compete with Slack. Some license provisions protecting against unauthorized use, copying, transfer, and disclosure of Slack, or certain aspects of Slack, may be unenforceable under the laws of certain jurisdictions and foreign countries. Further, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States, and mechanisms for enforcement of intellectual property rights in some foreign countries may be inadequate. To the extent we expand our international activities, our exposure to unauthorized copying and use of Slack, or certain aspects of Slack, and proprietary information may increase. Further, competitors, foreign governments, foreign government-backed actors, criminals, or other third parties may gain unauthorized access to our proprietary information and technology. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our technology and intellectual property.
We rely in part on trade secrets, proprietary know-how, and other confidential information to maintain our competitive position. Although we enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with the parties with whom we have strategic relationships and business alliances, no assurance can be given that these agreements will be effective in controlling access to and distribution of Slack, or certain aspects of Slack, and proprietary information. Further, these agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to Slack.
To protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights, and we may or may not be able to detect infringement by third parties. Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Such litigation 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 inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of Slack, impair the functionality of Slack, delay introductions of new features, integrations, and capabilities, result in our substituting inferior or more

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costly technologies into Slack, or injure our reputation. In addition, we may be required to license additional technology from third parties to develop and market new features, integrations, and capabilities, and we cannot assure you that we could license that technology on commercially reasonable terms or at all, and our inability to license this technology could harm our ability to compete.
Our results of operations may be harmed if we are subject to a protracted infringement claim, a claim that results in a significant damage award, or a claim that results in an injunction.
There is considerable patent and other intellectual property development and enforcement activity in our industry. We expect that software product developers will increasingly be subject to infringement claims as the number of products and competitors grows and the functionality of products in different industry segments overlaps. Our future success depends in part on not infringing upon or misappropriating the intellectual property rights of others. Other companies have claimed in the past, and may claim in the future, that we infringe upon their intellectual property rights. A claim may also be made relating to technology that we acquire or license from third parties. If we were subject to a claim of infringement, regardless of the merit of the claim or our defenses, the claim could:
require costly litigation to resolve and the payment of substantial damages;
require and divert significant management time;
cause us to enter into unfavorable royalty or license agreements;
require us to discontinue some or all of the features, integrations, and capabilities available in Slack;
require us to indemnify organizations on Slack or third-party service providers; and/or
require us to expend additional development resources to redesign Slack or certain aspects of Slack.
Any one or more of the above could harm our business, results of operations, and financial condition.
We use open source software, which could negatively affect our ability to offer Slack and subject us to litigation or other actions.
We use substantial amounts of open source software in Slack and may use more open source software in the future. From time to time, there have been claims challenging both the ownership of open source software against companies that incorporate open source software into their products and whether such incorporation is permissible under various open source licenses. The terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize Slack. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source software, or breach of open source licenses. Litigation could be costly for us to defend, have a negative effect on our results of operations and financial condition, or require us to devote additional research and development resources to change Slack, or certain aspects of Slack. In addition, if we were to combine our proprietary source code or software with open source software in a certain manner, we could, under certain of the open source licenses, be required to release the source code of our proprietary software to the public. This would allow our competitors to create similar products with less development effort and time. If we inappropriately use open source software, or if the license terms for open source software that we use change, we may be required to re-engineer our Slack, or certain aspects of Slack, incur additional costs, discontinue the sale of Slack or the availability of certain features, integrations, or capabilities of Slack, or take other remedial actions.
In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or assurance of title or controls on origin of the software. In addition, many of the risks associated with usage of open source software, such as the lack of warranties or assurances of title, cannot be eliminated, and could, if not properly addressed, negatively affect our business. We have established processes to help alleviate these risks, but we cannot be sure that all of our use of open source software is in a manner that is consistent with our current policies and procedures, or will not subject us to liability.

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Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.
Our agreements with organizations on Slack 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 the use of Slack or other acts or omissions. The term of these contractual provisions often survives termination or expiration of the applicable agreement. As we continue to grow, the possibility of these and other intellectual property rights claims against us may increase. For any intellectual property rights indemnification claim against us or organizations on Slack, we may incur significant legal expenses and may have to pay damages, license fees and/or stop using technology found to be in violation of the third party’s rights. Large indemnity payments could harm our business, results of operations, and financial condition. We may also have to seek a license for the technology. Such license may not be available on reasonable terms, if at all, and may significantly increase our operating expenses or may require us to restrict our business activities and limit our ability to deliver Slack and/or certain features, integrations, and capabilities of Slack. As a result, we may also be required to develop alternative non-infringing technology, which could require significant effort and expense and/or cause us to alter Slack, which could negatively affect our business.
From time to time, organizations on Slack may require us to indemnify or otherwise be liable to them for breach of confidentiality, violation of applicable law, or failure to implement adequate security measures with respect to their data stored, transmitted, or accessed using Slack. Although we normally contractually limit our liability with respect to such obligations, the existence of such a dispute may have adverse effects on our relationship with organizations on Slack and reputation or such limitations may not be honored in every jurisdiction and we may still incur substantial liability related to them.
Any assertions by a third party, whether or not successful, with respect to such indemnification obligations could subject us to costly and time-consuming litigation, expensive remediation and licenses, divert management attention and financial resources, harm our relationship with that organization on Slack and other current and prospective organizations, reduce demand for Slack, and harm our brand, business, results of operations, and financial condition.
We provide service level commitments under certain of our paid customer contracts. If we fail to meet these contractual commitments, we could be obligated to provide credits for future service, or face contract termination with refunds of prepaid amounts related to unused subscriptions, which could harm our business, results of operations, and financial condition.
Certain of our paid customer agreements contain service level agreements, under which we guarantee specified minimum availability of Slack. From time to time, we have granted credits to paid customers pursuant to the terms of these agreements. We do not currently have any material liabilities accrued on our balance sheet for these commitments. Any failure of or disruption to our infrastructure could make Slack unavailable to organizations on Slack. If we are unable to meet the stated service level commitments to our paid customers or suffer extended periods of unavailability of Slack, we may be contractually obligated to provide affected paid customers with service credits for future subscriptions, or paid customers could elect to terminate and receive refunds for prepaid amounts related to unused subscriptions. Our revenue, other results of operations, and financial condition could be harmed if we suffer unscheduled downtime that exceeds the service level commitments under our agreements with our paid customers, and any extended service outages could adversely affect our business and reputation as paid customers may elect not to renew and we could lose future sales.
We may be subject to liability claims if we breach our contracts and our insurance may be inadequate to cover our losses.
We are subject to numerous obligations in our contracts with organizations on Slack and our partners. Despite the procedures, systems and internal controls we have implemented to comply with our contracts, we may breach these commitments, whether through a weakness in these procedures, systems, and internal controls, negligence, or the willful act of an employee or contractor. Our insurance policies, including our errors and omissions insurance, may be inadequate to compensate us for the potentially significant losses that may result from claims arising from breaches of our contracts, disruptions in our services, failures or disruptions to our infrastructure, catastrophic events, and disasters or otherwise.

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In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention.
We may be subject to litigation for a variety of claims, which could harm our reputation and adversely affect our business, results of operations, and financial condition.
In the ordinary course of business, we may be involved in and subject to litigation for a variety of claims or disputes and receive regulatory inquiries. These claims, lawsuits, and proceedings could include labor and employment, wage and hour, commercial, antitrust, alleged securities law violations or other investor claims, and other matters. The number and significance of these potential claims and disputes may increase as our business expands. Further, our general liability insurance may not cover all potential claims made against us or be sufficient to indemnify us for all liability that may be imposed. Any claim against us, regardless of its merit, could be costly, divert management’s attention and operational resources, and harm our reputation. As litigation is inherently unpredictable, we cannot assure you that any potential claims or disputes will not have a material adverse effect on our business, results of operations, and financial condition.
We may be subject to federal and state health privacy laws and regulations. If we are unable to comply or have not fully complied with such laws and regulations, we could face government enforcement actions, civil penalties, criminal sanctions, or damages, which could harm our reputation and adversely affect our business.
We may function as a HIPAA business associate for certain of our paid customers and, as such, are subject to applicable privacy and data security requirements. If we fail to comply with any of these requirements, we could be subject to significant liability, which could harm our reputation and adversely affect our business as well as our ability to attract new and retain existing paid customers.
The Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, or collectively, HIPAA, establish a set of federal privacy and security standards for the protection of individually identifiable health information that apply to health plans, healthcare clearinghouses, and healthcare providers that submit certain covered transactions, or “covered entities.” A subset of these standards also apply to ‘‘ business associates ,’’ which are persons or entities that perform certain services for, or on behalf of, a covered entity that involve creating, receiving, maintaining, or transmitting protected health information.
Certain of our paid customers are HIPAA covered entities and service providers, and in that context we may function as a business associate under HIPAA. Among other things, this status means that for certain activities we must comply with applicable administrative, technical, and physical safeguards as required by HIPAA, including stringent data security obligations. F ailure to comply with HIPAA can result in significant civil monetary penalties and, in certain circumstances, criminal penalties with fines and/or imprisonment.
The HIPAA covered entities and service providers to whom we serve as a business associate require us to enter into HIPAA-compliant business associate agreements with them. If we are unable to comply with our obligations as a HIPAA business associate, we could face contractual liability under the applicable business associate agreement .
In addition, many state laws govern the privacy and security of health information in certain circumstances, many of which differ from HIPAA. There may also be costs associated with responding to government investigations regarding alleged violations of these and other laws and regulations, even if there are ultimately no findings of violations or no penalties imposed. These costs can consume company resources and impact our business and, if public, harm our reputation.
If we are unable to meet the requirements of HIPAA, our business associate agreements or state health privacy laws, we could face contractual liability or civil and criminal liability under HIPAA, all of which can have an adverse impact on our business and generate negative publicity, which, in turn, can have an adverse impact on our ability to attract new paid customers and to grow or maintain our Net Dollar Retention Rate.

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We are subject to anti-corruption, anti-bribery, and similar laws, and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation.
We are subject to anti-corruption and anti-bribery and similar laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act 2010, and other anti-corruption, anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly and prohibit companies and their employees and agents from promising, authorizing, making, or offering improper payments or other benefits to government officials and others in the private sector. As we increase our international sales and business, our risks under these laws may increase. Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, adverse media coverage, and other consequences. Any investigations, actions or sanctions could harm our business, results of operations, and financial condition.
In addition, in the future we may use third parties to sell access to Slack and conduct business on our behalf abroad. We or such future third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities, and we can be held liable for the corrupt or other illegal activities of such future third-party intermediaries, and our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. We have implemented an anti-corruption compliance program but cannot assure you that all our employees and agents, as well as those companies to which we outsource certain of our business operations, will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. Any violation of the FCPA, other applicable anti-corruption laws, or anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment from U.S. government contracts, any of which could have a materially adverse effect on our reputation, business, results of operations, and prospects.
We are subject to governmental export controls and economic sanctions laws that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws.
Some of our business activities may be subject to various restrictions under U.S. and E.U. export controls and trade and economic sanctions laws, including, among others, the U.S. Commerce Department’s Export Administration Regulations and economic and trade sanctions regulations maintained by the U.S. Treasury Department’s Office of Foreign Assets Control. U.S. and E.U. export control laws and U.S. and E.U. economic sanctions laws may prohibit or restrict the sale or supply of certain products, including encryption items and technology, and services to certain governments, persons, and entities and countries and territories, including those that are the target of comprehensive sanctions. In addition, various countries regulate the import of certain encryption technology, including through import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute Slack or could limit the ability of organizations on Slack to implement Slack in those countries. Although we take precautions to prevent Slack from being provided in violation of such laws and regulations, we cannot guarantee that such precautions will be fully effective and Slack may have been in the past, and could in the future be, provided inadvertently in violation of such laws, despite the precautions we take. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to civil or criminal penalties, government investigation, loss of export privileges, and reputational harm. Further, obtaining the necessary authorizations, including any required licenses, for a particular transaction may be time-consuming, is not guaranteed, and may result in the delay or loss of sales opportunities. Although we take precautions to prevent transactions with sanction targets, we cannot guarantee that such precautions will be fully effective and we could inadvertently provide Slack to persons prohibited by U.S. and E.U. sanctions, which could result in negative consequences to us, including government investigations, penalties, and harm to our reputation.
In addition, changes in Slack, or future changes in export and import regulations may prevent our users with international operations from using Slack globally or, in some cases, prevent the export or import of Slack to certain countries, governments, or persons altogether. 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 Slack by, or in our decreased ability to export or sell subscriptions to Slack to, existing or

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potential users with international operations. Any decreased use of Slack or limitation on our ability to export or sell Slack would likely adversely affect our business, results of operations and financial condition.
We are subject to a variety of U.S. and international laws that could subject us to claims, increase our operating expenses, or otherwise harm our business due to changes in the laws, changes in the interpretations of the laws, greater enforcement of the laws, or investigations into compliance with the laws.
We are subject to compliance with various laws, including those covering copyright, consumer protection, child protection, and similar matters. There have been instances where improper or illegal content has been stored on Slack without our knowledge. As a service provider, with some exceptions, we do not regularly monitor Slack to evaluate the legality of content stored on it. While to date we have not been subject to material legal or administrative actions as a result of the content stored on Slack or the activities conducted or organized using Slack, the laws in this area are currently in a state of flux and vary widely between jurisdictions. Accordingly, it may be possible that in the future we and our competitors may be subject to legal actions, along with the organizations on Slack and users who upload improper or illegal content, or engage in improper or illegal activities using Slack. In addition, regardless of any legal liability we may face, our reputation could be harmed should there be an incident generating negative publicity about the content stored on Slack, or the activities conducted or organized using Slack. Such publicity could harm our reputation and brand as well as our business, results of operations, and financial condition.
We may also be subject to consumer privacy or consumer protection laws that may impact our sales, marketing, and compliance efforts, including laws related to subscriptions, billing, and auto-renewal. These laws, as well as any changes in these laws, could adversely affect our free version of Slack and make it more difficult for us to grow or maintain our Net Dollar Retention Rate, upgrade organizations on Slack, and attract new organizations to Slack. Additionally, we have in the past, are currently, and may from time to time in the future become the subject of inquiries and other actions by regulatory authorities as a result of our business practices, including our subscription, billing, and auto-renewal policies. Consumer privacy and consumer protection laws may be interpreted or applied by regulatory authorities in a manner that could require us to make changes to Slack, our contracts, or our operations, or incur fines, penalties, or settlement expenses, which may result in harm to our business, results of operations, financial condition, and brand.
Further, in certain countries, we may be classified as a telecommunications service provider, or our classification may be uncertain. Such classification as a telecommunications service provider could restrict our ability to operate in such markets without appropriate local authorization, or at all.
We are also subject to other U.S. and international laws. Although we take precautions to prevent violations of these laws, our exposure for violating these laws increases as we continue to expand our international presence and any failure to comply with such laws could harm our reputation and our business.
Action by governments to restrict access to Slack in their countries or to require us to disclose or provide access to information in our possession could harm our business, results of operations, and financial condition.
Slack depends on the ability of our users to access the Internet and Slack could be blocked or restricted in some countries for various reasons. Further, it is possible that governments of one or more foreign countries may seek to limit access to or certain features of Slack in their countries, or impose other restrictions that may affect the availability of Slack, or certain features of Slack, in their countries for an extended period of time or indefinitely. For example, Russia and China are among a number of countries that have recently blocked certain online services, including AWS, which hosts Slack, making it very difficult for such services to access those markets. In addition, governments in certain countries may seek to restrict or prohibit access to Slack if they consider us to be in violation of their laws and may require us to disclose or provide access to information in our possession. If we fail to anticipate developments in the law, or fail for any reason to comply with relevant law, Slack could be further blocked or restricted and we could be exposed to significant liability that could harm our business. In the event that access to Slack is restricted, in whole or in part, in one or more countries or our competitors are able to successfully penetrate geographic markets that we cannot access, our ability to grow or maintain our Net Dollar Retention Rate may be adversely affected, we may not be able to maintain or grow our revenue as anticipated and our business, results of operations, and financial condition could be adversely affected.

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Because our success depends, in part, on our ability to expand sales of Slack to organizations located outside of the United States, our business will be susceptible to risks associated with international operations.
We currently maintain offices and have sales personnel outside the United States in Australia, Canada, Ireland, India, Japan, and the United Kingdom, and we intend to expand our international operations. In fiscal years 2017, 2018, and 2019, our non-U.S. revenue was 34%, 34%, and 36% of our total revenue, respectively. We expect to continue to expand our international operations, which may include opening offices in new jurisdictions and providing Slack in additional languages. Any additional international expansion efforts that we are undertaking and may undertake may not be successful. In addition, conducting international operations subjects us to new risks, some of which we have not generally faced in the United States or in other countries where we currently operate. These risks include, among other things:
unexpected costs and errors in the localization of Slack, including translation into foreign languages and adaptation for local culture, practices, and regulatory requirements;
lack of familiarity and burdens of complying with foreign laws, legal standards, privacy standards, regulatory requirements, tariffs, and other barriers, and the risk of penalties to our users and individual members of management or employees if our practices are deemed to be out of compliance;
practical difficulties of enforcing intellectual property rights in countries with varying laws and standards and reduced or varied protection for intellectual property rights in some countries;
an evolving legal framework and additional legal or regulatory requirements for data privacy, which may necessitate the establishment of systems to maintain data in local markets, requiring us to invest in additional data centers and network infrastructure, and the implementation of additional employee data privacy documentation (including locally-compliant data privacy notice and policies), all of which may involve substantial expense and may cause us to need to divert resources from other aspects of our business, all of which may adversely affect our business;
as a U.S. company, we are subject to U.S. laws concerning governmental access to data and the risk, or perception of risk, of such access may make Slack less attractive to organizations outside the U.S., and compliance with such U.S. laws may conflict with legal obligations that we, or our organizations on Slack, may be subject to in other countries;
unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties, or other trade restrictions;
difficulties in managing systems integrators and technology partners;
differing technology standards;
longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
increased financial accounting and reporting burdens and complexities;
difficulties in managing and staffing international operations including the proper classification of independent contractors and other contingent workers, differing employer/employee relationships, and local employment laws;
increased costs involved with recruiting and retaining an expanded employee population outside the United States through cash and equity-based incentive programs and unexpected legal costs and regulatory restrictions in issuing our shares to employees outside the United States;
global political and regulatory changes that may lead to restrictions on immigration and travel for our employees outside the United States;
fluctuations in exchange rates that may decrease the value of our foreign-based revenue;

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potentially adverse tax consequences, including the complexities of foreign value added tax (or other tax) systems, and restrictions on the repatriation of earnings; and
permanent establishment risks and complexities in connection with international payroll, tax, and social security requirements for international employees.
Additionally, operating in international markets also requires significant management attention and financial resources. We cannot be certain that the investment and additional resources required in establishing operations in other countries will produce desired levels of revenue or profitability.
Further, we have not engaged in currency hedging activities to limit risk of exchange rate fluctuations. Changes in exchange rates affect our costs and earnings, and may also affect the book value of our assets located outside the United States and the amount of our stockholders’ equity.
Compliance with laws and regulations applicable to our global operations also substantially increases our cost of doing business in foreign jurisdictions. We have limited experience in marketing, selling, and supporting Slack outside of the United States. Our limited experience in operating our business internationally increases the risk that any potential future expansion efforts that we may undertake will not be successful. If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business, results of operations, and financial condition will suffer. 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 harm our business. In many countries, it is common for others to engage in business practices that are prohibited by our internal policies and procedures 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, reputational harm, disgorgement of profits, fines, civil and criminal penalties, damages, injunctions, other collateral consequences, or the prohibition of the importation or exportation of Slack and could harm our business, results of operations, and financial condition.
We may face exposure to foreign currency exchange rate fluctuations.
Today, our contracts with paid customers outside of the United States are sometimes denominated in local currencies. In addition, the majority of our foreign costs are denominated in local currencies. Over time, an increasing portion of our contracts with paid customers outside of the United States may be denominated in local currencies. Therefore, fluctuations in the value of the U.S. dollar and foreign currencies may affect our results of operations when translated into U.S. dollars. We do not currently engage in currency hedging activities to limit the risk of exchange rate fluctuations. 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.
Exposure to political developments in the United Kingdom, including the outcome of the U.K. referendum on membership in the European Union, could harm us.
On June 23, 2016, a referendum was held on the United Kingdom’s membership in the European Union, the outcome of which was a vote in favor of leaving the European Union. The United Kingdom’s vote to leave the European Union has created an uncertain political and economic environment in the United Kingdom and across other European Union member states. The result of the referendum means that the long-term nature of the United Kingdom’s relationship with the European Union is unclear and that there is considerable uncertainty as to whether and when any such relationship will be agreed and implemented. The political and economic instability created by the United Kingdom’s vote to leave the European Union has caused and may continue to cause significant volatility in global financial markets and the value of the British Pound or other currencies, including the Euro. Depending on the terms reached regarding any exit from the European Union, or if no such terms are reached, it is possible that there may be adverse practical or operational implications on our business. For example, the UK Data Protection Act that substantially implements the

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GDPR became effective in May 2018. It remains unclear, however, how United Kingdom data protection laws or regulations will develop in the medium to longer term and how data transfers to and from the United Kingdom will be regulated and how those regulations may differ from those in the European Union. Further, the United Kingdom’s exit from the European Union may create increased compliance costs and an uncertain regulatory landscape for offering equity-based incentives to our employees in the United Kingdom. If we are unable to maintain equity-based incentive programs for our employees in the United Kingdom due to the departure of the United Kingdom from the European Union, our business in the United Kingdom may suffer and we may face legal claims from employees in the United Kingdom to whom we previously offered equity-based incentive programs.
Our activities in the United States subject us to various laws relating to foreign investment and the export of certain technologies, and our failure to comply with these laws or adequately monitor the compliance of our suppliers and others we do business with could subject us to fines, penalties, and even injunctions, the imposition of which on us could have a material adverse effect on the success of our business.
Because we are a U.S. business with substantial operations in the United States, we may be subject to U.S. laws that regulate foreign investments in U.S. businesses and access by foreign persons to technology developed and produced in the United States. These laws include Section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment Risk Review Modernization Act of 2018, and the regulations at 31 C.F.R. Parts 800 and 801, as amended, administered by the Committee on Foreign Investment in the United States; and the Export Control Reform Act of 2018, which is being implemented in part through Commerce Department rulemakings to impose new export control restrictions on “emerging and foundational technologies” yet to be fully identified. Application of these laws, including as they are implemented through regulations being developed, may negatively impact our business in various ways, including by restricting our access to capital and markets; limiting the collaborations we may pursue; regulating the export of our service and technology from the United States and abroad; increasing our costs and the time necessary to obtain required authorizations and to ensure compliance; and threatening monetary fines and other penalties if we do not.
We may be required to defer recognition of some of our revenue, which may harm our financial results in any given period.
We may be required to defer recognition of revenue for a significant period of time after entering into an agreement due to a variety of factors, including, among other things, whether:
the paid customer fails to deploy Slack to as many users as contemplated in the agreement given that, in many of our transactions, revenue is reduced in the form of fair billing credits we provide to paid customers when a user becomes inactive;
contract modification is granted to reduce commitment or to lower fees because of frequent service interruptions or because Slack did not meet the paid customer’s needs or expectations;
service outages result in failure to meet our monthly uptime guarantee because revenue is reduced when we compensate paid customers in the form of credits promised under our service level agreements;
the transaction includes an option to renew at significantly higher discounts than what was provided under existing agreement and other comparable transactions;
the transaction is contingent on future functionality that is not delivered within the paid customer’s expected timeline; or
the transaction involves acceptance criteria or other contingencies that may delay revenue recognition.
Because of these factors and other specific revenue recognition requirements under GAAP, we must have very precise terms in our contracts to recognize revenue when we initially provide access to Slack or perform services. Although we strive to enter into agreements that meet the criteria under GAAP for current revenue recognition on delivered elements, our agreements are often subject to negotiation and revision based on the demands of our paid customers. The final terms of our agreements sometimes result in deferred revenue recognition well after the time of delivery, which may adversely affect our financial results in any given period.

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Furthermore, the presentation of our financial results requires us to make estimates and assumptions that may affect the timing of revenue recognition as well as how revenue is allocated between revenue categories. In some instances, we could reasonably use different estimates and assumptions, and changes in estimates are likely to occur from period to period as new updated information becomes available or when there is a change in prevailing conditions. Accordingly, actual results could differ significantly from our estimates.
We have limited experience with respect to determining the optimal prices for Slack.
We have limited experience with respect to determining the optimal prices for Slack 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. In the past, we have sometimes adjusted our prices either for individual paid customers in connection with long-term agreements or unique situations. Moreover, demand for Slack is also sensitive to price. Many factors, including our marketing, user acquisition and technology costs, and our current and future competitors’ pricing and marketing strategies, can significantly affect our pricing strategies. Further, certain of our competitors offer, or may in the future offer, lower-priced or free products or services that compete with Slack or may bundle functionality compatible with Slack and offer a broader range of products and services. Similarly, certain competitors may use marketing strategies that enable them to acquire users more rapidly or at a lower cost than us, or both, and we may be unable to attract new users and organizations or grow or maintain our Net Dollar Retention Rate based on our historical pricing. As we expand internationally, we also must determine the appropriate price to enable us to compete effectively internationally. In addition, if our mix of features, integrations, and capabilities on Slack changes or we develop additional versions for specific use cases or additional premium versions, then we may need to, or choose to, revise our pricing. There can be no assurance that we will not be forced to engage in price-cutting initiatives or to increase our marketing and other expenses to attract users and organizations to Slack and to grow or maintain our Net Dollar Retention Rate in response to competitive or other pressures, either of which could materially and adversely affect our business, results of operations, and financial condition.
Future acquisitions, strategic investments, partnerships, or alliances could be difficult to identify and integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value, and harm our results of operations and financial condition.
We have in the past acquired, and we may in the future seek to acquire or invest in, businesses, products, or technologies that we believe could complement Slack or expand its breadth, enhance our technical capabilities, or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated. Any acquisition, investment or business relationship may result in unforeseen operating difficulties and expenditures. In addition, we have limited experience in acquiring other businesses. If we acquire additional businesses, we may not be able to integrate successfully the acquired personnel, operations, and technologies, or effectively manage the combined business following the acquisition. Specifically, we may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges. 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.
We may not be able to find and identify desirable acquisition targets or we may not be successful in entering into an agreement with any one target. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could harm our results of operations. In addition, if an acquired business fails to meet our expectations, our business, results of operations, and financial condition may suffer.
We also make strategic investments in early stage companies developing products or technologies that we believe could complement Slack or expand its breadth, enhance our technical capabilities, or otherwise offer growth opportunities through our subsidiary, Slack Fund. These investments are generally in early stage private companies for restricted stock. Such investments are generally illiquid and may never generate value. Further, the companies in which we invest may not succeed, and our investments would lose their value.

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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 other highly skilled employees could harm 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, customer experience, 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 harm our business. Changes in our executive management team may also cause disruptions in, and harm to, 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 Software-as-a-Service 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. In addition, certain domestic immigration laws restrict or limit our ability to recruit internationally. Any changes to U.S. immigration policies that restrain the flow of technical and professional talent may inhibit our ability to recruit and retain highly qualified employees. 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 harm 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 harmed. Meanwhile, additions of executive-level management and large numbers of employees could significantly and adversely impact our culture.
Volatility or lack of appreciation in the stock price of our Class A common stock may also affect our ability to attract and retain our key employees. Many of our senior personnel and other key employees have become, or will soon become, vested in a substantial amount of stock or stock options. Employees may be more likely to leave us if the shares they own or the shares underlying their vested options or restricted stock units, or RSUs, have significantly appreciated in value relative to the original purchase price of the shares or the exercise price of the options, or conversely, if the exercise price of the options that they hold are significantly above the market price of our Class A common stock. If we do not maintain and continue to develop our corporate culture as we grow and evolve, it could harm our ability to foster the innovation, craftsmanship, teamwork, curiosity, and diversity, we believe that we need to support our growth.
Our management team has limited experience managing a public company.
Most members of our management team have limited experience managing a publicly-traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company that is subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could harm our business, results of operations, and financial condition.
Catastrophic events may disrupt our business.
Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce, and the global economy, and thus could harm our business. We have our headquarters and a large employee presence in San Francisco, California and the west coast of the United States contains active earthquake zones. 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,

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reputational harm, delays in our application development, lengthy interruptions in Slack, breaches of data security, and loss of critical data, all of which could harm our business, results of operations, and financial condition. Acts of terrorism could also cause disruptions to the Internet or the economy as a whole. In addition, the insurance we maintain would likely not be adequate to cover our losses resulting from disasters or other business interruptions.
Our failure to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies in the future could reduce our ability to compete successfully and harm our results of operations.
Historically, we have funded our operations and capital expenditures primarily through equity issuances and cash generated from our operations. Although we currently anticipate that our existing cash and cash equivalents and cash flow from operations will be sufficient to meet our cash needs for the foreseeable future, we may require additional financing, and we may not be able to obtain debt or equity financing on favorable terms, if at all. If we raise equity financing to fund operations or on an opportunistic basis, our stockholders may experience significant dilution of their ownership interests. If we engage in debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, force us to maintain specified liquidity or other ratios or restrict our ability to pay dividends or make acquisitions. If we need additional capital and cannot raise it on acceptable terms, or at all, we may not be able to, among other things:
develop new features, integrations, capabilities, and enhancements;
continue to expand our product development, sales, and marketing organizations;
hire, train, and retain employees;
respond to competitive pressures or unanticipated working capital requirements; or
pursue acquisition opportunities.
Changes in laws and regulations related to the Internet or changes in the Internet infrastructure itself may diminish the demand for Slack, and could harm 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. The adoption of any laws or regulations that could reduce the growth, popularity, or use of the Internet, including laws or practices limiting Internet neutrality, could decrease the demand for, or the usage of, Slack and services, increase our cost of doing business and harm our results of operations. Changes in these laws or regulations could require us to modify Slack, or certain aspects of Slack, in order to comply with these changes. 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 products such as ours. In addition, the use of the Internet as a business tool could be harmed 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. Further, Slack depends on the quality of our users’ access to the Internet. Certain features of Slack require significant bandwidth and fidelity to work effectively. Internet access is frequently provided by companies that have significant market power that could take actions that degrade, disrupt or increase the cost of user access to Slack, which would negatively impact our business. The performance of the Internet and its acceptance as a business tool has been harmed 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 Slack could decline.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file

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with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting. For example, as we have prepared to become a public company, we have worked to improve the controls around our key accounting processes and our quarterly close process, we have implemented a number of new systems to supplement our core enterprise resource planning, or ERP, system as part of our control environment, and we have hired additional accounting and finance personnel to help us implement these processes and controls. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight. If any of these new or improved controls and systems do not perform as expected, we may experience material weaknesses in our controls. In addition to our results determined in accordance with GAAP, we believe certain non-GAAP measures and key metrics may be useful in evaluating our operating performance. We present certain non-GAAP financial measures and key metrics in this prospectus and intend to continue to present certain non-GAAP financial measures and key metrics in future filings with the SEC and other public statements. Any failure to accurately report and present our non-GAAP financial measures and key metrics could cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our Class A common stock.
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our consolidated financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our Class A common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NYSE. We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. As a public company, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report on Form 10-K.
Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could harm our business, results of operations, and financial condition and could cause a decline in the price of our Class A common stock.
We are an “emerging growth company,” and the reduced disclosure requirements applicable to “emerging growth companies” may make our Class A common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these exemptions until we are no longer an “emerging growth company,” which could be as long as five full fiscal years following the listing of our Class A common stock on the NYSE. We cannot predict if investors will find our Class A common stock less attractive because we will rely on these exemptions. If some investors find our

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Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and the price of our Class A common stock may be more volatile.
We recently implemented a new enterprise resource planning system, and if this new system proves ineffective or if we experience issues with the transition, we may be unable to timely or accurately prepare financial reports, make payments to our suppliers and employees, or invoice and collect from our users.
In fiscal year 2019, we implemented a new ERP system, including our systems for tracking revenue recognition. Our ERP system is critical to our ability to accurately maintain books and records and to prepare our consolidated financial statements. The transition to our new ERP system may be disruptive to our business if the ERP system does not work as planned or if we experience issues relating to the implementation. Such disruptions could impact our ability to timely or accurately make payments to our suppliers and employees, and could also inhibit our ability to invoice, and collect from our users. Data integrity problems or other issues may be discovered which, if not corrected, could impact our business or financial results. In addition, we may experience periodic or prolonged disruption of our financial functions arising out of this conversion, general use of such system, other periodic upgrades or updates, or other external factors that are outside of our control. If we encounter unforeseen problems with our ERP system or other related systems and infrastructure, our business, results of operations, and financial condition could be adversely affected.
Changes in existing financial accounting standards or practices may harm our results of operations.
Changes in existing accounting rules or practices, new accounting pronouncements rules, or varying interpretations of current accounting pronouncements practice could harm our results of operations or the manner in which we conduct our business. Further, such changes could potentially affect our reporting of transactions completed before such changes are effective.
GAAP is subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change. In particular, in February 2016, the FASB issued Accounting Standards Codification, or ASC, 842, which supersedes the lease accounting guidance in ASC 840, Leases. The core principle of ASC 842 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. As an “emerging growth company,” we are allowed under the JOBS Act to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to take advantage of this extended transition period under the JOBS Act with respect to ASC 842, which will result in ASC 842 becoming effective for us beginning on February 1, 2020 unless we choose to adopt it earlier. Any difficulties in implementing these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.
We are evaluating ASC 842 and have not determined the impact it may have on our financial reporting.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and related notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, stock-based compensation including the estimation of fair value of common stock, valuation of strategic investments, period of benefit for deferred costs, and uncertain tax positions. Our results of operations may

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be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A common stock.
Changes in tax laws or regulations in the various tax jurisdictions we are subject to that are applied adversely to us or our paid customers could increase the costs of Slack and harm our business.
New income, sales, use or other tax laws, statutes, rules, regulations, or ordinances could be enacted at any time. Those enactments could harm our domestic and international business operations, and our business, results of operations, and financial condition. Further, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted, changed, modified, or applied adversely to us. These events could require us or our paid customers to pay additional tax amounts on a prospective or retroactive basis, as well as require us or our paid customers to pay fines and/or penalties and interest for past amounts deemed to be due. If we raise our prices to offset the costs of these changes, existing and potential future paid customers may elect not to purchase Slack in the future. Additionally, new, changed, modified, or newly interpreted or applied tax laws could increase our paid customers’ and our compliance, operating, and other costs, as well as the costs of Slack. Further, these events could decrease the capital we have available to operate our business. Any or all of these events could harm our business, results of operations, and financial condition.
On December 22, 2017, the legislation commonly referred to as the Tax Cuts and Jobs Act, or the Tax Act, was enacted, which contains significant changes to U.S. tax law, including, but not limited to, a reduction in the corporate tax rate and a transition to a modified territorial system of taxation. The primary impact of the new legislation on our provision for income taxes was a reduction of the future tax benefits of our deferred tax assets as a result of the reduction in the corporate tax rate. However, since we have recorded a full valuation allowance against our deferred tax assets, we do not currently anticipate that these changes will have a material impact on our consolidated financial statements. The impact of the Tax Act will likely be subject to ongoing technical guidance and accounting interpretation, which we will continue to monitor and assess. As we expand the scale of our international business activities, any changes in the U.S. or foreign taxation of such activities may increase our worldwide effective tax rate and harm our business, results of operations, and financial condition.
Additionally, the application of U.S. federal, state, local, and international tax laws to services provided electronically is unclear and continuously evolving. Existing tax laws, statutes, rules, regulations, or ordinances could be interpreted or applied adversely to us, possibly with retroactive effect, which could require us or our paid customers to pay additional tax amounts, as well as require us or our paid customers to pay fines or penalties, as well as interest for past amounts. If we are unsuccessful in collecting such taxes due from our paid customers, we could be held liable for such costs, thereby adversely affecting our results of operations and harming our business.
As a multinational organization, we may be subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws, or revised interpretations of existing tax laws and precedents, which could harm our liquidity and results of operations. In addition, the authorities in these jurisdictions could review our tax returns and impose additional tax, interest, and penalties, and the authorities could claim that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could harm us and our results of operations.
Our results of operations may be harmed if we are required to collect sales or other related taxes for subscriptions to Slack in jurisdictions where we have not historically done so.
States and some local taxing jurisdictions have differing rules and regulations governing sales and use taxes, and these rules and regulations are subject to varying interpretations that may change over time. The application of federal, state, local, and international tax laws to services provided electronically is evolving. In particular, the applicability of sales taxes to Slack in various jurisdictions is unclear. We collect and remit U.S. sales and value-added tax, or VAT, in a number of jurisdictions. It is possible, however, that we could face sales tax or VAT audits and that our liability for these taxes could exceed our estimates as state tax authorities could still assert that we are obligated to collect additional tax amounts from our paid customers and remit those taxes to those authorities. We could also be subject to audits in states and international jurisdictions for which we have not accrued tax liabilities. A successful assertion that we should

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be collecting additional sales or other taxes on our services in jurisdictions where we have not historically done so and do not accrue for sales taxes could result in substantial tax liabilities for past sales, discourage organizations from subscribing to Slack, or otherwise harm our business, results of operations, and financial condition.
Further, one or more state or foreign authorities could seek to impose additional sales, use or other tax collection and record-keeping obligations on us or may determine that such taxes should have, but have not been, paid by us. Liability for past taxes may also include substantial interest and penalty charges. Any successful action by state, foreign, or other authorities to compel us to collect and remit sales tax, use tax or other taxes, either retroactively, prospectively or both, could harm our business, results of operations, and financial condition.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change taxable income or tax liability may be limited. We have experienced ownership changes in the past and, although we do not expect to experience an ownership change in connection with our listing on the NYSE, any such ownership change could result in increased future tax liability. In addition, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards and other pre-change tax attributes to offset U.S. federal taxable income or tax liability may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, under the Tax Act, the amount of post 2017 net operating loss carryforward that we are permitted to use in any taxable year is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the net operating loss deduction itself. The Tax Act also generally eliminates the ability to carry back net operating losses to prior taxable years. For these reasons, we may not be able to realize a tax benefit from the use of our net operating losses even if we attain profitability.
Risks Related to Ownership of Our Class A Common Stock
Our listing differs significantly from an underwritten initial public offering.
This is not an underwritten initial public offering of our Class A common stock. This listing of our Class A common stock on the NYSE differs from an underwritten initial public offering in several significant ways, which include, but are not limited to, the following:
There are no underwriters. Consequently, prior to the opening of trading on the NYSE, there will be no book building process and no price at which underwriters initially sold shares to the public to help inform efficient and sufficient price discovery with respect to the opening trades on the NYSE. Therefore, buy and sell orders submitted prior to and at the opening of trading of our Class A common stock on the NYSE will not have the benefit of being informed by a published price range or a price at which the underwriters initially sold shares to the public, as would be the case in an underwritten initial public offering. Moreover, there will be no underwriters assuming risk in connection with the initial resale of shares of our Class A common stock. Additionally, because there are no underwriters, there is no underwriters’ option to purchase additional shares to help stabilize, maintain, or affect the public price of our Class A common stock on the NYSE immediately after the listing. In an underwritten initial public offering, the underwriters may engage in “covered” short sales in an amount of shares representing the underwriters’ option to purchase additional shares. To close a covered short position, the underwriters purchase shares in the open market or exercise the underwriters’ option to purchase additional shares. In determining the source of shares to close the covered short position, the underwriters typically consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the underwriters’ option to purchase additional shares. Purchases in the open market to cover short positions, as well as other purchases underwriters may undertake for their own accounts, may have the effect of preventing a decline in the market price of shares. Given that there will be no underwriters’ option to purchase additional shares and no underwriters engaging in stabilizing transactions, there could be greater volatility in the public price of our Class A common stock during the period immediately following the listing. See also “—The public price of our Class A common stock may be volatile, and could, upon listing on the NYSE, decline significantly and rapidly.”

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There is not a fixed or determined number of shares of Class A common stock available for sale in connection with the registration and the listing, except we expect approximately          shares of our Class A common stock to be sold on our first trading day in order to fund the tax withholding and remittance obligations arising in connection with the RSUs that will vest and settle upon that day. See the section titled “RSU Sales.” Therefore, there can be no assurance that any Registered Stockholders or other existing stockholders will sell any of their shares of Class A common stock and there may initially be a lack of supply of, or demand for, shares of Class A common stock on the NYSE. Alternatively, we may have a large number of Registered Stockholders or other existing stockholders, including holders of RSUs that vest and settle on the first day of trading, who choose to sell their shares of Class A common stock in the near term, resulting in potential oversupply of our Class A common stock, which could adversely impact the public price of our Class A common stock once listed on the NYSE.
None of our Registered Stockholders or other existing stockholders have entered into contractual lock-up agreements or other contractual restrictions on transfer. In an underwritten initial public offering, it is customary for an issuer’s officers, directors, and most or all of its other stockholders to enter into a 180-day contractual lock-up arrangement with the underwriters to help promote orderly trading immediately after such initial public offering. Consequently, any of our stockholders, including our directors and officers who own our common stock and other significant stockholders, may sell any or all of their shares of Class A common stock at any time upon conversion of any shares of Class B common stock into Class A common stock at the time of sale (subject to any restrictions under applicable law), including immediately upon listing. If such sales were to occur in a significant volume in a short period of time following the listing, it may result in an oversupply of our Class A common stock in the market, which could adversely impact the public price of our Class A common stock. See also “—None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Following our listing, sales of substantial amounts of our Class A common stock in the public markets or the perception that sales might occur, could cause the market price of our Class A common stock to decline.”
We will not conduct a traditional “roadshow” with underwriters prior to the opening of trading of our Class A common stock on the NYSE. Instead, we intend to host an investor day and engage in certain other investor education meetings. In advance of the investor day, we will announce the date for such day over financial news outlets in a manner consistent with typical corporate outreach to investors. We intend to prepare an electronic presentation for this investor day, which will have content similar to a traditional roadshow presentation, and to make the presentation publicly available, without restrictions, on our website. There can be no guarantee that the investor day and other investor education meetings will have the same impact on investor education as a traditional “roadshow” conducted in connection with an underwritten initial public offering. As a result, there may not be efficient or sufficient price discovery with respect to our Class A common stock or sufficient demand among potential investors immediately after our listing, which could result in a more volatile public price of our Class A common stock.
Such differences from an underwritten initial public offering could result in a volatile market price for our Class A common stock and uncertain trading volume, which may adversely affect your ability to sell any Class A common stock that you may purchase.
The public price of our Class A common stock may be volatile, and could, upon listing on the NYSE, decline significantly and rapidly.
The listing of our Class A common stock and the registration of the Registered Stockholders’ shares of Class A common stock is a novel process that is not an underwritten initial public offering. We have engaged Goldman Sachs & Co. LLC, or Goldman Sachs; Morgan Stanley & Co. LLC, or Morgan Stanley; and Allen & Company LLC, or Allen & Company, as our financial advisors. We have also engaged Credit Suisse Securities (USA) LLC, Barclays Capital Inc., Citigroup Global Markets Inc., RBC Capital Markets, LLC, KeyBanc Capital Markets Inc., Canaccord Genuity LLC, and William Blair & Company, L.L.C. as our associate financial advisors. There will be no book building process and no price at which underwriters initially sold shares to the public to help inform efficient and sufficient price discovery with respect to the opening trades on the NYSE. As there has not been a recent sustained history of trading in our common stock in a private placement market prior to listing, NYSE listing rules require that a designated marker maker,

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or DMM, consult with our financial advisors in order to effect a fair and orderly opening of our Class A common stock without coordination with us, consistent with the federal securities laws in connection with our direct listing. Accordingly, Morgan Stanley and our other financial advisors will be available to consult with the DMM who will be setting the opening public price of our Class A common stock on the NYSE. Our financial advisors are expected to provide input to the DMM regarding their understanding of the ownership of our outstanding common stock and pre-listing selling and buying intere st in our Class A common stock that they become aware of from potential investors and holders of our Class A common stock, including after consultation with certain institutional investors (which may include certain of the Registered Holders, other than the RSU holders) , in each case, without coordination with us. The DMM, in consultation with Morgan Stanley and our other financial advisors, is also expected to consider the information in the section titled “Sale Price History of our Capital Sto ck.” Based on information provided to the NYSE, the opening public price of our Class A common stock on the NYSE will be determined by buy and sell orders collected by the NYSE from broker-dealers, and the NYSE is where buy orders can be matched with sell orders at a single price. Based on such orders, the DMM will determine an opening price for our Class A common stock pursuant to NYSE rules. However, because our financial advisors will not have engaged in a book building process, they will not be able to provide input to the DMM that is based on or informed by that process. For more information, see the section titled “Plan of Distribution.”
Moreover, prior to the opening trade, there will not be a price at which underwriters initially sold shares of Class A common stock to the public as there would be in an underwritten initial public offering. The absence of a predetermined initial public offering price could impact the range of buy and sell orders collected by the NYSE from various broker-dealers. Consequently, upon listing on the NYSE, the public price of our Class A common stock may be more volatile than in an underwritten initial public offering and could decline significantly and rapidly.
Moreover, because of our novel listing process and the broad consumer awareness and brand recognition of Slack, individual investors, retail or otherwise, may have greater influence in setting the opening public price and subsequent public prices of our Class A common stock on the NYSE and may participate more in our initial trading than is typical for an underwritten initial public offering. These factors could result in a public price of our Class A common stock that is higher than other investors (such as institutional investors) are willing to pay, which could cause volatility in the trading price of our Class A common stock and an unsustainable trading price if the price of our Class A common stock significantly rises upon listing and institutional investors believe our Class A common stock is worth less than retail investors, in which case the price of our Class A common stock may decline over time. Further, if the public price of our Class A common stock is above the level that investors determine is reasonable for our Class A common stock, some investors may attempt to short our Class A common stock after trading begins, which would create additional downward pressure on the public price of our Class A common stock. To the extent that there is a lack of consumer awareness among retail investors, such lack of consumer awareness could reduce the value of our Class A common stock and cause volatility in the trading price of our Class A common stock.
The public price of our Class A common stock following the listing also could be subject to wide fluctuations in response to the risk factors described in this prospectus and others beyond our control, including:
the number of shares of our Class A common stock publicly owned and available for trading;
overall performance of the equity markets and/or publicly-listed technology companies;
actual or anticipated fluctuations in our revenue or other operating metrics;
our actual or anticipated operating performance and the operating performance of our competitors;
changes in the financial projections we provide to the public or our failure to meet these projections;
failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet the estimates or the expectations of investors;
any major change in our board of directors, management, or key personnel;
the economy as a whole and market conditions in our industry;

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rumors and market speculation involving us or other companies in our industry;
announcements by us or our competitors of significant innovations, new products, services, features, integrations or capabilities, acquisitions, strategic investments, partnerships, joint ventures, or capital commitments;
new laws or regulations or new interpretations of existing laws or regulations applicable to our business, including those related to data privacy and cyber security in the U.S. or globally;
lawsuits threatened or filed against us;
other events or factors, including those resulting from war, incidents of terrorism, or responses to these events; and
sales or expected sales of our Class A common stock by us, and our officers, directors, and principal stockholders.
In addition, stock markets, and the market for technology companies in particular, have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies, including technology companies, have fluctuated in a manner often unrelated to the operating performance of those companies. These fluctuations may be even more pronounced in the trading market for our Class A common stock shortly following the listing of our Class A common stock on the NYSE as a result of the supply and demand forces described above. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and harm our business, results of operations, and financial condition.
The public price of our Class A common stock, upon listing on the NYSE, may have little or no relationship to the historical sales prices of our capital stock in private transactions.
Prior to the listing of our Class A common stock on the NYSE, there has been no public market for our capital stock. The historical sales prices of our capital stock is primarily from sales of shares of our Class B common stock (on an as converted basis), which entitle holders to 10 votes per share (as opposed to one vote per share of our Class A common stock). In the section titled “Sale Price History of our Capital Stock,” we have provided the historical sales prices of our capital stock in private transactions. However, given the differences in voting rights between Class A and Class B common stock and the limited history of sales, among other factors, this information may have little or no relation to broader market demand for our Class A common stock and thus the initial public price of our Class A common stock on the NYSE once trading begins. As a result, you should not place undue reliance on these historical sales prices as they may differ materially from the opening public prices and subsequent public prices of our Class A common stock on the NYSE. For more information about how the initial listing price on the NYSE will be determined, see the section titled “Plan of Distribution.”
An active, liquid and orderly market for our Class A common stock may not develop or be sustained. You may be unable to sell your shares of Class A common stock at or above the price you bought them for.
We currently expect our Class A common stock to be listed and traded on the NYSE. Prior to listing on the NYSE, there has been no public market for our common stock. Moreover, consistent with Regulation M and other federal securities laws applicable to our listing, we have not consulted with Registered Stockholders or other existing stockholders regarding their desire or plans to sell shares in the public market following the listing or discussed with potential investors their intentions to buy our Class A common stock in the open market. While our Class A common stock may be sold after our listing on the NYSE by the Registered Stockholders pursuant to this prospectus or by our other existing stockholders in accordance with Rule 144 of the Securities Act of 1933, as amended, or the Securities Act, unlike an underwritten initial public offering, there can be no assurance that any Registered Stockholders or other existing stockholders will sell any of their shares of Class A common stock and there may initially be a lack of supply of, or demand for, Class A common stock on the NYSE. Conversely, there can be no assurance that the Registered Stockholders and other existing stockholders will not sell all of their shares of Class A common stock, resulting in an

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oversupply of our Class A common stock on the NYSE. In the case of a lack of supply of our Class A common stock, the trading price of our Class A common stock may rise to an unsustainable level. Further, institutional investors may be discouraged from purchasing our Class A common stock if they are unable to purchase a block of our Class A common stock in the open market due to a potential unwillingness of our existing stockholders to sell a sufficient amount of Class A common stock at the price offered by such institutional investors and the greater influence individual investors have in setting the trading price. If institutional investors are unable to purchase our Class A common stock, the market for our Class A common stock may be more volatile without the influence of long-term institutional investors holding significant amounts of our Class A common stock. In the case of a lack of demand for our Class A common stock, the trading price of our Class A common stock could decline significantly and rapidly after our listing. Therefore, an active, liquid, and orderly trading market for our Class A common stock may not initially develop or be sustained, which could significantly depress the public price of our Class A common stock and/or result in significant volatility, which could affect your ability to sell your shares of Class A common stock.
The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the listing of our Class A common stock on the NYSE, including our directors, executive officers and their respective affiliates, who will hold in the aggregate          % of the voting power of our capital stock upon the effectiveness of the registration statement of which this prospectus forms a part. This ownership will limit or preclude your ability to influence corporate matters, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
Our Class B common stock has ten votes per share, and our Class A common stock, which is the stock we are listing on the NYSE and is being registered pursuant to the registration statement of which this prospectus forms a part, has one vote per share. Upon the effectiveness of the registration statement of which this prospectus forms a part, our directors, executive officers and their affiliates will hold in the aggregate          % of the voting power of our capital stock. Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively could continue to control a significant percentage of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval until the               anniversary of the date of this prospectus, when all outstanding shares of Class A common stock and Class B common stock will convert automatically into shares of a single class of common stock. This concentrated control may limit or preclude your ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval. In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may believe are in your best interest as one of our stockholders.
Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning purposes. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. As a result, it is possible that one or more of the persons or entities holding our Class B common stock could gain significant voting control as other holders of Class B common stock sell or otherwise convert their shares into Class A common stock.
In addition, while we do not expect to issue any additional shares of Class B common stock following the listing of our Class A common stock on the NYSE, any future issuances of Class B common stock would be dilutive to holders of Class A common stock.
We cannot predict the effect our dual class structure may have on the market price of our Class A common stock.
We cannot predict whether our dual class structure will result in a lower or more volatile market price of our Class A common stock, in adverse publicity, or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indices. In July 2017, FTSE Russell announced that it plans to require new constituents of its indices to have greater than 5% of the company’s voting rights in the hands of public stockholders, and S&P Dow Jones announced that it will no longer admit companies with multiple-class share structures to certain of its indices. Affected indices include the Russell 2000

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and the S&P 500, S&P MidCap 400, and S&P SmallCap 600, which together make up the S&P Composite 1500. Also in 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices; however, in October 2018, MSCI announced its decision to include equity securities “with unequal voting structures” in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria. Under such announced policies, the dual class structure of our common stock would make us ineligible for inclusion in certain indices and, as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track those indices would not invest in our Class A common stock. These policies are relatively new and it is unclear what effect, if any, they will have on the valuations of publicly-traded companies excluded from such indices, but it is possible that they may depress valuations, as compared to similar companies that are included. Because of the dual class structure of our common stock, we will likely be excluded from certain indices and we cannot assure you that other stock indices will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors. As a result, the market price of our Class A common stock could be adversely affected.
None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Following our listing, sales of substantial amounts of our Class A common stock in the public markets or the perception that sales might occur, could cause the market price of our Class A common stock to decline.
In addition to the supply and demand and volatility factors discussed above, sales of a substantial number of shares of our Class A common stock into the public market, particularly sales by our directors, executive officers and principal stockholders, or the perception that these sales might occur in large quantities, could cause the market price of our Class A common stock to decline.
As of          , 2019, giving effect to the conversion of all outstanding shares of our convertible preferred stock to shares of Class B common stock upon the effectiveness of the registration statement of which this prospectus forms a part, we have          shares of common stock outstanding, of which          are Class A common stock and          are Class B common stock, all of which will be “restricted securities” (as defined in Rule 144 under the Securities Act). These shares may be immediately sold either by the Registered Stockholders pursuant to this prospectus or by our other existing stockholders under Rule 144 since such shares held by such other stockholders will have been beneficially owned by non-affiliates for at least one year. Moreover, once we have been a reporting company subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act for 90 days and assuming the availability of certain public information about us, (i) non-affiliates who have beneficially owned our common stock for at least six months may rely on Rule 144 to sell their shares of common stock, and (ii) our directors, executive officers, and other affiliates who have beneficially owned our common stock for at least six months, including certain of the shares of Class A common stock covered by this prospectus to the extent not sold hereunder, will be entitled to sell their shares our common stock subject to volume limitations under Rule 144 under the Securities Act and various vesting agreements.
Further, as of January 31, 2019, we had 18,405,776 options outstanding that, if fully exercised, would result in the issuance of shares of Class B common stock, as well as 63,113,635 shares of Class B common stock subject to RSU awards. All of the shares of Class B common stock issuable upon the exercise of stock options, subject to RSU awards and reserved for future issuance under our equity incentive plans, will be registered for public resale under the Securities Act. Accordingly, these shares will be able to be freely sold in the public market upon issuance, subject to applicable vesting requirements and compliance by affiliates with Rule 144. The listing and public trading of our Class A common stock on the NYSE will satisfy the performance vesting condition on our RSUs and result in the vesting and settlement of approximately               RSUs held by our current and former employees and other service providers. We expect approximately               shares of our Class A common stock to be sold on our first trading day in order to fund the tax withholding and remittance obligations arising in connection with the RSUs that will vest and settle upon that day and the remaining approximately          shares upon the vesting and settlement of RSUs may also be sold as early as the first day of trading. See the section titled “RSU Sales.” If the market price of our Class A common stock on the NYSE is volatile or if there is an oversupply of shares of Class A common stock and holders of RSUs are unable to sell their shares, holders of RSUs would still be responsible for funding the tax withholding and remittance obligations arising in connection with the vesting and settlement of their RSUs and could have to fund such amounts with cash. A potential

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oversupply of shares due to sales by holders of RSUs could also adversely impact the public price of our Class A common stock.
None of our stockholders are subject to any contractual lock-up or other contractual restriction on the transfer or sale of their shares.
Following the effectiveness of the registration statement of which this prospectus forms a part, the holders of 372,136,712 shares of our Class B common stock will have rights, subject to some conditions, to require us to file registration statements for the public resale of the Class A common stock issuable upon conversion of such shares or to include such shares in registration statements that we may file for us or other stockholders. Any registration statement we file to register additional shares, whether as a result of registration rights or otherwise, could cause the market price of our Class A common stock to decline or be volatile.
We also may issue our capital stock or securities convertible into our capital stock from time to time in connection with a financing, acquisition, investments, or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and cause the public price of our Class A common stock to decline.
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 will be subject to the reporting requirements of the Exchange Act, the listing standards of the NYSE, and other applicable securities rules and regulations. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and costly, and place significant strain on our personnel, systems, and resources. For example, the Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and results of operations. 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 harm our business, results of operations, and financial condition. 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 harmed.
We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and 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 and risk committee and compensation committee, and qualified executive officers.
As a result of disclosure of information in this prospectus and in filings required of a public company, our business and financial condition will become more visible, which may result in an increased risk of threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business, results of operations, and financial condition could be harmed, 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 harm our business, results of operations, and financial condition.

51



If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our Class A common stock and trading volume could decline.
The trading market for our Class A common stock will depend in part on the research and reports that securities or industry analysts publish about us and/or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our Class A common stock would be negatively affected. If one or more of the analysts who cover us downgrade our Class A common stock or publish inaccurate or unfavorable research about our business, our Class A common stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us on a regular basis, demand for our Class A common stock could decrease, which might cause our Class A common stock price and trading volume to decline.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the operation of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
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 board of directors, and limit the market price of our Class A common stock.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws, which will become effective shortly following the effectiveness of the registration statement of which this prospectus forms a part, include provisions that:
provide that our board of directors will be classified into three classes of directors with staggered three-year terms;
permit our board of directors to establish the number of directors and fill any vacancies and newly-created directorships;
require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and amended and restated bylaws;
authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;
provide that only the Chairperson of our board of directors, our Chief Executive Officer, or a majority of our board of directors will be authorized to call a special meeting of stockholders;
provide for a dual class common stock structure in which holders of our Class B common stock have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our Class A and Class B common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets;
prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and
advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.

52



Moreover, Section 203 of the Delaware General Corporation Law may discourage, delay, or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock. See the section titled “Description of Capital Stock” for additional information.
Our amended and restated bylaws will designate a state or federal court located within the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our amended and restated bylaws will provide that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) will be the exclusive forum for:
any derivative action or proceeding brought on our behalf;
any action asserting a breach of fiduciary duty;
any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws; or
or any action asserting a claim against us that is governed by the internal affairs doctrine.
Nothing in our amended and restated bylaws will preclude stockholders that assert claims under the Securities Act from bringing such claims in state or federal court, subject to applicable law.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find either choice of forum provision contained in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition.

53



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of the federal securities laws, which are statements that 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,” “shall,” “should,” “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 prospectus include, but are not limited to, statements about:
our future financial performance, including our revenue, cost of revenue, and operating expenses;
our ability to maintain the security and availability of Slack;
our ability to increase the number of organizations on Slack and paid customers;
our ability to grow or maintain our Net Dollar Retention Rate;
our ability to achieve widespread adoption;
our ability to effectively manage our growth and future expenses;
our ability to maintain our network of partners;
our ability to enhance Slack to respond to new technologies and requirements of organizations on Slack;
our estimated market opportunity;
the future benefits to be derived from new third-party applications and integrations;
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;
the attraction and retention of qualified employees and key personnel;
our anticipated investments in sales and marketing and research and development;
the sufficiency of our cash, cash equivalents, and investments to meet our liquidity needs;
our ability to successfully defend litigation brought against us; and
the increased expenses associated with being a public company.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this prospectus.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this prospectus primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, 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 prospectus. 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 prospectus. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

54



The forward-looking statements made in this prospectus 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 prospectus to reflect events or circumstances after the date of this prospectus 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.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

55



MARKET AND INDUSTRY DATA
This prospectus contains statistical data and estimates that are based on independent industry publications or other publicly available information, as well as other information based on our internal sources. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors.”
Certain information in this prospectus is taken from an independent industry publication (Netskope, Inc., Cloud Report , February 2018) and publicly-available reports.

56



USE OF PROCEEDS
Registered Stockholders may, or may not, elect to sell shares of our Class A common stock covered by this prospectus. To the extent any Registered Stockholder chooses to sell shares of our Class A common stock covered by this prospectus, we will not receive any proceeds from any such sales of our Class A common stock. See the section titled “Principal and Registered Stockholders.”
RSU SALES
We grant RSUs to our employees and directors with both service-based and performance vesting conditions. The service-based vesting period for these awards is typically four years with a cliff vesting period of one year and continued vesting quarterly thereafter. The performance vesting condition is satisfied on the earlier of (i) a change in control of the company, (ii) the initial public offering of our securities, or (iii) the listing and public trading of our Class A common stock on the NYSE .
The listing and public trading of our Class A common stock on the NYSE will satisfy the performance vesting condition and result in the vesting and settlement of approximately                 RSUs held by our current and former employees and other service providers. To fund the personal tax withholding and remittance obligations arising in connection with the RSUs that will vest and settle on that day, we expect that current and former employees will use a broker or brokers to sell a portion of such shares into the market on the first trading day. The proceeds of such sales will be remitted either to us or directly to the relevant taxing authorities, in either case, to be applied towards such tax obligations. Approximately                 shares of our Class A common stock are expected to be sold throughout the first trading day in order to fund such tax amounts. The number of shares expected to be sold has been calculated using a percentage that is based on the estimated withholding tax rates for those current and former employees and other service providers holding RSUs that will vest and settle on the first trading day. In order to meet our obligation to remit withholding taxes on behalf of certain of our employees and former employees on a timely basis, we may use our own cash reserves to satisfy such tax remittance obligations prior to receiving the proceeds from such market sales. We do not currently know the amount of cash that would be used to satisfy these tax withholding obligations because it would be dependent on a number of factors, including the share price at the time of settlement. After the first trading day, additional RSUs typically will vest and settle on the first of each month and RSU holders may sell a portion of such shares into the market.
If the market price of our Class A common stock on the NYSE is volatile or if there is an oversupply of shares of Class A common stock and holders of RSUs are unable to sell their shares, holders of RSUs would still be responsible for funding the tax withholding and remittance obligations arising in connection with the vesting and settlement of their RSUs and could have to fund such amounts with cash.

57



DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors that our board of directors may deem relevant.

58



CAPITALIZATION
The following table sets forth cash, cash equivalents, and marketable securities, as well as our capitalization, as of January 31, 2019 as follows:
on an actual basis; and
on a pro forma basis, giving effect to (i) the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 373,371,712 shares of our Class B common stock, as if such conversion had occurred on January 31, 2019, (ii) the vesting and settlement of   22,388,531   RSUs for which the service-based condition was fully satisfied as of January 31, 2019 and for which we expect the performance vesting condition to be satisfied upon the listing and public trading of our Class A common stock on the NYSE , and (iii) stock-based compensation of $157.5 million associated with outstanding RSUs as of January 31, 2019 for which we expect the performance vesting condition to be satisfied upon the listing and public trading of our Class A common stock on the NYSE.
You should read this table together with our financial statements and related notes, and the sections titled “Selected Consolidated Financial Data and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are included elsewhere in this prospectus.
 
As of January 31, 2019
 
Actual
 
Pro
Forma
(1)
 
(In thousands, except share and per share data)
Cash, cash equivalents, and marketable securities
$
841,071

 
$
841,071

Stockholders’ equity:
 
 
 
Convertible preferred stock, $0.0001 par value; 390,588,630 shares authorized, 373,371,712 shares issued and outstanding, actual; no shares authorized, issued and outstanding, pro forma
$
1,392,101

 

Class A common stock, $0.0001 par value; 660,000,000 shares authorized, 896,057 shares issued and outstanding, actual; 660,000,000 shares authorized, 896,057 shares issued and outstanding, pro forma

 

Class B common stock, $0.0001 par value; 650,000,000 shares authorized, 126,677,232 shares issued and outstanding, actual; 650,000,000 shares authorized, 522,437,475 shares issued and outstanding, pro forma
13

 
52

Additional paid-in capital
105,633

 
1,655,190

Accumulated other comprehensive loss
(498
)
 
(498
)
Accumulated deficit
(665,563
)
 
(823,058
)
Total Slack Technologies, Inc. stockholders’ equity
831,686

 
831,686

Noncontrolling interest
9,920

 
9,920

Total stockholders’ equity
841,606

 
841,606

Total capitalization
$
841,606

 
$
841,606

__________________
(1)
Payroll taxes and other withholding obligations have not been included in the pro forma column. For additional information, see Note 1 to our consolidated financial statements included elsewhere in this prospectus and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Significant Impacts of Stock-Based Compensation.”
The pro forma column in the table above is based on 896,057 shares of Class A and 522,437,475 shares of Class B common stock outstanding as of January 31, 2019, and excludes:
18,405,776 shares of our Class B common stock issuable upon the exercise of options to purchase shares of our Class B common stock that were outstanding as of January 31, 2019, with a weighted-average exercise price of $0.94 per share;

59



3,662,500 shares of our Class B common stock issuable upon the vesting and exercise of options to purchase shares of our Class B common stock that were granted after January 31, 2019, with a weighted-average exercise price of $10.58 per share;
40,725,104 RSUs for shares of our Class B common stock that are releasable upon satisfaction of service and performance conditions outstanding as of January 31, 2019, for which the service-based condition was not yet satisfied as of January 31, 2019;
15,658,894 RSUs for shares of our Class B common stock that are releasable upon satisfaction of service and performance conditions that were granted after January 31, 2019;
505,000 restricted stock awards, or RSAs, for shares of our Class B common stock that were granted after January 31, 2019;
1,200,000 shares of our Class B common stock reserved for issuance to fund and support our social impact initiatives;
825,031 shares of our Class B common stock reserved for future issuance pursuant to our 2009 Stock Plan, or our 2009 Plan; and
          shares of our Class A common stock reserved for future issuance under our stock-based compensation plans to be adopted in connection with the effectiveness of the registration statement of which this prospectus forms a part, consisting of:
          shares of our Class A common stock reserved for future issuance under our 2019 Stock Option and Incentive Plan, or our 2019 Plan; and
          shares of our Class A common stock reserved for future issuance under our 2019 Employee Stock Purchase Plan, or ESPP.
Our 2019 Plan and ESPP each provide for annual automatic increases in the number of shares reserved thereunder and our 2019 Plan also provides for increases to the number of shares of Class A common stock that may be granted thereunder based on shares underlying any awards under our 2009 Plan that expire, are forfeited, or are otherwise terminated, as more fully described in the section titled “Executive Compensation—Employee Benefits and Stock Plans.”
Except as otherwise indicated, all information in this prospectus assumes:
the filing and effectiveness of our amended and restated certificate of incorporation in Delaware and the adoption of our amended and restated bylaws, each of which will occur shortly following the effectiveness of the registration statement of which this prospectus forms a part; and
the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 373,371,712 shares of our Class B common stock, the conversion of which will occur upon the effectiveness of the registration statement of which this prospectus forms a part.

60



SELECTED CONSOLIDATED FINANCIAL DATA AND OTHER DATA
The following selected consolidated statements of operations data for the years ended January 31, 2017, 2018, and 2019 and consolidated balance sheet data as of January 31, 2018 and 2019 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. You should read the following selected consolidated financial data and other data below in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.
 
Year Ended January 31,
 
2017
 
2018
 
2019
 
(In thousands, except per share data)
Consolidated Statements of Operations Data:
 
 
 
 
 
Revenue
$
105,153

 
$
220,544

 
$
400,552

Cost of revenue (1)
15,517

 
26,364

 
51,301

Gross profit
89,636

 
194,180

 
349,251

Operating expenses:
 
 
 
 
 
Research and development (1)
96,678

 
141,350

 
157,538

Sales and marketing (1)
104,006

 
140,188

 
233,191

General and administrative (1)
37,455

 
56,493

 
112,730

Total operating expenses
238,139

 
338,031

 
503,459

Loss from operations
(148,503
)
 
(143,851
)
 
(154,208
)
Other income (expense), net
1,749

 
4,581

 
16,146

Loss before income taxes
(146,754
)
 
(139,270
)
 
(138,062
)
Provision for income taxes
155

 
793

 
840

Net loss
(146,909
)
 
(140,063
)
 
(138,902
)
Net income (loss) attributable to noncontrolling interest (2)
(45
)
 
22

 
1,781

Net loss attributable to Slack
(146,864
)
 
(140,085
)
 
(140,683
)
Less: Deemed dividends to preferred stockholders

 
40,883

 

Net loss attributable to Slack common stockholders
$
(146,864
)
 
$
(180,968
)
 
$
(140,683
)
Basic and diluted net loss per share:
 
 
 
 
 
Net loss per share attributable to Slack common stockholders, basic and diluted (3)
$
(1.28
)
 
$
(1.47
)
 
$
(1.16
)
Weighted-average shares used in computing net loss per share attributable to Slack common stockholders, basic and diluted (3)
114,887

 
122,865

 
121,732

Pro forma net loss per share attributable to Slack common stockholders, basic and diluted (unaudited) (3)
 
 
 
 
$
(0.27
)
Weighted-average shares used in computing pro forma net loss per share attributable to Slack common stockholders, basic and diluted (unaudited) (3)
 
 
 
 
517,493


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__________________
(1)
Includes stock-based compensation as follows:
 
Year Ended January 31,
 
2017
 
2018
 
2019
 
(In thousands)
Cost of revenue
$
630

 
$
491

 
$
732

Research and development
34,546

 
35,260

 
9,948

Sales and marketing
9,744

 
8,044

 
2,677

General and administrative
5,171

 
4,288

 
9,775

Total stock-based compensation
$
50,091

 
$
48,083

 
$
23,132

Stock-based compensation for fiscal years 2017, 2018, and 2019 included compensation expense of $26.5 million, $0, and $14.8 million, respectively, related to secondary sales of common stock by certain of our current and former employees and $8.0 million, $39.4 million, and $0, respectively, related to cash payments attributable to tender offers and repurchases for our outstanding common stock.
(2)
Our consolidated financial statements include our majority-owned subsidiary, Slack Fund . The ownership interest of minority investors in Slack Fund is recorded as a noncontrolling interest.
(3)
See note 10 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the method used to calculate basic and diluted net loss per share attributable to Slack common stockholders and pro forma basic and diluted net loss per share attributable to Slack common stockholders and the weighted-average number of shares used in the computation of the per share amounts.
 
As of January 31,
 
Pro Forma
January 31, 2019
(1)
 
2018
 
2019
 
 
(In thousands)
Consolidated Balance Sheet Data:
 
 
 
 
 
Cash, cash equivalents, and marketable securities
$
548,761

 
$
841,071

 
$
841,071

Working capital
440,258

 
650,324

 
650,324

Total assets
697,780

 
1,198,956

 
1,198,956

Total deferred revenue
125,453

 
241,873

 
241,873

Convertible preferred stock
965,221

 
1,392,101

 

Total stockholders’ equity
519,288

 
841,606

 
841,606

__________________
(1)
The pro forma column in the consolidated balance sheet data table above reflects (a) the automatic conversion of all outstanding shares of our convertible preferred stock into  373,371,712  shares of Class B common stock as if such conversion had occurred on January 31, 2019, (b) the vesting and settlement of  22,388,531 RSUs for which the service-based condition was fully satisfied as of January 31, 2019 and for which we expect the performance vesting condition to be satisfied upon the listing and public trading of our Class A common stock on the NYSE, and (c) stock-based compensation of $157.5 million associated with outstanding RSUs as of January 31, 2019 for which we expect the performance vesting condition to be satisfied upon the listing and public trading of our Class A common stock on the NYSE. Payroll taxes and other withholding obligations have not been included in the pro forma column. For additional information, see Note 1 to our consolidated financial statements included elsewhere in this prospectus and in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Significant Impacts of Stock-Based Compensation.”
Key Business Metrics
We review the following key business metrics to measure our performance, identify trends, formulate financial projections, and make strategic decisions. We are not aware of any uniform standards for calculating these key metrics, which may hinder comparability with other companies who may calculate similarly-titled metrics in a different way.
 
As of January 31,
 
2017
 
2018
 
2019
Paid Customers
37,000

 
59,000

 
88,000

Paid Customers >$100,000
135

 
298

 
575

Net Dollar Retention Rate
171
%
 
152
%
 
143
%

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For additional information about our key business metrics, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics.”
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP we believe the below non-GAAP measures are useful in evaluating our operating performance . We use the below non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes.
 
Year Ended January 31,
 
2017
 
2018
 
2019
 
(In thousands)
Calculated Billings
$
143,390

 
$
289,013

 
$
516,972

 
 
 
 
 
 
Free Cash Flow
$
(114,038
)
 
$
(57,661
)
 
$
(97,239
)
Tender offer payments and repurchases deemed compensation   (1)
8,033

 
39,374

 

Adjusted Free Cash Flow
$
(106,005
)
 
$
(18,287
)
 
$
(97,239
)
__________________
(1)
In fiscal years 2017 and 2018, we made cash payments of $8.0 million and $39.4 million, respectively, attributable to tender offers and repurchases for our outstanding common stock, which was accounted for as compensation. Adjusted Free Cash Flow has been shown here as adjusted for these cash payments. We have adjusted our Free Cash Flow for these payments because we do not expect them to occur when we are a public company so we believe that this provides greater comparability across periods.
For additional information and reconciliations of the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.”

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the “Selected Consolidated Financial Data and Other Data” and the consolidated financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” or in other parts of this prospectus. Our fiscal year ends January 31.
Overview
Slack is a new layer of the business technology stack that brings together people, applications, and data a single place where people can effectively work together, access hundreds of thousands of critical applications and services, and find important information to do their best work. Slack has very general and broad applicability. It is not aimed at any one specific purpose, but at nearly anything that people do together at work. Slack is used to review job candidates, coordinate election coverage, diagnose network problems, negotiate budgets, plan marketing campaigns, approve menus, and organize disaster response teams, along with countless other tasks.
Slack provides an easy way for users to share and aggregate information from other software, take action on notifications, and advance workflows in a multitude of third-party applications, over 1,500 of which are listed in the Slack App Directory. Further, Slack’s platform capabilities extend beyond integrations with third-party applications and allow for easy integrations with an organization’s internally-developed software.
During the three months ended January 31, 2019, our daily active users, which we define as users who either created or consumed content in a given 24-hour period on either a free or paid subscription plan, exceeded 10 million. As of January 31, 2019, Slack had more than 600,000 organizations with three or more users, comprised of more than 88,000 Paid Customers and more than 500,000 organizations on our Free subscription plan. We define an organization as a separate entity, such as a company, educational or government institution, or distinct business unit of a company, that is on a subscription plan, whether free or paid. Once an organization has three or more users on a paid subscription plan, we count them as a Paid Customer.
We serve organizations of all sizes across industries, ranging from software companies, such as Autodesk and Oracle, to consumer retail companies, such as LVMH and Everlane, to financial services companies, such as Liberty Mutual, and government entities, such as NASA Jet Propulsion Laboratory. Slack is currently used in over 150 countries and available in eight languages (English (U.S.), English (U.K.), French, German, Japanese, Portuguese (Brazil), Spanish (Latin America), and Spanish (Spain)). In the years ended January 31, 2017, 2018 and 2019, 34%, 34%, and 36%, respectively, of our revenue was generated by Paid Customers outside of the United States. In the periods presented, no one Paid Customer accounted for more than 3% of our revenue.
We have experienced rapid growth in recent periods. Our revenue was $105.2 million , $220.5 million , and $400.6 million for the years ended January 31, 2017, 2018 and 2019, respectively, representing annual growth of 110% and 82% , respectively. We generated net losses for the years ended January 31, 2017, 2018, and 2019 of $146.9 million , $140.1 million , and $138.9 million , respectively, which included $50.1 million , $48.1 million , and $23.1 million , respectively, of stock-based compensation. Our net losses have been decreasing as a percentage of revenue over time as revenue growth has outpaced the growth in operating expenses. We plan to continue to invest in adding organizations to Slack in order to increase our revenues, decrease our operating losses, and eventually reach profitability. However, there can be no guarantee as to when we will eventually reach profitability, if at all.

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Since our public launch in 2014, we have focused on designing Slack and developing partnerships in ways that have allowed organizations on Slack to realize the value of this new way of working.
MDAB1.JPG
Our Subscriptions
We generate revenue primarily from the sale of subscriptions for Slack. Paid customers typically pay on a monthly or annual basis, based on the number of users that they have on Slack. We offer four subscription plans to serve the varying needs of organizations on Slack: Free, Standard, Plus, and Enterprise Grid.
Our Free, Standard, and Plus subscription plans consist of a single workspace, or a basic Slack environment configured for each team. These plans are typically adopted by teams within small- and medium-sized businesses. Our Free subscription plan is designed for new organizations and users to quickly realize value. Our Standard and Plus subscription plans introduce additional capabilities, including enhanced access to content, unlimited integrations, shared channels, guest accounts, and administrative controls. We believe these features offer organizations and users significant value, especially as Slack expands within an organization.
We designed Enterprise Grid for larger organizations that often have tens of thousands of users and require enhanced functionality, flexibility, administrative control, and security at scale. Enterprise Grid allows paid customers to create, manage, and search across an unlimited set of connected workspaces and channels. Enterprise Grid makes it easy for workers and administrators to tap into their organization’s collective knowledge at scale; access centralized controls to provision and manage Slack; and integrate with third-party e-Discovery and data loss prevention tools to help meet security and compliance requirements.
We have a fair billing policy under which certain paid customers are charged a fee per user, and their billing is reconciled on a monthly or quarterly basis based on usage. As part of this policy, these paid customers are entitled to a credit if they have not used the entirety of the contracted number of users for which they have paid during the contractual term of the arrangement. Other paid customers have a type of subscription agreement where they are charged a fee based on the number of purchased user subscriptions, but billing is fixed and independent of usage.

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Our Go-to-Market Model
We combine a web-based, self-service go-to-market approach to attract users with direct sales efforts that focus on growing paid users within larger organizations that generally already have Slack users and acquiring new large organizations as paid customers. We believe that these go-to-market approaches reinforce one another; self-service users become leads for our salespeople and paid users within larger enterprises create organic awareness of Slack inside and outside of their organizations. We complement these activities with an obsessive focus on customer experience and customer success to support the growth of the number of users on free and paid subscriptions.
Self-service adoption and marketing
Many organizations adopt Slack initially as part of our self-service go-to-market approach. We deploy a range of marketing strategies and tactics to drive initial awareness and adoption. Slack is easily accessible from our website and users can immediately begin using Slack through our Free subscription plan. This model facilitates rapid and efficient user adoption, particularly by empowering users to access Slack without the friction of payment or a formal sales interaction. We believe free usage helps prospective paid customers realize the value of Slack and users spread the word organically throughout their networks and organizations. Many of our users begin their journey with Slack on our Free subscription plan.
Our customer experience team is core to enhancing user adoption, free-to-paid conversion, and Net Dollar Retention Rate. This team educates users and organizations on Slack about Slack’s broad use cases and benefits, and helps facilitate broader organic adoption. As organizations engage more deeply with Slack, they often upgrade to paid plans via our website.
Direct sales and marketing
To acquire new paid customers and increase adoption within larger organizations, we utilize a direct sales organization that complements our self-service approach. Our direct sales force leverages Slack champions and proofs of concept developed through self-service adoption. We combine this bottoms-up demand with direct sales efforts targeted at C-suite executives and business unit leaders. These efforts include a globally distributed field sales force, solutions engineering, demand generation campaigns, webinars, analyst relations, C-suite events, cooperative marketing efforts with our partners, and hosted user conferences, highlighted by Frontiers, our annual user conference.
Factors Affecting our Performance
We believe that the growth of Slack and our future success and performance are dependent upon many factors, including those below. While these factors present significant opportunities for us, these factors also represent the challenges that we must successfully address in order to grow the adoption and use of Slack and improve our results of operations.
Self-service acquisition of new organizations
We primarily attract new and prospective organizations organically, through a self-service customer engagement model. Prospective organizations can evaluate and subscribe to Slack directly on our website, through either our Free subscription plan or one of our self-service paid plans. As organizations realize the benefits of Slack, they often expand their usage and spread the word organically throughout their networks about the benefits they have experienced. This organic growth in the number of organizations on Slack in turn leads to increased benefits for organizations already on Slack. We intend to continue investing to maintain organic growth in the number of organizations on Slack by strengthening our efficient self-service customer engagement model and investing in marketing to help new organizations discover the benefits of Slack. This self-service model requires us to incur sales and marketing expenses often prior to generating corresponding revenue.
Conversion of organizations on our free version to paid customers
Many organizations often start using our Free subscription plan. We have observed that organizations on Free subscription plans often upgrade to paid subscriptions as they engage more deeply with Slack, both through using Slack for collaboration and communication and integrating more third-party and internally-developed applications via our

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platform. Often, we believe that organizations on our Free subscription plan convert to a paid subscription plan because of the ability to search and access beyond 10,000 messages, which is the limit under our Free subscription plan, and single-sign-on, which is offered under our Plus plan. In the fiscal year ended January 31, 2018, approximately 10% of our revenue was derived from organizations on our Free subscription plan prior to fiscal year 2018 that converted to Paid Customers in fiscal year 2018. I n the fiscal year ended January 31, 2019, approximately 8% of our revenue was derived from organizations on our Free subscription plan prior to fiscal year 2019 that converted to Paid Customers in fiscal year 2019.
We intend to continue to invest in product development, customer experience, customer support, and sales and marketing in order to help all organizations on Slack transform the way they work, which we believe will continue to propel the conversion of organizations on our Free subscription plan to a paid subscription plan.
Success of our direct sales force
We believe that there is a substantial opportunity for us to continue to increase the size of our enterprise paid customer base across a broad range of industries given the fundamental need to help people collaborate, communicate, and seamlessly integrate workflows across applications. Our direct sales force is focused on growing usage within larger paid customers and acquiring new paid customers. We intend to continue to expand our enterprise direct sales force to address this opportunity.
Expansion of users within existing paid customers
We believe that the long-term value of Slack to an organization increases as an organization expands its adoption, increases application integrations, and grows inter- and intra-organization communications. Our direct sales and customer success teams help organizations on Slack realize and achieve the potential value from broader adoption of Slack. We are investing substantially in customer experience, customer success, education, and other capabilities to drive an increase in users within organizations on Slack. We measure the rate of expansion within our Paid Customer base by calculating our Net Dollar Retention Rate. We believe that our Net Dollar Retention Rate demonstrates our large addressable market and high rate of net expansion within Paid Customers. As of January 31, 2019, our Net Dollar Retention Rate was 143%.

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The chart below illustrates the annual recurring revenue, or ARR, of each cohort over the periods presented, with each cohort representing Paid Customers who made their first purchase from us in a given fiscal year. For example, the fiscal year 2015 cohort represents all Paid Customers that purchased their first subscription from us during the fiscal year ended January 31, 2015. For a description of how our ARR is calculated, see the section titled “—Key Business Metrics—Paid Customers >$100,000” below.
MDAA2.JPG
Continued investment in product development
We intend to continually invest to innovate and augment Slack’s core capabilities, to further our market leadership and to make Slack an even easier and more effective place where users get work done. For example, we recently launched shared channels, which create a new way for secure inter-organization communication and collaboration beyond what single- and multi-channel guest accounts provide. We also intend to continue investing to expand the number of developers building applications that integrate with Slack and to make Slack work with an increasing number of third-party and internally developed custom applications. We intend to continue to build and enhance Slack through both internal research and development as well as selectively pursuing acquisitions that can uniquely contribute to Slack’s capabilities. We also intend to unlock growth in under-penetrated regions by translating and localizing Slack, as well as adding product functionality to address new markets. We expect these investments to benefit our business over the long term and to see research and development expenses increase in dollar amount over time as we grow.
Continued investment for growth
Although we have invested significantly in our business to date, we believe that our high-growth market opportunity is still in the early stages of development. We intend to continue to make investments to support the growth and expansion of our business, to increase revenue, and to further scale our operations. We believe there is a significant opportunity to continue our growth and, therefore, we intend to increase investments in marketing and expand our field sales team in order to drive greater adoption of Slack. We plan to open offices, hire sales and customer experience employees in additional countries, and expand our presence in countries where we already operate. Further, we expect to incur additional general and administrative expenses in connection with our transition to being a public company. As cost of revenue and operating expenses may fluctuate over time, we may experience short-term, negative impacts to our results of operations and cash flows, but we expect our investments will contribute to the long-term growth and success of our company.

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Key Business Metrics
We review the following key business metrics to measure our performance, identify trends, formulate financial projections, and make strategic decisions. We are not aware of any uniform standards for calculating these key metrics, which may hinder comparability with other companies who may calculate similarly-titled metrics in a different way.
We define an organization as a separate entity, such as a company, educational or government institution, or distinct business unit of a company, that is on a subscription plan, whether free or paid. Once an organization has three or more users on a paid subscription plan, we count them as a Paid Customer, and when disclosing the number of Paid Customers, we round down to the nearest thousand.
 
As of January 31,
 
2017
 
2018
 
2019
Paid Customers
37,000

 
59,000

 
88,000

Paid Customers >$100,000
135

 
298

 
575

Net Dollar Retention Rate
171
%
 
152
%
 
143
%
Paid Customers
We believe that the growth in our Paid Customer base reflects our value proposition and positions us for future growth as our Paid Customers often expand their adoption over time and Paid Customers increase awareness of Slack, which leads to organic adoption by new organizations. Our Paid Customers base has expanded through increasing awareness of Slack, further developing our go-to-market strategy and continuing to build features tuned to different industry needs. Our Paid Customer base includes organizations of all sizes across a wide range of industries.
MDAA3.JPG
Paid Customers >$100,000
We focus on growing the number of Paid Customers >$100,000 as a measure of our ability to scale with organizations on Slack and attract larger organizations to Slack. We believe that our ability to increase the number of Paid Customers >$100,000 is a key indicator for important components of the growth of our business, including our success in expanding

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the number of users within a Paid Customer, providing the functionality required by large organizations and developing our direct sales force. In fiscal years 2017, 2018, and 2019, approximately 22%, 32%, and 40%, respectively, of our revenue was generated from our Paid Customers >$100,000.
We define Paid Customers >$100,000 as those organizations on a paid subscription plan that had more than $100,000 in ARR as of a period end. ARR is based on monthly recurring revenue, or MRR, for the most recent month at period end, multiplied by twelve. For Paid Customers that have a type of subscription agreement where billing is reconciled on a monthly or quarterly basis based on usage, MRR is calculated by multiplying the monthly subscription price, inclusive of discounts, by the number of active subscriptions as of the month end. For Paid Customers that have a type of subscription agreement where billing is fixed and independent of usage, MRR is calculated by multiplying the monthly subscription price, inclusive of discounts, by the number of purchased subscriptions.
MDAA4.JPG
Net Dollar Retention Rate
We disclose Net Dollar Retention Rate as a supplemental measure of our organic revenue growth. We believe Net Dollar Retention Rate is an important metric that provides insight into the long-term value of our subscription agreements and our ability to retain, and grow revenue from, our Paid Customers.
We calculate Net Dollar Retention Rate as of a period end by starting with the MRR from all Paid Customers as of twelve months prior to such period end, or Prior Period MRR. We then calculate the MRR from these same Paid Customers as of the current period end, or Current Period MRR. Current Period MRR includes expansion within Paid Customers and is net of contraction or attrition over the trailing twelve months, but excludes revenue from new Paid Customers in the current period, including those organizations that were only on Free subscription plans in the prior period and converted to paid subscription plans during the current period. We then divide the total Current Period MRR by the total Prior Period MRR to arrive at our Net Dollar Retention Rate. Our Net Dollar Retention Rate has declined from 171% as of January 31, 2017 to 152% as of January 31, 2018 to 143% as of January 31, 2019 as our base of revenue has grown the past few years and our penetration within existing, long-term Paid Customers has increased. Our Net Dollar Retention Rate will fluctuate in future periods due to a number of factors, including the growing level of our revenue base, the level of penetration within our Paid Customer base, expansion of products and features, and our ability to retain our Paid Customers.

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Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the below non-GAAP measures are useful in evaluating our operating performance . We use the below non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance, and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
 
Year Ended January 31,
 
2017
 
2018
 
2019
 
(In thousands)
Calculated Billings
$
143,390

 
$
289,013

 
$
516,972

 
 
 
 
 
 
Free Cash Flow
$
(114,038
)
 
$
(57,661
)
 
$
(97,239
)
Tender offer payments and repurchases deemed compensation (1)
8,033

 
39,374

 

Adjusted Free Cash Flow
$
(106,005
)
 
$
(18,287
)
 
$
(97,239
)
__________________
(1)
In fiscal years 2017 and 2018, we made cash payments of $8.0 million and $39.4 million, respectively, attributable to tender offers and repurchases for our outstanding common stock, which was accounted for as compensation. Adjusted Free Cash Flow has been shown here as adjusted for these cash payments. We have adjusted our Free Cash Flow for these payments because we do not expect them to occur when we are a public company so we believe that this provides greater comparability across periods.
Calculated Billings
Calculated Billings consists of our revenue plus the change in our deferred revenue in a given period. The Calculated Billings metric is intended to reflect sales to new paid customers plus renewals and additional sales to existing paid customers. Our management uses Calculated Billings to measure and monitor our sales growth because we generally bill our paid customers at the time of sale, but may recognize a portion of the related revenue ratably over time. For subscriptions, we typically invoice our paid customers at the beginning of the term, in annual or monthly installments and, from time to time, in multi-year installments. Only amounts invoiced to a paid customer in a given period are included in Calculated Billings. While we believe that Calculated Billings provides valuable insight into the cash that will be generated from sales of our subscriptions, this metric may vary from period-to-period for a number of reasons, and therefore has a number of limitations as a quarter-over-quarter or year-over-year comparative measure. These reasons include, but are not limited to, the following: (i) a variety of contractual terms could result in some periods having a higher proportion of annual subscriptions than other periods, (ii) as we focus on sales to large organizations, the lengthening of our sales cycle, and the variability in the timing of the execution of these larger transactions, (iii) fluctuations in payment terms affecting the billings recognized in a particular period, and (iv) seasonality in our billings, with a greater proportion of our billings occurring in our fourth quarter, following typical enterprise software buying patterns. Because of these and other limitations, you should consider Calculated Billings along with revenue and our other GAAP financial results.

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The following table presents a reconciliation of revenue, the most directly comparable financial measure calculated in accordance with GAAP, to Calculated Billings, for each of the periods presented:
 
Year Ended January 31,
 
2017
 
2018
 
2019
 
(In thousands)
Revenue
$
105,153

 
$
220,544

 
$
400,552

Add: Total deferred revenue, end of period
56,984

 
125,453

 
241,873

Less: Total deferred revenue, beginning of period
(18,747
)
 
(56,984
)
 
(125,453
)
Calculated Billings
$
143,390

 
$
289,013

 
$
516,972

Free Cash Flow and Adjusted Free Cash Flow
Free Cash Flow is a non-GAAP financial measure that we calculate as net cash provided by (used in) operating activities less purchases of property and equipment. Adjusted Free Cash Flow is a non-GAAP financial measure that we calculate as Free Cash Flow plus cash payments attributable to tender offers and repurchases for our outstanding common stock, which was accounted for as compensation. We believe that Free Cash Flow and Adjusted Free Cash Flow are useful indicators of liquidity that provide information to management and investors about the amount of cash generated from our core operations that, after the purchases of property and equipment, can be used for strategic initiatives, including investing in our business, making strategic acquisitions, and strengthening our balance sheet. We have adjusted our Free Cash Flow by the amount of cash payments attributable to tender offers and repurchases, which was accounted for as compensation because we do not expect such payments to occur when we are public company so we believe that this provides greater comparability across periods. Free Cash Flow and Adjusted Free Cash Flow have limitations as analytical tools, and they should not be considered in isolation or as substitutes for analysis of other GAAP financial measures, such as net cash provided by operating activities. Some of the limitations of Free Cash Flow and Adjusted Free Cash Flow are that these metrics do not reflect our future contractual commitments and may be calculated differently by other companies in our industry, limiting their usefulness as comparative measures. We expect our Free Cash Flow and Adjusted Free Cash Flow to fluctuate in future periods as we invest in our business to support our plans for growth. These activities, along with certain increased operating expenses as described below, may result in a decrease in Free Cash Flow and Adjusted Free Cash Flow, each as a percentage of revenue in future periods. We do not expect to use Adjusted Free Cash Flow as a metric for periods after we become a public reporting company.

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The following table summarizes our cash flows for the periods presented and provides a reconciliation of net cash from operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to Free Cash Flow and Adjusted Free Cash Flow, for each of the periods presented:
 
Year Ended January 31,
 
2017
 
2018
 
2019
 
(In thousands)
Net cash used in operating activities
$
(89,806
)
 
$
(35,617
)
 
$
(41,059
)
Purchases of property and equipment
(24,232
)
 
(22,044
)
 
(56,180
)
Free Cash Flow
(114,038
)
 
(57,661
)
 
(97,239
)
Tender offer payments and repurchases deemed compensation (1)
8,033

 
39,374

 

Adjusted Free Cash Flow
$
(106,005
)
 
$
(18,287
)
 
$
(97,239
)
Net cash used in investing activities
$
(41,771
)
 
$
(240,436
)
 
$
(333,421
)
Net cash provided by financing activities
$
214,096

 
$
297,035

 
$
437,677

__________________
(1)
In fiscal years 2017 and 2018, we made cash payments of $8.0 million and $39.4 million, respectively, attributable to tender offers and repurchases for our outstanding common stock, which was accounted for as compensation. Adjusted Free Cash Flow has been shown here as adjusted for these cash payments. We have adjusted our Free Cash Flow for these payments because we do not expect them to occur when we are public company so we believe that this provides greater comparability across periods.
Key Components of Results of Operations
Revenue
We generate substantially all of our revenue through sales of subscriptions of Slack to organizations. We recognize subscription revenue on a straight-line basis over the term of the contract subscription period beginning on the date access to Slack is granted, provided all other revenue recognition criteria have been met. Our subscriptions are generally non-cancellable and typically do not contain general rights of return. We maintain a fair billing policy, under which certain organizations on a paid subscription plan are entitled to credit if they have not used the entirety of the contracted number of users for which they have paid during the contractual term of the arrangement. These credits, accounted for as a part of deferred revenue, may be carried over to offset future billings and are not refundable for cash. On occasion, we also provide professional services to organizations on Slack. Professional services revenue has not been material to date.
Overhead Allocation and Employee Compensation Costs
We allocate shared costs, such as facilities (including rent, utilities, and depreciation on equipment shared by all departments) and information technology (IT) costs to all departments based on headcount. As such, allocated shared costs are reflected in cost of revenue and each operating expense category. Employee compensation costs, or personnel costs, include salaries, bonuses, benefits, and stock-based compensation for cost of revenue and each operating expense category and also includes sales commissions for sales and marketing.
Cost of Revenue
Cost of revenue consists primarily of expenses related to hosting Slack and providing ongoing customer support for paid customers. These expenses include employee compensation (including stock-based compensation) and other employee-related expenses for customer experience and technical operations staff, payments to outside service providers, third-party hosting costs, payment processing fees, and amortization expense associated with internally-developed and purchased technology . We expect our cost of revenue to continue to increase in absolute dollar amounts as we grow our business and revenue.

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Operating Expenses
Research and Development. Research and development expenses consist primarily of personnel costs and allocated overhead. Our research and development efforts focus on maintaining and enhancing existing functionality of, and adding new functionality to, Slack. We plan to increase the dollar amount of our investment in research and development for the foreseeable future as we focus on developing new features and enhancements. We expect, however, that our research and development expenses will decrease as a percentage of our revenue over time as our revenue grows, although the percentage may fluctuate from period to period depending on fluctuations in the timing and extent of our research and development expenses.
Sales and Marketing. Sales and marketing expenses consist primarily of personnel costs, expenses associated with our marketing and business development programs, including Frontiers, our annual user conference. Sales and marketing expenses also include allocated third-party hosting costs as well as customer experience and technical operations employee overhead costs for users of our free version of Slack. Sales commissions that are directly related to acquiring sales contracts, as well as associated payroll taxes, are deferred upon execution of a non-cancellable contract with an organization, and subsequently amortized to sales and marketing expense over the estimated period of benefit, typically four years. We plan to increase the dollar amount of our investment in sales and marketing for the foreseeable future, primarily for increased headcount for our direct sales organization and investment in brand and product marketing efforts. We expect, however, that our sales and marketing expenses will decrease as a percentage of our revenue over time as our revenue grows, although the percentage may fluctuate from period to period depending on fluctuations in the timing and extent of our sales and marketing expenses.
General and Administrative . General and administrative expenses consist primarily of personnel costs for our finance and accounting, legal, human resources, and other administrative teams as well as for certain executives and professional fees, including audit, legal, and recruiting services. We expect to increase the size of our general and administrative function to support the growth of our business. We also expect to recognize certain non-recurring costs as part of our transition to a publicly-traded company, consisting of professional fees and other expenses. These fees are being expensed in the period incurred. We expect to incur $          million in audit fees and $          million in legal fees and expenses. In the quarter of the listing of our Class A common stock on the NYSE, we expect to incur approximately $          million in fees paid to our financial advisors and associate financial advisors. Following the listing of our Class A common stock on the NYSE, we expect to continue to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a U.S. securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC. In addition, as a public company, we expect to incur increased expenses in the areas of insurance, investor relations, and professional services. As a result, we expect the dollar amount of our general and administrative expenses to increase for the foreseeable future. We expect, however, that our general and administrative expenses will decrease as a percentage of our revenues over time, although the percentage may fluctuate from period to period depending on fluctuations in our revenue and the timing and extent of our general and administrative expenses.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest income earned on our cash, cash equivalents, and marketable securities, gains or losses on foreign currency exchange, and the change in fair value of our strategic investments.
Provision for Income Taxes
Provision for income taxes consists primarily of U.S. federal, state income taxes, and income taxes in certain foreign jurisdictions in which we conduct business. Since inception, we have incurred operating losses and, accordingly, have not recorded a provision for income taxes for any of the periods presented other than provisions for foreign income tax. As of January 31, 2019, we had net operating loss carryforwards for both federal and state income tax purposes of $221.4 million and $154.5 million , respectively. We also had federal research and development tax credit carryforwards of approximately $17.2 million and state research and development tax credit carryforwards of approximately $14.4 million .

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Since the realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain, we have recorded a valuation allowance of $112.7 million as of January 31, 2019, against our net deferred tax asset balance of $112.7 million . If not utilized, a portion of the federal and state net operating loss and tax credit carryforwards will begin to expire in 2029. Utilization of these net operating losses and credit carryforwards may be subject to an annual limitation that is applicable if we experience an “ownership change” through a change in significant stockholder allocation or equity structure.
On December 22, 2017, the legislation commonly referred to as the Tax Cuts and Jobs Act, or the Tax Act, was enacted, which contains significant changes to U.S. tax law. Among other provisions, the Tax Act reduces the U.S. corporate income tax rate to 21% and repeals the alternative minimum tax, effective as of 2018. As a result, we have re-measured our U.S. deferred tax assets and liabilities as of December 31, 2017 to reflect the lower rate expected to apply when these temporary differences reverse.
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:
 
Year Ended January 31,
 
2017
 
2018
 
2019
 
(In thousands)
Revenue
$
105,153

 
$
220,544

 
$
400,552

Cost of revenue (1)
15,517

 
26,364

 
51,301

Gross profit
89,636

 
194,180

 
349,251

Operating expenses:
 
 
 
 
 
Research and development (1)
96,678

 
141,350

 
157,538

Sales and marketing (1)
104,006

 
140,188

 
233,191

General and administrative (1)
37,455

 
56,493

 
112,730

Total operating expenses
238,139

 
338,031

 
503,459

Loss from operations
(148,503
)
 
(143,851
)
 
(154,208
)
Other income (expense), net
1,749

 
4,581

 
16,146

Loss before income taxes
(146,754
)
 
(139,270
)
 
(138,062
)
Provision for income taxes
155

 
793

 
840

Net loss
(146,909
)
 
(140,063
)
 
(138,902
)
Net income (loss) attributable to noncontrolling interest (2)
(45
)
 
22

 
1,781

Net loss attributable to Slack
(146,864
)
 
(140,085
)
 
(140,683
)
Less: Deemed dividends to preferred stockholders

 
40,883

 

Net loss attributable to Slack common stockholders
$
(146,864
)
 
$
(180,968
)
 
$
(140,683
)
__________________
(1)
Includes stock-based compensation as follows:
 
Year Ended January 31,
 
2017
 
2018
 
2019
 
(In thousands)
Cost of revenue
$
630

 
$
491

 
$
732

Research and development
34,546

 
35,260

 
9,948

Sales and marketing
9,744

 
8,044

 
2,677

General and administrative
5,171

 
4,288

 
9,775

Total stock-based compensation
$
50,091

 
$
48,083

 
$
23,132


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(2)
Our consolidated financial statements include our majority-owned subsidiary, Slack Fund. The ownership interest of minority investors in Slack Fund is recorded as a noncontrolling interest.
 
Year Ended January 31,
 
2017
 
2018
 
2019
 
(as a % of revenue)
Revenue
100
 %
 
100
 %
 
100
 %
Cost of revenue
15

 
12

 
13

Gross profit
85

 
88

 
87

Operating expenses:
 
 
 
 
 
Research and development
92

 
64

 
39

Sales and marketing
99

 
63

 
58

General and administrative
35

 
26

 
28

Total operating expenses
226

 
153

 
125

Loss from operations
(141
)
 
(65
)
 
(38
)
Other income (expense), net
1

 
2

 
4

Loss before income taxes
(140
)
 
(63
)
 
(34
)
Provision for income taxes

 
1

 
1

Net loss
(140
)
 
(64
)
 
(35
)
Net income (loss) attributable to noncontrolling interest

 

 

Net loss attributable to Slack
(140
)
 
(64
)
 
(35
)
Less: Deemed dividends to preferred stockholders

 
18

 

Net loss attributable to Slack common stockholders
(140
)%
 
(82
)%
 
(35
)%
Comparison of the Years Ended January 31, 2018 and 2019
Revenue and Cost of Revenue
 
Year Ended January 31,
 
 
 
 
 
2018
 
2019
 
$ Change
 
% Change
 
(In thousands)
 
 
 
 
Revenue
$
220,544

 
$
400,552

 
$
180,008

 
82
%
Cost of revenue
26,364

 
51,301

 
24,937

 
95

Gross profit
$
194,180

 
$
349,251

 
$
155,071

 
80

Revenue increased $180.0 million , or 82% , for the year ended January 31, 2019 compared to the year ended January 31, 2018. The increase in revenue was primarily due to expansion within our existing Paid Customers, as reflected by our Net Dollar Retention Rate of 143% as of January 31, 2019, and the addition of new Paid Customers, as our number of Paid Customers increased by 49% in the year ended January 31, 2019 compared to the prior year.
Cost of revenue increased $24.9 million , or 95% , for the year ended January 31, 2019 compared to the year ended January 31, 2018. The increase was primarily due to an $11.2 million increase in third-party hosting costs as the number of organizations on and usage of Slack in general increased, an $8.3 million increase in personnel and related costs, a $2.7 million increase in facility- and IT-related overhead costs due to additional headcount to support the growth in organizations on Slack, and a $2.4 million increase in credit card payment processing fees as the volume of sales transactions increased.

76



Operating Expenses
 
Year Ended January 31,
 
 
 
 
 
2018
 
2019
 
$ Change
 
% Change
 
(In thousands)
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Research and development
$
141,350

 
$
157,538

 
$
16,188

 
11
%
Sales and marketing
140,188

 
233,191

 
93,003

 
66

General and administrative
56,493

 
112,730

 
56,237

 
100

Total operating expenses
$
338,031

 
$
503,459

 
$
165,428

 
49

Research and Development
Research and development expenses increased $16.2 million , or 11% , for the year ended January 31, 2019 compared to the year ended January 31, 2018. The increase was primarily due to a $6.9 million increase in personnel costs, primarily attributable to a 36% increase in research and development headcount, a $6.4 million increase in facility- and IT-related overhead costs to support our headcount growth, and the continued development and scalability of Slack, and a $2.5 million increase in contracted workers to supply additional workforce.
Sales and Marketing
Sales and marketing expenses increased $93.0 million , or 66% , for the year ended January 31, 2019 compared to the year ended January 31, 2018. The increase was primarily due to the substantial expansion of our sales force and marketing programs, including a $34.9 million increase in marketing expenses associated with higher advertising, brand marketing, and promotional activities. Personnel costs, which includes customer experience and infrastructure employee costs for users of our free version, also increased $30.2 million as we increased our sales and marketing headcount by 77% due to the need to support our growth. In addition, facility- and IT-related overhead costs increased $10.3 million to support our headcount growth. Further, third-party hosting costs for users on a Free subscription plan of Slack increased $9.5 million primarily due to continuing growth in our user base.
General and Administrative
General and administrative expenses increased $56.2 million , or 100% , for the year ended January 31, 2019 compared to the year ended January 31, 2018. The increase was primarily due to a $27.1 million increase in personnel costs primarily attributable to a 74% increase in our administrative, finance and accounting, legal, and human resources headcount, a $15.6 million increase in third-party professional service expenses to support our growth, and a $7.6 million increase in facility- and IT-related overhead costs due to additional headcount. In addition, we recorded a $2.3 million loss on disposals of property and equipment associated with office equipment and furniture and fixtures located at our previous headquarters facility.
Other Income (Expense), Net
Other income (expense), net was $16.1 million for the year ended January 31, 2019, an increase of $11.6 million from the year ended January 31, 2018. The increase in other income (expense), net was primarily due to an increase in interest income of $9.6 million on marketable securities and an increase in fair market value of our strategic investments of $3.7 million, partially offset by increased net foreign exchange losses of $1.4 million.
Provision for Income Taxes
The provision for income taxes was consistent at $0.8 million for the year ended January 31, 2019 and January 31, 2018.

77



Comparison of the Years Ended January 31, 2017 and 2018
Revenue and Cost of Revenue
 
Year Ended January 31,
 
 
 
 
 
2017
 
2018
 
$ Change
 
% Change
 
(In thousands)
 
 
 
 
Revenue
$
105,153

 
$
220,544

 
$
115,391

 
110
%
Cost of revenue
15,517

 
26,364

 
10,847

 
70

Gross profit
$
89,636

 
$
194,180

 
$
104,544

 
117

Revenue increased $115.4 million , or 110% , for the year ended January 31, 2018 compared to the year ended January 31, 2017. The increase in revenue was primarily due to expansion within our existing Paid Customers, as reflected by our Net Dollar Retention Rate of 152% as of January 31, 2018, and the addition of new Paid Customers, as our number of Paid Customers increased by 59% in the year ended January 31, 2018 compared to the prior year.
Cost of revenue increased $10.8 million , or 70% , for the year ended January 31, 2018 compared to the year ended January 31, 2017. The increase was primarily due to a $5.0 million increase in third-party hosting costs as the number of organizations on and usage of Slack in general increased, a $2.5 million increase in personnel and related costs, a $1.6 million increase in credit card payment processing fees as the volume of sales transactions increased due to the growth of our business, and a $1.4 million increase in facility- and IT-related overhead costs due to additional headcount to support the growth in organizations on Slack.
Operating Expenses
 
Year Ended January 31,
 
 
 
 
 
2017
 
2018
 
$ Change
 
% Change
 
(In thousands)
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Research and development
$
96,678

 
$
141,350

 
$
44,672

 
46
%
Sales and marketing
104,006

 
140,188

 
36,182

 
35

General and administrative
37,455

 
56,493

 
19,038

 
51

Total operating expenses
$
238,139

 
$
338,031

 
$
99,892

 
42

Research and Development
Research and development expenses increased $44.7 million , or 46% , for the year ended January 31, 2018 compared to the year ended January 31, 2017. The increase was primarily due to a $31.0 million increase in personnel costs, primarily attributable to a 22% increase in research and development headcount, a $10.6 million increase in facility- and IT-related overhead costs to support our headcount growth, and the continued development and scalability of Slack.
Sales and Marketing
Sales and marketing expenses increased $36.2 million , or 35% , for the year ended January 31, 2018 compared to the year ended January 31, 2017. The increase was primarily due to the substantial expansion of our sales force and marketing programs. Personnel costs, which includes customer experience and infrastructure employee costs for users of our free version, increased $17.0 million as we increased our sales and marketing headcount by 86% due to the need to support our growth. In addition, third-party hosting costs for users on a Free subscription plan of Slack increased $9.9 million primarily due to continuing growth in our user base. Further, facility- and IT-related overhead costs increased $8.1 million to support our headcount growth.

78



General and Administrative
General and administrative expenses increased $19.0 million , or 51% , for the year ended January 31, 2018 compared to the year ended January 31, 2017. The increase was primarily due to a $10.0 million increase in personnel costs primarily attributable to a 38% increase in our administrative, finance and accounting, legal, and human resources headcount, a $4.7 million increase in facility- and IT-related overhead costs due to additional headcount, and a $2.5 million increase in third-party professional service expenses to support our growth.
Other Income (Expense), Net
Other income (expense), net was $4.6 million for the year ended January 31, 2018, an increase of $2.8 million from the year ended January 31, 2017. The increase in other income (expense), net was primarily due to an increase in interest income of $1.8 million on investments, increased net foreign exchange gains of $0.6 million, and an increase in other non-operating income of $0.4 million.
Provision for Income Taxes
The provision for income taxes was $0.8 million for the year ended January 31, 2018, an increase of $0.6 million from the year ended January 31, 2017, primarily related to a provision for income taxes in foreign tax jurisdictions.

79



Quarterly Results of Operations
The following tables set forth our unaudited quarterly statements of operations data for each of the eight quarters ended January 31, 2019, as well as the percentage of revenue that each line item represents for each quarter. The information for each of these quarters has been prepared on the same basis as the audited annual financial statements included elsewhere in this prospectus and, in the opinion of management, includes all adjustments, which includes only normal recurring adjustments, necessary for the fair statement of the results of operations for these periods. This data should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this prospectus. These quarterly results of operations are not necessarily indicative of our future results of operations that may be expected for any future period.
 
Three Months Ended
 
April 30,
2017
 
July 31,
2017
 
October 31,
2017
 
January 31,
2018
 
April 30,
2018
 
July 31,
2018
 
October 31,
2018
 
January 31,
2019
 
(In thousands)
Revenue
$
42,719

 
$
51,320

 
$
58,046

 
$
68,459

 
$
80,919

 
$
92,018

 
$
105,648

 
$
121,967

Cost of revenue (1)
5,418

 
6,098

 
6,788

 
8,060

 
10,101

 
11,361

 
13,540

 
16,299

Gross profit
37,301

 
45,222

 
51,258

 
60,399

 
70,818

 
80,657

 
92,108

 
105,668

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research and development (1)
24,381

 
26,800

 
28,489

 
61,680

 
35,410

 
35,182

 
40,990

 
45,956

Sales and marketing (1)
26,761

 
29,307

 
35,274

 
48,846

 
42,168

 
53,553

 
67,687

 
69,783

General and administrative (1)
12,337

 
12,482

 
14,404

 
17,270

 
19,568

 
25,608

 
34,185

 
33,369

Total operating expenses
63,479

 
68,589

 
78,167

 
127,796

 
97,146

 
114,343

 
142,862

 
149,108

Loss from operations
(26,178
)
 
(23,367
)
 
(26,909
)
 
(67,397
)
 
(26,328
)
 
(33,686
)
 
(50,754
)
 
(43,440
)
Other income (expense), net
547

 
890

 
843

 
2,301

 
1,802

 
2,085

 
3,376

 
8,883

Loss before income taxes
(25,631
)
 
(22,477
)
 
(26,066
)
 
(65,096
)
 
(24,526
)
 
(31,601
)
 
(47,378
)
 
(34,557
)
Provision for (benefit from) income taxes
194

 
(114
)
 
161

 
552

 
350

 
85

 
318

 
87

Net loss
(25,825
)
 
(22,363
)
 
(26,227
)
 
(65,648
)
 
(24,876
)
 
(31,686
)
 
(47,696
)
 
(34,644
)
Net income (loss) attributable to noncontrolling interest (2)
(1
)
 
47

 
31

 
(55
)
 
6

 
174

 
(24
)
 
1,625

Net loss attributable to Slack
(25,824
)
 
(22,410
)
 
(26,258
)
 
(65,593
)
 
(24,882
)
 
(31,860
)
 
(47,672
)
 
(36,269
)
Less: Deemed dividends to preferred stockholders

 

 

 
40,883

 

 

 

 

Net loss attributable to Slack common stockholders
$
(25,824
)
 
$
(22,410
)
 
$
(26,258
)
 
$
(106,476
)
 
$
(24,882
)
 
$
(31,860
)
 
$
(47,672
)
 
$
(36,269
)

80



__________________
(1)
Includes stock-based compensation as follows:
 
Three Months Ended
 
April 30,
2017
 
July 31,
2017
 
October 31,
2017
 
January 31,
2018
 
April 30,
2018
 
July 31,
2018
 
October 31,
2018
 
January 31,
2019
 
(In thousands)
Cost of revenue
$
71

 
$
59

 
$
56

 
$
305

 
$
603

 
$
58

 
$
40

 
$
31

Research and development
1,126

 
1,494

 
1,108

 
31,532

 
3,395

 
944

 
3,532

 
2,077

Sales and marketing
479

 
416

 
312

 
6,837

 
1,204

 
248

 
227

 
998

General and administrative
814

 
659

 
486

 
2,329

 
916

 
388

 
6,716

 
1,755

Total stock-based compensation
$
2,490

 
$
2,628

 
$
1,962

 
$
41,003

 
$
6,118

 
$
1,638

 
$
10,515

 
$
4,861

In the fourth quarter of fiscal year 2018, we recorded compensation expense of $39.1 million attributable to a tender offer that increased all operating expense line items and cost of revenue for the quarter. In the first, second and fourth quarters of fiscal year 2019, we recorded an additional compensation expense of $4.4 million, $7.9 million, and $2.5 million, respectively, related to secondary sales of Class B common stock by certain of our current and former employees.
(2)
Our consolidated financial statements include our majority-owned subsidiary, Slack Fund. The ownership interest of minority investors in Slack Fund is recorded as a noncontrolling interest.
 
Three Months Ended
 
April 30,
2017
 
July 31,
2017
 
October 31,
2017
 
January 31,
2018
 
April 30,
2018
 
July 31,
2018
 
October 31,
2018
 
January 31,
2019
 
(as a % of revenue)
Revenue
100
 %
 
100
 %
 
100
 %
 
100
 %
 
100
 %
 
100
 %
 
100
 %
 
100
 %
Cost of revenue
13

 
12

 
12

 
12

 
12

 
12

 
13

 
13

Gross profit
87

 
88

 
88

 
88

 
88

 
88

 
87

 
87

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
57

 
52

 
49

 
90

 
44

 
39

 
39

 
38

Sales and marketing
62

 
57

 
60

 
71

 
52

 
58

 
64

 
57

General and administrative
29

 
25

 
25

 
25

 
24

 
28

 
32

 
28

Total operating expenses
148

 
134

 
134

 
186

 
120

 
125

 
135

 
123

Loss from operations
(61
)
 
(46
)
 
(46
)
 
(98
)
 
(32
)
 
(37
)
 
(48
)
 
(36
)
Other income (expense), net
1

 
2

 
1

 
3

 
2

 
3

 
3

 
8

Loss before income taxes
(60
)
 
(44
)
 
(45
)
 
(95
)
 
(30
)
 
(34
)
 
(45
)
 
(28
)
Provision for/(benefit from) income taxes

 

 

 
1

 
1

 

 

 

Net loss
(60
)
 
(44
)
 
(45
)
 
(96
)
 
(31
)
 
(34
)
 
(45
)
 
(28
)
Net income (loss) attributable to noncontrolling interest

 

 

 

 

 
1

 

 
2

Net loss attributable to Slack
(60
)
 
(44
)
 
(45
)
 
(96
)
 
(31
)
 
(35
)
 
(45
)
 
(30
)
Less: Deemed dividends to preferred stockholders

 

 

 
60

 

 

 

 

Net loss attributable to Slack common stockholders
(60
)%
 
(44
)%
 
(45
)%
 
(156
)%
 
(31
)%
 
(35
)%
 
(45
)%
 
(30
)%

81



Quarterly Trends
Revenue and Cost of Revenue
Our revenue increased sequentially for all periods presented primarily due to higher sales of subscriptions to both our existing and new Paid Customers.
Total cost of revenue increased sequentially for all periods presented, consistent with our revenue growth, in order to support our overall growth.
Operating Expenses
Total operating expenses increased sequentially for all periods presented, excluding stock-based compensation of $39.1 million attributable to tender offers and repurchases for our outstanding common stock in the fourth quarter of fiscal year 2018, primarily due to increases in employee headcount and the expansion of our business. In the fourth quarter of fiscal year 2018, we recorded a one-time compensation charge for a total amount of $39.1 million due to a tender offer in which we repurchased shares of our Class B common stock and convertible preferred stock from certain of our stockholders. The expense associated with the tender offer increased cost of revenue by $0.3 million, research and development expense by $30.4 million, sales and marketing expense by $6.5 million, and general and administrative expense by $1.9 million, in the fourth quarter of fiscal year 2018. In the third quarter of fiscal year 2019, we incurred additional sales and marketing expenses primarily due to increased advertising efforts as well as incurring expenses in connection with holding our annual user conference, Frontiers.
Key Business Metrics
 
As of
 
April 30,
2017
 
July 31,
2017
 
October 31,
2017
 
January 31,
2018
 
April 30,
2018
 
July 31,
2018
 
October 31,
2018
 
January 31,
2019
Paid Customers (period end)
42,000

 
47,000

 
52,000

 
59,000

 
67,000

 
73,000

 
81,000

 
88,000

Paid Customers >$100,000 (period end)
164

 
209

 
254

 
298

 
351

 
412

 
491

 
575

Net Dollar Retention Rate
156
%
 
153
%
 
151
%
 
152
%
 
149
%
 
146
%
 
144
%
 
143
%
Quarterly Key Metrics Trends
Our Paid Customers, including Paid Customers >$100,000, increased sequentially for all quarters in fiscal year 2018 and 2019, primarily due to organic growth of new organizations on Slack as a result of strong performance within our self-service acquisition model, as well as increased expansion of users within our existing Paid Customer base.
Our Net Dollar Retention Rate has declined across most of the eight quarters as our base of revenue has grown and our penetration within existing, long-term Paid Customers has increased. We expect our Net Dollar Retention Rate will fluctuate in future periods due to a number of factors, including the growing level of our revenue base, the level of penetration within our Paid Customer base, expansion of products and features, and our ability to retain our Paid Customers.

82



Non-GAAP Financial Measures
 
Three Months Ended
 
April 30,
2017
 
July 31,
2017
 
October 31,
2017
 
January 31,
2018
 
April 30,
2018
 
July 31,
2018
 
October 31,
2018
 
January 31,
2019
 
(In thousands)
Calculated Billings
$
59,696

 
$
66,602

 
$
74,484

 
$
88,231

 
$
102,080

 
$
114,767

 
$
126,457

 
$
173,668

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Free Cash Flow
$
(10,977
)
 
$
5,237

 
$
(1,388
)
 
$
(50,533
)
 
$
(14,969
)
 
$
(7,722
)
 
$
(43,467
)
 
$
(31,081
)
Tender offer payments and repurchases deemed compensation (1)
51

 
251

 

 
39,072

 

 

 

 

Adjusted Free Cash Flow
$
(10,926
)
 
$
5,488

 
$
(1,388
)
 
$
(11,461
)
 
$
(14,969
)
 
$
(7,722
)
 
$
(43,467
)
 
$
(31,081
)
__________________
(1)
In fiscal year 2018, we made cash payments of $39.4 million, attributable to tender offers and repurchases for our outstanding common stock, which was accounted for as compensation. Adjusted Free Cash Flow has been shown here as adjusted for these cash payments. We have adjusted our Free Cash Flow for these payments because we do not expect them to occur when we are a public company so we believe that this provides greater comparability across periods.
Calculated Billings
We define Calculated Billings as revenue plus the change in total deferred revenue during the period.
 
Three Months Ended
 
April 30,
2017
 
July 31,
2017
 
October 31,
2017
 
January 31,
2018
 
April 30,
2018
 
July 31,
2018
 
October 31,
2018
 
January 31,
2019
 
(In thousands)
Revenue
$
42,719

 
$
51,320

 
$
58,046

 
$
68,459

 
$
80,919

 
$
92,018

 
$
105,648

 
$
121,967

Add: Deferred revenue, end of period
73,961

 
89,243

 
105,681

 
125,453

 
146,614

 
169,363

 
190,172

 
241,873

Less: Deferred revenue, beginning of period
(56,984
)
 
(73,961
)
 
(89,243
)
 
(105,681
)
 
(125,453
)
 
(146,614
)
 
(169,363
)
 
(190,172
)
Calculated Billings
$
59,696

 
$
66,602

 
$
74,484

 
$
88,231

 
$
102,080

 
$
114,767

 
$
126,457

 
$
173,668

Our Calculated Billings increased sequentially for all periods presented primarily due to higher sales of subscriptions to both our existing and new Paid Customers. The significant increase in the fourth quarter of fiscal year 2019 was due to the impact of seasonality on our business, following typical enterprise software buying patterns, and a particularly strong fourth quarter in billings. We expect Calculated Billings to decline or grow less quickly in the first quarter of fiscal year 2020 due to the impact of seasonality on our business.


83



Free Cash Flow and Adjusted Free Cash Flow
We define Free Cash Flow as net cash provided by (used in) operating activities less cash used for purchases of property and equipment and Adjusted Free Cash Flow as Free Cash Flow plus tender offer payments and repurchases deemed compensation.
 
Three Months Ended
 
April 30,
2017
 
July 31,
2017
 
October 31,
2017
 
January 31,
2018
 
April 30,
2018
 
July 31,
2018
 
October 31,
2018
 
January 31,
2019
 
(In thousands)
Net cash provided by (used in) operating activities
$
(2,848
)
 
$
7,048

 
$
2,499

 
$
(42,316
)
 
$
3,433

 
$
1,488

 
$
(28,375
)
 
$
(17,605
)
Purchases of property and equipment
(8,129
)
 
(1,811
)
 
(3,887
)
 
(8,217
)
 
(18,402
)
 
(9,210
)
 
(15,092
)
 
(13,476
)
Free Cash Flow
(10,977
)
 
5,237

 
(1,388
)
 
(50,533
)
 
(14,969
)
 
(7,722
)
 
(43,467
)
 
(31,081
)
Tender offer payments and repurchases deemed compensation (1)
51

 
251

 

 
39,072

 

 

 

 

Adjusted Free Cash Flow
$
(10,926
)
 
$
5,488

 
$
(1,388
)
 
$
(11,461
)
 
$
(14,969
)
 
$
(7,722
)
 
$
(43,467
)
 
$
(31,081
)
Net cash provided by (used in) investing activities
$
5,950

 
$
(11,629
)
 
$
(89,192
)
 
$
(145,565
)
 
$
(38,608
)
 
$
(7,141
)
 
$
(289,939
)
 
$
2,267

Net cash provided by financing activities
$
681

 
$
1,013

 
$
249,428

 
$
45,913

 
$
758

 
$
7,173

 
$
427,623

 
$
2,123

__________________
(1)
In fiscal year 2018, we made cash payments of $39.4 million, attributable to tender offers and repurchases for our outstanding common stock, which was accounted for as compensation. Adjusted Free Cash Flow has been shown here as adjusted for these cash payments. We have adjusted our Free Cash Flow for these payments because we do not expect them to occur when we are a public company so we believe that this provides greater comparability across periods.
Liquidity and Capital Resources
As of January 31, 2019, our principal sources of liquidity were cash, cash equivalents, and restricted cash of $201.3 million and marketable securities of $660.3 million . Cash and cash equivalents are comprised of bank deposits and money market funds. Restricted cash consists of cash deposited with financial institutions as collateral for our obligations under the facility leases in San Francisco, California and Denver, Colorado. As of January 31, 2019, restricted cash was $20.5 million . Marketable securities are comprised of commercial paper, U.S. agency securities, U.S. government securities, international government securities, and corporate bonds. Substantially all cash and cash equivalents are held in the United States. Since our inception, we have financed our operations primarily through proceeds from the issuance of our convertible preferred stock and common stock and cash generated from the sale of our subscriptions.
We have generated significant losses from operations and negative cash flows from operating activities in the past as reflected in our accumulated deficit of $665.6 million as of January 31, 2019 We expect to continue to incur operating losses for the foreseeable future due to the investments that we intend to make in our business and, as a result, we may require additional capital resources to grow our business.
We believe that current cash, cash equivalents, and marketable securities will be sufficient to fund our operations for at least the next 12 months. Our future capital requirements, however, will depend on many factors, including our subscription growth rate, our Net Dollar Retention Rate, the timing and extent of spending to support our research and development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced products and features, particularly for large organizations and for networks between organizations and the continuing market adoption of Slack. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. In the event that additional financing is required from outside sources, we may seek to raise additional funds at any time through equity, equity-linked arrangements, and debt. If we are unable to raise additional capital when desired and at reasonable rates, our business, results of operations,

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and financial condition would be adversely affected. See the section titled “Risk Factors—Risks Related to Our Business—Our failure to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies in the future could reduce our ability to compete successfully and harm our results of operations.”
Cash Flows
The following table summarizes our cash flows for the periods indicated:
 
Year Ended January 31,
 
2017
 
2018
 
2019
 
(In thousands)
Net cash used in operating activities
$
(89,806
)
 
$
(35,617
)
 
$
(41,059
)
Net cash used in investing activities
(41,771
)
 
(240,436
)
 
(333,421
)
Net cash provided by financing activities
214,096

 
297,035

 
437,677

Net increase in cash, cash equivalents and restricted cash
$
82,519

 
$
20,982

 
$
63,197

Cash Used in Operating Activities
Our largest source of operating cash is cash collections from organizations on a paid subscription plan. Our primary uses of cash from operating activities are for employee-related expenditures, sales and marketing expenses, and third-party hosting costs. Historically, we have generated negative cash flows from operating activities and have supplemented working capital requirements through net proceeds from the private sale of equity securities.
During the year ended January 31, 2019, operating activities used $41.1 million in cash. The primary factors affecting our operating cash flows during this period were our net loss of $138.9 million , impacted by $39.2 million non-cash charges and $58.6 million of cash provided from changes in our operating assets and liabilities. The non-cash charges primarily consisted of $23.1 million in stock-based compensation, $16.8 million of depreciation and amortization, $3.2 million of amortization of deferred contract acquisition costs, and a $2.3 million loss on disposal of property and equipment, partially offset by a $3.7 million gain as a result of the change in fair value of our strategic investments and $3.1 million of net amortization of bond discount on debt securities available for sale. The cash provided from changes in our operating assets and liabilities was primarily due to a $116.4 million increase in deferred revenue due to increased billings, and a $45.6 million increase in accounts payable, accrued expenses, and other liabilities as a result of our increased spending and headcount associated with the growth of our business. These amounts were partially offset by a $53.1 million increase in prepaid expenses and other assets mainly due to a $22.8 million increase in prepaid hosting services and a $12.7 million increase in deferred commissions, and a $50.3 million increase in accounts receivable, reflecting increased billings.
During the year ended January 31, 2018, operating activities used $35.6 million in cash. The primary factors affecting our operating cash flows during this period were our net loss of $140.1 million, impacted by non-cash charges of $25.3 million, primarily consisting of $14.3 million of depreciation and amortization, $8.7 million in stock-based compensation, and $1.4 million of net amortization of bond premium on debt securities available for sale, and $79.1 million of cash provided from changes in our operating assets and liabilities. The cash provided from changes in our operating assets and liabilities was primarily due to a $68.5 million increase in deferred revenue due to increased billings, a $26.2 million increase in accounts payable, accrued expenses, and other liabilities as a result of our increased spending and headcount associated with the growth of our business, and a $6.4 million decrease in prepaid expenses and other assets. These amounts were partially offset by an increase in accounts receivable of $22.0 million reflecting increased billings.
During the year ended January 31, 2017, operating activities used $89.8 million in cash. The primary factors affecting our operating cash flows during this period were our net loss of $146.9 million, impacted by non-cash charges of $51.3 million, primarily consisting of $42.1 million in stock-based compensation, $6.8 million of depreciation and amortization, and $2.2 million of net amortization of bond premium on debt securities available for sale, and $5.8 million of cash provided from changes in our operating assets and liabilities. The cash provided by changes in our operating assets and liabilities was primarily the result of a $38.2 million increase in deferred revenue due to increased billings,

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a $12.6 million increase in accrued expenses, and other liabilities due to increased expenditures and headcount associated with the growth of our business. These increases were partially offset by a $31.6 million increase in prepaid expenses and other assets of which $20.0 million was for our hosting service contract, a $12.0 million increase in accounts receivable reflecting increased billings, and a $1.4 million decrease in accounts payable.
Cash Used in Investing Activities
Net cash used in investing activities during the year ended January 31, 2019 was $333.4 million , which was primarily used to purchase marketable securities of $967.1 million , property and equipment of $56.2 million , business and intangible assets of $47.7 million, and strategic investments of $2.3 million , partially offset by sales and maturities of marketable securities of $738.9 million.
Net cash used in investing activities during the year ended January 31, 2018 was $240.4 million, which was primarily used to purchase marketable securities of $510.8 million, property and equipment of $22.0 million and strategic investments of $2.9 million, partially offset by sales and maturities of marketable securities of $295.2 million.
Net cash used in investing activities during the year ended January 31, 2017 was $41.8 million, which was primarily used to purchase marketable securities of $346.4 million, property and equipment of $24.2 million, and strategic investments of $4.5 million, partially offset by sales and maturities of marketable securities of $333.9 million.
Cash Provided by Financing Activities
Net cash provided by financing activities for the year ended January 31, 2019 was $437.7 million , reflecting proceeds from issuance of convertible preferred stock of $426.9 million , proceeds from issuance of common stock to a third party of $6.1 million , and the exercise of stock options to purchase common stock of $4.8 million .
Net cash provided by financing activities for the year ended January 31, 2018 was $297.0 million, reflecting proceeds from issuance of convertible preferred stock of $412.4 million and the exercise of stock options to purchase common stock of $2.9 million, partially offset by repurchases of convertible preferred stock of $77.7 million and common stock of $40.5 million.
Net cash provided by financing activities for the year ended January 31, 2017 was $214.1 million, reflecting proceeds from the issuance of convertible preferred stock of $207.9 million, the exercise of stock options to purchase common stock of $4.7 million, and capital contributions made by noncontrolling interest members of Slack Fund of $5.8 million, partially offset by repurchases of common stock of $4.3 million.
Contractual Obligations and Commitments
Our principal contractual commitments primarily consist of obligations under leases for office space and datacenter operations.
The following table summarizes our consolidated principal contractual cash obligations, as of January 31, 2019, and is supplemented by the discussion following the table:
 
Payments Due by Period
 
Total
 
Less than
1 year
 
1-3 years
 
3-5 years
 
More than
5 years
 
( In thousands )
Operating lease obligations (1)
$
238,187

 
$
27,359

 
$
50,952

 
$
48,327

 
$
111,549

Hosting commitments (2)
212,500

 
50,000

 
100,000

 
62,500

 

Other commitments (3)
47,944

 
17,801

 
15,989

 
3,576

 
10,578

Total
$
498,631

 
$
95,160

 
$
166,941

 
$
114,403

 
$
122,127

__________________
(1)
Consists of future non-cancelable minimum rental payments under operating leases for our offices.

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(2)
In April 2018, we executed an amendment to our existing agreement with Amazon Web Services. The amended agreement was effective as of May 1, 2018 and continues through July 31, 2023. We have minimum annual commitments of $50.0 million each year of the agreement term for a total minimum commitment of $250.0 million.
(3)
Consists of future minimum payments under non-cancelable purchase commitments primarily related to IT operations, sales and marketing activities, and acquisition related obligations.
In addition to the contractual obligations set forth above, as of January 31, 2019, we had $20.5 million in standby letters of credit outstanding related to our office facilities in San Francisco, California and Denver, Colorado.
In March 2019, we entered into a non-cancelable operating lease agreement for an office facility in San Francisco, California. The lease term is from March 2019 to June 2030, with future minimum lease payments of $170.3 million . In conjunction with the agreement and to secure the lease, we entered into an $18.0 million irrevocable standby letter of credit.
Off-Balance Sheet Arrangements
As of January 31, 2019, we did not have any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other purposes.
Significant Impacts of Stock-Based Compensation
Restricted Stock Units (RSUs)
We have granted RSUs to our employees and directors under our 2009 Plan. RSUs outstanding as of January 31, 2019 have both service-based and performance vesting conditions. The service-based vesting period for these awards is typically four years with a cliff vesting period of one year and continued vesting quarterly thereafter. Upon satisfaction of the performance vesting condition, RSUs for which the service-based condition has also been satisfied will vest immediately, and any remaining unvested RSUs will vest quarterly over the remaining service period. The performance vesting condition is satisfied on the earlier of (i) a change in control of the company, (ii) the initial public offering of our securities, or (iii) the listing and public trading of our Class A common stock on the NYSE .
As of January 31, 2019, all compensation expense related to RSUs remained unrecognized because the performance vesting condition was not satisfied. At the time the performance vesting condition becomes probable, which is not until such condition is satisfied, we will recognize the cumulative stock-based compensation expense for the outstanding RSUs using the accelerated attribution method. As of January 31, 2019, 63.1 million RSUs were outstanding, of which 22.4 million had met their service-based condition. If the performance vesting condition had occurred on January 31, 2019, we would have recorded $157.5 million of stock-based compensation, and we would recognize unamortized stock-based compensation of $151.4 million over a weighted-average remaining requisite service period of 2.9 years . The recognition of stock-based compensation would affect our cost of revenue and our research and development, sales and marketing, and general and administrative operating expense line items.
Indemnification Agreements
In the ordinary course of business, we enter into contractual arrangements under which we agree to provide indemnification of varying scope and terms to organizations on Slack, business partners, and other parties with respect to certain matters, including losses arising out of intellectual property infringement claims made by third parties, violation of applicable laws, and negligence or acts of willful misconduct, among others, with respect to Slack. In these circumstances, payment is typically conditional on the other party making a claim pursuant to the procedures specified in the particular contract.
In addition, we have entered into indemnification agreements with our directors, executive officers, and certain board observers that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or as board observers until the effectiveness of the registration statement of which this prospectus forms a part.

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Quantitative and Qualitative Disclosures about Market Risk
We are exposed to certain market risks in the ordinary course of our business. These risks primarily include:
Interest Rate Risk
We had cash and cash equivalents of $180.8 million and marketable securities of $660.3 million as of January 31, 2019, which consisted of bank deposits, money market accounts, commercial paper, U.S. agency securities, U.S. government securities, international government securities, and corporate bonds. The cash and cash equivalents are held primarily for working capital purposes. Such interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in interest income have not been significant. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Due to the short-term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements.
Currency Exchange Risk
The functional currency of our foreign subsidiaries is generally the U.S. dollar. Monetary assets and liabilities are remeasured using foreign currency exchange rates at the end of the period, and non-monetary assets are remeasured based on historical exchange rates. Gains and losses due to foreign currency are the result of either the remeasurement of subsidiary balances or transactions denominated in currencies other than the foreign subsidiaries’ functional currency and are included in other income (expense), net in our statements of operations.
We have foreign currency exchange risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar, principally the Euro. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. We have experienced and will continue to experience fluctuations in foreign exchange gains (losses) related to changes in foreign currency exchange rates. In the event our foreign currency denominated assets, liabilities, sales, or expenses increase, our results of operations may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business.
We do not currently engage in any hedging activity to reduce our potential exposure to currency fluctuations, although we may choose to do so in the future. A hypothetical 10% change in foreign currency exchange rates during any of the periods presented would not have had a material impact on our consolidated financial statements.
Inflation Risk
We do not believe that inflation has had a material effect on our business, results of operations, or financial condition.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
We believe that of our significant accounting policies, which are described in Note 1 to our consolidated financial statements, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.
Under the JOBS Act, an “emerging growth company” can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an “emerging growth company” to delay the adoption of new or revised accounting standards that have different transition dates for public and private companies until those standards would otherwise apply to private companies. We meet the definition of an “emerging growth

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company” and have elected to use this extended transition period. As a result of this election, our timeline to comply with these standards will in many cases be delayed as compared to other public companies that are not eligible to take advantage of this election or have not made this election. Therefore, our financial statements may not be comparable to those of companies that comply with the public company effective dates for these standards.
Revenue Recognition
We elected to adopt Accounting Standards Codification, or ASC Topic 606, Revenue from Contracts with Customers, or ASC 606, effective as of February 1, 2017, utilizing the full retrospective method of adoption. Accordingly, the consolidated financial statements for the fiscal years ended January 31, 2017, 2018, and 2019 are presented under ASC 606. We recognize revenue from contracts with organizations on a paid subscription plan using the five-step method described in Note 1 in our consolidated financial statements. We derive revenue from monthly, annual, and multi-year subscription fees earned from organizations on a paid subscription plan accessing Slack.
In our contracts, we typically have one performance obligation of providing access to Slack . On occasion, we also provide professional services to organizations on Slack, which are separate performance obligations. Professional services revenue has not been material to date. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on their relative standalone selling price. We determine standalone selling price, or SSP, for all of our performance obligations using observable inputs, such as standalone sales and historical contract pricing. SSP also reflects the amount we would charge for that performance obligation if it were sold separately in a standalone sale, and the price we would sell to similar organizations on Slack in similar circumstances.
In general, we satisfy our performance obligations over time as we provide the promised services to organizations on a paid subscription plan. We maintain a fair billing policy, under which certain organizations on a paid subscription plan are entitled to credit if they have not used the entirety of the contracted number of users for which they have paid during the contractual term of the arrangement. These credits, accounted for as a part of deferred revenue, may be carried over to offset future billings and are not refundable for cash. A majority of our contracts give a right to bill for additional usage, and this is deemed variable consideration. The variable consideration is allocated to the distinct day the services are completed, as services provided to the additional users are specific to the period that the usage occurs. To the extent that we believe it is probable that a significant reversal would not occur, an estimate is made for the revenue associated with incremental usage during a period. The incremental revenue recognized associated with these estimates has not been material through fiscal year 2019.
Business Combinations and Valuation of Goodwill and Other Acquired Intangible Assets
Upon acquiring a business, we estimate the fair value of assets acquired and liabilities assumed. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.
The estimation of fair value requires significant judgment and the use of assumptions by management. Key assumptions made in making these estimates include, but are not limited to, estimating future cash flows, selecting discount rates, and selecting valuation methodologies. While we believe the assumptions and estimates we have made in the past have been appropriate, they are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. On the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in our consolidated statements of operations.
Stock-Based Compensation
We measure compensation expense for all stock-based payment awards, including stock options, RSUs, and RSAs, granted to employees, directors, and other service providers, based on the estimated fair value of the awards on the date of grant. The fair value of each stock option granted is estimated using the Black-Scholes option pricing model. Stock-based compensation is recognized on a straight-line basis, net of forfeitures, over the requisite service period.

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We grant RSUs to our employees and directors with both service-based and performance vesting conditions. The service-based vesting period for these awards is typically four years with a cliff vesting period of one year and continued vesting quarterly thereafter. The performance vesting condition is satisfied on the earlier of (i) a change in control of the company, (ii) the initial public offering of our securities, or (iii) the listing and public trading of our Class A common stock on the NYSE . As of January 31, 2019, achievement of the performance condition was not probable and therefore, all compensation expense related to RSUs remained unrecognized. A change in control event, the initial public offering of our securities, and effective registration statement for the listing and public trading of our Class A common stock on the NYSE are not deemed probable until consummated. If the listing and public trading of our Class A common stock on the NYSE had occurred on January 31, 2019, we would have recognized $157.5 million of stock-based compensation for all RSUs that had fully satisfied the service-based vesting condition on that date, and would have $151.4 million of unrecognized compensation cost that represents the grants that have not met the service condition as of January 31, 2019.
Common Stock Valuations
The fair value of the common stock underlying our stock-based payment awards is determined by our board of directors, with input from management and reviews of third-party valuations which are performed at least quarterly to determine the fair value of RSUs and RSAs and perform the fair value calculations with the Black-Scholes option-pricing model. We believe that our board of directors has the relevant experience and expertise to determine the fair value of our common stock. If stock-based payment awards were granted a short period of time prior to the date of a valuation report, we retrospectively assessed the fair value used for financial reporting purposes after considering the fair value reflected in the subsequent valuation report and other facts and circumstances on the date of grant as discussed below. Prior to the listing of our Class A common stock on the NYSE, given the absence of a public trading market for our common stock, the valuations of common stock were determined in accordance with the guidance provided by the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation , and our board of directors exercised reasonable judgment and considered numerous and subjective factors to determine the best estimate of fair value of our common stock, including the following factors:
the results of contemporaneous valuations performed at periodic intervals by an independent valuation firm;
the prices, rights, preferences, and privileges of our convertible preferred stock relative to those of our common stock;
the prices of our convertible preferred stock and common stock sold to investors in arms-length transactions or offered to investors through a tender offer;
our actual operating and financial performance and estimated trends and prospects for our future performance;
our stage of development;
the likelihood of achieving a liquidity event, such as an initial public offering, direct listing, or sale of our company, given prevailing market conditions;
the lack of marketability involving securities in a private company;
the market performance of comparable publicly traded companies; and
U.S. and global capital market conditions.
In valuing our common stock, our board of directors determined the equity value of our business generally using a weighting of the income and market approach valuation methods. The income approach estimates value based on the expectation of future cash flows that a company will generate. These future cash flows are discounted to their present values using a discount rate based on our weighted-average cost of capital and are adjusted to reflect the risks inherent in our cash flows. The market approach estimates value based on a comparison of the subject company to comparable public companies in a similar line of business. From the comparable companies, a representative market value multiple is determined and then applied to the subject company’s financial forecasts to estimate the value of the subject company.

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For valuations prior to January 31, 2018, the equity valuation was based on both the income and the market approach valuation methods. The Option Pricing Method, or OPM, was selected as the principal equity allocation method. When we had completed or were expecting to complete a preferred equity financing, the terms and pricing of the financing round were included in the analysis used to estimate our value and the value of our common stock. These methods were consistent with prior valuations.
For valuations as of and subsequent to January 31, 2018, where the company did not have a recent or expected arm’s length preferred equity financing, we have used a hybrid method utilizing a combination of the OPM and the probability-weighted expected return method, or PWERM, in estimating the value of our common stock. Using the PWERM, the value of our common stock is estimated based upon a probability-weighted analysis of varying values for our common stock assuming possible future events for our company, including a scenario of an IPO or a direct listing of our Class A common stock on an exchange and a scenario assuming continued operation as a private entity. When the company had a recent or expected arm’s length preferred equity financing, the results from the PWERM analysis were not inconsistent with the overall weighted value considering the terms and pricing of the preferred round of financing.
Application of these approaches involves the use of estimates, judgment, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses, and future cash flows, discount rates, market multiples, the selection of comparable companies, and the probability of possible future events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of our common stock.
Our board of directors’ assessments of the fair value of our common stock for grant dates between the dates of an available third-party valuation report were based in part on the current available financial and operational information and the common stock value provided in the most recent available third-party valuation report as compared to the timing of each grant. For financial reporting purposes, we generally used a straight-line interpolation between the two dates of the valuation included in third-party valuation reports. This determination included an evaluation of whether the subsequent valuation report indicated that any significant change in valuation had occurred between the previous valuation and the grant date.
For valuations after the completion of the listing of our Class A common stock on the NYSE, our board of directors will determine the fair value of each share of underlying Class A common stock based on the closing price of our Class A common stock as reported on the date of grant.
Recent Accounting Pronouncements
See the section titled “Summary of Business and Significant Accounting Policies” in Note 1 of the notes to our consolidated financial statements included elsewhere in this prospectus for more information.

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BUSINESS
Introduction – What is Slack?
Slack is where work happens.
Around the world, over 600,000 organizations in over 150 countries have turned to Slack as the place to communicate, collaborate, and get work done. Over 10 million people inside those organizations – accountants, customer support reps, engineers, lawyers, journalists, dentists, chefs, detectives, executives, scientists, farmers, hoteliers, salespeople, and many others – collectively spend more than 50 million hours in active use of Slack in a typical week, on either a free or paid subscription plan. They do so because Slack is a new layer of the business technology stack that brings together people, applications, and data – a single place where people can effectively work together, access hundreds of thousands of critical applications and services, and find important information to do their best work.
History
We created Slack initially as an internal tool to help our own team stay on the same page, to be able to easily access conversations, decisions, data, and content that had been shared, and to tap into a variety of software applications from one place. We were frustrated with email. It created fragmented silos of inaccessible information, hidden in individual inboxes. When new members joined the team, they were cut off from the rich history of communication that occurred before they arrived. Transparency was difficult to achieve and routine communication had to be supplemented with status reports and stand-up meetings in order to keep the team coordinated.
In addition, despite the fact that email was the universal default routing mechanism for enterprise software, it was also an ineffective medium for sharing and managing the information and activity generated by that software. The notifications and simple workflows, such as approval processes, generated by customer support ticketing tools, human resources management systems, and expense trackers, disappeared into individual inboxes. Email is static and offers no direct integration with any of these tools. In short, email was a tiny window into the vast landscape of business information and software available to us collectively, and we needed to see the whole picture.
We needed a new way to work that would help us make the most of both our people and our significant investment in software. What was available was incomplete, inadequate, and unfit for our work at hand. What we needed did not exist. So we built it.
Since our public launch in 2014, it has become apparent that organizations worldwide have similar needs, and are now finding the solution with Slack. Our growth is largely due to word-of-mouth recommendations. Slack usage inside organizations of all kinds is typically initially driven bottoms-up, by end users. Despite this, we (and the rest of the world) still have a hard time explaining Slack. It’s been called an operating system for teams, a hub for collaboration, a connective tissue across the organization, and much else. Fundamentally, it is a new layer of the business technology stack in a category that is still being defined.
Slack’s Role
The most helpful explanation of Slack is often that it replaces the use of email inside the organization. Like email (or the Internet or electricity), Slack has very general and broad applicability. It is not aimed at any one specific purpose, but nearly anything that people do together at work. Slack is used to review job candidates, coordinate election coverage, diagnose network problems, negotiate budgets, plan marketing campaigns, approve menus, and organize disaster response teams, along with countless other tasks.
Unlike email, however, most of this activity happens in team-based channels, rather than in individual inboxes. Channels offer a persistent record of the conversations, data, documents, and application workflows relevant to a project or a topic. Membership of a channel can change over time as people join or leave a project or organization, and users benefit from the accumulated historical information in a way an employee never could when starting with an empty email inbox. Depending on the size of the organization, this might provide tens, hundreds or even thousands of times more access to information than is available to individuals working in environments where email is the primary means of communication.

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Also unlike email, Slack was designed from the ground up to integrate with external software systems. Slack provides an easy way for users to share and aggregate information from other software, take action on notifications, and advance workflows in a multitude of third-party applications, over 1,500 of which are listed in the Slack App Directory. Further, Slack’s platform capabilities extend beyond integrations with third-party applications and allow for easy integrations with an organization’s internally-developed software. During the three months ended January 31, 2019, our more than 10 million daily active users included more than 500,000 registered developers. Developers have collectively created more than 450,000 third-party applications or custom integrations that were used in a typical week during the three months ended January 31, 2019. Additionally, we are currently developing low-code solutions to create integrations and workflows entirely in Slack, suitable for all users and based on a simple, non-technical user interface .
Ultimately, Slack is more than email replacement. It is a new layer of technology that brings together people, applications, and data. Just as an operating system coordinates the flow of information and resources of a computer in a centralized fashion, using Slack inside an organization creates a hub into which critical business information flows, is acted upon and transformed, and is then quickly routed to its desired destination. Slack streamlines our users’ workflows, increases the beneficial return on the time they spend communicating, and creates a powerful point of leverage for increased productivity.
Business Context
We believe Slack is positioned extremely well to benefit from several powerful secular trends that are transforming businesses and shaping the future of work. The first is the explosive proliferation of software into every aspect of business and the second is the increased pace of disruption driven by technological change.
According to Netskope, a typical enterprise uses more than 1,000 cloud services. Many of the largest IT departments maintain thousands of enterprise applications. All of this software either automates the repetitive and often error-prone work that humans used to do or augments human effort with entirely new capabilities. This software has enormous benefits in terms of accuracy of information, speed of delivery, and knowledge worker productivity, but it also introduces new challenges.
With the simpler and more routine tasks automated away, the work that remains is more sophisticated and complex. Those tasks, which most rely on human judgment, intelligence, and creativity, are both more difficult to perform and more difficult to coordinate. Organizational alignment becomes harder to achieve. Further, the increased use of highly specialized software in different functional areas leads to a fragmentation of attention and, because it is often difficult to share objects or records with non-users, impedes the flow of important information across the organization.
These challenges compound the disruptive threats companies face in increasingly dynamic environments. Technological change and increased globalization continually create new opportunities and threats, but they also accelerate second-order change in customer needs, competitors’ behavior, and overall macroeconomic conditions. This environment demands an ever-greater ability to adapt and respond : 52% of the companies in the S&P 500 at the end of 2000 were no longer in the S&P at the end of 2018. In an increasingly dynamic world, the fundamental business advantage is organizational agility the ability for individuals, teams, and organizations to maintain alignment while continually transforming to meet evolving challenges.
How Slack Helps
Slack is designed to allow people and teams to realize their full potential at work and, in doing so, to help organizations overcome the challenges created by their increased reliance on a proliferation of specialized software and radically reduce the communication and coordination effort required to achieve a given amount of organizational agility.
Our vision is a world where organizational agility is easy to achieve, regardless of an organization’s size
As a result of the alignment teams and organizations are able to maintain while continuously adapting to respond in increasingly dynamic environments, less effort and energy is wasted and the human beings on those teams are able to fully utilize their intelligence and creativity in pursuit of the organization’s shared objectives.

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Slack makes existing software more useful and accessible
As a flexible platform for routing information of all kinds – messages, data, documents, even user interfaces and application state – Slack integrates horizontally with thousands of other applications, from those provided by companies like Google, Salesforce, ServiceNow, Atlassian, and Dropbox to the proprietary line-of-business applications developed by organizations for their own internal use. This functionality enables users to securely interact with all of these applications in one familiar user interface , with actions and workflows recorded both in Slack and in the integrated applications. For example, a manager can quickly look up an account in Salesforce, approve a time-off request in Workday, and view a Word document stored in Box, all without leaving Slack.
Whatever tools organizations on Slack already use, and whatever they might use in the future, our goal is to make their experience of those tools better because they use Slack. Through an open API and an expansive approach to partnerships, we enable organizations on Slack to get more out of their software investment. Because software is a way of getting more out of what is often an organization’s largest expense, payroll, this can have a double-levered impact on topline productivity.
Slack drives increased organizational agility
As a new layer of business technology that brings together an organization’s people, applications, and data, Slack improves organizational alignment. In a December 2018 survey that we conducted with more than a thousand U.S.-based users who had been using Slack for at least one month, which we refer to as our 2018 Survey, 87% reported that Slack improved communication and collaboration inside their organization. Of those users who believed that Slack impacted the transparency of projects, initiatives, or team activities across their organization, 97% reported either “more” or “much more” transparency with Slack. By the same measure, 89% reported “more” or “much more” productivity.
Organizational agility is a difficult thing to measure, but anyone who has worked at a large organization knows that the cost of communication and coordination is high and it grows dramatically with the number of people involved. We believe an organization’s perception of the value of Slack and specifically their perception of its impact on key factors in their organization’s performance are useful indicators of the improvements organizations are able to achieve through their use of Slack.
Summary of Key Benefits
Working in Slack provides several key benefits to users, teams, and organizations and to our platform ecosystem:
People love using Slack and that leads to high levels of engagement. Slack is enterprise software created with an eye for user experience usually associated with consumer products. We believe that the more simple, enjoyable, and intuitive the product is, the more people will want to use it. As a result, teams benefit from the aggregated attention that happens when all members of a team are engaged in a single collaboration tool.
Slack increases an organization’s “return on communication.” Moving to channel-based communication increases accessibility of communication, which in turn increases transparency and breaks down silos. The organization benefits from increased coordination and alignment from a given amount of communication, with no additional effort in the form of status reports, update meetings, and so on.
Slack increases the value of existing software investment . Integration with Slack increases both the accessibility of information inside applications and the response times for many basic actions. Because Slack users can do virtually everything on Slack on mobile that they can do on desktop, they do not need to have dozens of work applications on their mobile devices to be able to make lightweight use of those applications on the go.
An organization’s archive of data increases in value over time. As teams continue to use Slack, they build a valuable resource of widely accessible information. Important messages are surrounded by useful context and users can see how fellow team members created and worked with the information and arrived at a decision. New employees can have instant access to the information they need to be effective whenever they join a new

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team or company. Finally, the content on Slack is available through powerful search and discovery tools, powered by machine learning, which improve through usage.
Slack helps organizations improve culture and employees’ feelings of empowerment. When every member of a team learns from, and contributes towards, common goals, people feel they have greater influence over the ultimate outcomes of their work. By keeping all team members in the information flow, we believe that Slack increases this sense that members of a team can have an impact and make a difference and that creates greater team cohesion and increases motivation.
Slack helps achieve organizational agility . Slack’s channels immerse workers directly into the dynamic and evolving communication, decision making, and data flow that defines modern work. Because workers have both more access to data updated in real time and more context for that data, they are better able to quickly react and adjust work streams in response to new business priorities or changing conditions while staying in alignment with one another.
Developers are better able to reach and deliver value to their customers . Slack has aggregated hundreds of thousands of organizations on one platform and made it easier for developers to distribute their software to any Slack-using organization. By making information from their applications available and allowing users to perform key actions through a whole new interface, developers can make their customers happier and more engaged.
Organizations and employees demand better and more productive ways to work, and organizations must be able to fully employ the knowledge, skill, and creativity of the people they invest in. We believe that whoever makes it easiest for teams to function with agility and cohesion in an ever more complex world will be the most important software company in the world. We aim to be that company.
Our Business Model
From the outset, our go-to-market strategy has centered around offering an exceptional product and level of service to organizations on Slack. We offer a self-service approach, for b oth free and paid subscriptions to Slack, which capitalizes on strong word-of-mouth adoption and customer love for our brand. Since 2016, we have augmented our approach with a direct sales force and customer success professionals who are focused on driving successful adoption and expansion within organizations, whether on a free or paid subscription plan. We believe deep user engagement and an obsessive focus on customer experience are catalysts for expanding paid adoption within organizations.
We define daily active users as users who either created or consumed content in a given 24-hour period on either a free or paid subscription plan. We define an organization on Slack as a separate entity, such as a company, educational or government institution, or distinct business unit of a company, that is on a subscription plan, whether free or paid. Once an organization has three or more users on a paid subscription plan, we count them as a Paid Customer.
Our user base has grown rapidly since our launch in 2014. During the three months ended January 31, 2019, our daily active users exceeded 10 million. As of January 31, 2019, Slack had more than 600,000 organizations with three or more users, comprised of:
More than 88,000 Paid Customers, including more than 65 companies in the Fortune 100; and
More than 500,000 organizations on our Free subscription plan.
Many of our Paid Customers have thousands of active users and our largest Paid Customers have tens of thousands of employees using Slack on a daily basis.
Our users, whether on a free or paid subscription plan, are highly engaged, and their collective active use of Slack for the week ended January 31, 2019 exceeded 50 million hours. During the week ended January 31, 2019, more than 1 billion messages were sent in Slack. During this same time, on a typical workday, users at Paid Customers averaged nine hours connected to Slack through at least one device and spent more than 90 minutes actively using Slack. We believe that this broad, active user base and deep user engagement propel increased adoption within organizations and inspire many organizations to become Paid Customers.

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Our direct sales and customer success efforts are focused on larger organizations who have a greater number of users and teams and have the potential to increase spend over time. We measure the number of Paid Customers >   $100,000 of ARR as a gauge of adoption within and expansion into large enterprises. We had 575 Paid Customers >$100,000 of ARR as of January 31, 2019, which accounted for approximately 40% of our revenue in fiscal year 2019 .
We generate revenue primarily from the sale of subscriptions for Slack. Paid customers typically pay on a monthly or annual basis, based on the number of users that they have on Slack.
Our reven ue was $105.2 million, $220.5 million, and $400.6 million in fiscal years 2017, 2018, and 2019, respectively, representing annual growth of 110% and 82%, respectively. Our growth is global with international revenue representing 34%, 34%, and 36% of total revenue in fiscal years 2017, 2018, and 2019, respectively. We continue to invest in growing our business to capitalize on our market opportunity. As a result, we incurred net losses of $146.9 million, $140.1 million, and $138.9 million in fiscal years 2017, 2018, and 2019, respectively. Our net losses have been decreasing as a percentage of revenue over time as revenue growth has outpaced the growth in operating expenses.
Expansion within organizations on Slack is a significant contributor to our growth. We measure the rate of expansion within our Paid Customer base, whether it is sales-driven growth inside our larger Paid Customers or product-driven organic growth inside of self-serve Paid Customers, by Net Dollar Retention Rate. Our Net Dollar Retention Rate was 143% as of January 31, 2019. We believe that our Net Dollar Retention Rate is a reflection of the rapid pace of adoption that often occurs as usage spreads within and across teams. We believe that all of these factors will contribute to a high lifetime value of an organization on Slack.
What Sets Us Apart
We believe Slack is uniquely well positioned to maintain its advantages as the market for our new category grows.
Singular focus
Our development, design, partnerships, customer engagement, and investments are targeted at realizing the enormity and simplicity of Slack’s singular mission: to make people’s working lives simpler, more pleasant, and more productive. We have no legacy products or competing priorities. We believe our platform has broad enough utility and a large enough market that we can remain focused indefinitely.
Scale and market leadership
The strength of our market leadership is demonstrated by the scale and growth of our users, the high level of engagement within our user base, our growth within organizations, the breadth of applications that integrate with Slack, and the size of our developer ecosystem. We believe we know more about how organizations use platforms like Slack than anyone else in the world and will put this knowledge to work faster.
Strong increasing returns dynamics
As Slack usage increases inside an organization, more value is created for each additional user who might join, as well as for all existing users. As organizations continue to use Slack over time, the value of their archive increases and they realize more utility in their usage. We believe shared channels between organizations will increase the value of the overall Slack network for each new organization that joins as well as for all existing network members. Slack also generates more value for developers as more users and more organizations join Slack, and users and organizations are more attracted to Slack as more apps are integrated into or built on our platform.
Customer love leading to stickiness and organic expansion
People love using Slack and many become advocates for wider use inside of their organizations. They also tend to recommend Slack when they switch jobs or join organizations that are not yet using Slack. There are thousands of public tweets and other public endorsements or recommendations of Slack, a source of growth that is exceptional in enterprise software.

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Differentiated go-to-market strategy
Organic growth is generated as users realize the benefits of Slack. This growth enables us to attract new and prospective organizations through a highly effective self-service customer engagement model for free and paid subscription plans. We complement our self-service strategy with a focused direct sales effort targeted at organizations with existing organic adoption of Slack. Once prospective organizations are identified, our direct sales and customer success teams work to broaden adoption of Slack into wider-scale deployments.
Customer-centricity as the fundamental tenet of our company
We build our software and user interface around the real needs of human beings. We aim for radical convenience and do our best to anticipate the needs of our users. Empathy and respect for users is built into our company values and this mindset extends to our broader sales and customer engagement model. We focus maniacally on customer support for free and paid subscription plans and treat it as a critical and strategic imperative for our company. We believe people should leave every interaction with a Slack representative feeling that they have been heard, respected, and helped by a human being who truly understands Slack and the experience of depending on it for work. This quality of service has a real impact on user behavior: based on our internal data, users who interact with our customer experience team are eight times more likely to become paid users than those who do not.
Market Opportunity
We believe everyone whose working life is mediated by email is a potential Slack user. Indeed, because of the universal need for organizational agility and the impact to current and potential organizations on Slack of getting more out of their investment in software, we further believe that the shift to Slack, or services like Slack, is inevitable.
We estimate the market opportunity for Slack and other providers of workplace business technology software platforms for communication and collaboration to be $28 billion. We calculate this market opportunity by estimating the total number of companies in our addressable market globally across large enterprises (companies that have more than 5,000 employees), medium-sized organizations (companies that have 250 5,000 employees), and emerging and small businesses, or ESB (companies that have 10 250 employees), and applying ARR to each respective organization based on its size and location. The ARR applied to the estimated number of organizations is calculated by using our internal data on current spend by size of the organization. For large enterprises, we have applied the median ARR of our top 100 global Paid Customers. For medium-sized organizations and ESBs, we have applied a median ARR based on current Paid Customer spend by size. For both medium-sized organizations and ESBs in emerging markets, we have reduced ARR to reflect pricing plans in emerging market regions such as Brazil and India. As our market and the number of competitors in it is rapidly evolving, our estimates for the size of this market may not be reflective of the actual size of the market.
Growth Strategy
Slack has shown significant growth relative to other enterprise software companies, indicating strong product-market fit and a large market opportunity. We intend to continue to grow by the following, and other, means:
Expand our user base through continuous enhancements to Slack
We believe our user base is loyal and engaged because users enjoy working in Slack and value the productivity it enables. We will continue a relentless focus on product design and new user experience to reach more users and organizations who can benefit from Slack. To maintain high levels of user satisfaction, we intend to continue to enhance Slack’s speed, reliability, quality, and capabilities. For example, we intend to increase our investment in the interoperability between Slack and leading providers of email, calendar, task management, file system, and unified communication services.
Grow the number of organizations on Slack and increase our paid customers
We believe our market remains underpenetrated and we will continue to expand our marketing and sales efforts to reach more users and organizations and to increase the number of paid customers.

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Increase usage within organizations on Slack
Expansion within organizations on Slack has been an important growth driver. We plan to continue our efforts to grow use and users within organizations on Slack by increasing our investments in our direct sales force, customer success, and customer experience teams, along with new user education initiatives to help teams get the most out of Slack.
Enable Slack usage across existing and new business networks
Slack has been used primarily for internal communications. Slack’s guest account feature, which allows organizations to bring customers, vendors, consultants, contractors, and other service providers into their Slack instance, is used by more than 65% of paid customers. Our shared channels feature, which facilitates secure collaboration between companies, is in beta release and over 15% of our paid customers have used this feature to connect with other paid customers. We believe adoption of this feature will grow significantly in the coming years, both in terms of network participants and network density. Because the associated network effect increases the value of Slack both for organizations on Slack and organizations new to Slack, we expect shared channels to create more utility for existing users and be an important factor in future growth.
Further invest in enterprise capabilities
We believe there is significant opportunity to accelerate our growth within the world’s largest organizations. We launched Enterprise Grid in 2017 to provide scalability and greater administrative controls to address the needs of larger and more complex enterprises. We intend to increase investments in marketing and expand our field sales team in order to drive greater adoption of Enterprise Grid by large organizations. Additionally, we plan to continue to build product functionality that meets the unique needs of the world’s largest, most complex organizations. Examples of such needs include enterprise key management and features and support for regulated industries, including organizations that are HIPAA or FINRA regulated.
Invest in international expansion
We are currently used in more than 150 countries and available in eight languages (English (U.S.), English (U.K.), French, German, Japanese, Portuguese (Brazil), Spanish (Latin America), and Spanish (Spain)). More than 36% of our revenue in the fiscal year ended January 31, 2019 came from outside the United States. We have sales and customer experience offices in the United States, Canada, Japan, Australia, Ireland, and the United Kingdom. We plan to open offices and hire sales and customer experience people in additional countries and expand our presence in countries where we already operate. We also intend to unlock growth in under-penetrated regions by translating and localizing our product, as well as adding product functionality to address new markets.
Grow our application platform and developer ecosystem
As of the week ended January 31, 2019, more than 1,500 apps were available through our App Directory, and in a typical week during the three months ended January 31, 2019, more than 450,000 third-party applications or custom integrations were used by organizations on Slack. We will continue investing to expand the number of developers building applications that integrate with Slack and to make Slack work with an increasing number of third-party and internally developed custom applications , making Slack even more powerful for our user s. Additionally, we are currently developing low-code solutions to create integrations and workflows entirely in Slack, suitable for all users and based on a simple, non-technical user interface.
Leverage artificial intelligence, machine learning and advanced search
We believe that there is a significant opportunity to improve the quality of communication and collaboration and further streamline people’s working lives by automating workflows . This automation can help people prioritize the most important information and work. We have already seen early benefits from using machine learning and advanced search technologies to proactively recommend relevant topics, experts, and documents in discussions. We intend to continue to invest in our research and development efforts in artificial intelligence, machine learning, and search capabilities.

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Our Service
Slack is a new layer of the business technology stack that brings together people, applications, and data – a single place where people can effectively work together, access hundreds of thousands of critical applications and services, and find important information to do their best work.
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Slack’s Key Functionality
Messaging and Channels: Slack users communicate with one another by posting messages to a channel or sending direct messages to a person or a group of people. Slack’s core organizing principle is the channel, which brings the right people together to collaborate, share information, and get work done. Channels offer flexibility and can be organized by project, topic, team, or whatever makes sense for a specific task or situation. Public channels are accessible to all users within a Slack workspace. For more exclusive workstreams and conversations, users create invite-only channels.
Within channels, users post messages, documents, and images and interact with other software. Users can search for information about a topic or project, find a relevant channel, join it, and easily scroll through the entire channel’s history, finding messages and contextual content. Slack enables users to optimize the way they use the service, allowing users to choose when to receive notifications and customize alerts by person, keyword, channel, or application.
During the week ended January 31, 2019, more than 1 billion messages were sent in Slack.
Integrations: Through integrations with both third-party and internally-built software applications, users of Slack are able to easily access and interact in their channels with information from other applications. We believe this makes Slack users more productive at work and increases the value of other software programs. For example, a user may look up customer account information in Salesforce or get updates on deployment status through GitHub within Slack. More advanced use cases include the ability to design custom workflows, which can automatically perform a series of tasks and actions in Slack in otherwise unconnected software applications. For example, creating a customer service ticket routing application that brings together

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information from a Zendesk ticket, customer data from Salesforce, and suggested solutions from an internally-built knowledge base – all without leaving Slack. Additionally, we are currently developing low-code solutions to create integrations and workflows entirely in Slack, suitable for all users and based on a simple, non-technical user interface .
There are two main types of application integrations:
Custom-built integrations . Purpose-built tools developed by organizations on Slack for their own internal use, or built on their behalf by systems integrators. These applications address unique needs of specific users and organizations on Slack. Examples are:
An integration built by Shopify that enables Shopify employees to run more than 100 custom commands within Slack, including receiving phone, email, and chat support service updates, which helps the team manage requests and assign the right support team member to appropriate channels, and querying information about the most active shops, traffic volume, and sales; and
An integration built by Monzo that alerts the team to a spike or incident in the infrastructure backend and creates a new channel where individuals can troubleshoot the issue in a moment’s notice.
Third-party integrations . Applications available for download from the App Directory or through the vendor. Examples include:
An integration with Atlassian’s Trello that enables a user to create new Trello cards, attach conversations, change due dates, and take other actions on a Trello card in Slack;
An integration with SurveyMonkey that enables users to start and answer surveys in Slack; and
An integration with Zoom that enables a user to start a video call directly from Slack.
Shared Channels: Slack enables communication and collaboration among organizations via shared channels and guest accounts. Shared channels securely connect the Slack workspaces of different organizations, enabling the same level of communication and collaboration between enterprises that Slack brings to teams within an organization. Shared channels can be public or invite-only and contain all of the powerful tools and integrations of Slack along with an added layer of administrative capabilities to regulate and monitor the flow of information between organizations. Guest accounts allow workspace owners to invite people from outside their organizations to join one or more channels.
As of January 31, 2019, more than 15% of our Paid Customers have adopted shared channels since we launched our beta program in September 2017. These Paid Customers have connected an average of more than four shared channels.

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Search: Everything in Slack, including messages, posts from applications, and text content of files is searchable, so that permissioned users can tap into company knowledge and find information when they need it. Over time, use of Slack creates an archive of information generated by an organization that is universally available, persistent and contextual, making Slack’s search function increasingly useful. Our search capability offers a range of filters and modifiers to allow users easy and efficient access to specific knowledge from potentially vast repositories of information. We also leverage machine learning to deliver personalized search results based on user behavior and context, such as the people a user may communicate with most often, the files that may be most relevant to the user and the channels in which the user tends to participate.
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Our Subscription Plans
We offer four subscription plans to serve the varying needs of our users: Free, Standard, Plus, and Enterprise Grid.
Our Free, Standard, and Plus subscription plans consist of a single workspace, which we define as a Slack environment configured for a team. These plans are most often adopted by small and medium sized teams. From time to time, we provide additional features and functionality, such as enterprise key management, to meet specialized requirements of organizations on Slack.
Our Enterprise Grid plan is uniquely designed for larger organizations, which typically are more complex and require enhanced functionality, flexibility, administrative control, and security at scale. Enterprise Grid allows paid customers to:
create and manage an unlimited set of connected workspaces and channels;
search across multiple workspaces, making it easy for workers and administrators to tap into their organization’s collective knowledge at scale;
access centralized controls to ensure a company’s data remains secure, giving administrators a single point of visibility to provision and manage Slack; and
integrate with third-party e-Discovery and data loss prevention tools to help meet security and compliance requirements.
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Slack is accessible through the web, a desktop application, and native iOS and Android applications.
The Slack Platform
Our technology platform was purpose built to enable independent software developers and organizations to integrate existing software with Slack or build entirely new applications that provide new features for Slack users. We believe that the power of Slack is amplified through integration with third-party and internal software, providing easy, intuitive access to a broad range of applications. Our platform consists of a set of open, documented APIs, developer tools, and an App Directory that lists apps that have met our guidelines. Organizations on Slack use our platform to create internal applications and integrations, ranging from simple notifications to complex internal workflows. Third-party developers build integrations and applications that make it easier for their existing customers to engage with their products as well as find new customers.

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There were more than 450,000 third-party applications or custom integrations used in a typical week during the three months ended January 31, 2019. More than 90% of Paid Customers used a third-party application or custom integration in the week ended January 31, 2019.
Our App Directory lists applications and integrations that address virtually all aspects of knowledge work. These applications and integrati ons connect Slack users with software from some of the world’s largest technology companies to some of the smallest startups.
As of January 31, 2019, more than 1,500 apps were listed in our App Directory. A sample of some of the integrations listed in the App Directory is as follows:
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We foster our platform ecosystem through our dedicated Slack API site, open source forums, software development kits, global developer events, partnerships, and technical support for developers building for their own companies or aiming to list their apps in our App Directory.
Organizations on Slack
Organizations on Slack are of all sizes, from individual entrepreneurs, freelancers, and emerging small businesses to large, multi-national corporations. They work across a wide range of industries, including professional services, technology, media, education, healthcare, government, industrials, consumer and retail, and financial services. Organizations are adopting Slack globally and using Slack across more than 150 countries, and more than half of our daily active users are outside the United States. Slack is used by all types of departments, roles, and functions within organizations, including sales, marketing, product, design, engineering, finance, legal, and human resources. According to our 2018 Survey, more than half of our users are in non-technical roles.
As of January 31, 2019, we had more than 600,000 organizations with three or more users, comprised of more than 88,000 Paid Customers, including more than 65 of the companies in the Fortune 100, and more than 500,000 organizations on our Free subscription plan. The number of organizations on Slack is highly diversified, and during the year ended January 31, 2018, no Paid Customer accounted for more than 3% of our revenue.

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Case Studies
The examples of organizations on Slack below illustrate how organizations of all sizes across a wide range of industries benefit from Slack.

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Our Sales and Marketing Approach
We combine a web-based, self-service go-to-market approach with direct sales efforts that focus on growing users within larger organizations and acquiring new large paid customers. We believe that these go-to-market approaches reinforce one another; self-service users become leads for our direct sales force and users within larger enterprises create organic awareness of Slack inside and outside their organizations. We complement these sales and marketing activities with an obsessive focus on customer experience and customer success.
Self-Service Adoption and Marketing
Many organizations adopt Slack initially as part of our self-service go-to-market approach. We deploy a range of marketing strategies and tactics to drive initial awareness and adoption. These include brand advertising, public relations, digital marketing campaigns, product localization, in-product customer education, and a website designed to teach new users about Slack.
Organizations often start by using our free version. Organizations on Slack are diverse, and range from businesses to non-governmental organizations, universities, sports clubs, and open source communities. We believe free usage helps create champions of Slack, and as these prospective paid customers realize the value of Slack, they spread the word organically throughout their networks and organizations.
As organizations engage more deeply with Slack, both through using Slack for collaboration and communication and integrating more third-party and internally-developed software via our platform, they often upgrade to paid plans via our website. We support this upgrade path through targeted marketing campaigns and in-product prompts highlighting the added benefits and features of our paid plans.
Direct sales and marketing
To increase adoption within larger paid customers and acquire new paid customers, we utilize a direct sales organization that complements our self-service approach. Our direct sales force leverages the Slack champions and proofs of concept developed through self-service adoption. We combine this bottoms-up demand with direct sales efforts targeted at C-suite executives and business unit leaders.
These efforts include a globally distributed direct sales force, solutions engineering, demand generation campaigns, webinars, analyst relations, C-suite events, and cooperative marketing efforts with our partners. We also host an annual user conference, Frontiers, where we bring together organizations and partners around the world to share best practices on achieving organizational alignment, unveil the latest Slack features, educate users, and embrace our growing application developer and platform ecosystem.
Customer experience and customer success
We believe that highly responsive and effective support and education are an extension of our brand and are core to building and maintaining user love and trust.
Our customer experience team provides support to users of both free and paid versions of Slack and is core to enhancing user adoption, free-to-paid conversion, and subscription renewal. Additionally, our customer experience team receives and quantifies feedback from organizations on Slack at scale. This maniacal focus on responsiveness and personal touch helps us optimize customer satisfaction and identify high-value opportunities for both user-facing and internal product improvements.
Our customer experience core philosophies are:
Organizations on Slack are busier than we are;
We exist to be of service to organizations on Slack;
The barriers to reach and receive support should be as low as possible; and
Support is an opportunity not just to fix problems, but to educate users and organizations on Slack.

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Our educational offerings include a range of free, web-based classes and tutorials on how to use, administer, optimize, and customize Slack, as well as how to integrate other applications, build custom workflows, and build entirely new applications on Slack. We also offer in-person training through our developer relations program and at events for organizations on Slack.
Our customer success team supports larger organizations through every step of their journey with Slack. This starts with supporting onboarding, workspace best practices, change management, and education, and continues with renewals and expansion to other functional teams, departments, or business units. In addition, we offer professional services tailored to the needs of organizations on Slack.
Our Partnerships
Slack has a robust and diverse partner ecosystem that includes leading enterprise software companies, security providers, systems integrators, and new, emerging companies. Our partner ecosystem extends and enhances Slack through integrations and operates as an important component of our go-to-market strategy. Partners serve as a source of enterprise sales leads and help to accelerate our sales cycles through co-selling and services delivery. Our partners benefit from growth in customer engagement with their products and services and new opportunities to grow their users and customers.
We have deep partnerships with some of the largest and fastest growing enterprise software providers, including Atlassian, Google, Okta, Oracle, Salesforce, SAP, ServiceNow, Workday, and Zoom. Through these partnerships we expand the number of organizations on Slack and provide differentiated user experiences between Slack and the other critical applications used by large, complex organizations. Some examples of the activities we undertake with other software providers include:
Atlassian: Joint migration of organizations from Atlassian’s Hipchat and Stride products to Slack; creation of differentiated user experiences between Slack and the suite of Atlassian products, including Jira, Bitbucket, Confluence, Trello, and Statuspage;
Okta: Cross-platform identity mapping and synchronization; co-selling and joint initiatives to bring our integrated, solutions to the market; and
Workday: Joint product roadmap to deliver Slack-centric experiences for Workday’s employee directory, feedback, expenses, paid time off, and recruiting functionalities.
Slack Fund
Investing is also a component of our partnerships strategy. The Slack Fund is an investment fund that we started, in partnership with entities affiliated with certain of our stockholders, Accel, Andreessen Horowitz, Index Ventures, Kleiner Perkins, Social Capital, and Spark Capital. We created the fund to support companies building applications on the Slack platform and other applications that are focused on the next generation of enterprise software. As of January 31, 2019, Slack Fund has invested $10.1   million in  46  companies, with $5.2 million funded by Slack and the balance funded by the venture capital funds who partner with Slack Fund. We plan to continue to invest in start-up companies that we believe enhance the value of Slack and that are focused on the future of work.
Our Employees, Culture, Values, and Slack for Good
As of January 31, 2019, we had 1,502 full-time employees. We supplement our workforce with contractors and consultants.
At Slack, our goal is to make people’s working lives simpler, more pleasant, and more productive. Slack’s culture is rooted in a sense of belonging, encouraging personal and professional growth, and the ability to empathize and relate to one another.
Part of our culture is what we refer to as Slack for Good. Slack for Good’s principal focus is to increase the representation of people from backgrounds that have been historically under-represented in the technology industry. We have pledged 1% of employee time, 1% of our equity, and 1% of our product to activities associated with Slack

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for Good. We encourage our employees to volunteer their time to support causes of their choice and provide them with paid time off to do so. We have reserved 1.2 million shares of our Class B common stock for potential future sale to fund and support our social impact initiatives. We also donate money and discount access to our service for non-profit organizations.
Research and Development
We build our software with the user in mind – we invest substantial time, energy, and resources to ensure we have a deep understanding of the needs of organizations on Slack and we continually innovate on our product. Unlike traditional enterprise software, we aim to release new features to users and organizations on Slack as rapidly as possible through internal testing releases and external beta cycles to ensure that we are constantly receiving feedback. We leverage the power of our expansive user base and our focused customer service philosophy to collect feedback on product features to enhance our development process.
Since Slack’s launch, we have invested more than $455 million to build our service. Research and development expenses were $96.7 million and $141.4 million for the years ended January 31, 2017 and January 31, 2018, respectively. As of January 31, 2019, we had 536 employees across our engineering, product, research, and design teams.
Technology Infrastructure and Operations
We have built our technology infrastructure using a distributed and scalable architecture on a global scale.
We designed our technology platform with multiple layers of redundancy to guard against data loss and deliver high availability and low latency. Incremental backups are performed hourly and full backups are performed daily. In addition, redundant copies of content are stored in at least two geographically separate regions and are replicated within each region. Data is transmitted in encrypted form and encrypted when stored in our system. We use Amazon Web Services as our processing and delivery infrastructure.
We have built a network operations infrastructure that combines automated, 24x7 telemetry with human monitoring to help ensure that any issues that arise with our service are addressed as quickly as possible. We publish our uptime metrics, system status, and event reports on our public website so that users and organizations know how our systems are performing at any given time.
Security, Privacy, and Data Protection
Trust is important for our relationship with users and organizations on Slack, and we take significant measures to protect their privacy and data.
Security
We devote considerable resources to our security program, which is dedicated to ensuring that organizations on Slack have the highest confidence in our custodianship of their data. Our security program is aligned to the ISO 27000 standards and is regularly audited and assessed by third parties as well as organizations on Slack.
Our security program consists of the following:
Organizational security including personnel security, security and privacy training, a team of dedicated security professionals, policies and standards, separation of duties, and regular audits, compliance activities, and third-party assessments;
Secure by design principles by which we assess the security risk of each software development project according to our secure development lifecycle and create a set of requirements that must be met before the resulting change may be released to production; and
Public bug bounty program to facilitate responsible disclosure of potential security vulnerabilities identified by external researchers and reward them for their verified findings.

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The focus of our security program is to prevent unauthorized access to the data of organizations on Slack. To this end, our team of security practitioners, working in partnership with peers across our company, work to identify and mitigate risks, implement best practices, and continue to evaluate ways to improve. These steps include data encryption in transit and at rest, network security, classifying and inventorying data, limiting and authorizing access controls, and multi-factor authentication for access to systems with data. We also employ regular system monitoring, logging, and alerting to retain and analyze the security state of our corporate and production infrastructure.
In addition, our security program has achieved several internationally-recognized certifications and industry standard audited attestations of our security controls, and maintains a number of compliance programs.
The International Organization for Standardization, or ISO, has developed a series of standards for information security and related areas, and we have received the following ISO certifications:
ISO/IEC 27001 (Information Security Management);
ISO/IEC 27017 (Security Controls for the Provisions and Use of Cloud Services); and
ISO/IEC 27018 (Protection of Personally Identifiable Information).
Service Organization Controls, or SOC, are standards established by the American Institute of Certified Public Accountants for reporting on internal control environments implemented within an organization. We have completed SOC 2 and SOC 3 examinations.
We are a member of the Cloud Security Alliance, or CSA. The CSA Security, Trust & Assurance Registry, or STAR, is a publicly-accessible registry that offers a security assurance program for cloud services, helping organizations assess the security posture of cloud providers they currently use or are considering using. We meet the requirements of the STAR Level 1 Self-Assessment.
The Health Insurance Portability and Accountability Act, or HIPAA, is a U.S. government regulation that includes data privacy, security and breach notification requirements for safeguarding protected health information. Since 2017, we have offered limited support for HIPAA-regulated organizations that purchase Enterprise Grid.
The Federal Risk and Authorization Management Program, or FedRAMP, is a U.S. government program that provides a standardized approach to security assessment, authorization and continuous monitoring for cloud products and services and allows federal agencies to accelerate cloud adoption initiatives. We have achieved a FedRAMP Authority to Operate at the Low/Tailored impact level issued by the General Services Administration for our Standard, Plus and Enterprise Grid subscription plans.
The G-Cloud framework is an agreement between the government of the United Kingdom and suppliers who provide cloud-based services to U.K. public sector organizations. All approved cloud-based services and providers are listed on a publicly accessible portal known as the Digital Marketplace. Our Standard and Plus subscription plans are listed in the Digital Marketplace.
We take appropriate steps to help ensure that our security measures are maintained by the third-party vendors we use, including by conducting security reviews and audits.
Privacy and data protection
The privacy of users and protection of data is important to Slack’s continued growth and success. Privacy is a shared responsibility among all our employees, but we also have a dedicated privacy and data governance team that builds and executes on our privacy program, including the management of data protection impact assessments. Our privacy and legal teams work together to conduct product and feature reviews, data inventory and mapping, and support for data protection and privacy-related requests.
We are committed to complying with, and helping organizations on Slack comply with, data protection laws globally. We monitor guidance from industry and regulatory bodies, meet with regulators and update our product features and contractual commitments accordingly.

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Slack is offered to organizations outside the United States and Canada by Slack Technologies Limited, an Irish company based in Dublin, Ireland, which is subject to the European Union’s General Data Protection Regulation and the regulatory oversight of the Irish Data Protection Commission. We also maintain a self-certification under the E.U.-U.S. and Swiss-U.S. Privacy Shield and offer European Union Model Clauses, also known as Standard Contractual Clauses.
We maintain a privacy policy that describes how Slack collects, uses and discloses information, and what choices organizations and users have.
Competition
The market for services like Slack is emerging, rapidly evolving, and fragmented, and we believe that Slack represents a new category of business technology. As a result, we principally compete against incumbent collaboration and communication tools and products from established vendors, such as Microsoft, productivity tool and email providers, such as Google, unified communications providers, such as Cisco, and consumer application companies that have entered the business software market, such as Facebook. We also compete with smaller companies that offer niche or point products that attempt to address certain problems that Slack addresses. These smaller companies include companies that specialize in voice or video communication, instant messaging, email filtering and email inbox organization, business workflows, team-based collaboration, intranet creation, and maintenance and other functionality. Some of these companies offer free or discounted services. We believe that we compete favorably with these smaller companies because they do not offer the unique mix of features and functionality combined with our proven ability to scale to handle large amounts of users, usage, and data. In addition, our market is subject to changing technology, shifting customer needs, new market entrants, and frequent introductions of new products and services.
We believe that the principal competitive factors in our markets include the following:
ease of adoption, use, and deployment;
product functionality;
platform capabilities;
breadth and depth of platform integrations;
scalability;
security and privacy;
ability to support intercompany collaboration;
brand awareness and reputation;
customer support; and
total cost of ownership.
We believe that our product experience and product strategy, technological innovation, and company culture enable us to compete favorably on each of these factors.
We expect competition to increase as established and emerging companies continue to enter the markets we serve or attempt to address the problems Slack addresses, as customer requirements evolve and as new products, technologies, and regulations are introduced. Further, some of our competitors have longer operating histories, the ability to bundle a broader range of products and services, larger marketing budgets, access to larger existing user bases, and greater financial, technical, and other resources than we do. We believe, however, that we are uniquely positioned to more rapidly innovate and respond to new technologies and customer requirements than our competitors.

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Intellectual Property
We believe that our intellectual property rights are valuable and important to our business. We rely on a combination of patents, trademarks, copyrights, trade secrets, license agreements, confidentiality procedures, non-disclosure agreements, employee disclosure, and invention assignment agreements, and other legal and contractual rights to establish and protect our proprietary rights.
As of January 31, 2019, we had one issued patent in the United States, which expires in 2036, and more than 80 pending patent applications that cover various aspects of Slack in the United States and abroad. These patents and patent applications are intended to protect our proprietary inventions relevant to our business.
We have trademark rights in our name and other brand indicia and have trademark registrations for select marks in the United States and other jurisdictions around the world. We also have registered domain names for websites that we use in our business, such as www.slack.com, and similar variations.
We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost effective. Despite our efforts to protect our intellectual property rights, they may not be respected in the future or may be invalidated, circumvented, or challenged. In addition, the laws of various foreign countries where our products are distributed may not protect our intellectual property rights to the same extent as laws in the United States.
Facilities
Our corporate headquarters is located in San Francisco, California, and covers 228,998 square feet pursuant to an operating lease that expires in 2028. We also lease additional facilities in San Francisco, California; Denver, Colorado; New York, New York; Dublin, Ireland; London, United Kingdom; Toronto, Canada; Vancouver, Canada; Melbourne, Australia; Sydney, Australia; Tokyo, Japan; and Pune, India.
We lease all of our facilities and do not own any real property. We believe that our facilities are generally suitable to meet our current needs. We intend to expand our facilities as we add employees and enter new geographic markets, and we believe that suitable additional or alternative space will be available as needed to accommodate any such growth.
Legal Proceedings
We are not party to any material pending legal proceedings. From time to time, we may be subject to legal proceedings and claims arising in the ordinary course of business.

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MANAGEMENT
Executive Officers and Directors
The following table provides information regarding our executive officers and directors as of February 28, 2019:
Name
 
Age
 
Position
Executive Officers:
 
 
 
 
Stewart Butterfield
 
45
 
Co-Founder, Chief Executive Officer, and Chairman of the Board of Directors
Allen Shim
 
38
 
Chief Financial Officer
Robert Frati
 
49
 
Senior Vice President of Sales and Customer Success
Cal Henderson
 
38
 
Co-Founder, Chief Technology Officer
David Schellhase
 
55
 
General Counsel, Secretary
Tamar Yehoshua
 
54
 
Chief Product Officer
 
 
 
 
 
Non-Employee Directors:
 
 
 
 
Andrew Braccia (2)
 
43
 
Director
Edith Cooper (2)(3)
 
57
 
Director
Sarah Friar (1)
 
46
 
Director
John O’Farrell (1)
 
60
 
Director
Chamath Palihapitiya
 
42
 
Director
Graham Smith (1)(3)
 
59
 
Director
__________________
(1)
Member of the audit and risk committee.
(2)
Member of the compensation committee.
(3)
Member of the nominating and corporate governance committee.
Each executive officer serves at the discretion of our board of directors and holds office until his or her successor is duly elected and qualified or until his or her earlier resignation or removal. There are no family relationships among any of our directors or executive officers.
Executive Officers
Stewart Butterfield . Mr. Butterfield co-founded Slack and has served as our Chief Executive Officer and as Chairman of our board of directors since February 2009. From April 2005 to July 2008, Mr. Butterfield served as General Manager of the photo-sharing website Flickr at Yahoo! Inc., following Yahoo!’s acquisition of Ludicorp Research and Development Ltd. (which developed Flickr), where he served as Chief Executive Officer from May 2002 to April 2005. Mr. Butterfield holds a Master of Philosophy from the University of Cambridge and a Bachelor of Arts in Philosophy from the University of Victoria.
We believe that Mr. Butterfield is qualified to serve as a member of our board of directors because of his experience and perspective as our Chief Executive Officer and a co-founder.
Allen Shim . Mr. Shim has served as our Chief Financial Officer since January 2018. Mr. Shim joined Slack in March 2014 and served as Senior Vice President of Finance and Operations from March 2014 to January 2018. From September 2008 to March 2014, Mr. Shim served as Vice President of Finance and Treasurer at YuMe, Inc., a data analysis company for television advertising that was acquired by RhythmOne in 2017. From March 2005 to September 2008, Mr. Shim worked in business operations at Yahoo! Inc. Mr. Shim is a Chartered Financial Analyst (CFA) charterholder and holds a Bachelor of Science in Economics from the Wharton School of the University of Pennsylvania.

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Robert Frati . Mr. Frati has served as our Senior Vice President of Sales and Customer Success since February 2018. Mr. Frati joined Slack in May 2016 and served as Vice President of Sales and Customer Success from May 2016 to February 2018. From January 2006 to May 2016, Mr. Frati served in various roles at salesforce.com inc., a customer relationship management software company, most recently as Senior Vice President, Commercial Sales, Asia Pacific from August 2014 to April 2016. Mr. Frati holds a Bachelor of Arts in Political Economy from the University of California, Berkeley.
Cal Henderson. Mr. Henderson co-founded Slack. He has served as our Chief Technology Officer since December 2012 and served as Vice President of Engineering from April 2009 to December 2012. From June 2005 to April 2009, Mr. Henderson served as Director of Engineering at Yahoo! Inc. From December 2003 to June 2005, Mr. Henderson served as Director of Web Development at Ludicorp Research and Development Ltd. Mr. Henderson holds a Bachelor of Science in Software Engineering from the University of Central England.
David Schellhase. Mr. Schellhase has served as our General Counsel and Secretary since December 2016. From February 2015 to April 2016, Mr. Schellhase served as Chief Operating Officer at Honest Work Corporation, a software company that was acquired by Twitter, Inc. From June 2011 to January 2015, Mr. Schellhase served as General Counsel and then Strategic Advisor at Groupon, Inc., an e-commerce marketplace company. From July 2002 to May 2011, Mr. Schellhase served as General Counsel at salesforce.com, inc. Mr. Schellhase holds a Juris Doctor from Cornell Law School and a Bachelor of Arts in European History from Columbia University.
Tamar Yehoshua . Ms. Yehoshua has served as our Chief Product Officer since January 2019. From August 2010 to January 2019, Ms. Yehoshua served in various roles at Alphabet, Inc., an Internet-related services and products company, first as Director, Product Management, until September 2013, and then as Vice President, Product Management, in leadership roles on search, identity, and privacy. Since March 2019, Ms. Yehoshua has served as a member of the board of directors of ServiceNow, Inc., a publicly traded cloud computing company. Since October 2017, Ms. Yehoshua has served as a member of the board of directors of Yext Inc., a publicly traded online brand management company. From December 2015 to May 2017, Ms. Yehoshua served as a member of the board of directors of RetailMeNot, Inc., a publicly-traded company operating an online marketplace that aggregates discounts and offer codes. Ms. Yehoshua holds a Master of Science in Computer Science from the Hebrew University of Jerusalem and a Bachelor of Arts in Mathematics from the University of Pennsylvania.
Non-Employee Directors
Andrew Braccia . Mr. Braccia has served as a member of our board of directors since March 2010. Since April 2007, Mr. Braccia has served as a Partner at Accel, a venture capital firm. From 1998 to 2007, Mr. Braccia was Vice President of Yahoo! Search at Yahoo! Inc. Mr. Braccia serves as a member of the board of directors of several private technology companies. Mr. Braccia holds a Bachelor of Science in Business Administration from the University of Arizona.
We believe that Mr. Braccia is qualified to serve as a member of our board of directors because of his significant knowledge of and history with our company, his experience as a seasoned investor and as a current and former director of many companies, and his knowledge of the industry in which we operate.
Edith Cooper . Ms. Cooper has served as a member of our board of directors since January 2018. From May 1996 to December 2017, Ms. Cooper served in various roles at Goldman Sachs Group, Inc., an investment bank, including Managing Director, Securities Division; Managing Director, Global Head of Human Capital Management; and, most recently, Senior Director. Ms. Cooper serves as a member of the board of directors of Etsy, Inc., a publicly-traded e-commerce company. Ms. Cooper holds a Masters of Business Administration from Northwestern University Kellogg School of Management and a Bachelor of Arts in American History from Harvard University.
We believe that Ms. Cooper is qualified to serve as a member of our board of directors because of her experience as a financial industry executive and her extensive knowledge of that industry and the industry in which we operate.
Sarah Friar . Ms. Friar has served as a member of our board of directors since March 2017. Since December 2018, Ms. Friar has served as Chief Executive Officer at Nextdoor, a social network for neighborhoods. From July 2012 to November 2018, Ms. Friar served as Chief Financial Officer at Square, Inc., a financial services and mobile payment

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company. From April 2011 to July 2012, Ms. Friar served as Senior Vice President, Finance and Strategy at salesforce.com, inc. Ms. Friar also serves as a member of the board of directors of Walmart Inc., a publicly-traded retail and wholesale operations company. From September 2012 to May 2015, Ms. Friar served as a member of the board of directors of Model N, Inc., a publicly-traded company providing revenue management cloud solutions for life sciences and technology companies. From June 2014 to April 2018, Ms. Friar served as a member of the board of directors of New Relic, Inc., a publicly-traded provider of real-time insights for software-driven businesses. Ms. Friar holds a Masters of Business Administration from Stanford University and a Masters of Engineering in Metallurgy, Economics, and Management from the University of Oxford.
We believe that Ms. Friar is qualified to serve as a member of our board of directors because of her experience as a public company executive, her extensive finance background, her service as a current and former director of public companies, and her knowledge of the industry in which we operate.
John O’Farrell . Mr. O’Farrell has served as a member of our board of directors since April 2011. Since June 2010, Mr. O’Farrell has served as a General Partner at Andreessen Horowitz, a venture capital firm. Prior to joining Andreessen Horowitz, Mr. O’Farrell served in various management positions with Silver Spring Networks, Inc., Opsware, Inc., a publicly-traded software company, At Home Corporation, US WEST Inc., and Telecom Eireann, an Irish telecommunications company. Mr. O’Farrell has served as a member of the board of directors of PagerDuty, Inc., a publicly-traded software-as-a-service company that provides a digital operations management platform for businesses, since 2013. Mr. O’Farrell also serves as a member of the board of directors of a number of privately held companies, the U.S. Fund for UNICEF (d/b/a UNICEF USA), and MapLight, a nonprofit research organization . Mr. O’Farrell holds a Masters of Business Administration from Stanford University and a Bachelor of Engineering in Electrical Engineering from University College Dublin.
We believe that Mr. O’Farrell is qualified to serve as a member of our board of directors because of his significant knowledge of and history with our company, his business and venture capital expertise, his extensive experience as an executive and board member of technology companies, and his knowledge of the industry in which we operate.
Chamath Palihapitiya . Mr. Palihapitiya has served as a member of our board of directors since August 2017. Mr. Palihapitiya co-founded Social Capital, a venture capital firm, and has served as its Chief Executive Officer since July 2011. From July 2007 to June 2011, Mr. Palihapitiya worked at Facebook, Inc., a social media and social networking company, where he held various roles, including Vice President, Platform and Monetization and Vice President, User Growth, Mobile & International. Mr. Palihapitiya serves as a member of the board of directors of Social Capital Hedosophia Holdings Corp., a publicly-traded blank check company. Mr. Palihapitiya also serves as a member of the board of directors of several private technology companies. Mr. Palihapitiya holds a Bachelor of Applied Sciences in Electrical Engineering from the University of Waterloo.
We believe that Mr. Palihapitiya is qualified to serve as a member of our board of directors because of his experience as a company executive, his experience as a seasoned investor, and his knowledge of the industry in which we operate.
Graham Smith . Mr. Smith has served as a member of our board of directors since December 2018. Mr. Smith serves as a member of the board of directors of Splunk Inc., BlackLine, Inc., and Xero Limited, all of which are publicly-traded software companies. From March 2015 to February 2019, Mr. Smith served as a member of the board of directors of MINDBODY, Inc., a publicly-traded technology platform serving the fitness, beauty and wellness services industries, which was acquired by Vista Equity Partners in February 2019. From December 2015 to June 2018, Mr. Smith served as a member of the board of directors of Citrix Systems, Inc., a publicly-traded software company providing server, application, and desktop virtualization, and networking. From December 2007 to June 2015, Mr. Smith worked at salesforce.com, inc. serving first as Chief Financial Officer and then as Executive Vice President, Finance. From January 2003 to December 2007, Mr. Smith served as Chief Financial Officer at Advent Software, Inc., a portfolio accounting software company. Mr. Smith qualified as a member of the Institute of Chartered Accountants in England and Wales and holds a Bachelor of Science in Economics and Politics from the University of Bristol.
We believe that Mr. Smith is qualified to serve as a member of our board of directors because of his experience as a current and former director of many public companies, his extensive finance background, including service as a chief financial officer of several large, publicly-traded technology companies, and his knowledge of the industry in which we operate.

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Code of Conduct
Our board of directors has adopted a code of conduct that will apply to all of our employees, officers, and directors, including our Chief Executive Officer, Chief Financial Officer, and other executive and senior financial officers. Upon the effectiveness of the registration statement of which this prospectus forms a part, the full text of our code of conduct will be posted on our website. We intend to disclose any amendments to our code of conduct, or waivers of its requirements, on our website or in filings under the Exchange Act.
Board of Directors
Our business and affairs are managed under the direction of our board of directors. The number of directors will be fixed by our board of directors, subject to the terms of our amended and restated certificate of incorporation and amended and restated bylaws that will become effective shortly following the effectiveness of the registration statement of which this prospectus forms a part. Our board of directors consists of seven directors, six of whom will qualify as “independent” under NYSE listing standards.
In accordance with our amended and restated certificate of incorporation and our amended and restated bylaws, our board of directors will be divided into three classes with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Our directors will be divided among the three classes as follows:
the Class I directors will be Stewart Butterfield and John O’Farrell, and their terms will expire at the annual meeting of stockholders to be held in 2020;
the Class II directors will be Andrew Braccia, Sarah Friar, and Chamath Palihapitiya, and their terms will expire at the annual meeting of stockholders to be held in 2021; and
the Class III directors will be Edith Cooper and Graham Smith, and their terms will expire at the annual meeting of stockholders to be held in 2022.
Each director’s term will continue until the election and qualification of his or her successor, or his or her earlier death, resignation, or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.
This classification of our board of directors may have the effect of delaying or preventing changes in control of our company.
Director Independence
Our board of directors has undertaken a review of the independence of each director. Based on information provided by each director concerning his or her background, employment, and affiliations, our board of directors has determined that Messrs. Braccia, O’Farrell, Palihapitiya, and Smith and Mmes. Cooper and Friar do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable rules and regulations of the SEC and the listing standards of the NYSE. In making these determinations, our board of directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director, and the transactions involving them described in the section titled “Certain Relationships and Related Party Transactions.”
Lead Independent Director
Our board of directors has adopted, effective prior to the effectiveness of the registration statement of which this prospectus forms a part, corporate governance guidelines that provide that one of our independent directors will serve as our lead independent director for so long as we have a non-independent chairperson. Our board of directors has appointed Mr. O’Farrell to serve as our lead independent director. As lead independent director, Mr. O’Farrell will preside over periodic meetings of our independent directors, serve as a liaison between the Chairperson of our board

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of directors and the independent directors and perform such additional duties as our board of directors may otherwise determine and delegate.
Committees of the Board of Directors
Our board of directors has established an audit and risk committee, a compensation committee, and a nominating and corporate governance committee. The composition and responsibilities of each of the committees of our board of directors are described below. Members will serve on these committees until their resignation or until as otherwise determined by our board of directors.
Audit and Risk Committee
Our audit and risk committee consists of Ms. Friar, Mr. O’Farrell, and Mr. Smith, with Mr. Smith serving as Chairperson. The composition of our audit and risk committee meets the requirements for independence under current NYSE listing standards and SEC rules and regulations. Each member of our audit and risk committee meets the financial literacy requirements of the NYSE listing standards. In addition, our board of directors has determined that each of Mr. Smith and Ms. Friar is an audit committee financial expert within the meaning of Item 407(d) of Regulation S-K under the Securities Act. Our audit and risk committee will, among other things:
select and hire a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;
supervise and evaluate the independent registered public accounting firm;
evaluate the independence of the independent registered public accounting firm;
discuss the scope and results of the audit with the independent registered public accounting firm, and review, with management and the independent registered public accounting firm, our interim and year-end results of operations;
approve audited financial information and the audit and risk committee report;
oversee procedures for employees to submit concerns anonymously about questionable accounting or audit matters;
review major financial risk exposures and information security risk;
review related party transactions;
obtain and review a report by the independent registered public accounting firm at least annually, that describes our internal control procedures, any material issues with such procedures and any steps taken to deal with such issues;
review disclosure controls and procedures; and
approve (or, as permitted, pre-approve) all audit and all permissible non-audit services and fees, to be performed by the independent registered public accounting firm.
Our audit and risk committee operates under a written charter that satisfies the applicable rules of the SEC and the listing standards of the NYSE.
Compensation Committee
Our compensation committee consists of Ms. Cooper and Mr. Braccia, with Ms. Cooper serving as Chairperson. The composition of our compensation committee meets the requirements for independence under NYSE listing standards and SEC rules and regulations. Each member of the compensation committee is also a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act. The purpose of our compensation committee

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is to discharge the responsibilities of our board of directors relating to compensation of our executive officers. Our compensation committee, among other things:
reviews, approves and determines, or makes recommendations to our board of directors regarding, the compensation of our executive officers;
administers our stock and equity incentive plans;
reviews and approves, or make recommendations to our board of directors regarding, incentive compensation and equity plans; and
establishes and reviews general policies relating to compensation and benefits of our employees.
Our compensation committee operates under a written charter that satisfies the applicable rules of the SEC and the listing standards of the NYSE.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Ms. Cooper and Mr. Smith, with Ms. Cooper serving as Chairperson. The composition of our nominating and corporate governance committee meets the requirements for independence under NYSE listing standards and SEC rules and regulations. Our nominating and corporate governance committee will, among other things:
identify, evaluate and select, or make recommendations to our board of directors regarding, nominees for election to our board of directors and its committees;
evaluate the performance of our board of directors and of individual directors;
consider and make recommendations to our board of directors regarding the composition of our board of directors and its committees;
review developments in corporate governance practices;
evaluate the adequacy of our corporate governance practices and reporting; and
develop and make recommendations to our board of directors regarding corporate governance guidelines and matters.
The nominating and corporate governance committee operates under a written charter that satisfies the applicable listing requirements and rules of the NYSE.
Role of Board of Directors in Risk Oversight
Our board of directors has responsibility for the oversight of our risk management and, either as a whole or through the audit and risk committee, regularly discusses with management our major risk exposures, their potential impact on our business and the steps we take to manage them. The risk oversight process includes receiving regular reports from the audit and risk committee and members of senior management to enable our board of directors to understand our risk identification, risk management and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory, cybersecurity, strategic, and reputational risk.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee is or has been an officer or employee of our company. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee. See the section titled “Certain Relationships and Related Party Transactions” for information about related party transaction involving members of our compensation committee or their affiliates.

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Non-Employee Director Compensation
Other than as set forth in the table and described more fully below, we did not pay any compensation or make any equity awards or non-equity awards to any of our non-employee directors during fiscal year 2019. Directors may be reimbursed for travel and other expenses directly related to their activities as directors. Directors who also serve as employees receive no additional compensation for their service as directors. During fiscal year 2019, Mr. Butterfield, our Chief Executive Officer, was a member of our board of directors, as well as an employee, and received no additional compensation for his services as a director. See the section titled “Executive Compensation” for more information about Mr. Butterfield’s compensation for fiscal year 2019. The following table presents the total compensation for each person who served as a non-employee director during fiscal year 2019.
Name
 
Stock Awards ($) (1)
 
Total ($)
Andrew Braccia, Edith Cooper, John O’Farrell, Chamath Palihapitiya (2)
 
 
Sarah Friar (3)
 
3,024,827
 
3,024,827
Graham Smith (4)
 
1,751,400
 
1,751,400
__________________
(1)
The amounts reported represent the aggregate grant date fair value of the restricted shares or restricted stock units awarded to the non-employee directors during fiscal year 2019, calculated in accordance with FASB ASC Topic 718. Such grant date fair value does not take into account any estimated forfeitures. The assumptions used in calculating the grant date fair value of the awards reported in this column are set forth in the notes to our consolidated financial statements included elsewhere in this prospectus. The amounts reported in this column reflect the accounting cost for these awards and does not correspond to the actual economic value that may be received by the director upon the sale of any of the underlying shares of Class B common stock.
(2)
Messrs. Braccia, O’Farrell, and Palihapitiya and Ms. Cooper did not receive any compensation for fiscal year 2019.
(3)
In October 2018, we granted a restricted stock award for 406,017 shares of our Class B common stock outside of our 2009 Plan to Ms. Friar through the David Riley and Sarah Friar Revocable Trust dated August 11, 2006. The restricted shares vest in 16 equal quarterly installments commencing on June 8, 2017, subject to Ms. Friar’s continuous service on each such date. Upon Ms. Friar’s service to us through a change in control, 100% of the restricted shares shall immediately vest.
(4)
Mr. Smith was elected to our board of directors in December 2018 and was granted a restricted stock unit award for 210,000 shares of our Class B common stock under our 2009 Plan. The restricted stock units vest upon the satisfaction of both a time condition and performance vesting. The time condition is satisfied over a four year period, with 25% vesting in December 2019, and the remaining 75% time-vesting in 12 equal quarterly installments thereafter, subject to Mr. Smith’s continuous service on each such date. The performance vesting will be achieved upon the first to occur of (i) a change in control of the company, (ii) the initial public offering of our securities, or (iii) the listing and public trading of our Class A common stock on the NYSE. Upon Mr. Smith’s service to us through a change in control, 100% of the restricted stock units shall immediately satisfy the time condition.
As of January 31, 2019, Ms. Cooper held 273,428 restricted stock units, Ms. Friar held 228,385 shares of restricted stock that are subject to a risk of forfeiture through the David Riley and Sarah Friar Revocable Trust dated August 11, 2006, and Mr. Smith held 210,000 restricted stock units. None of the other non-employee directors held equity awards as of January 31, 2019.

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Prior to the effectiveness of the registration statement of which this prospectus forms a part, we did not have a formal policy to compensate our non-employee directors. Immediately prior to the effectiveness of the registration statement of which this prospectus forms a part, we intend to implement a formal policy pursuant to which our non-employee directors will be eligible to receive the following cash retainers and equity awards.
Annual Retainer for Board Membership
 
Annual service on the board of directors
$
35,000

Annual service on the board of directors as lead independent director
$
20,000

Additional Annual Retainer for Committee Membership
 
Annual service as member of the audit and risk committee (other than chair)
$
10,000

Annual service as chair of the audit and risk committee
$
20,000

Annual service as member of the compensation committee (other than chair)
$
7,500

Annual service as chair of the compensation committee
$
15,000

Annual service as member of the nominating and corporate governance committee (other than chair)
$
4,000

Annual service as chair of the nominating and corporate governance committee
$
8,000

Our policy will provide that each non-employee director elected to our board of directors after the effectiveness of this registration statement of which this prospectus forms a part, upon initial election to our board of directors, will be granted RSUs having a fair market value of $300,000, or the Initial Grant. In addition, on the date of each of our annual meetings of stockholders following the completion of the effectiveness of the registration statement of which this prospectus forms a part, each non-employee director who will continue as a non-employee director following such meeting will be granted an annual award of RSUs having a fair market value of $180,000, or the Annual Grant. The Initial Grant will vest in three equal annual installments on each anniversary date on which the non-employee director was appointed to our board for directors, subject to continued service as a director through each applicable vesting date. The Annual Grant will vest in full on the earlier of (i) the first anniversary of the grant date or (ii) our next annual meeting of stockholders, subject to continued service as a director through the applicable vesting date. In addition, all such awards are subject to full accelerated vesting upon the sale event of our company (as defined in the policy).
Employee directors will receive no additional compensation for their service as a director.
We will reimburse all reasonable out‑of‑pocket expenses incurred by directors for their attendance at meetings of our board of directors or any committee thereof.

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EXECUTIVE COMPENSATION
Overview
The following discussion contains forward-looking statements that are based on our current plans, considerations, expectations, and determinations regarding future compensation programs. The actual amount and form of compensation and the compensation policies and practices that we adopt in the future may differ materially from currently planned programs as summarized in this discussion.
As an “emerging growth company,” we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act. This section provides an overview of the compensation awarded to, earned by, or paid to each individual who served as our principal executive officer during fiscal year 2019, and our next two most highly compensated executive officers in respect of their service to our company for fiscal year 2019. We refer to these individuals as our named executive officers. Our named executive officers for fiscal year 2019 are:
Stewart Butterfield, our Chief Executive Officer;
Robert Frati, our Senior Vice President of Sales and Customer Success; and
Allen Shim, our Chief Financial Officer.
Our executive compensation program is based on a pay for performance philosophy. Compensation for our executive officers is comprised primarily of the following main components: base salary, bonus (or commissions), and equity incentives in the form of restricted stock or RSU awards. Our executive officers, like all full-time employees, are eligible to participate in our health and welfare benefit plans. As we transition from a private company to a publicly traded company, we intend to evaluate our compensation philosophy and compensation plans and arrangements as circumstances require.
2019 Summary Compensation Table
The following table provides information regarding the total compensation, for services rendered in all capacities, that was earned by our named executive officers during fiscal year 2019.
Name and principal position
 
Year
 
Salary
($)
 
Stock Awards ($) (1)
 
Non-Equity Incentive Plan Compensation
($)
(2)
 
All Other Compensation ($) (3)
 
Total
($)
Stewart Butterfield
Chief Executive Officer (4)
 
2019

 
356,952

(5)  
 
9,798,113

 
136,715

 
55,466

 
10,347,246

Robert Frati
SVP of Sales and Customer Success
 
2019

 
450,000

 
 
758,840

 
331,087

 
4,000

 
1,543,927

Allen Shim
Chief Financial Officer
 
2019

 
320,000

 
 
3,357,900

 
122,880

 
4,094

 
3,804,874

__________________
(1)
The amounts reported represent the aggregate grant date fair value of the restricted stock or restricted stock units awarded to the named executive officers during fiscal year 2019, calculated in accordance with FASB ASC Topic 718. Such grant date fair value does not take into account any estimated forfeitures. The assumptions used in calculating the grant date fair value of the awards reported in this column are set forth in the notes to our consolidated financial statements included elsewhere in this prospectus. The amounts reported in this column reflect the accounting cost for these awards and does not correspond to the actual economic value that may be received by the officer upon the sale of any of the underlying shares of Class B common stock.
(2)
The amounts represent annual cash bonuses earned by Mr. Butterfield and Mr. Shim based on the achievement of company and individual performance objectives. For Mr. Frati, the amount reflects quarterly commissions earned by Mr. Frati under our sales incentive plan, or Sales Incentive Plan.
(3)
The amounts reported represent 401(k) company matching contributions for Mr. Frati and Mr. Shim. For Mr. Butterfield, the amount reported represents $29,438 in travel and housing costs, $24,953 as a tax gross-up for the aforementioned costs, and $1,075 in 401(k) company matching contributions.
(4)
From February 1, 2018 through June 30, 2018 as well as the month of September 2018, Mr. Butterfield was compensated in Canadian dollars for an aggregate amount of CAD$154,006, which has been converted into U.S. dollars based on the exchange rate at the applicable points in time that such compensation was paid (such exchange rate obtained from Xignite) to $119,637.
(5)
Mr. Butterfield’s base salary was increased to $430,000 on July 1, 2018.

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Narrative to Summary Compensation Table
Base Salaries
We use base salaries to recognize the experience, skills, knowledge, and responsibilities required of all our employees, including our named executive officers. Base salaries are reviewed annually, typically in connection with our annual performance review process, and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance, and experience. For fiscal year 2019, the annual base salary for Mr. Butterfield was $234,949 (which is equal to CAD$320,000 converted into U.S. dollars using an exchange rate of CAD$1.362 for each U.S. dollar) until June 30, 2018, and $430,000 on and after July 1, 2018, and for Messrs. Frati and Shim $450,000 and $320,000, respectively.
Annual Bonuses and Commissions
From time to time, our board of directors may approve annual bonuses for our named executive officers based on individual performance, company performance, or as otherwise determined to be appropriate. In fiscal year 2019, Messrs. Butterfield and Shim were both eligible for an annual cash bonus equal to 40% of their base salary based upon company and individual performance. In fiscal year 2019, Mr. Frati participated in the Sales Incentive Plan, which provided quarterly commission payments based upon our attainment of certain revenue targets, paid shortly after attainment of the relevant target.
Equity Compensation
Although we do not have a formal policy with respect to the grant of equity incentive awards to our executive officers, we believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture, and help to align the interests of our executives and our stockholders. In addition, we believe that equity grants with a time-based vesting feature promote executive retention because this feature incentivizes our executive officers to remain in our employment during the vesting period. Accordingly, our board of directors periodically reviews the equity incentive compensation of our named executive officers and from time to time may grant equity incentive awards to them. During fiscal year 2019, we granted restricted stock to Mr. Butterfield and restricted stock units to Messrs. Frati and Shim, as described in more detail in the “Outstanding Equity Awards at Fiscal Year-End 2019” table below.
In February 2019, our board of directors approved equity awards to our employees, including the named executive officers. Mr. Butterfield received a restricted stock award for 295,000 shares of our Class B common stock, which vests in 16 equal quarterly installments commencing February 1, 2019 subject to his continued service to us through each vesting date. Mr. Frati and Mr. Shim received an award for 250,000 and 220,000 restricted stock units, respectively, and a stock option to purchase 114,000 and 78,000 shares of our Class B common stock, respectively. The restricted stock units vest upon the satisfaction of both a time-based condition and a performance-based condition. The performance-based condition will be satisfied on the first to occur of (i) a change in control, (ii) the initial public offering of our securities, or (iii) the listing and public trading of our Class A common stock on the NYSE. The time-based condition is satisfied over a four-year period in 16 equal quarterly installments commencing February 1, 2019, subject to the applicable named executive officer’s continued service to us through each such vesting date. The stock options vest in 24 equal quarterly installments following February 1, 2019 subject to the named executive officer’s continued service to us through each such vesting date.
Executive Employment Arrangements
Executive Employment Arrangements
Below are descriptions of our current offer letters with our named executive officers.
Stewart Butterfield
Prior to and during fiscal year 2019, we had not entered into an offer letter or employment agreement with Mr. Butterfield. On March 7, 2019, we entered into an offer letter with Mr. Butterfield to continue to serve as our Chief Executive Officer. The offer letter provides for Mr. Butterfield’s at-will employment and an annual base salary of

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$430,000, target bonus set at 40% of his adjusted base salary for fiscal year 2019 and 60% of his adjusted base salary for fiscal year 2020, and his eligibility to participate in our benefit plans generally. Mr. Butterfield is subject to our standard confidential information, invention assignment and arbitration agreement.
Robert Frati
On March 23, 2016, we entered into an offer letter with Mr. Frati, who currently serves as our Senior Vice President of Sales and Customer Success. The offer letter provides for Mr. Frati’s at-will employment and an annual base salary of $420,000, target bonus of $280,000, and an initial RSU grant, as well as his eligibility to participate in our benefit plans generally. Pursuant to his offer letter, we also provided Mr. Frati with a one-time signing bonus in the amount of $250,000, and we agreed to provide Mr. Frati with reimbursement of his moving expenses, up to a maximum aggregate amount of $75,000. Mr. Frati is subject to our standard confidential information, invention assignment and arbitration agreement.
Allen Shim
On March 9, 2014, we entered into an offer letter with Mr. Shim, who currently serves as our Chief Financial Officer. The offer letter provided for Mr. Shim’s at-will employment and an initial annual base salary of $200,000 and an initial stock option grant, as well as his eligibility to participate in our benefit plans generally. Mr. Shim is subject to our standard confidential information, invention assignment and arbitration agreement.
Executive Severance Plan
In connection with the effectiveness of the registration statement of which this prospectus forms as part, we adopted an executive severance plan, in which our named executive officers, and certain other executives, will participate. Our executive severance plan, or the Executive Severance Plan, will provide that upon a (i) termination by us for any reason other than for “cause,” as defined in the Executive Severance Plan, death or disability or (ii) a resignation for “good reason,” as defined in the Executive Severance Plan, in each case outside of the change in control period (i.e., the period beginning on and ending 12 months after, a “change in control,” as defined in the Executive Severance Plan), an eligible participant will be entitled to receive, subject to the execution and delivery of an effective release of claims in favor of the Company, (i) a lump sum cash payment equal to 12 months of base salary for our Chief Executive Officer and 6 months of base salary for the other participants, and (ii) a monthly cash payment equal to our contribution towards health insurance for up to 12 months for our Chief Executive Officer and up to 6 months for the other participants.
The Executive Severance Plan will also provide that upon a (i) termination by us other than for cause, death or disability or (ii) a resignation for good reason, in each case within the change in control period, an eligible participant will be entitled to receive, in lieu of the payments and benefits above and subject to the execution and delivery of an effective release of claims in favor of the Company, (i) a lump sum cash payment equal to 12 months of base salary for all participants, (ii) a monthly cash payment equal to our contribution towards health insurance for up to 12 months for all participants, (iii) accelerated vesting of certain outstanding and unvested equity award held by such participant; provided, that any unvested and outstanding equity awards subject to performance conditions will be deemed satisfied at the higher of target levels specified in the applicable award agreements or actual achievement, and (iv) a lump sum cash amount equal to the participant’s pro-rated annual target bonus.
The payments and benefits provided under the Executive Severance Plan in connection with a change in control may not be eligible for a federal income tax deduction by us pursuant to Section 280G of the Code. These payments and benefits may also subject an eligible participant, including the named executive officers, to an excise tax under Section 4999 of the Code. If the payments or benefits payable in connection with a change in control would be subject to the excise tax imposed under Section 4999 of the Code, then those payments or benefits will be reduced if such reduction would result in a higher net after-tax benefit to the recipient.

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Outstanding Equity Awards at Fiscal Year-End 2019
The following table sets forth information regarding outstanding equity awards held by our named executive officers as of January 31, 2019:
 
 
 
 
Option Awards
 
Stock Awards (1)
Name
 
Grant Date
 
Vesting Commencement Date
 
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
 
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
 
Option
Exercise
Price
($)
 
Option
Expiration
Date
 
Number of Shares or Units of Stock That Have Not Vested
(#)
 
Market Value of Shares or Units of Stock That Have Not Vested
($)
(2)
Stewart Butterfield
 
06/08/2016 (3)
 
10/1/2017
 
 
 
 
 
3,050,680
 
32,215,181
 
 
10/28/2018 (4)
 
7/1/2019
 
 
 
 
 
1,315,183
 
13,888,332
Robert Frati
 
06/08/2016 (5)
 
5/1/2017
 
 
 
 
 
682,080
 
7,202,765
 
 
06/20/2018 (6)
 
5/1/2018
 
 
 
 
 
40,000
 
865,920
 
 
06/20/2018 (6)
 
8/1/2018
 
 
 
 
 
82,000
 
422,400
Allen Shim
 
05/21/2014 (7)
 
 
588,605
 
 
0.14
 
5/21/2024
 
 
 
 
02/17/2016 (8)
 
3/1/2016
 
 
 
 
 
31,243
 
329,926
 
 
04/06/2016 (6)
 
7/1/2016
 
 
 
 
 
122,026
 
1,288,595
 
 
05/10/2017 (6)
 
6/1/2017
 
 
 
 
 
150,000
 
1,584,000
 
 
02/21/2018 (6)
 
5/1/2018
 
 
 
 
 
682,500
 
7,207,200
__________________
(1)
As further described in the footnotes below, the RSUs granted pursuant to our 2009 Plan will vest upon the satisfaction of both a time-based condition and a performance-based condition before the award’s expiration date. The performance-based condition will be satisfied on the first to occur of (i) a change in control, (ii) the initial public offering of our securities, or (iii) the listing and public trading of our Class A common stock on the NYSE. The expiration date is seven years from the Grant Date. Any RSUs that have satisfied the time-based condition at the time of the named executive officer’s termination of service remain eligible for vesting upon the achievement of the performance-based condition prior to the expiration date of the award.
(2)
The amounts represent the number of shares underlying the RSUs or restricted stock multiplied by the value of a share of our Class B common stock on January 31, 2019, which was $10.56 per share.
(3)
The time-based condition of the award vests as follows: 4.286% of the RSUs subject to the award satisfy the time-based condition each quarter commencing on the vesting commencement date, subject to Mr. Butterfield continuing to provide service to us on such date. Upon the effectiveness of the registration statement of which this prospectus forms a part, the time-based condition shall be automatically adjusted as follows: 7.5% of the RSUs subject to the award shall satisfy the time-based condition on the applicable quarterly vesting date, subject to Mr. Butterfield continuing to provide service to us on such dates. If Mr. Butterfield is subject to a termination without “cause” or resignation for “good reason” (as each term is defined in his stock purchase agreement dated March 17, 2009) within 12 months after a change in control (as defined in the award agreement), 100% of the RSUs shall immediately satisfy the time-based condition as of such termination date.
(4)
This award represents an award for restricted stock under our 2009 Plan. With respect to such award, 1/6th of the shares shall vest and no longer be subject to our right of repurchase on the vesting commencement date, subject to Mr. Butterfield continuing to provide service to us through such date. Following such date, 1/24th of the shares shall vest and no longer be subject to our right of repurchase on each quarter thereafter, subject to Mr. Butterfield continuing to provide service to us through each such date. In addition, if Mr. Butterfield is subject to a termination without “cause” or resignation for “good reason” (as each term is defined in his stock purchase agreement dated March 17, 2009) within 12 months after a change in control (as defined in the award agreement), 100% of the shares shall vest and no longer be subject to our right of repurchase immediately upon such termination date.
(5)
The time-based condition of the award vests as follows: 25% of the RSUs subject to the award vest on the first anniversary of the vesting commencement date and the remaining 75% of the RSUs vest in 12 equal quarterly installments thereafter, subject to Mr. Frati continuing to provide service to us through each such vesting date.
(6)
The time-based condition of the award vests as follows: the RSUs subject to the award vest in 16 equal quarterly installments commencing on the vesting commencement date, subject to the named executive officer continuing to provide service to us through each such vesting date.
(7)
Mr. Shim’s stock option was granted pursuant to our 2009 Plan and all of the shares are fully vested.
(8)
This award represents an award for restricted stock under our 2009 Plan. With respect to such award, 1/48 th of the shares vest and are no longer subject to our right of repurchase commencing on the vesting date, subject to Mr. Shim continuing to provide service to us through each such vesting date. The shares were transferred by Mr. Shim to the Shim-Park Family Revocable Trust on November 28, 2016.
Employee Benefits and Stock Plans
2019 Stock Option and Incentive Plan
Our 2019 Plan was adopted by our board of directors in April 2019 and is expected to be approved by our stockholders and become effective immediately prior to the effectiveness of the registration statement of which this prospectus forms a part. The 2019 Plan will replace the 2009 Plan, as our board of directors is expected to determine not to make additional

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awards under the 2009 Plan following the effectiveness of the registration statement of which this prospectus forms a part. However, the 2009 Plan will continue to govern outstanding equity awards granted thereunder. The 2019 Plan will allow the compensation committee to make equity-based incentive awards to our officers, employees, directors, and other key persons, including consultants.
Authorized Shares. We will initially reserve            shares of our Class A common stock for the issuance of awards under the 2019 Plan. The 2019 Plan will provide that the number of shares reserved and available for issuance under the 2019 Plan will automatically increase each February 1, beginning on February 1, 2020, by      % of the outstanding number of shares of our Class A and Class B common stock on the immediately preceding January 31 or such lesser number of shares as determined by our compensation committee. This number will be subject to adjustment in the event of a stock split, stock dividend, or other change in our capitalization. The shares we issue under the 2019 Plan will be authorized but unissued shares or shares that we reacquire. The shares of Class A and Class B common stock underlying any awards that are forfeited, canceled, held back upon exercise, or settlement of an award to satisfy the exercise price or tax withholding, reacquired by us prior to vesting, satisfied without the issuance of stock, expire, or are otherwise terminated, other than by exercise, under the 2019 Plan and the 2009 Plan will be added back to the shares of Class A common stock available for issuance under the 2019 Plan (provided that any such shares of Class B common stock will first be converted into shares of Class A common stock). The maximum number of shares of Class A common stock that may be issued as incentive stock options in any one calendar year period may not exceed            shares cumulatively increased on February 1, 2020 and on each February 1 thereafter by the lesser of      % of the number of outstanding shares of Class A and Class B common stock as of the immediately preceding January 31, or            shares. The value of all awards issued under the 2019 Plan and all other cash compensation paid by us to any non‑employee director in any calendar year cannot exceed $1,000,000.
Administration. The 2019 Plan will be administered by our compensation committee. Our compensation committee will have full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants, and to determine the specific terms and conditions of each award, subject to the provisions of the 2019 Plan.
Eligibility. Persons eligible to participate in the 2019 Plan will be those employees, non-employee directors, and consultants, as selected from time to time by our compensation committee in its discretion.
Options. The 2019 Plan will permit the granting of both options to purchase Class A common stock intended to qualify as incentive stock options under Section 422 of the Code and options that do not so qualify. The option exercise price of each option will be determined by our compensation committee but may not be less than 100% of the fair market value of our Class A common stock on the date of grant unless the option is granted (i) pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code or (ii) to individuals who are not subject to U.S. income tax. The term of each option will be fixed by our compensation committee and may not exceed 10 years from the date of grant. Our compensation committee will determine at what time or times each option may be exercised.
Stock Appreciation Rights. Our compensation committee will be able to award stock appreciation rights subject to such conditions and restrictions as it may determine. Stock appreciation rights entitle the recipient to shares of Class A common stock, or cash, equal to the value of the appreciation in our stock price over the exercise price. The exercise price may not be less than 100% of the fair market value of our Class A common stock on the date of grant. The term of each stock appreciation right will be fixed by our compensation committee and may not exceed 10 years from the date of grant. Our compensation committee will determine at what time or times each stock appreciation right may be exercised.
Restricted Stock and Restricted Stock Units. Our compensation committee will be able to award restricted shares of Class A common stock and restricted stock units to participants subject to such conditions and restrictions as it may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with us through a specified vesting period.
Unrestricted Stock Awards. Our compensation committee will also be able to grant shares of Class A common stock that are free from any restrictions under the 2019 Plan. Unrestricted stock may be granted to participants in recognition of past services or for other valid consideration and may be issued in lieu of cash compensation due to such participant.

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Dividend Equivalent Rights. Our compensation committee will be able to grant dividend equivalent rights to participants that entitle the recipient to receive credits for dividends that would be paid if the recipient had held a specified number of shares of common stock.
Cash-Based Awards. Our compensation committee will be able to grant cash bonuses under the 2019 Plan to participants, subject to the achievement of certain performance goals.
Sale Event. The 2019 Plan will provide that upon the effectiveness of a “sale event,” as defined in the 2019 Plan, an acquirer or successor entity may assume, continue, or substitute for the outstanding awards under the 2019 Plan. To the extent that awards granted under the 2019 Plan are not assumed, continued, or substituted by the successor entity, all unvested awards granted under the 2019 Plan shall terminate. In such case, except as may be otherwise provided in the relevant award agreement, all options and stock appreciation rights with time-based vesting, conditions, or restrictions that are not exercisable immediately prior to the sale event will become fully exercisable as of the sale event, all other awards with time-based vesting, conditions, or restrictions will become fully vested and nonforfeitable as of the sale event, and all awards with conditions and restrictions relating to the attainment of performance goals may become vested and nonforfeitable in connection with the sale event in the plan administrator’s discretion or to the extent specified in the relevant award agreement. In the event of such termination, individuals holding options and stock appreciation rights will be permitted to exercise such options and stock appreciation rights (to the extent exercisable) prior to the sale event. In addition, in connection with the termination of the 2019 Plan upon a sale event, we may make or provide for a cash payment to participants holding vested and exercisable options and stock appreciation rights equal to the difference between the per share cash consideration payable to stockholders in the sale event and the exercise price of the options or stock appreciation rights.
Amendment. Our board of directors will be able to amend or discontinue the 2019 Plan and our compensation committee will be able to amend or cancel outstanding awards for purposes of satisfying changes in law or any other lawful purpose, but no such action may adversely affect rights under an award without the holder’s consent. The compensation committee is specifically authorized to exercise its discretion to reduce the exercise price of outstanding stock options or stock appreciation rights or effect the repricing of such awards through cancellation and re-grants. Certain amendments to the 2019 Plan will require the approval of our stockholders.
No awards may be granted under the 2019 Plan after the date that is 10 years from the date of stockholder approval of the 2019 Plan. No awards under the 2019 Plan have been made prior to the date hereof.
2009 Stock Plan, as amended
Our board of directors adopted, and our stockholders approved, our 2009 Plan in June 2009. Our 2009 Plan was most recently amended in August 2018. Our 2009 Plan allows for the grant of incentive stock options to our employees and any of our parent and subsidiary corporations’ employees, and for the grant of nonqualified stock options and restricted stock unit awards and the direct award or sale of shares to employees, officers, directors, and consultants of ours and our parent and subsidiary corporations.
Authorized Shares. No shares will be available for future issuance under the 2009 Plan following the effectiveness of the registration statement of which this prospectus forms a part. However, our 2009 Plan will continue to govern outstanding awards granted thereunder. As of January 31, 2019, options to purchase 18,405,776 shares of our Class B common stock remained outstanding under our 2009 Plan at a weighted-average exercise price of approximately $0.9428 per share and 63,113,635 restricted stock units also remained outstanding.
Administration. Our board of directors currently administers our 2009 Plan. Subject to the provisions of our 2009 Plan, the administrator has full authority and discretion to take any actions it deems necessary or advisable for the administration of our 2009 Plan. Our board is specifically authorized to exercise its discretion to reduce the exercise price of outstanding stock options or stock appreciation rights or effect the repricing of such awards through cancellation and re-grants without stockholder approval.
Options. Stock options may be granted under our 2009 Plan. The exercise price per share of all options must equal at least 100% of the fair market value per share of our Class B common stock on the date of grant. The term of an incentive stock option may not exceed 10 years. An incentive stock option granted to a participant who owns more

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than 10% of the total combined voting power of all classes of our outstanding stock, or any parent or subsidiary corporations’, on the date of grant may not be exercisable after the expiration of five years from the date of grant and must have an exercise price of at least 110% of the fair market value per share of our Class B common stock on the date of grant. The administrator will determine the methods of payment of the exercise price of an option, which may include cash or cash equivalents, surrender of stock or certain other forms of payment acceptable to the administrator and permitted by the Delaware General Corporation Law.
Stock Awards. Our 2009 Plan also allows for the grant or purchase of shares of Class B common stock subject to such conditions and restrictions as our board may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with us through a specified vesting period.
RSUs. RSUs may be granted under our 2009 Plan. An RSU is an award that covers a number of shares of our Class B common stock that may be settled upon vesting in cash or shares of our Class B common stock. The administrator determines the terms and conditions of RSUs, including the number of units granted and the vesting criteria (which may include achievement of pre-established performance goals or continued service to us).
Transferability or Assignability of Awards. Our awards are subject to transfer restrictions as the administrator may determine. In addition, options are transferable only by a beneficiary designation, a will, or the laws of descent and distribution. Nonstatutory options may also be transferable by gift or domestic relations order to an immediate family member. In addition, incentive stock options may be exercised during the lifetime of the optionee only by the optionee or by the optionee’s guardian or legal representative.
Certain Adjustments. In the event of certain changes in our capitalization, the number of shares available for future grants, the number of shares covered by each outstanding equity grant and the exercise price under each outstanding option will be proportionately adjusted.
Mergers and Consolidations. The 2009 Plan provides that in the event that we are a party to a merger or consolidation, all shares acquired under our 2009 Plan and all outstanding awards shall be subject to the agreement of merger or consolidation, or, in the event such transaction does not entail an agreement to which we are a party, as determined by the administrator of the 2009 Plan, in either case, all outstanding awards need not be treated in an identical manner. Such agreement, without the optionees’, grantees’, or purchasers’ consent, may provide for one or more of the following with respect to each award that is outstanding as of the effective date of such merger or consolidation: (i) the continuation of the option, RSU, or award by the Company (if the Company is the surviving corporation), (ii) the assumption or substitution of the option by the surviving corporation or its parent in a manner that complies with Section 424(a) of the Code, (iii) the cancellation of options and a payment to the optionees equal to the excess of (A) the fair market value of the shares subject to such options as of the effective date of such merger or consolidation over (B) their exercise price, (iv) the cancellation of such options without payment of any consideration, (v) the assumption of RSUs, or substitution of a new RSU, by the surviving corporation or its parent with an equitable or proportionate adjustment to the amount and kind of shares subject thereto, (vi) the cancellation of RSUs and a payment to the grantee with respect to each share subject to the portion of the RSUs that are vested as of the effective date of such merger or consolidation (including those RSUs that become vested as a result of such transaction) equal to the fair market value of such shares, (vii) suspension of the right to exercise options for a limited period of time prior to the closing of a merger or consolidation transaction, or (viii) termination of the right to exercise options unvested as of the closing of a merger or consolidation transaction.
Our board of directors has determined that no further awards shall be made pursuant to the 2009 Plan after the effectiveness of the registration statement of which this prospectus forms a part. Following the effectiveness of the registration statement of which this prospectus forms a part, we expect to make future awards under the 2019 Plan.
2019 Employee Stock Purchase Plan
Our ESPP is expected to be adopted by our board of directors and approved by our stockholders and become effective immediately prior to the effectiveness of the registration statement of which this prospectus forms a part. The ESPP will initially reserve and authorize the issuance of up to a total of            shares of Class A common stock to participating employees. The ESPP will provide that the number of shares reserved and available for issuance will automatically increase each February 1, beginning on February 1, 2020, by the lesser of            shares of our Class A

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common stock,      % of the outstanding number of shares of our Class A and Class B common stock on the immediately preceding January 31, or such lesser number of shares as determined by our compensation committee. This number will be subject to adjustment in the event of a stock split, stock dividend, or other change in our capitalization.
All employees who work for entities designated as participating in the ESPP will be eligible to participate in the ESPP. Any employee who owns 5% or more of the total combined voting power or value of all classes of stock will not be eligible to purchase shares under the ESPP.
We will make one or more offerings, consisting of one or more purchase periods, each year to our employees to purchase shares under the ESPP. The first offering will begin on the date that our Class A common stock is first publicly traded on the NYSE and, unless otherwise determined by the administrator of the ESPP, will end on October 9, 2019. Each eligible employee as of the date that our Class A common stock is first publicly traded on the NYSE will be deemed to be a participant in the ESPP at that time and must authorize payroll deductions or other contributions by submitting an enrollment form by the deadline specified by the plan administrator. Unless otherwise determined by the plan administrator, subsequent offerings will usually begin every six months and will continue for six-month periods, referred to as offering periods. If an offering period contains more than one purchase period, and if the fair market value of our Class A common stock on the exercise date is less than the fair market value on the first trading day of the offering period, participants will be withdrawn from the current offering period following their purchase of our Class A common stock on the purchase date and will be automatically re-enrolled in a new offering period. Each eligible employee may elect to participate in any subsequent offering by submitting an enrollment form by the deadline specified by the plan administrator.
Each employee who is a participant in the ESPP may purchase shares by authorizing contributions of up to 15% of his or her compensation during an offering period. Unless the participating employee has previously withdrawn from the offering, his or her accumulated contributions will be used to purchase shares on the last business day of the purchase period at a price equal to 85% of the fair market value of the shares on the first business day of the offering period or the business day prior to the last business day of the purchase period, whichever is lower, provided that no more than          shares of Class A common stock (or a lesser number as established by the plan administrator in advance of the purchase period) may be purchased by any one employee during each purchase period. Under applicable tax rules, an employee may purchase no more than $25,000 worth of shares of Class A common stock, valued at the start of the offering period, under the ESPP for each calendar year in which a purchase right is outstanding.
The accumulated contributions of any employee who is not a participant on the last day of a purchase period will be refunded. An employee’s rights under the ESPP terminate upon voluntary withdrawal from the plan or when the employee ceases employment with us for any reason.
The ESPP may be terminated or amended by our board of directors at any time but shall automatically terminate on the 10 year anniversary of the effective date of the registration statement of which this prospectus forms a part. An amendment that increases the number of shares of Class A common stock that are authorized under the ESPP and certain other amendments will require the approval of our stockholders. The plan administrator may adopt subplans under the ESPP for employees of our non U.S. subsidiaries who may participate in the ESPP and may permit such employees to participate in the ESPP on different terms, to the extent permitted by applicable law.
Senior Executive Cash Incentive Bonus Plan
In April 2019, our board of directors adopted the Senior Executive Cash Incentive Bonus Plan, or the Bonus Plan. The Bonus Plan provides for cash bonus payments based upon the attainment of performance targets established by our compensation committee. The payment targets will be related to financial and operational measures or objectives with respect to our company, or corporate performance goals, as well as individual performance objectives.
Our compensation committee may select corporate performance goals from among but not limited to the following: achievement of cash flow (including, but not limited to, operating cash flow and Free Cash Flow); earnings before interest, taxes, depreciation, and amortization; net income (loss) (either before or after interest, taxes, depreciation, and/or amortization); changes in the market price of our common stock; economic value-added; acquisitions or strategic transactions, including licenses, collaborations, joint ventures, or promotion arrangements; operating income (loss); return on capital, assets, equity, or investment; total stockholder returns; productivity; expense efficiency; margins;

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operating efficiency; working capital; earnings (loss) per share of our common stock; sales or market shares; revenue; corporate revenue; operating income and/or net annual recurring revenue, any of which may be (A) measured in absolute terms or compared to any incremental increase, (B) measured in terms of growth, (C) compared to another company or companies or to results of a peer group, (D) measured against the market as a whole and/or as compared to applicable market indices, and/or (E) measured on a pre-tax or post-tax basis (if applicable).
Each executive officer who is selected to participate in the Bonus Plan will have a target bonus opportunity set for each performance period. The bonus formulas will be adopted in each performance period by the compensation committee and communicated to each executive. The corporate performance goals will be measured at the end of each performance period after our financial reports have been published or such other appropriate time as the compensation committee determines. If the corporate performance goals and individual performance objectives are met, payments will be made as soon as practicable following the end of each performance period. Subject to the rights contained in any agreement between the executive officer and us, an executive officer must be employed by us on the bonus payment date to be eligible to receive a bonus payment. The Bonus Plan also permits the compensation committee to approve additional bonuses to executive officers in its sole discretion and provides the compensation committee with discretion to adjust the size of the award as it deems appropriate to account for unforeseen factors beyond management’s control that affected corporate performance.
401(k) Plan
We maintain a tax-qualified retirement plan that provides eligible U.S. employees with an opportunity to save for retirement on a tax-advantaged basis. Plan participants are able to defer eligible compensation subject to applicable annual Code limits. We provide a matching contribution of 50% of employee contributions up to $4,000, which is 100% vested after one year of service. The 401(k) plan is intended to be qualified under Section 401(a) of the Code with the 401(k) plan’s related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the compensation arrangements, including employment, termination of employment, and change in control arrangements, and indemnification arrangements, discussed, when required, in the sections titled “Management” and “Executive Compensation” and the registration rights described in the section titled “Description of Capital Stock—Registration Rights,” the following is a description of each transaction since February 1, 2016 and each currently proposed transaction in which:
we have been or are to be a participant;
the amount involved exceeded or exceeds $120,000; and
any of our directors, executive officers or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest.
Equity Financings
Series F and Series F-1 Convertible Preferred Stock Financing
On March 31, 2016, we sold an aggregate of 19,866,694 shares of our Series F convertible preferred stock at a purchase price of $7.802 per share, for an aggregate purchase price of $155.0 million and an aggregate of 6,793,130 shares of our Series F-1 convertible preferred stock at a purchase price of $7.802 per share, for an aggregate purchase price of $53.0 million, pursuant to our Series F and Series F-1 convertible preferred stock financing. The following table summarizes purchases of our Series F and Series F-1 convertible preferred stock by holders of more than 5% of our capital stock and their affiliated entities. None of our executive officers purchased shares of Series F or Series F-1 convertible preferred stock.
Stockholder
 
Shares of  
Series F
Convertible
Preferred Stock
 
Shares of  
Series F-1
Convertible
Preferred Stock
 
Total  
Purchase  
Price
Entities affiliated with Accel (1)
 

 
6,793,130

 
$
53,000,000

Entities affiliated with Social Capital (2)
 
2,550,628

 

 
19,900,000

__________________
(1)
Consists of Accel Growth Fund III L.P., Accel Growth Fund III Strategic Partners L.P., Accel Growth Fund Investors 2014 L.L.C., Accel Investors 2013 L.L.C., Accel XI L.P., and Accel XI Strategic Partners L.P. Andrew Braccia, a member of our board of directors, is a partner at Accel.
(2)
Consists of The Social+Capital Partnership Opportunities Fund, L.P. Chamath Palihapitiya, a member of our board of directors, is the Chief Executive Officer of Social Capital.

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Series G and Series G-1 Convertible Preferred Stock Financing
From October 2017 through December 2017, we sold an aggregate of 24,717,887 shares of our Series G convertible preferred stock at a purchase price of $9.305 per share, for an aggregate purchase price of $230.0 million and an aggregate of 2,149,382 shares of our Series G-1 convertible preferred stock at a purchase price of $9.305 per share, for an aggregate purchase price of $20.0 million, pursuant to our Series G and Series G-1 convertible preferred stock financing. The following table summarizes purchases of our Series G and Series G-1 convertible preferred stock by holders of more than 5% of our capital stock and their affiliated entities. None of our executive officers purchased shares of Series G or Series G-1 convertible preferred stock.
Stockholder
 
Shares of
Series G
Convertible
Preferred Stock
 
Shares of
Series G-1
Convertible
Preferred Stock
 
Total
Purchase
Price
Entities affiliated with Accel (1)
 
7,173,562

 

 
$
66,749,994

Entities affiliated with Social Capital (2)
 
322,407

 

 
2,999,997

SoftBank Vision Fund (AIV M1) L.P.
 
14,454,593

 

 
134,499,988

__________________
(1)
Consists of Accel Growth Fund Investors 2016 L.L.C., Accel Growth Fund IV L.P., Accel Growth Fund IV Strategic Partners L.P., Accel Leaders Fund Investors 2016 L.L.C., and Accel Leaders Fund L.P. Andrew Braccia, a member of our board of directors, is a partner at Accel.
(2)
Consists of The Social+Capital Partnership III, L.P., for itself and as nominee for The Social+Capital Partnership Principals Fund III, L.P. Chamath Palihapitiya, a member of our board of directors, is the Chief Executive Officer of Social Capital.
Series G-2 Convertible Preferred Stock Financing
On November 22, 2017, we sold an aggregate of 17,241,379 shares of our Series G-2 convertible preferred stock at a purchase price of $8.70 per share, for an aggregate purchase price of $150.0 million, pursuant to our Series G-2 convertible preferred stock financing. The following table summarizes purchases of our Series G-2 convertible preferred stock by holders of more than 5% of our capital stock and their affiliated entities. None of our executive officers purchased shares of Series G-2 convertible preferred stock.
Stockholder
 
Shares of  
Series G-2
Convertible
Preferred Stock
 
Total
Purchase
Price
SoftBank Vision Fund (AIV M1) L.P.
 
17,241,379

 
$
149,999,997

Series G-3 Convertible Preferred Stock Financing
On December 29, 2017, we sold an aggregate of 1,464,680 shares of our Series G-3 convertible preferred stock at a purchase price of $8.70 per share, for an aggregate purchase price of $12.7 million, pursuant to our Series G-3 convertible preferred stock financing. The following table summarizes purchases of our Series G-3 convertible preferred stock by holders of more than 5% of our capital stock and their affiliated entities. None of our executive officers purchased shares of Series G-3 convertible preferred stock.
Stockholder
 
Shares of  
Series G-3
Convertible
Preferred Stock
 
Total
Purchase
Price
SoftBank Vision Fund (AIV M1) L.P.
 
1,464,680

 
$
12,742,716

Series H and Series H-1 Convertible Preferred Stock Financing
From August 2018 through September 2018, we sold an aggregate of 33,469,795 shares of our Series H convertible preferred stock at a purchase price of $11.9053 per share, for an aggregate purchase price of $398.5 million and an aggregate of 2,418,922 shares of our Series H-1 convertible preferred stock at a purchase price of $11.9053 per share,

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for an aggregate purchase price of $28.8 million, pursuant to our Series H and Series H-1 convertible preferred stock financing. The following table summarizes purchases of our Series H and Series H-1 convertible preferred stock by holders of more than 5% of our capital stock and their affiliated entities. None of our executive officers purchased shares of Series H and Series H-1 convertible preferred stock.
Stockholder
 
Shares of  
Series H
Convertible
Preferred Stock
 
Shares of  
Series H-1
Convertible
Preferred Stock
 
Total  
Purchase  
Price
Entities affiliated with Accel (1)
 
2,519,886

 
1,679,924

 
$
49,999,998

SoftBank Vision Fund (AIV M1) L.P.
 
2,245,638

 

 
26,734,994

__________________
(1)
Consists of Accel Growth Fund Investors 2016 L.L.C., Accel Growth Fund IV L.P., Accel Growth Fund IV Strategic Partners L.P., Accel Investors 2013 L.L.C., Accel Leaders Fund Investors 2016 L.L.C., Accel Leaders Fund L.P., Accel XI L.P., and Accel XI Strategic Partners L.P. Andrew Braccia, a member of our board of directors, is a partner at Accel.
Stock Repurchases
November 2017
In November 2017, we repurchased an aggregate of 17,921,146 shares of our outstanding Class B common stock, Series A preferred stock, Series D preferred stock, Series D-1 preferred stock, and Series E preferred stock from our stockholders, at a purchase price of $8.37 per share, for an aggregate purchase price of $150.0 million, which we refer to as the November 2017 Repurchase. The following table summarizes our repurchases of capital stock from our directors and executive officers in the November 2017 Repurchase.
Stockholder
 
Title
 
Shares of  
Stock
 
Aggregate
Purchase
Price
Stewart Butterfield (1)
 
CEO, Director, Co-Founder
 
125,000

 
$
1,046,250

Allen Shim (2)
 
CFO
 
48,000

 
401,760

Cal Henderson (3)
 
Chief Technology Officer, Co-Founder
 
1,077,497

 
9,018,650

__________________
(1)
Includes shares repurchased from Omnibus Land & Cattle Co. Ltd., an entity affiliated with Mr. Butterfield.
(2)
Shares were repurchased from The Shim-Park Family Revocable Trust.
(3)
Shares were repurchased from Cal Henderson and Rebecca Reeve Henderson, as Trustees of The Henderson Family Trust.

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Third Party Tender Offers
September 2016
In August 2016, we entered into a participation agreement with Social Capital , a holder of more than 5% of our capital stock, and GGV Capital, pursuant to which we agreed to waive certain transfer restrictions in connection with a tender offer that such parties proposed to commence. In September 2016, these holders conducted a tender offer for shares of our outstanding common stock, Series A preferred stock, Series C preferred stock, and Series D-1 preferred stock from our stockholders and purchased an aggregate of 3,268,450 shares of our outstanding common stock and Series A preferred stock from our stockholders, at a purchase price of $7.41 per share, for an aggregate purchase price of $24.2 million, which we refer to as the September 2016 Third Party Tender. Social Capital purchased an aggregate of 2,178,967 shares of our outstanding common stock and Series A preferred stock for an aggregate purchase price of $16.1 million. The following table summarizes purchases of common stock from our executive officers in the September 2016 Third Party Tender.
Stockholder
 
Title
 
Shares of  
Common Stock
 
Aggregate
Purchase
Price
Allen Shim
 
CFO
 
93,699

 
$
694,310

Omnibus Land & Cattle Co. Ltd. (1)
 
 
 
120,000

 
889,200

__________________
(1)
Omnibus Land & Cattle Co. Ltd. is an entity affiliated with Mr. Butterfield, our Chief Executive Officer, a director, and a co-founder.
Stock Transfers
November 2016
On November 18, 2016, entities affiliated with Andreessen Horowitz, a holder of more than 5% of our capital stock, purchased an aggregate of 674,291 shares of our outstanding common stock from Cal Henderson, one of our executive officers, at a purchase price of $7.41 per share, for an aggregate purchase price of $5.0 million.
April 2018
On April 30, 2018, SoftBank Vision Fund (AIV M1) L.P., a holder of more than 5% of our capital stock, purchased an aggregate of 1,205,454 shares of our outstanding Class B common stock from holders of our Class B common stock, at a purchase price of $8.37 per share, for an aggregate purchase price of $10.1 million, which we refer to as the April 2018 Stock Transfer. The following table summarizes purchases of Class B common stock from our directors and executive officers in the April 2018 Stock Transfer.
Stockholder
 
Title
 
Shares of  
Stock
 
Aggregate
Purchase
Price
Stewart Butterfield
 
CEO, Director, Co-Founder
 
150,000

 
$
1,255,500

Investors’ Rights Agreement
We are party to an amended and restated investors’ rights agreement which provides, among other things, that certain holders of our capital stock, including entities affiliated with Accel, Andreessen Horowitz, Social Capital, and SoftBank, which each hold more than 5% of our outstanding capital stock, have the right to demand that we file a registration statement or request that their shares of our capital stock be included on a registration statement that we are otherwise filing. See the section titled “Description of Capital Stock—Registration Rights” for more information regarding these registration rights.

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Right of First Refusal
Pursuant to our equity compensation plans and certain agreements with our stockholders, including a right of first refusal and co-sale agreement with certain holders of our capital stock, including entities affiliated with Accel, Andreessen Horowitz, Social Capital, and SoftBank, which each hold more than 5% of our outstanding capital stock, and Mr. Butterfield, our Chief Executive Officer and a co-founder and director, we or our assignees have a right to purchase shares of our capital stock which certain stockholders propose to sell to other parties. This right will terminate upon the effectiveness of the registration statement of which this prospectus forms a part. Since July 31, 2014, we have waived our right of first refusal in connection with the sale of certain shares of our capital stock, including sales by certain of our executive officers. See the section titled “Principal and Registered Stockholders” for additional information regarding beneficial ownership of our capital stock.
Voting Agreement
We are party to a voting agreement under which certain holders of our capital stock, including entities affiliated with Accel, Andreessen Horowitz, Social Capital, and SoftBank, which each hold more than 5% of our outstanding capital stock, and Mr. Butterfield, our Chief Executive Officer and a co-founder and director, have agreed as to the manner in which they will vote their shares of our capital stock on certain matters, including with respect to the election of directors. Upon the effectiveness of the registration statement of which this prospectus forms a part, the voting agreement will terminate and none of our stockholders will have any special rights regarding the election or designation of members of our board of directors.
Slack Fund L.L.C.
We are the manager of Slack Fund L.L.C., a Delaware limited liability company, or Slack Fund. We established and designed Slack Fund to fund companies that we believe are building the future of work through next-generation enterprise software, are solving problems for working teams by building on Slack and have potential for substantial contribution to Slack. Entities affiliated with Accel, Andreessen Horowitz, and Social Capital, each holders of more than 5% of our capital stock, are members of Slack Fund. The following table summarizes the contractual contribution of holders of more than 5% of our capital stock and their affiliated entities in Slack Fund. In addition, Mr. Butterfield, our Chief Executive Officer and a co-founder and director, serves on the investment committee of Slack Fund.
Stockholder
 
Subscription
Amount
 
Amount Funded as of January 31, 2019
Entities affiliated with Accel (1)
 
$
2,000,000

 
$
1,360,000

Entities affiliated with Andreessen Horowitz (2)
 
$
2,000,000

 
$
1,360,000

Entities affiliated with Social Capital (3)
 
$
2,000,000

 
$
1,360,000

__________________
(1)
Consists of Accel X L.P., Accel X Strategic Partners L.P., Accel XI L.P., Accel XI Strategic Partners L.P., Accel Growth Fund III L.P., Accel Growth Fund III Strategic Partners L.P., Accel Growth Fund Investors 2014 L.L.C., Accel Investors 2009 L.L.C., and Accel Investors 2013 L.L.C. Andrew Braccia, a member of our board of directors, is a partner at Accel.
(2)
Consists of AH Parallel Fund IV, L.P. for itself and as nominee for AH Parallel Fund IV-A, L.P., AH Parallel Fund IV-B, L.P., and AH Parallel Fund IV-Q, L.P. John O’Farrell, a member of our board of directors, is a general partner at Andreessen Horowitz.
(3)
Consists of The Social+Capital Partnership III, L.P., for itself and as nominee for The Social+Capital Partnership Principals Fund III, L.P. Chamath Palihapitiya, a member of our board of directors, is the Chief Executive Officer of Social Capital.
Transactions with Square, Inc.
In September 2014, we entered into a Subscription Agreement with Square, Inc. for the use of Slack, which was renewed in 2016, 2017 and 2018. The 2017 renewal agreement for the use of Slack from September 2017 to September 2018 had a total contract value of $150,592. We recognized revenue of $144,760 from Square, Inc. in fiscal year 2018. The 2018 renewal agreement for the use of Slack from September 2018 to September 2019 has a total contract value of $230,400. We recognized revenue of $214,589 from Square, Inc. in fiscal year 2019. Sarah Friar joined our board of directors in March 2017 and previously served as the Chief Financial Officer of Square, Inc. from July 2012 to October 2018.

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Transactions with Pacific Content
On February 10, 2015, we entered into a Consulting Agreement with Pacific Content Company Incorporated, as last amended on August 1, 2016, for the creation of branded podcast episodes for us. We paid Pacific Content Company Incorporated $820,762, $567,500 and $0 in fiscal years 2017, 2018 and 2019, respectively. The former domestic partner of Stewart Butterfield , our Chief Executive Officer, is the Co-Founder and a director of Pacific Content Company Incorporated.
Transactions with RSquared
On January 1, 2015, we entered into a Client Agreement with Rsquared Communication, Inc. and on November 1, 2017, we entered into a Supplier Services Agreement with Rsquared Communication, Inc., both for the provision of Rsquared Communication, Inc.’s communication and media relations services to us. We paid Rsquared Communication, Inc. $519,342, $413,932 and $78,000 in fiscal years 2017, 2018 and 2019, respectively. The wife of Cal Henderson, our Chief Technology Officer, is the Founder and Principal of Rsquared Communication, Inc.
Other Transactions
We have granted stock options, RSUs, and RSAs to our executive officers and certain of our directors. See the sections titled “Executive Compensation” and “Management—Non-Employee Director Compensation” for a description of these options, RSUs, and RSAs.
Jonathan O’Farrell, the son of John O’Farrell, one of our directors, is a non-executive employee and has served as an Associate Software Engineer with us since August 2017. Jonathan O’Farrell does not live in the same household as John O’Farrell.
Other than as described above under this section titled “Certain Relationships and Related Person Transactions,” since February 1, 2016, we have not entered into any transactions, nor are there any currently proposed transactions, between us and a related party where the amount involved exceeds, or would exceed, $120,000, and in which any related person had or will have a direct or indirect material interest. We believe the terms of the transactions described above were comparable to terms we could have obtained in arm’s-length dealings with unrelated third parties.
Limitation of Liability and Indemnification of Officers and Directors
We expect to adopt an amended and restated certificate of incorporation, which will become effective shortly following the effectiveness of the registration statement of which this prospectus forms a part, and which will contain provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for the following:
any breach of their duty of loyalty to our company or our stockholders;
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or
any transaction from which they derived an improper personal benefit.
Any amendment to, or repeal of, these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to that amendment or repeal. If the Delaware General Corporation Law is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further limited to the greatest extent permitted by the Delaware General Corporation Law.
In addition, shortly following the effectiveness of the registration statement of which this prospectus forms a part, we expect to adopt amended and restated bylaws, which will provide that we will indemnify, to the fullest extent permitted by law, any person who is or was a party or is threatened to be made a party to any action, suit, or proceeding

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by reason of the fact that he or she is or was one of our directors or officers or is or was serving at our request as a director or officer of another corporation, partnership, joint venture, trust, or other enterprise. Our amended and restated bylaws are expected to provide that we may indemnify to the fullest extent permitted by law any person who is or was a party or is threatened to be made a party to any action, suit, or proceeding by reason of the fact that he or she is or was one of our employees or agents or is or was serving at our request as an employee or agent of another corporation, partnership, joint venture, trust, or other enterprise. Our amended and restated bylaws will also provide that we must advance expenses incurred by or on behalf of a director or officer in advance of the final disposition of any action or proceeding, subject to very limited exceptions.
Further, we have entered into indemnification agreements with each of our directors and executive officers that may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements require us, among other things, to indemnify our directors and executive officers against liabilities that may arise by reason of their status or service. These indemnification agreements also require us to advance all expenses incurred by the directors and executive officers in investigating or defending any such action, suit, or proceeding. We believe that these agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers.
The limitation of liability and indemnification provisions that are expected to be included, or are included, in our amended and restated certificate of incorporation, amended and restated bylaws, and in indemnification agreements that we enter into with our directors and executive officers may discourage stockholders from bringing a lawsuit against our directors and executive officers for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and executive officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be harmed to the extent that we pay the costs of settlement and damage awards against directors and executive officers as required by these indemnification provisions. At present, we are not aware of any pending litigation or proceeding involving any person who is or was one of our directors, officers, employees, or other agents or is or was serving at our request as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.
We have obtained insurance policies under which, subject to the limitations of the policies, coverage is provided to our directors and executive officers against loss arising from claims made by reason of breach of fiduciary duty or other wrongful acts as a director or executive officer, including claims relating to public securities matters, and to us with respect to payments that may be made by us to these directors and executive officers pursuant to our indemnification obligations or otherwise as a matter of law.
Certain of our non-employee directors may, through their relationships with their employers, be insured and/or indemnified against certain liabilities incurred in their capacity as members of our board of directors.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or persons controlling our company pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Policies and Procedures for Related Party Transactions
Our audit and risk committee charter provides that the audit and risk committee has the primary responsibility for reviewing and approving or disapproving “related party transactions,” which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which a related person has or will have a direct or indirect material interest. For purposes of this policy, a related person is defined as a director, executive officer, nominee for director, or greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed year, and their immediate family members.
All of the transactions described above were approved by either the audit and risk committee or the disinterested members of our board of directors after making a determination that the transaction was executed on terms no less favorable than those that could have been obtained from an unrelated third party.

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PRINCIPAL AND REGISTERED STOCKHOLDERS
The following table sets forth:
certain information with respect to the beneficial ownership of our common stock as of January 31, 2019, for: (i) each of our executive officers; (ii) each of our directors; (iii) all of our directors and executive officers as a group; and (iv) each person known by us to be the beneficial owner of more than five percent of any class of our voting securities; and
the number of shares of common stock held by and registered for resale by means of this prospectus for the Registered Stockholders.
The Registered Stockholders include (i) our affiliates and certain other stockholders with “restricted securities” (as defined in Rule 144 under the Securities Act) who, because of their status as affiliates pursuant to Rule 144 or because they acquired their shares of common stock from an affiliate or from us within the prior 12 months, would be unable to sell their securities pursuant to Rule 144 until we have been subject to the reporting requirements of Section 13 or Section 15(d) the Exchange Act for a period of at least 90 days, and (ii) our non-executive officer service providers who acquired shares under Rule 701 and hold “restricted securities” (as defined in Rule 144 under the Securities Act). The Registered Stockholders may, or may not, elect to sell their shares of Class A common stock covered by this prospectus, as and to the extent they may determine. Such sales, if any, will be made through brokerage transactions on the NYSE at prevailing market prices. As such, we will have no input if and when any Registered Stockholder may, or may not, elect to sell their shares of common stock or the prices at which any such sales may occur. Prior to any sales of shares of Class A common stock, Registered Stockholders who hold Class B common stock must convert their shares of Class B common stock into shares of Class A common stock. See the section titled “Plan of Distribution.”
The listing and public trading of our Class A common stock on the NYSE will satisfy the performance vesting condition and result in the vesting and settlement of approximately                 RSUs held by our current and former employees and other service providers. To fund the tax withholding and remittance obligations arising in connection with the RSUs that will vest and settle on that day, we expect that current and former employees will use a broker or brokers to sell a portion of such shares into the market on the first trading day. The proceeds of such sales will be remitted either to us or directly to the relevant taxing authorities, in either case, to be applied towards such tax obligations. Approximately                 shares of our Class A common stock are expected to be sold throughout the first trading day in order to fund such tax amounts. The number of shares expected to be sold has been calculated using a percentage that is based on the estimated withholding tax rates for those employees with RSUs that will vest and settle on the first day of trading. Information concerning the Registered Stockholders may change from time to time and any changed information will be set forth in supplements to this prospectus, if and when necessary. Because the Registered Stockholders who hold Class B common stock may convert their shares of Class B common stock into Class A common stock at any time and the Registered Stockholders may sell all, some, or none of the shares of Class A common stock covered by this prospectus, we cannot determine the number of such shares of Class A common stock that will be sold by the Registered Stockholders, or the amount or percentage of shares of common stock that will be held by the Registered Stockholders, either as Class A common stock or Class B common stock, upon consummation of any particular sale. In addition, the Registered Stockholders listed in the table below may have sold, transferred, or otherwise disposed of, or may sell, transfer, or otherwise dispose of, at any time and from time to time, shares of common stock in transactions exempt from the registration requirements of the Securities Act, after the date on which they provided the information set forth in the table below. The Registered Stockholders have not, nor have they within the past three years had, any position, office, or other material relationship with us, other than as disclosed in this prospectus. See the sections titled “Management” and “Certain Relationships and Related Party Transactions” for further information regarding the Registered Stockholders.
After the effectiveness of the registration statement of which this prospectus forms a part, certain of the Registered Stockholders are entitled to registration rights with respect to their shares of Class B common stock, as described in the section titled “Description of Capital Stock—Registration Rights” at any time beginning 180 days after the date that the registration statement of which this prospectus forms a part is declared effective by the SEC.
We currently intend to use our reasonable efforts to keep the Registration Statement effective for a period of 90 days after the effectiveness of the Registration Statement. As a result, we have registered shares of Class A common stock

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and Class B common stock currently held by Registered Stockholders, as well as shares of Class B common stock of our affiliates that can vest and settle while the registration statement of which this prospectus forms a part is effective.
We are not party to any arrangement with any Registered Stockholder or any broker-dealer with respect to sales of the shares of Class A common stock by the Registered Stockholders. However, we have engaged financial advisors and associate financial advisors with respect to certain other matters relating to our listing. See the section titled “Plan of Distribution.”
We have determined beneficial ownership in accordance with the rules of the SEC, and thus it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable. We have deemed shares of our common stock subject to options that are currently exercisable or exercisable within 60 days of January 31, 2019 to be outstanding and to be beneficially owned by the person holding the option for the purpose of computing the percentage ownership of that person. We have deemed shares of our common stock subject to RSUs for which the service condition has been satisfied or would be satisfied within 60 days of January 31, 2019 to be outstanding and to be beneficially owned by the person holding the RSUs for the purpose of computing the percentage ownership of that person. However, we did not deem these shares subject to stock options or RSUs outstanding for the purpose of computing the percentage ownership of any other person.
We have based percentage ownership of our common stock on 896,057 shares of our Class A common stock and 500,048,944 shares of our Class B common stock outstanding as of January 31, 2019, which includes 373,371,712 shares of Class B common stock resulting from the automatic conversion of all outstanding shares of our convertible preferred stock upon the effectiveness of the registration statement of which this prospectus forms a part, as if this conversion had occurred as of January 31, 2019.

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Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Slack Technologies, Inc., 500 Howard St., San Francisco, California 94105.
 
Shares Beneficially Owned
 
Percent of Total Voting Power
 
Shares of Class A Common Stock being Registered
 
Class A
 
Class B
 
 
 
Shares Outstanding
 
%
 
Shares Outstanding
 
Shares that may be Acquired within 60 Days
 
Total
 
%
 
 
5% Stockholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Entities affiliated with Accel (1)

 

 
119,928,410

 

 
119,928,410

 
24.0
%
 
24.0
%
 
 
Entities affiliated with Andreessen Horowitz   (2)

 

 
66,523,324

 

 
66,523,324

 
13.3
%
 
13.3
%
 
 
Entities affiliated with Social Capital (3)

 

 
50,853,362

 

 
50,853,362

 
10.2
%
 
10.2
%
 
 
Entities affiliated with SoftBank (4)

 

 
36,611,744

 

 
36,611,744

 
7.3
%
 
7.3
%
 
 
Executive Officers and Directors:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stewart Butterfield (5)

 

 
42,324,937

 
915,204

 
43,240,141

 
8.6%

 
8.6
%
 
 
Allen Shim (6)

 

 
1,749,105

 
925,749

 
2,674,854

 
*

 
*

 
 
Robert Frati (7)

 

 

 
494,305

 
494,305

 
*

 
*

 
 
Cal Henderson (8)

 

 
16,604,503

 
167,805

 
16,772,308

 
3.4
%
 
3.4
%
 
 
David Schellhase (9)

 

 

 
444,028

 
444,028

 
*

 
*

 
 
Tamar Yehoshua (10)
 
 
 
 

 

 

 
*

 
*

 
 
Andrew Braccia (11)

 

 
119,928,410

 

 
119,928,410

 
24.0
%
 
24.0
%
 
 
Edith Cooper (12)

 

 

 
85,446

 
85,446

 
*

 
*

 
 
Sarah Friar (13)

 

 
406,017

 

 
406,017

 
*

 
*

 
 
John O’Farrell (14)

 

 

 

 

 

 

 
 
Chamath Palihapitiya (15)

 

 
50,853,362

 

 
50,853,362

 
10.2%

 
10.2
%
 
 
Graham Smith (16)

 

 

 

 

 

 

 
 
All directors and executive officers as a group (12 persons) (17)

 

 
231,866,334

 
3,032,537

 
234,898,871

 
46.7%

 
46.7
%
 
 
Other Registered Stockholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Executive Officer Service Providers Holding Common Stock (18)

 

 
 
 
 
 
 
 
 
 
 
 
 
All Other Registered Stockholders (19)
896,057

 
100%

 
 
 
 
 
 
 
 
 
 
 
 
__________________
*
Represents less than one percent (1%).
(1)
Consists of (i) 14,822,116 shares of Class B common stock held of record by Accel Growth Fund III L.P., (ii) 699,769 shares of Class B common stock held of record by Accel Growth Fund III Strategic Partners L.P., (iii) 981,989 shares of Class B common stock held of record by Accel Growth Fund Investors 2014 L.L.C., (iv) 233,298 shares of Class B common stock held of record by Accel Growth Fund Investors 2016 L.L.C., (v) 4,877,680 shares of Class B common stock held of record by Accel Growth Fund IV L.P., (vi) 27,749 shares of Class B common stock held of record by Accel Growth Fund IV Strategic Partners L.P., (vii) 2,753,490 shares of Class B common stock held of record by Accel Investors 2009 L.L.C., (viii) 1,550,384 shares of Class B common stock held of record by Accel Investors 2013 L.L.C., (ix) 207,696 shares of Class B common stock held of record by Accel Leaders Fund Investors 2016 L.L.C., (x) 4,347,025 shares of Class B common stock held of record by Accel Leaders Fund L.P., (xi) 68,584,320 shares of Class B common stock held of record by Accel X L.P., (xii) 5,147,490 shares of Class B common stock held of record by Accel X Strategic Partners L.P., (xiii) 14,598,564 shares of Class B common stock held of record by Accel XI L.P., and (xiv) 1,096,840 shares of Class B common stock held of record by Accel XI Strategic Partners L.P. Accel Growth Fund III Associates L.L.C. is the general partner of each of Accel Growth Fund III L.P. and Accel Growth Fund III Strategic Partners L.P. (the “Accel Growth Fund III Entities”). The managing members of Accel Growth Fund III Associates L.L.C. are Andrew Braccia, Sameer Gandhi, Ping Li, Tracy Sedlock, Ryan Sweeney, and Richard Wong. Accel Growth Fund III Associates L.L.C. has sole voting and dispositive power with regard to the shares held by the Accel Growth Fund III Entities, and its managing members share such powers. The managing members of Accel Growth Fund

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Investors 2014 L.L.C. are Andrew Braccia, Sameer Gandhi, Ping Li, Tracy Sedlock, Ryan Sweeney, and Richard Wong, all of whom share voting and dispositive power with regard to the shares held by Accel Growth Fund Investors 2014 L.L.C. The managing member of Accel Growth Fund Investors 2016 L.L.C. are Andrew Braccia, Sameer Gandhi, Ping Li, Tracy Sedlock, Ryan Sweeney, and Richard Wong, all of whom share voting and dispositive power with regard to the shares held by Accel Growth Fund Investors 2016 L.L.C. Accel Growth Fund IV Associates L.L.C. is the general partner of each Accel Growth Fund IV L.P. and Accel Growth Fund IV Strategic Partners L.P. (the “Accel Growth Fund IV Entities”). The managing members of Accel Growth Fund IV Associates L.L.C. are Andrew Braccia, Sameer Gandhi, Ping Li, Tracy Sedlock, Ryan Sweeney, and Richard Wong. Accel Growth Fund IV Associates L.L.C. has sole voting and dispositive power with regard to the shares held by the Accel Growth Fund IV Entities, and its managing members share such powers. The managing member of Accel Investors 2009 L.L.C. are Andrew Braccia, Kevin Efrusy, Sameer Gandhi, Ping Li, Tracy Sedlock, and Richard Wong, all of whom share voting and dispositive power with regard to the shares held by Accel Investors 2009 L.L.C. The managing members of Accel Investors 2013 L.L.C. are Andrew G. Braccia, Sameer K. Gandhi, Ping Li, Tracy L. Sedlock, and Richard P. Wong, all of whom share voting and dispositive power with regard to the shares held by Accel Investors 2013 L.L.C. The managing members of Accel Leaders Funder Investors 2016 L.L.C. are Andrew Braccia, Sameer Gandhi, Ping Li, Tracy Sedlock, Ryan Sweeney, and Richard Wong, all of whom share voting and dispositive power with regard to the shares held by Accel Leaders Funder Investors 2016 L.L.C. Accel Leaders Fund Associates L.L.C. is the general partner of Accel Leaders Fund L.P. The managing members of Accel Leaders Fund Associates L.L.C. are Andrew Braccia, Sameer Gandhi, Ping Li, Tracy Sedlock, Ryan Sweeney, and Richard Wong. Accel Leaders Fund Associates L.L.C. has sole voting and dispositive power with regard to the shares held by the Accel Leaders Fund L.P. Accel X Associates L.L.C. is the general partner of each of Accel X L.P. and Accel X Strategic Partners L.P. (together, the “Accel X Entities”). The managing members of Accel X Associates L.L.C. are Andrew Braccia, Kevin Efrusy, Sameer Gandhi, Ping Li, Tracy Sedlock, and Richard P. Wong. Accel X Associates L.L.C. has sole voting and dispositive power with regard to the shares held by the Accel X Entities. Accel XI Associates L.L.C. is the general partner each of Accel XI L.P. and Accel XI Strategic Partners L.P. (together, the “Accel XI Entities”). The managing members of Accel XI Associates L.L.C. are Andrew Braccia, Sameer Gandhi, Ping Li, Tracy Sedlock, and Richard Wong. Accel XI Associates L.L.C. has sole voting and dispositive power with regard to the shares held by the Accel XI Entities. The address for each of these entities is 500 University Avenue, Palo Alto, CA 94301.
(2)
Consists of (i) 42,990 shares of Class B common stock held of record by a16z Seed-III, LLC (“a16z Seed”), (ii) 18,092,974 shares of Class B common stock held of record by AH Parallel Fund IV, L.P. for itself and as nominee for AH Parallel Fund IV-A, L.P., AH Parallel Fund IV-B, L.P., and AH Parallel Fund IV-Q, L.P. (collectively, the “AH Parallel Fund IV Entities”), and (iii) 48,387,360 shares of Class B common stock held of record by Andreessen Horowitz Fund I, L.P., as nominee for Andreessen Horowitz Fund I, L.P., Andreessen Horowitz Fund I-A, L.P., and Andreessen Horowitz Fund I-B, L.P. (collectively, the “AH Fund I Entities”). The shares held directly by a16z Seed are indirectly held by Andreessen Horowitz Fund III, L.P., Andreessen Horowitz Fund III-A, L.P., Andreessen Horowitz Fund III-B, L.P., and Andreessen Horowitz Fund III-Q, L.P. (collectively, the “AH Fund III Entities”), and the members of a16z Seed. AH Equity Partners III, L.L.C. (“AH EP III”), the general partner of the AH Fund III Entities, has sole voting and dispositive power with regard to the shares held by a16z Seed. The managing members of AH EP III are Marc Andreessen and Ben Horowitz. AH Equity Partners IV (Parallel), L.L.C. (“AH EP IV Parallel”), the general partner of the AH Parallel Fund IV Entities, has sole voting and dispositive power with regard to the shares held by the AH Parallel Fund IV Entities. The managing members of AH EP IV Parallel are Marc Andreessen and Ben Horowitz. AH Equity Partners I, L.L.C. (“AH EP I”), the general partner of the AH Fund I Entities, has sole voting and dispositive power with regard to the shares held by the AH Fund I Entities. The managing members of AH EP I are Marc Andreessen and Ben Horowitz. The address for each of these individuals and entities is 2865 Sand Hill Road, Suite 101, Menlo Park, CA 94025.
(3)
Consists of (i) 43,290,060 shares of Class B common stock held of record by The Social+Capital Partnership II, L.P., for itself and as nominee for certain other individuals and entities, (ii) 2,501,374 shares of Class B common stock held of record by The Social+Capital Partnership III, L.P., for itself and as nominee for The Social+Capital Partnership Principals Fund III, L.P., and (iii) 5,061,928 shares of Class B common stock of record by The Social+Capital Partnership Opportunities Fund, L.P. The Social+Capital Partnership GP II, Ltd. is the general partner of The Social+Capital Partnership GP II, L.P., which is the general partner of The Social+Capital Partnership II, L.P. The sole member of The Social+Capital Partnership GP II, Ltd. is Social Capital Holdings Inc. The Social+Capital Partnership GP II, Ltd. has sole voting and dispositive power with regard to the shares held by The Social+Capital Partnership II, L.P. The Social+Capital Partnership GP III, Ltd. is the general partner of The Social+Capital Partnership GP III, L.P., which is the general partner of The Social+Capital Partnership III, L.P. The sole member of The Social+Capital Partnership GP III, Ltd. is Social Capital Holdings Inc. The Social+Capital Partnership GP III, Ltd. has sole voting and dispositive power with regard to the shares held by The Social+Capital Partnership III, L.P. The Social+Capital Partnership Opportunities Fund GP, Ltd. is the general partner of The Social+Capital Partnership Opportunities Fund GP, L.P., which is the general partner of The Social+Capital Partnership Opportunities Fund, L.P. The sole member of The Social+Capital Partnership Opportunities Fund GP, Ltd. is Social Capital Holdings Inc. The Social+Capital Partnership Opportunities Fund GP, Ltd. has sole voting and dispositive power with regard to the shares held by The Social+Capital Partnership Opportunities Fund, L.P. Chamath Palihapitiya is the Chief Executive Officer of Social Capital Holdings Inc. and holds voting and dispositive power over shares controlled by The Social+Capital Partnership GP II, Ltd., The Social+Capital Partnership GP III, Ltd., and The Social+Capital Partnership Opportunities Fund GP, Ltd. The address for each of these entities is c/o The Social+Capital Partnership, L.L.C. 120 Hawthorne Avenue, Palo Alto, CA 94301.
(4)
Consists of 36,611,744 shares of Class B common stock held of record by SoftBank Vision Fund (AIV M1) L.P. SoftBank Vision Fund (AIV M1) L.P. is managed by SB Investment Advisers (UK) Limited. Ruwan Weerasekera is a Director of SB Investment Advisers (UK) Limited. SB Investment Advisers (UK) Limited has sole voting and dispositive power over the shares held by the SoftBank Vision Fund (AIV M1) L.P. The address of SoftBank Vision Fund (AIV M1) L.P. is c/o SB Investment Advisers (UK) Limited, 69 Grosvenor Street, London, W1K 3JP and c/o SB Investment Advisers (US), Inc., 1 Circle Star Way, 4F, San Carlos, CA 94070.
(5)
Consists of (i) 42,324,937 shares of Class B common stock, of which 1,315,183 are subject to repurchase by the company and (ii) 915,204 shares of Class B common stock subject to outstanding RSUs for which the service condition has been satisfied or would be satisfied within 60 days of January 31, 2019.
(6)
Consists of (i) 1,749,105 shares of Class B common stock held of record by the Shim-Park Family Revocable Trust, of which 31,243 are subject to repurchase by the company, (ii) 588,605 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of January 31, 2019, and (iii) 337,144 shares of Class B common stock subject to outstanding RSUs for which the service condition has been satisfied or would be satisfied within 60 days of January 31, 2019.

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(7)
Consists of 494,305 shares of Class B common stock subject to outstanding RSUs for which the service condition has been satisfied or would be satisfied within 60 days of January 31, 2019.
(8)
Consists of (i) 16,604,503 shares of Class B common stock held of record by Cal Henderson and Rebecca Reeve Henderson, Trustees of The Henderson Family Trust and (ii) 167,805 shares of Class B common stock subject to outstanding RSUs for which the service condition has been satisfied or would be satisfied within 60 days of January 31, 2019.
(9)
Consists of 444,028 shares of Class B common stock subject to outstanding RSUs for which the service condition has been satisfied or would be satisfied within 60 days of January 31, 2019.
(10)
Consists of 0 shares of Class B common stock subject to outstanding RSUs for which the service condition has been satisfied or would be satisfied within 60 days of January 31, 2019.
(11)
Consists of shares held by the entities affiliated with Accel identified in footnote 1.
(12)
Consists of 85,446 shares of Class B common stock subject to outstanding RSUs for which the service condition has been satisfied or would be satisfied within 60 days of January 31, 2019.
(13)
Consists of 406,017 shares of Class B common stock held of record by Sarah J. Friar, as Trustee of the David Riley and Sarah Friar Revocable Trust Dated August 11, 2006, of which 203,009 are subject to repurchase by the company.
(14)
Excludes shares listed in footnote 2 above owned by entities affiliated with Andreessen Horowitz. Mr. O’Farrell, one of our directors, is a non-managing member of these entities and does not have voting or dispositive power over such shares.
(15)
Consists of shares held by the entities affiliated with Social Capital identified in footnote 3.
(16)
Consists of 0 shares of Class B common stock subject to outstanding RSUs for which the service condition has been satisfied or would be satisfied within 60 days of January 31, 2019.
(17)
Consists of (i) 231,866,334 shares of Class B common stock beneficially owned by our current directors and executive officers, of which 1,549,435 are subject to repurchase by the company, (ii) 588,605 shares of common stock subject to outstanding options that are exercisable within 60 days of January 31, 2019, and (iii) 2,443,932 shares of common stock subject to outstanding RSUs for which the service condition has been satisfied or would be satisfied within 60 days of January 31, 2019.
(18)
Consists of          shares of Class B common stock.
(19)
Consists of (i) 896,057 shares of Class A common stock and (ii)           shares of Class B common stock.


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DESCRIPTION OF CAPITAL STOCK
General
The following description summarizes the most important terms of our capital stock, as they are expected to be in effect shortly following the effectiveness of the registration statement of which this prospectus forms a part. We expect to adopt an amended and restated certificate of incorporation and amended and restated bylaws in connection with this registration, and this description summarizes the provisions that are expected to be included in such documents. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description of the matters set forth in this section titled “Description of Capital Stock,” you should refer to our amended and restated certificate of incorporation, amended and restated bylaws, and our amended and restated investor rights’ agreement, which are or will be included as exhibits to the registration statement of which this prospectus forms a part, and to the applicable provisions of Delaware law. Shortly following the effectiveness of the registration statement of which this prospectus forms a part, our authorized capital stock will consist of:
          shares of Class A common stock, $0.0001 par value per share,
          shares of Class B common stock, $0.0001 par value per share, and
          shares of undesignated preferred stock, $0.0001 par value per share.
Assuming the conversion of all outstanding shares of our convertible preferred stock into shares of our Class B common stock, which will occur upon the effectiveness of the registration statement of which this prospectus forms a part, as of January 31, 2019, there were 896,057 outstanding shares of Class A common stock and 500,048,944 shares of our Class B common stock outstanding, held by 435 stockholders of record, and no shares of our convertible preferred stock outstanding. Our board of directors is authorized, without stockholder approval except as required by the listing standards of the NYSE, to issue additional shares of our capital stock.
Class A Common Stock and Class B Common Stock
We have two classes of authorized common stock, Class A common stock and Class B common stock. All outstanding shares of our convertible preferred stock will be converted into shares of our Class B common stock. In addition, any options to purchase shares of our capital stock outstanding prior to the effectiveness of the registration statement of which this prospectus forms a part are eligible to be settled in or exercisable for shares of our Class B common stock.
Dividend Rights
Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of our Class A common stock and Class B common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and then only at the times and in the amounts that our board of directors may determine. See the section titled “Dividend Policy.”

153



Voting Rights
Holders of our Class A common stock are entitled to one vote per share, and holders of our Class B common stock are entitled to 10 votes per share, on all matters submitted to a vote of stockholders. The holders of our Class A common stock and Class B common stock will generally vote together as a single class on all matters submitted to a vote of our stockholders, unless otherwise required by Delaware law or our amended and restated certificate of incorporation. Delaware law could require either holders of our Class A common stock or Class B common stock to vote separately as a single class in the following circumstances:
if we were to seek to amend our amended and restated certificate of incorporation to increase or decrease the par value of a class of our capital stock, then that class would be required to vote separately to approve the proposed amendment; and
if we were to seek to amend our amended and restated certificate of incorporation in a manner that alters or changes the powers, preferences, or special rights of a class of our capital stock in a manner that affected its holders adversely, then that class would be required to vote separately to approve the proposed amendment.
Our amended and restated certificate of incorporation and amended and restated bylaws will establish a classified board of directors that is divided into three classes with staggered three-year terms. Only the directors in one class will be subject to election by a plurality of the votes cast at each annual meeting of our stockholders, with the directors in the other classes continuing for the remainder of their respective three-year terms. Our amended and restated certificate of incorporation will not provide for cumulative voting for the election of directors.
Conversion
Each outstanding share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon (i) any transfer, whether or not for value, which occurs after the effectiveness of the registration statement of which this prospectus forms a part , except for certain permitted transfers, described in the paragraph that immediately follows this paragraph and further described in our amended and restated certificate of incorporation, or (ii), in the case of a stockholder who is a natural person, the death or incapacity of such stockholder. Once converted into Class A common stock, the Class B common stock will not be reissued.
The following transfers of Class B common stock will not trigger an automatic conversion of such stock to Class A common stock: (i) a transfer by a holder of Class B common stock to any of such holder’s affiliates with the prior written approval of the Company; (ii) a transfer by a holder of Class B common stock to any of the persons or entities listed in clauses (A) through (G) below (each, a “Permitted Transferee”) and from any such Permitted Transferee back to such holder of Class B common stock and/or any other Permitted Transferee established by or for such holder of Class B common stock: (A) to any family member of such holder of Class B common stock, including a spouse, domestic partner, parent, grandparent, lineal descendant (which includes a descendant adopted as a minor), sibling or lineal descendant of a sibling; (B) to a trust for the benefit of the holder of Class B common stock or over which such holder of Class B common stock or its family members retain sole dispositive power and voting control, provided the holder of Class B common stock does not receive consideration in exchange for the transfer (other than as a settlor or beneficiary of such trust); (C) to a trust under the terms of which such holder of Class B common stock has retained a “qualified interest” within the meaning of §2702(b)(1) of the Internal Revenue Code and/or a reversionary interest so long as the holder of Class B common stock and/or family members of such holder of Class B common stock retain sole dispositive power and exclusive voting control with respect to the shares of Class B common stock held by such trust; (D) to an Individual Retirement Account, as defined in Section 408(a) of the Internal Revenue Code, or a pension, profit sharing, stock bonus or other type of plan or trust of which such holder of Class B common stock is a participant or beneficiary and which satisfies the requirements for qualification under Section 401 of the Internal Revenue Code, so long as such holder of Class B common stock retains sole dispositive power and exclusive voting control with respect to the shares of Class B common stock held in such account, plan or trust; (E) to a corporation, partnership or limited liability company in which such holder of Class B common stock and/or family members of such holder of Class B common stock directly, or indirectly, retain sole dispositive power and exclusive voting control with respect to the shares of Class B common stock held by such corporation, partnership or limited liability company; (F) to another holder of Class B common stock; or (G) to an affiliate of a holder of Class B common stock, provided that the person or entity

154



holding sole dispositive power and exclusive voting control with respect to the shares of Class B common stock being transferred retains, directly or indirectly, sole dispositive power and exclusive voting control with respect to the shares following such transfer.
Each outstanding share of Class B common stock will convert automatically into one share of Class A common stock upon the date specified by affirmative vote of the holders of at least 66-2/3% of the outstanding shares of Class B common stock, voting as a single class.
All outstanding shares of Class A common stock and Class B common stock will convert automatically into shares of a single class of common stock on the earlier of the date that is          years from the date of this prospectus or the date the holders of at least two-thirds of our Class B common stock elect to convert the Class B common stock to Class A common stock. The purpose of this provision is to ensure that following such conversion, each share of common stock will have one vote per share and the rights of the holders of all outstanding common stock will be identical. Once converted into a single class of common stock, the Class A common stock and Class B common stock may not be reissued. See the section titled “Risk Factors— Risks Related to Ownership of Our Class A Common Stock— The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the listing of our Class A common stock on the NYSE, including our directors, executive officers and their respective affiliates, who will hold in the aggregate          % of the voting power of our capital stock upon the effectiveness of the registration statement of which this prospectus forms a part. This ownership will limit or preclude your ability to influence corporate matters, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.” f or a description of the risks related to the dual class structure of our common stock.
No Preemptive or Similar Rights
Our Class A common stock and Class B common stock are not entitled to preemptive rights and are not subject to conversion (except as noted above), redemption, or sinking fund provisions.
Right to Receive Liquidation Distributions
If we become subject to a liquidation, dissolution, or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our Class A common stock and Class B common stock and any participating preferred stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of preferred stock.
Fully Paid and Non-Assessable
All of the outstanding shares of our Class A common stock and Class B common stock are fully paid and non-assessable.
Preferred Stock
Shortly following the effectiveness of the registration statement of which this prospectus forms a part, our board of directors will be authorized, subject to limitations prescribed by Delaware law, to issue preferred stock in one or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences, and rights of the shares of each series and any of its qualifications, limitations, or restrictions, in each case without further vote or action by our stockholders. Our board of directors can also increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our Class A common stock and Class B common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring, or preventing a change in control of our company and might adversely affect the market price of

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our Class A common stock and the voting and other rights of the holders of our Class A common stock and Class B common stock. We have no current plan to issue any shares of preferred stock.
Options
As of January 31, 2019, we had outstanding options to purchase an aggregate of 18,405,776 shares of our Class B common stock, with a weighted-average exercise price of $0.9428 per share, pursuant to our 2009 Plan.
Restricted Stock Units
As of January 31, 2019, we had outstanding RSUs representing 63,113,635 shares of our Class B common stock, issued pursuant to our 2009 Plan.
Registration Rights
After the effectiveness of the registration statement of which this prospectus forms a part, certain holders of our Class B common stock will be entitled to rights with respect to the registration of their shares under the Securities Act. These registration rights are contained in our amended and restated investors’ rights agreement, or the IRA, dated as of August 13, 2018. We, along with certain holders of our convertible preferred stock are parties to the IRA. The registration rights set forth in the IRA will expire five years following the effectiveness of the registration statement of which this prospectus forms a part, or, with respect to any particular stockholder, when such stockholder is able to sell all of its shares pursuant to Rule 144(b)(1)(i) of the Securities Act or holds 1% or less of our common stock and is able to sell all of its Registrable Securities, as defined in the IRA, without registration pursuant to Rule 144 of the Securities Act during any three-month period. We will pay the registration expenses (other than underwriting discounts and selling commissions) of the holders of the shares registered pursuant to the registrations described below, including the reasonable fees of one counsel for the selling holders. In an underwritten offering, the underwriters have the right, subject to specified conditions, to limit the number of shares such holders may include.
Demand Registration Rights
After the effectiveness of the registration statement of which this prospectus forms a part, the holders of approximately 372,136,712 shares of our Class B common stock will be entitled to certain demand registration rights. At any time beginning six months after the effectiveness of the registration statement of which this prospectus forms a part, the holders of at least 25% of these shares then outstanding can request that we register the offer and sale of their shares. We are obligated to effect only two such registrations. If we determine that it would be seriously detrimental to us and our stockholders to effect such a demand registration, we have the right to defer such registration, not more than once in any 12-month period, for a period of up to 90 days. Additionally, we will not be required to effect a demand registration during the period beginning 60 days prior to our good faith estimate of the date of the filing of and ending on a date 180 days following the effectiveness of a registration statement relating to our Class A common stock.
Piggyback Registration Rights
After the effectiveness of the registration statement of which this prospectus forms a part, if we propose to register the offer and sale of our common stock under the Securities Act, in connection with the public offering of such common stock, the holders of up to approximately 372,136,712 shares of our Class B common stock will be entitled to certain “piggyback” registration rights allowing the holders to include their shares in such registration, subject to certain marketing and other limitations. As a result, whenever we propose to file a registration statement under the Securities Act, other than with respect to (1) a registration related solely to a company stock plan, (2) a registration relating to a corporate reorganization or transaction under Rule 145 of the Securities Act, (3) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the public offering of our common stock, or (4) a registration in which the only common stock being registered is common stock issuable upon the conversion of debt securities that are also being registered, the holders of these shares are entitled to notice of the registration and have the right, subject to certain limitations, to include their shares in the registration.

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S-3 Registration Rights
After the effectiveness of the registration statement of which this prospectus forms a part, the holders of up to approximately 372,136,712 shares of our Class B common stock will be entitled to certain Form S-3 registration rights. The holders of at least 25% of these shares then outstanding may make a written request that we register the offer and sale of their shares on a registration statement on Form S-3 if we are eligible to file a registration statement on Form S-3 so long as the request covers at least that number of shares with an anticipated offering price, net of underwriting discounts and commissions, of at least $5.0 million. These stockholders may make an unlimited number of requests for registration on Form S-3; however, we will not be required to effect a registration on Form S-3 if we have effected two such registrations within the 12-month period preceding the date of the request. Additionally, if we determine that it would be seriously detrimental to us and our stockholders to effect such a registration, we have the right to defer such registration, not more than once in any 12-month period, for a period of up to 90 days.
Anti-Takeover Provisions
The provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated bylaws, which are summarized below, may have the effect of delaying, deferring, or discouraging another person from acquiring control of our company. They are also designed, in part, to encourage persons seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.
Delaware Law
We are governed by the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes mergers, asset sales or other transactions resulting in a financial benefit to the stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of the corporation’s outstanding voting stock. These provisions may have the effect of delaying, deferring, or preventing a change in our control.
Amended and Restated Certificate of Incorporation and Amended and Restated Bylaw Provisions
Our amended and restated certificate of incorporation and our amended and restated bylaws will include a number of provisions that could deter hostile takeovers or delay or prevent changes in control of our board of directors or management team, including the following:
Dual Class Stock. As described above in the subsection titled “—Class A Common Stock and Class B Common Stock—Voting Rights,” our amended and restated certificate of incorporation will continue to provide for a dual class common stock structure, which will provide our founders, current investors, executives, and employees with significant influence over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company of its assets.
Board of Directors Vacancies. Our amended and restated certificate of incorporation and amended and restated bylaws will authorize only our board of directors to fill vacant directorships, including newly created seats. In addition, the number of directors constituting our board of directors will be permitted to be set only by a resolution adopted by a majority vote of our entire board of directors. These provisions would prevent a stockholder from increasing the size of our board of directors and then gaining control of our board of directors by filling the resulting vacancies with its own nominees. This will make it more difficult to change the composition of our board of directors and promote continuity of management.
Classified Board. Our amended and restated certificate of incorporation and amended and restated bylaws will provide that our board of directors is classified into three classes of directors. A third party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it is more difficult

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and time consuming for stockholders to replace a majority of the directors on a classified board of directors. See the section titled “Management—Board of Directors.”
Stockholder Action; Special Meeting of Stockholders. Our amended and restated certificate of incorporation will provide that our stockholders may not take action by written consent, but may only take action at annual or special meetings of our stockholders. As a result, a holder controlling a majority of our capital stock would not be able to amend our amended and restated bylaws or remove directors without holding a meeting of our stockholders called in accordance with our amended and restated bylaws. Our amended and restated bylaws will further provide that special meetings of our stockholders may be called only by a majority of our board of directors, the Chairperson of our board of directors, or our Chief Executive Officer, thus prohibiting a stockholder from calling a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take any action, including the removal of directors.
Advance Notice Requirements for Stockholder Proposals and Director Nominations. Our amended and restated bylaws will provide advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. Our amended and restated bylaws will also specify certain requirements regarding the form and content of a stockholder’s notice. These provisions might preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.
No Cumulative Voting. The Delaware General Corporation Law provides that stockholders are not entitled to cumulate votes in the election of directors unless a corporation’s certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation will not provide for cumulative voting.
Directors Removed Only for Cause. Our amended and restated certificate of incorporation will provide that stockholders may remove directors only for cause.
Amendment of Charter Provisions. Any amendment of the above provisions in our amended and restated certificate of incorporation would require approval by holders of at least two-thirds of our then outstanding common stock.
Issuance of Undesignated Preferred Stock. Our board of directors has the authority, without further action by the stockholders, to issue up to          shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our board of directors. The existence of authorized but unissued shares of preferred stock would enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest, or other means.
Exclusive Forum. Our amended and restated bylaws will provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a breach of a fiduciary duty, (3) any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or (4) any action asserting a claim against us that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants. Nothing in our amended and restated bylaws will preclude stockholders that assert claims under the Securities Act from bringing such claims in state or federal court, subject to applicable law. Any person or entity purchasing or otherwise acquiring any interest in our securities shall be deemed to have notice of and consented to this provision. Although we believe these provisions benefit us by providing increased consistency in the application of Delaware law for the specified types of actions and proceedings, the provisions may have the effect of discouraging lawsuits against us or our directors and officers.

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Transfer Agent and Registrar
Upon the effectiveness of the registration statement of which this prospectus forms a part, the transfer agent and registrar for our Class A common stock and Class B common stock will be Computershare Trust Company, N.A. The transfer agent’s address is 250 Royal Street, Canton, MA 02021.
Listing
We have applied to list our Class A common stock on the NYSE under the symbol “SK.”

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SHARES ELIGIBLE FOR FUTURE SALE
Prior to the listing of our Class A common stock on the NYSE, there has been no public market for our common stock, and we cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Sales of substantial amounts of our Class A common stock in the public market following our listing on the NYSE, or the perception that such sales could occur, could adversely affect the public price of our Class A common stock and may make it more difficult for you to sell your Class A common stock at a time and price that you deem appropriate. We will have no input if and when any Registered Stockholder may, or may not, elect to sell its shares of Class A common stock or the prices at which any such sales may occur. Future sales of our Class A common stock in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time.
Upon the effectiveness of the registration statement of which this prospectus forms a part, based on the number of shares of our capital stock outstanding as of January 31, 2019, we will have a total of 896,057 shares of our Class A common stock and 500,048,944 shares of our Class B common stock outstanding, assuming the automatic conversion of all outstanding shares of our convertible preferred stock into 373,371,712 shares of our Class B common stock immediately prior to the effectiveness of the registration statement of which this prospectus forms a part.
Shares of our Class A common stock and Class B common stock will be deemed “restricted securities” (as defined in Rule 144 under the Securities Act). Restricted securities may be sold in the public market only if they are registered or if they qualify for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which rules are summarized below. Following the listing of our Class A common stock on the NYSE, shares of our Class A common stock may be sold either by the Registered Stockholders pursuant to this prospectus or by our other existing stockholders in accordance with Rule 144 of the Securities Act.
As further described below, until we have been a reporting company for at least 90 days, only non-affiliates who have beneficially owned their shares of common stock for a period of at least one year will be able to sell their shares of Class A common stock under Rule 144, which is expected to include approximately          shares of common stock immediately after our registration.
Rule 144
In general, under Rule 144 as currently in effect, once we have been subject to the public company reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person would be entitled to sell those shares without complying with any of the requirements of Rule 144.
In general, under Rule 144 as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell, within any three-month period, a number of shares that does not exceed the greater of:
1% of the number of shares of our Class A common stock then outstanding, which will equal approximately          shares immediately after the effectiveness of the registration statement of which this prospectus forms a part; or
the average weekly trading volume of our Class A common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale.
Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

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Rule 701
Rule 701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required by that rule to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701.
Registration Rights
Pursuant to our amended and restated investors’ rights agreement, the holders of up to 372,136,712 shares of our Class B common stock (including shares issuable upon the conversion of our outstanding convertible preferred stock immediately prior to the effectiveness of the registration statement of which this prospectus forms a part), or their transferees, will be entitled to certain rights with respect to the registration of the offer and sale of those shares under the Securities Act. See the section titled “Description of Capital Stock—Registration Rights” for a description of these registration rights. If the offer and sale of these shares is registered, the shares will be freely tradable without restriction under the Securities Act, and a large number of shares may be sold into the public market.
Registration Statement on Form S-8
We intend to file a registration statement on Form S-8 under the Securities Act to register all of the shares of our Class A common stock and Class B common stock issuable or reserved for issuance under our 2009 Plan, our 2019 Plan, and our 2019 ESPP. Shares covered by such registration statement will be eligible for sale in the public market, subject to the Rule 144 limitations and vesting restrictions. As of January 31, 2019, RSUs and options to purchase a total of 81,519,411 shares of our Class B common stock pursuant to our 2009 Plan were outstanding and no options or other equity awards were outstanding or exercisable under our 2019 Plan.

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SALE PRICE HISTORY OF OUR CAPITAL STOCK
We have applied to list our Class A common stock on the NYSE. Prior to the initial listing, no public market existed for our Class A common stock. However, our Class B common stock (on an as converted basis) has a history of trading in private transactions. The table below shows the high and low sales prices for our Class B common stock (on an as converted basis) in private transactions by our stockholders, for the indicated periods, based on information available to us. As of March 31, 2019, there have been no sales of our Class A common stock. While the DMM, in consultation with our financing advisors, is expected to consider this information in connection with setting the opening public price of our Class A common stock, this information may, however, have little or no relation to broader market demand for our Class A common stock and thus the opening public price and subsequent public price of our Class A common stock on the NYSE. As a result, you should not place undue reliance on these historical private sales prices as they may differ materially from the opening public price and subsequent public price of our Class A common stock on the NYSE. See the section titled “Risk Factors—Risks Related to Ownership of Our Class A Common Stock—The public price of our Class A common stock, upon listing on the NYSE, may have little or no relationship to the historical sales prices of our capital stock in private transactions.”
 
Per Share Sale
Price
 
Number of
Shares Sold in the Period
 
Number of
Shares Outstanding
(Period End)
 
High
 
Low
 
Annual
 
 
 
 
 
 
 
Year ended January 31, 2019
$
23.41

 
$
8.37

 
9,382,888

 
500,945,001

Quarterly
 
 
 
 
 
 
 
Year ended January 31, 2019
 
 
 
 
 
 
 
First Quarter
$
8.37

 
$
8.37

 
1,205,454

 
458,259,049

Second Quarter
$
15.50

 
$
14.00

 
312,104

 
460,744,948

Third Quarter
$
13.79

 
$
10.71

 
6,048,141

 
499,263,366

Fourth Quarter
$
23.41

 
$
17.25

 
1,817,189

 
500,945,001

Monthly
 
 
 
 
 
 
 
Year Ended January 31, 2019
 
 
 
 
 
 
 
July
$

 
$

 

 
460,744,948

August
$
10.71

 
$
10.71

 
4,185,501

 
494,056,811

September
$
11.91

 
$
11.91

 
1,548,640

 
497,210,557

October
$
13.79

 
$
13.79

 
314,000

 
499,263,366

November
$
22.00

 
$
22.00

 
75,000

 
499,315,136

December
$
22.00

 
$
17.25

 
154,500

 
499,806,957

January
$
23.41

 
$
21.00

 
1,587,689

 
500,945,001

Year Ended January 31, 2020
 
 
 
 
 
 
 
February
$
22.00

 
$
22.00

 
210,000

 
501,542,049

March
$
26.00

 
$
21.00

 
2,374,376

 
502,136,716


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CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material U.S. federal income and estate tax consequences relating to ownership and disposition of our common stock by a non-U.S. holder. For purposes of this discussion, the term “non-U.S. holder” means a beneficial owner of our common stock that is not, for U.S. federal income tax purposes:
an individual who is a citizen or resident of the United States;
a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or of any political subdivision of the United States;
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust, if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more “United States persons” (as defined in the Code) have authority to control all substantial decisions of the trust or if the trust has a valid election in effect to be treated as a United States person under applicable U.S. Treasury Regulations.
A modified definition of “non-U.S. holder” applies for U.S. federal estate tax purposes (as discussed below).
This discussion is based on current provisions of the Code, U.S. Treasury Regulations promulgated thereunder, current administrative rulings, and judicial decisions, all as in effect as of the date of this prospectus and all of which are subject to change or to differing interpretation, possibly with retroactive effect. Any change could alter the tax consequences to non-U.S. holders described in this prospectus. In addition, the Internal Revenue Service, or the IRS, could challenge one or more of the tax consequences described in this prospectus.
We assume in this discussion that each non-U.S. holder holds shares of our common stock as a capital asset (generally, property held for investment) within the meaning of Section 1221 of the Code. This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant to a particular non-U.S. holder in light of that non-U.S. holder’s individual circumstances nor does it address any aspects of state, local, or non-U.S. taxes, alternative minimum tax, or U.S. federal taxes other than income and estate taxes. This discussion also does not consider any specific facts or circumstances that may apply to a non-U.S. holder and does not address the special tax rules applicable to particular non-U.S. holders, such as:
banks;
insurance companies;
tax-exempt organizations;
other financial institutions;
brokers or dealers in securities;
pension plans;
tax-qualified retirement plans;
governmental organizations;
controlled foreign corporations;
passive foreign investment companies;
owners that hold our common stock as part of a straddle, hedge, conversion transaction, synthetic security, or other integrated investment;
certain U.S. expatriates;

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persons who have elected to mark securities to market;
persons subject to the unearned income Medicare contribution tax;
persons that elect to apply Section 1400Z-2 of the Code to gains recognized with respect to shares of our common stock; or
persons that acquire our common stock as compensation for services.
In addition, this discussion does not address the tax treatment of partnerships (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) or other entities that are “pass-throughs” for U.S. federal income tax purposes or persons who hold their common stock through partnerships or other entities that are “pass-throughs” for U.S. federal income tax purposes. In the case of a holder that is classified as a partnership for U.S. federal income tax purposes, the tax treatment of a person treated as a partner in such partnership for U.S. federal income tax purposes generally will depend on the status of the partner, the activities of the partner and the partnership, and certain determinations made at the partner level. A person treated as a partner in a partnership or who holds their stock through another transparent entity should consult his, her, or its own tax advisor regarding the tax consequences of the ownership and disposition of our common stock through a partnership or other “pass-through” entity, as applicable.
Prospective investors should consult their own tax advisors regarding the U.S. federal, state, local, and non-U.S. income and other tax considerations of acquiring, holding, and disposing of our common stock.
Distributions on our Common Stock
We have never declared or paid any cash dividend on our capital stock, and do not expect to pay any dividends in the foreseeable future. See the section titled “Dividend Policy.” However, in the event that we do pay distributions of cash or property on our common stock, those distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and profits, the excess will be treated as a tax-free return of the non-U.S. holder’s investment, up to such holder’s tax basis in our common stock. Any remaining excess will be treated as capital gain, subject to the tax treatment described below under the heading “Gain on Sale, Exchange, or Other Taxable Disposition of Common Stock.”
Subject to the discussion of effectively connected income below and the discussions below under the headings “Information Reporting and Backup Withholding” and “Foreign Account Tax Compliance Act”, dividends paid to a non-U.S. holder generally will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder’s country of residence. If we or another withholding agent apply over-withholding or if a non-U.S. holder does not timely provide us with the required certification, the non-U.S. holder may be entitled to a refund or credit of any excess tax withheld by timely filing an appropriate claim with the IRS.
A non-U.S. holder of our common stock who claims the benefit of an applicable income tax treaty between the United States and such holder’s country of residence generally will be required to provide a properly executed IRS Form W-8BEN or W-8BEN-E (or applicable successor form) and satisfy applicable certification and other requirements. A non-U.S. holder that is eligible for a reduced rate of U.S. withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim with the IRS. Non-U.S. holders are urged to consult their own tax advisors regarding their entitlement to benefits under a relevant income tax treaty.
Dividends that are treated as effectively connected with a trade or business conducted by a non-U.S. holder within the United States, and, if an applicable income tax treaty so provides, that are attributable to a permanent establishment or a fixed base maintained by the non-U.S. holder within the United States, are generally exempt from the 30% withholding tax if the non-U.S. holder satisfies applicable certification and disclosure requirements. To obtain this exemption, a non-U.S. holder must generally provide a properly executed original and unexpired IRS Form W-8ECI properly certifying such exemption. However, such U.S. effectively connected income is taxed at the same graduated U.S. federal income tax rates applicable to U.S. persons (as defined in the Code). Any U.S. effectively connected income received by a non-U.S. holder that is a corporation may also, under certain circumstances, be subject to an additional

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“branch profits tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder’s country of residence.
Any documentation provided to an applicable withholding agent may need to be updated in certain circumstances. The certification requirements described above also may require a non-U.S. holder to provide its U.S. taxpayer identification number.
Gain on Sale, Exchange, or Other Taxable Disposition of Common Stock
Subject to the discussions below under the headings “Information Reporting and Backup Withholding” and “Foreign Account Tax Compliance Act,” a non-U.S. holder generally will not be subject to U.S. federal income tax or withholding tax on gain recognized on a sale, exchange, or other taxable disposition of our common stock unless:
the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States, and, if an applicable income tax treaty so provides, the gain is attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the United States; in these cases, the non-U.S. holder will be taxed on a net income basis at the regular graduated rates and in the manner applicable to United States persons, and, if the non-U.S. holder is a foreign corporation, an additional branch profits tax at a rate of 30%, or a lower rate as may be specified by an applicable income tax treaty, may also apply;
the non-U.S. holder is an individual present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met, in which case the non-U.S. holder will be subject to U.S. federal income tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on the amount by which the non-U.S. holder’s capital gains allocable to U.S. sources exceed certain capital losses allocable to U.S. sources; or
we are or were a “U.S. real property holding corporation” during the shorter of the five-year period ending on the date of the disposition or the period that the non-U.S. holder held our common stock, unless our common stock is regularly traded on an established securities market and the non-U.S. holder held no more than five percent of our outstanding common stock, directly or indirectly, actually or constructively, during the shorter of the five-year period ending on the date of the disposition or the period that the non-U.S. holder held our common stock. In such case, such non-U.S. holder generally will be taxed on its net gain derived from the disposition at the graduated U.S. federal income tax rates applicable to United States persons. Generally, a corporation is a “U.S. real property holding corporation” if the fair market value of its “U.S. real property interests” equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. Although there can be no assurance in this regard, we believe that we have not been and are not currently, and we do not anticipate becoming, a “U.S. real property holding corporation” for U.S. federal income tax purposes.
Information Reporting and Backup Withholding
We (or the applicable paying agent) must report annually to the IRS and to each non-U.S. holder the gross amount of the distributions on our common stock paid to such holder and the tax withheld, if any, with respect to such distributions. Non-U.S. holders may have to comply with specific certification procedures to establish that the holder is not a United States person in order to avoid backup withholding at the applicable rate with respect to dividends on our common stock. Generally, a holder will comply with such procedures if it provides a properly executed IRS Form W-8BEN or W-8BEN-E or otherwise establishes an exemption.
Information reporting and backup withholding generally will apply to the proceeds of a disposition of our common stock by a non-U.S. holder effected by or through the U.S. office of any broker, U.S. or foreign, unless the holder certifies its status as a non-U.S. holder and satisfies certain other requirements, or otherwise establishes an exemption. Generally, information reporting and backup withholding will not apply to a payment of disposition proceeds to a non-U.S. holder where the transaction is effected outside the United States through a foreign broker. However, dispositions effected through a non-U.S. office of a broker with substantial U.S. ownership or operations generally will be treated in a manner similar to dispositions effected through a U.S. office of a broker. Non-U.S. holders should consult their own tax advisors regarding the application of the information reporting and backup withholding rules to them.

165



Copies of information returns may be made available to the tax authorities of the country in which the non-U.S. holder resides or is incorporated under the provisions of a specific treaty or agreement. Any documentation provided to an applicable withholding agent may need to be updated in certain circumstances.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder may be refunded or credited against the non-U.S. holder’s U.S. federal income tax liability, if any, provided that an appropriate claim is timely filed with the IRS.
Foreign Account Tax Compliance Act
Legislation commonly referred to as the Foreign Account Tax Compliance Act and associated guidance, or collectively, FATCA, generally imposes a 30% withholding tax on any “withholdable payment” (as defined below) to a “foreign financial institution” (as defined in the Code), unless such institution enters into an agreement with the U.S. government to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which would include certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with United States owners) or another applicable exception applies or such institution is compliant with applicable foreign law enacted in connection with an applicable intergovernmental agreement between the United States and a foreign jurisdiction. FATCA also generally imposes a 30% withholding tax on any “withholdable payment” (as defined below) to a foreign entity that is not a financial institution, unless such entity provides the withholding agent with a certification identifying the substantial U.S. owners of the entity (which generally includes any United States person who directly or indirectly owns more than 10% of the entity), if any, or another applicable exception applies or such entity is compliant with applicable foreign law enacted in connection with an applicable intergovernmental agreement between the United States and a foreign jurisdiction. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes.
Under final regulations and other current guidance, “withholdable payments” currently include dividends on our common stock. While withholding under FATCA would have applied also to the gross proceeds of a disposition of our common stock on or after January 1, 2019, recently proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued. The FATCA withholding tax will apply regardless of whether a payment would otherwise be exempt from or not subject to U.S. nonresident withholding tax (e.g., as capital gain).
Federal Estate Tax
Common stock owned or treated as owned by an individual who is a non-U.S. holder (as specially defined for U.S. federal estate tax purposes) at the time of death will be included in the individual’s gross estate for U.S. federal estate tax purposes and, therefore, may be subject to U.S. federal estate tax, unless an applicable estate tax or other treaty provides otherwise.
The preceding discussion of material U.S. federal tax considerations is for general information only. It is not tax advice. Prospective investors should consult their own tax advisors regarding the particular U.S. federal, state, local, and non-U.S. tax consequences of purchasing, holding, and disposing of our common stock, including the consequences of any proposed changes in applicable laws.

166



PLAN OF DISTRIBUTION
The Registered Stockholders may sell their shares of Class A common stock covered hereby pursuant to brokerage transactions on the NYSE, or other public exchanges or registered alternative trading venues, at prevailing market prices at any time after the shares of Class A common stock are listed for trading. We are not party to any arrangement with any Registered Stockholder or any broker-dealer with respect to sales of shares of Class A common stock by the Registered Stockholders, except we have engaged financial advisors and associate financial advisors with respect to certain other matters relating to our listing, as further described below. As such, we will have no input if and when any Registered Stockholder may, or may not, elect to sell their shares of Class A common stock or the prices at which any such sales may occur, and there can be no assurance that any Registered Stockholders will sell any or all of the shares of Class A common stock covered by this prospectus.
We will not receive any proceeds from the sale of shares of Class A common stock by the Registered Stockholders. We expect to recognize certain non-recurring costs as part of our transition to a publicly-traded company, consisting of professional fees and other expenses. As part of our direct listing, these fees will be expensed in the period incurred and not deducted from net proceeds to the issuer as they would be in an initial public offering.
We have engaged Goldman Sachs, Morgan Stanley, and Allen & Company as our financial advisors to advise and assist us with respect to certain matters relating to our listing. However, the financial advisors have not been engaged to participate in investor meetings or to otherwise facilitate or coordinate price discovery activities or sales of our Class A common stock in consultation with us, except as described herein with respect to consultation with the DMM on the opening public price in accordance with NYSE rules. We have also engaged Credit Suisse Securities (USA) LLC, Barclays Capital Inc., Citigroup Global Markets Inc., RBC Capital Markets, LLC, KeyBanc Capital Markets Inc., Canaccord Genuity LLC, and William Blair & Company, L.L.C. as our associate financial advisors t o advise and assist us with respect to certain matters relating to our listing. However, the associate financial advisors have not been engaged to participate in investor meetings or to otherwise facilitate or coordinate price discovery activities or sales of our Class A common stock in consultation with us.
The DMM, acting pursuant to its obligations under the rules of the NYSE, is responsible for facilitating an orderly market for our Class A common stock. Based on information provided to the NYSE, the opening public price of our Class A common stock on the NYSE will be determined by buy and sell orders collected by the NYSE from various broker-dealers and will be set based on the DMM’s determination of where buy orders can be matched with sell orders at a single price. On the NYSE, buy orders priced equal to or higher than the opening public price and sell orders priced lower than or equal to the opening public price will participate in that opening trade. In accordance with NYSE rules because there has not been a recent sustained history of trading in our common stock in a private placement market prior to listing, the DMM will consult with Morgan Stanley and our other financial advisors, in order for the DMM to effect a fair and orderly opening of our Class A common stock on the NYSE, without coordination with us, consistent with the federal securities laws in connection with our direct listing. Pursuant to such NYSE rules, and based upon information known to it at that time, Morgan Stanley and our other financial advisors are expected to provide input to the DMM regarding their understanding of the ownership of our outstanding common stock and pre-listing selling and buying interest in our Class A common stock that they become aware of from potential investors and holders of our Class A common stock, including after consultation with certain institutional investors (which may include certain of the Registered Holders, other than the RSU holders), in each case, without coordination with us. The DMM, in consultation with Morgan Stanley and our other financial advisors, is also expected to consider the information in the section titled “Sale Price History of our Capital Stock.”
Similar to how a security being offered in an underwritten initial public offering would open on the first day of trading, before the opening public price of our Class A common stock is determined, the DMM may publish one or more pre-opening indications, which provides the market with a price range of where the DMM anticipates the opening public price will be, based on the buy and sell orders entered on the NYSE. The pre-opening indications will be available on the consolidated tape and NYSE market data feeds. As part of this opening process, the DMM will continue to update the pre-opening indication until the buy and sell orders reach equilibrium and can be priced by offsetting one another to determine the opening public price of our Class A common stock.

167



In connection with the process described above, a DMM in a direct listing may have less information available to it to determine the opening public price of our Class A common stock than a DMM would in an underwritten initial public offering. For example, because our financial advisors are not acting as underwriters, they will not have engaged in a book building process, and as a result, they will not be able to provide input to the DMM that is based on or informed by that process. Moreover, prior to the opening trade, there will not be a price at which underwriters initially sold shares of Class A common stock to the public as there would be in an underwritten initial public offering. This lack of an initial public offering price could impact the range of buy and sell orders collected by the NYSE from various broker-dealers. Consequently, the public price of our Class A common stock may be more volatile than in an underwritten initial public offering and could, upon listing on the NYSE, decline significantly and rapidly. See the section titled “Risk Factors—Risks Related to Ownership of Our Class A Common Stock.”
In addition to sales made pursuant to this prospectus, the shares of Class A common stock covered by this prospectus may be sold by the Registered Stockholders in private transactions exempt from the registration requirements of the Securities Act.
Under the securities laws of some states, shares of Class A common stock may be sold in such states only through registered or licensed brokers or dealers.
If any of the Registered Stockholders utilize a broker-dealer in the sale of the shares of Class A common stock being offered by this prospectus, such broker-dealer may receive commissions in the form of discounts, concessions, or commissions from such Registered Stockholder or commissions from purchasers of the shares of Class A common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions, or commissions as to particular broker-dealers may be in excess of those customary in the types of transactions involved).

168



LEGAL MATTERS
Our principal legal advisor is Goodwin Procter LLP, San Francisco, California. Latham & Watkins LLP is legal advisor to the financial advisors and associate financial advisors.
EXPERTS
The consolidated financial statements of Slack Technologies, Inc. and subsidiaries as of January 31, 2018 and 2019, and for each of the years in the three-year period ended January 31, 2019, have been included herein and in the registration statement in reliance upon the report of KPMG LLP, our independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of Class A common stock covered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our Class A common stock, we refer you to the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The SEC maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
Immediately upon the effectiveness of the registration statement of which this prospectus forms a part, we will become subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, will file periodic reports, proxy statements, and other information with the SEC. These periodic reports, proxy statements, and other information will be available for inspection and copying at the website of the SEC referred to above. We also maintain a website at www.slack.com. Upon the effectiveness of the registration statement of which this prospectus forms a part, you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.

169


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
Page

F-1


Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Slack Technologies, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Slack Technologies, Inc. and subsidiaries (the Company) as of January 31, 2018 and 2019, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three‑year period ended January 31, 2019, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2018 and 2019, and the results of its operations and its cash flows for each of the years in the three‑year period ended January 31, 2019, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.  

/s/ KPMG LLP
We have served as the Company’s auditor since 2015.
San Francisco, California
April 3, 2019

F-2


SLACK TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
 
As of January 31,
 
Pro Forma
January 31,
2019
 
2018
 
2019
 
 
 
 
 
 
(unaudited)
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
120,463

 
$
180,770

 
 
Marketable securities
428,298

 
660,301

 
 
Accounts receivable, net
37,209

 
87,438

 
 
Prepaid expenses and other current assets
25,954

 
54,213

 
 
Total current assets
611,924

 
982,722

 
 
Restricted cash
17,600

 
20,490

 
 
Strategic investments
7,623

 
12,334

 
 
Property and equipment, net
42,997

 
88,359

 
 
Intangible assets, net

 
15,203

 
 
Goodwill
8,653

 
48,598

 
 
Other assets
8,983

 
31,250

 
 
Total assets
$
697,780

 
$
1,198,956

 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable
$
7,056

 
$
16,613

 
 
Accrued compensation and benefits
23,647

 
46,151

 
 
Accrued expenses and other current liabilities
15,510

 
29,809

 
 
Deferred revenue
125,453

 
239,825

 
 
Total current liabilities
171,666

 
332,398

 
 
Deferred revenue, noncurrent

 
2,048

 
 
Other liabilities
6,826

 
22,904

 
 
Total liabilities
178,492

 
357,350

 
 
Commitments and contingencies (Note 8)
 
 
 
 
 
Stockholders’ equity:
 
 
 
 
 
Convertible preferred stock, $0.0001 par value: 346,237 and 390,589 shares authorized; 337,483 and 373,372 shares issued and outstanding; liquidation preference of $962,659 and $1,389,925 as of January 31, 2018 and 2019, respectively; no shares outstanding as of January 31, 2019, pro forma (unaudited)
965,221

 
1,392,101

 
$

Common stock, $0.0001 par value: 1,150,785 and 1,310,000 shares authorized; Class A common stock - 575,000 and 660,000 shares authorized as of January 31, 2018 and 2019, respectively, 0 and 896 shares issued and outstanding as of January 31, 2018 and 2019, respectively, and 896 shares outstanding as of January 31, 2019, pro forma; Class B common stock - 575,785 and 650,000 shares authorized as of January 31, 2018 and 2019, respectively, 119,735 and 126,677 shares issued and outstanding as of January 31, 2018 and 2019, respectively, and 522,437 shares outstanding as of January 31, 2019, pro forma (unaudited)
12

 
13

 
52

Additional paid-in-capital
71,885

 
105,633

 
1,655,190

Accumulated other comprehensive loss
(1,089
)
 
(498
)
 
(498
)
Accumulated deficit
(524,880
)
 
(665,563
)
 
(823,058
)
Total Slack Technologies, Inc. stockholders’ equity
511,149

 
831,686

 
831,686

Noncontrolling interest
8,139

 
9,920

 
9,920

Total stockholders’ equity
519,288

 
841,606

 
$
841,606

Total liabilities and stockholders’ equity
$
697,780

 
$
1,198,956

 
 
See accompanying notes to consolidated financial statements.

F-3


SLACK TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
Year Ended January 31,
 
2017
 
2018
 
2019
Revenue
$
105,153

 
$
220,544

 
$
400,552

Cost of revenue
15,517

 
26,364

 
51,301

Gross profit
89,636

 
194,180

 
349,251

Operating expenses:
 
 
 
 
 
Research and development
96,678

 
141,350

 
157,538

Sales and marketing
104,006

 
140,188

 
233,191

General and administrative
37,455

 
56,493

 
112,730

Total operating expenses
238,139

 
338,031

 
503,459

Loss from operations
(148,503
)
 
(143,851
)
 
(154,208
)
Other income (expense), net
1,749

 
4,581

 
16,146

Loss before income taxes
(146,754
)
 
(139,270
)
 
(138,062
)
Provision for income taxes
155

 
793

 
840

Net loss
(146,909
)
 
(140,063
)
 
(138,902
)
Net income (loss) attributable to noncontrolling interest
(45
)
 
22

 
1,781

Net loss attributable to Slack
(146,864
)
 
(140,085
)
 
(140,683
)
Less: Deemed dividends to preferred stockholders

 
40,883

 

Net loss attributable to Slack common stockholders
$
(146,864
)
 
$
(180,968
)
 
$
(140,683
)
Basic and diluted net loss per share:
 
 
 
 
 
Net loss per share attributable to Slack common stockholders, basic and diluted
$
(1.28
)
 
$
(1.47
)
 
$
(1.16
)
Weighted-average shares used in computing net loss per share attributable to Slack common stockholders, basic and diluted
114,887

 
122,865

 
121,732

Pro forma net loss per share attributable to Slack common stockholders, basic and diluted (unaudited)
 
 
 
 
$
(0.27
)
Weighted-average shares used in computing pro forma net loss per share attributable to Slack common stockholders, basic and diluted (unaudited)
 
 
 
 
517,493

See accompanying notes to consolidated financial statements.

F-4


SLACK TECHNOLOGIES, INC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
 
Year Ended January 31,
 
2017
 
2018
 
2019
Net loss
$
(146,909
)
 
$
(140,063
)
 
$
(138,902
)
Other comprehensive loss, net of tax:
 
 
 
 
 
Change in unrealized losses on marketable securities
(153
)
 
(677
)
 
591

Other comprehensive loss, net of tax
(153
)
 
(677
)
 
591

Comprehensive loss
(147,062
)
 
(140,740
)
 
(138,311
)
Comprehensive income (loss) attributable to noncontrolling interest
(45
)
 
22

 
1,781

Comprehensive loss attributable to Slack
$
(147,017
)
 
$
(140,762
)
 
$
(140,092
)
See accompanying notes to consolidated financial statements.

F-5


SLACK TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
 
Convertible Preferred Stock
 
Common Stock
 
Additional Paid-In-Capital
 
Accumulated Other Comprehensive Loss
 
Accumulated Deficit
 
Noncontrolling Interest
 
Total Stockholders’ Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
Balance at January 31, 2016
274,537

 
$
381,812

 
120,454

 
$
12

 
$
13,760

 
$
(259
)
 
$
(153,950
)
 
$
2,402

 
$
243,777

Exercise of stock options

 

 
6,215

 
1

 
4,012

 

 

 

 
4,013

Vesting of early exercised stock options

 

 

 

 
572

 

 

 

 
572

Issuance of restricted stock awards (RSAs)

 

 
1,135

 

 

 

 

 

 

Cancellation of restricted stock awards (RSAs)

 

 
(465
)
 

 

 

 

 

 

Issuance of series F convertible preferred stock, net of issuance cost
19,867

 
154,957

 

 

 

 

 

 

 
154,957

Issuance of series F-1 convertible preferred stock, net of issuance cost
6,793

 
52,940

 

 

 

 

 

 

 
52,940

Capital contributions from noncontrolling interest holders

 

 

 

 

 

 

 
5,760

 
5,760

Repurchase of common stock

 

 
(1,661
)
 

 
(6
)
 

 
(4,297
)
 

 
(4,303
)
Stock-based compensation

 

 

 

 
42,428

 

 

 

 
42,428

Unrealized loss on short-term marketable securities

 

 

 

 

 
(153
)
 

 

 
(153
)
Net loss

 

 

 

 

 

 
(146,864
)
 
(45
)
 
(146,909
)
Balance at January 31, 2017
301,197

 
589,709

 
125,678

 
13

 
60,766

 
(412
)
 
(305,111
)
 
8,117

 
353,082

Exercise of stock options

 

 
3,662

 

 
3,634

 

 

 

 
3,634

Vesting of early exercised stock options

 

 

 

 
480

 

 

 

 
480

Issuance of series G convertible preferred stock, net of issuance cost
24,718

 
229,648

 

 

 

 

 

 

 
229,648

Issuance of series G-1 convertible preferred stock, net of issuance cost
2,149

 
20,000

 

 

 

 

 

 

 
20,000

Issuance of series G-2 convertible preferred stock, net of issuance cost
17,241

 
150,000

 

 

 

 

 

 

 
150,000

Issuance of series G-3 convertible preferred stock, net of issuance cost
1,465

 
12,714

 

 

 

 

 

 

 
12,714

Repurchase of Class B common stock

 

 
(9,605
)
 
(1
)
 
(1,704
)
 

 
(38,801
)
 

 
(40,506
)
Repurchase of series A convertible preferred stock
(458
)
 
(44
)
 

 

 

 

 
(3,787
)
 

 
(3,831
)
Repurchase of series D convertible preferred stock
(4,568
)
 
(11,650
)
 

 

 

 

 
(26,589
)
 

 
(38,239
)
Repurchase of series D-1 convertible preferred stock
(75
)
 
(156
)
 

 

 

 

 
(474
)
 

 
(630
)
Repurchase of series E convertible preferred stock
(4,186
)
 
(25,000
)
 

 

 

 

 
(10,033
)
 

 
(35,033
)
Unrealized loss on short-term marketable securities

 

 

 

 

 
(677
)
 

 

 
(677
)
Stock-based compensation

 

 

 

 
8,709

 

 

 

 
8,709

Net income (loss)

 

 

 

 

 

 
(140,085
)
 
22

 
(140,063
)
Balance at January 31, 2018
337,483

 
965,221

 
119,735

 
12

 
71,885

 
(1,089
)
 
(524,880
)
 
8,139

 
519,288

Exercise of stock options

 

 
4,888

 
1

 
4,166

 

 

 

 
4,167

Vesting of early exercised stock options

 

 

 

 
366

 

 

 

 
366

Issuance of Series H preferred stock, net of issuance cost
33,470

 
398,082

 

 

 

 

 

 

 
398,082

Issuance of Series H-1 preferred stock
2,419

 
28,798

 

 

 

 

 

 

 
28,798

Issuance of restricted stock awards (RSAs)

 

 
2,197

 

 

 

 

 

 

Issuance of Class A common stock to a third party

 

 
900

 

 
6,084

 

 

 

 
6,084

Cancellation of restricted stock awards (RSAs)

 

 
(19
)
 

 

 

 

 

 

Repurchase of early exercised stock options

 

 
(128
)
 

 

 

 

 

 

Unrealized gain on short-term investments

 

 

 

 

 
591

 

 

 
591

Stock-based compensation

 

 

 

 
23,132

 

 

 

 
23,132

Net income (loss)

 

 

 

 

 

 
(140,683
)
 
1,781

 
(138,902
)
Balance at January 31, 2019
373,372

 
$
1,392,101

 
127,573

 
$
13

 
$
105,633

 
$
(498
)
 
$
(665,563
)
 
$
9,920

 
$
841,606

See accompanying notes to consolidated financial statements.

F-6


SLACK TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
Year Ended January 31,
 
2017
 
2018
 
2019
Cash flows from operating activities:
 
 
 
 
 
Net loss
$
(146,909
)
 
$
(140,063
)
 
$
(138,902
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization
6,787

 
14,320

 
16,816

Loss on disposal of property and equipment
25

 

 
2,281

Stock-based compensation
42,058

 
8,709

 
23,132

Amortization of deferred contract acquisition costs
13

 
611

 
3,154

Net amortization of bond premium (discount) debt securities available for sale
2,163

 
1,352

 
(3,057
)
Change in fair value of strategic investments
73

 
(27
)
 
(3,701
)
Other non-cash charges
145

 
366

 
546

Changes in operating assets and liabilities:
 
 
 
 
 
Accounts receivable
(12,030
)
 
(21,964
)
 
(50,305
)
Prepaid expenses and other assets
(31,555
)
 
6,362

 
(53,072
)
Accounts payable
(1,363
)
 
4,851

 
2,846

Accrued compensation and benefits
9,617

 
12,470

 
22,504

Deferred revenue
38,237

 
68,469

 
116,420

Other current and long-term liabilities
2,933

 
8,927

 
20,279

Net cash used in operating activities
(89,806
)
 
(35,617
)
 
(41,059
)
Cash flows from investing activities:
 
 
 
 
 
Purchases of marketable securities
(346,407
)
 
(510,755
)
 
(967,055
)
Maturities of marketable securities
325,387

 
278,263

 
727,616

Sales of marketable securities
8,525

 
16,934

 
11,271

Acquisitions of businesses, net of cash acquired

 

 
(45,313
)
Acquisition of intangible assets

 

 
(2,382
)
Purchases of property and equipment
(24,232
)
 
(22,044
)
 
(56,180
)
Sales of property and equipment

 

 
762

Capitalized software development costs
(584
)
 
(50
)
 
(840
)
Purchase of strategic investments
(4,460
)
 
(2,901
)
 
(2,276
)
Proceeds from liquidation of strategic investments

 
117

 
976

Net cash used in investing activities
(41,771
)
 
(240,436
)
 
(333,421
)
Cash flows from financing activities:
 
 
 
 
 
Proceeds from exercise of stock options
4,742

 
2,912

 
4,783

Repurchase of common stock
(4,303
)
 
(40,506
)
 
(70
)
Net proceeds from issuance of convertible preferred stock
207,897

 
412,362

 
426,880

Repurchase of convertible preferred stock

 
(77,733
)
 

Capital contributions from noncontrolling interest holders
5,760

 

 

Issuance of common stock to third party

 

 
6,084

Net cash provided by financing activities
214,096

 
297,035

 
437,677

Net increase in cash, cash equivalents and restricted cash
82,519

 
20,982

 
63,197

Cash, cash equivalents and restricted cash at beginning of year
34,562

 
117,081

 
138,063

Cash, cash equivalents and restricted cash at end of year
$
117,081

 
$
138,063

 
$
201,260

 
 
 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
 
 
Cash paid for income taxes
$
48

 
$
947

 
$
876

Non-cash investing and financing activities:
 
 
 
 
 
Purchase of property and equipment, accrued but not paid
$
6,125

 
$
763

 
$
6,334

Stock-based compensation capitalized as internal-use software
$
370

 
$

 
$

Vesting of early exercised stock options
$
572

 
$
480

 
$
366

Unrealized short-term gain (loss) on marketable securities
$
(153
)
 
$
(677
)
 
$
791

See accompanying notes to consolidated financial statements.

F-7


SLACK TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
Note 1.    Description of Business and Summary of Significant Accounting Policies
Business
Slack Technologies, Inc. (the “Company” or “Slack”) operates a business technology software platform that brings together people, applications, and data and sells its offering under a software-as-a-service model. The Company was incorporated in Delaware in 2009 as Tiny Speck, Inc. In 2014, the Company changed its name to Slack Technologies, Inc. and publicly launched its current offering. The Company is headquartered in San Francisco, California.
Fiscal Year
The Company’s fiscal year ends on January 31. References to fiscal year 2019, for example, refer to the fiscal year ended January 31, 2019.
Basis of Presentation and Consolidation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The accompanying consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements include 100% of the accounts of wholly owned and majority-owned subsidiaries and the ownership interest of minority investors is recorded as noncontrolling interest.
Unaudited Pro Forma Information
Unaudited Pro Forma Balance Sheet
The unaudited pro forma balance sheet information as of January 31, 2019, assumes all shares of the Company’s convertible preferred stock had automatically converted into an aggregate of 373,371,712 shares of the Company’s Class B common stock as if such conversion had occurred on January 31, 2019.
The Company granted certain employees and non-employee directors restricted stock units (“RSUs”) with both service-based and performance-based vesting conditions. The performance-based requirement is satisfied on the earlier of: (1) a change in control or (2) the effective date of an initial public offering. The RSUs vest on the first date upon which both the service-based and performance-based requirements are satisfied. If the RSUs vest, the Company will deliver one share of Class B common stock for each vested RSU on the applicable settlement date. If the performance vesting condition had been met on January 31, 2019, 22.4 million RSUs that had met their service condition would have vested (“Vesting RSUs”). The Vesting RSUs have been included in the unaudited pro forma balance sheet disclosure of shares outstanding of Class B common stock, as the settlement of these shares will take place upon the satisfaction of both the service condition and performance vesting condition.
In addition, at the time the performance vesting condition becomes probable which is not until the performance vesting condition is satisfied, the Company will recognize cumulative stock-based compensation associated with outstanding RSUs based on the service-based condition using the accelerated attribution method. Accordingly, the unaudited pro forma balance sheet information as of January 31, 2019, gives effect to stock-based compensation of $157.5 million associated with the outstanding RSUs as of January 31, 2019. This pro forma adjustment is reflected as an increase to additional paid-in capital and accumulated deficit. Payroll tax expenses and other withholding obligations have not been included in the pro forma adjustments. The RSU holders will generally incur taxable income based upon the value of the shares on the date they are settled. The Company is required to withhold taxes on such value at applicable minimum statutory rates. The Company was unable to quantify these obligations as of January 31, 2019 and will remain unable to quantify them until the performance vesting condition is satisfied, as the withholding obligations will be based on the value of the shares on the settlement date.

F-8


Unaudited Pro Forma Loss Per Share Attributable to Common Stockholders
The unaudited pro forma basic and diluted net loss per share attributable to Slack common stockholders is computed to give effect to the automatic conversion of 373,371,712 shares of the Company’s outstanding convertible preferred stock into 373,371,712 shares of Class B common stock in connection with becoming a public company. The Company used the if-converted method as though the conversion had occurred as of the beginning of the period or the original date of issuance, if later.
The pro forma share amounts include shares of common stock issued for the Vesting RSUs as of January 31, 2019. Stock-based compensation associated with the RSUs is excluded from the pro forma presentation. If the performance vesting condition had been met on January 31, 2019,  22.4 million RSUs that had met their service condition would have vested and the Company would have recorded $157.5 million of cumulative stock-based compensation related to the outstanding RSUs.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates are based on information available as of the date of the consolidated financial statements. On a regular basis, management evaluates these estimates and assumptions; however, actual results could materially differ from these estimates.
The Company’s most significant estimates and judgments involve revenue recognition, stock-based compensation including the estimation of fair value of common stock, valuation of strategic investments, valuation of acquired goodwill and intangibles from acquisitions, period of benefit for deferred costs, and uncertain tax positions.
Revenue Recognition
On February 1, 2017, the Company adopted the requirements of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”) as discussed further in Recently Adopted Accounting Pronouncements below. Topic 606 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. Topic 606 also includes Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers , which requires the deferral of incremental costs of obtaining a contract with a customer. Collectively, references to Topic 606 used herein refer to both Topic 606 and Subtopic 340-40. The Company adopted Topic 606 with retrospective application to the beginning of the earliest period presented. The impact of adopting Topic 606 on the Company’s revenue is not material to any of the periods presented. The primary impact of adopting Topic 606 relates to the deferral of incremental costs of obtaining customer contracts and the amortization of those costs over the period of benefit.
The Company derives its revenue from monthly and annual subscription fees earned from customers accessing Slack. The Company’s policy is to exclude sales and other indirect taxes when measuring the transaction price of its subscription agreements. The Company accounts for revenue contracts with customers by applying the requirements of Topic 606, which includes the following steps:
Identification of the contract, or contracts, with the customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of the revenue when, or as, the Company satisfies a performance obligation.
Subscription revenue is recognized on a straight-line basis over the contractual term of the arrangement beginning on the date that the service is made available to the customer. The Company’s subscription service contracts are generally one month to thirty-six months in duration and are generally non-cancellable. Customers are billed either annually or

F-9


monthly in advance of services. The contracts do not provide customers with the right to take possession of the software supporting Slack. The Company’s arrangements do not contain general rights of return. Amounts that have been invoiced are recorded in accounts receivable and in revenue or deferred revenue, depending on whether the performance obligation has been satisfied. For certain multi-year agreements, revenue recognition may occur in advance of invoicing, resulting in a contract asset when there is an enforceable right to receive payment for services rendered, and is included in prepaid expenses and other current assets. The Company maintains a fair billing policy, under which certain customers maintain a credit balance if they have not used the entirety of the allotment of users for which they have paid during the contractual term of their respective arrangements. These credits, accounted for as a part of deferred revenue, may be carried over to offset billings related to increases in a customer’s number of active users and are not refundable for cash. A majority of the Company’s contracts give a right to bill for additional usage, and this is deemed variable consideration. The variable consideration is allocated to the distinct day the services are completed, as services provided to the additional users are specific to the period that the usage occurs. To the extent that the Company believes it is probable that a significant reversal would not occur, an estimate is made for the revenue associated with incremental usage during a period. The incremental revenue recognized associated with these estimates has not been material for any period presented.
The Company recognized $18.7 million, $57.0 million, and $125.5 million of subscription revenue during the years ended January 31, 2017, 2018, and 2019 respectively, that was included in deferred revenue balances at the beginning of the respective periods.
The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less, which applies primarily to its monthly and annual subscription contracts. As of January 31, 2019, future estimated revenue related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period was $185.1 million, of which $87.7 million, $66.0 million, $31.3 million, and $0.1 million is expected to be recognized in the years ending January 31, 2020, 2021, 2022, and 2023, respectively.
The Company applies the practical expedient in paragraph 606-10-65-1(f) where the consideration allocated to the remaining performance obligations or an explanation of when it expects to recognize that amount as revenue for all reporting periods presented before the date of the initial application is not disclosed.
Cost of Revenue
Cost of revenue consists primarily of expenses related to hosting Slack and providing ongoing customer experience support for paid customers, including employee compensation (including stock-based compensation) and other employee-related expenses for customer experience and technical operations staff, payments to outside service providers, third-party hosting costs, payment processing fees and amortization of internally-developed and purchased technology.
Stock-Based Compensation
The Company measures compensation for all stock-based payment awards, including stock options, RSUs, and restricted stock awards (“RSAs”) granted to employees, directors, and nonemployees, based on the estimated fair value of the awards on the date of grant. The fair value of each stock option granted is estimated using the Black-Scholes option pricing model. Stock-based compensation is recognized on a straight-line basis over the requisite service period.
The Company accounts for stock options issued to nonemployees based on the estimated fair value of the awards determined using the Black-Scholes option pricing model. The fair value of stock options granted to nonemployees is remeasured as the stock options vest, and the resulting change in fair value, if any, is recognized in the Company’s consolidated statements of operations over the period during which the related services are rendered.
The Company grants RSUs to its employees and directors with both a service-based vesting condition and a performance-based vesting condition. The service-based vesting period for these awards is typically four years with a cliff vesting period of one year and continued vesting quarterly thereafter. The fair value of RSUs is estimated based on the fair market value of t he Company’s common stock at the date of grant. The performance-based vesting condition is satisfied on the earlier of (i) an acquisition or change in control of the Company or (ii) the Company’s initial public

F-10


offering. No compensation expense will be recognized until the performance-based vesting condition is achieved, at which time the cumulative compensation expense using the accelerated attribution method from the service start date will be recognized.
The Company grants RSAs to its employees and directors with a service-based vesting condition. The service-based vesting period for these awards is typically four years with a cliff vesting period of one year and continued vesting monthly thereafter. The fair value of RSAs is estimated based on the fair market value of t he Company’s common stock at the date of grant.
Research and Development Costs
Research and development costs are expensed as incurred and consist primarily of personnel costs and allocated overhead.
Advertising Costs
Advertising costs are expensed as incurred and were $39.3 million, $35.5 million, and $61.7 million for the years ended January 31, 2017, 2018, and 2019, respectively, and are included in sales and marketing expense in the accompanying consolidated statements of operations.
Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized.
The Company accounts for uncertain tax positions based on an evaluation as to whether it is more likely than not that a tax position will be sustained on audit, including resolution of any related appeals or litigation processes. This evaluation is based on all available evidence and assumes that the appropriate tax authorities have full knowledge of all relevant information concerning the tax position. The tax benefit recognized is based on the largest amount that is greater than 50% likely of being realized upon ultimate settlement. The Company includes interest expense and penalties related to its uncertain tax positions in interest expense and other expense, respectively.
Financial Information about Segments and Geographical Areas
The Company has one business activity and there are no segment managers who are held accountable for operations, results of operations, or plans for levels or components below the consolidated unit level. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating the Company’s financial performance. Accordingly, the Company has determined that it operates in a single operating and reporting segment. For information regarding the Company’s long-lived assets and revenue by geographic area, see Note 12.
Foreign Currency Translation
The functional currency of the Company’s foreign subsidiaries is the U.S. dollar. Accordingly, each foreign subsidiary remeasures monetary assets and liabilities at period-end exchange rates, while nonmonetary items are remeasured at historical rates. Revenue and expense accounts are remeasured at the average exchange rate in effect during the year. Remeasurement adjustments are recognized in the consolidated statements of operations as transaction gains or losses in the year of occurrence as other income (expense). Realized and unrealized foreign currency gain (loss) for the years ended January 31, 2017, 2018, and 2019 was ($0.1) million, $0.5 million, and $(1.0) million, respectively.
Cash and Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents consist of funds deposited into money market funds. Restricted

F-11


cash as of January 31, 2019 consisted of cash deposited with financial institutions as collateral for the Company’s obligations under its facility leases.
A reconciliation of cash, cash equivalents and restricted cash to the consolidated statements of cash flows is as follows (in thousands):
 
As of January 31,
 
2018
 
2019
Cash and cash equivalents
$
120,463

 
$
180,770

Restricted cash
17,600

 
20,490

Total cash, cash equivalents and restricted cash
$
138,063

 
$
201,260

Marketable Securities
The Company determines the appropriate classification of its investments in marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its marketable securities as available-for-sale. The investments are adjusted for amortization of premiums and discounts to maturity and such amortization is included in other income (expense), net. After consideration of the Company’s capital preservation objectives, as well as its liquidity requirements, the Company may sell securities prior to their stated maturities. As the Company views these securities as available to support current operations, it has classified all available-for-sale securities as short-term. The Company carries its available-for-sale securities at fair value and reports the unrealized gains and losses as a component of stockholders’ equity, except for unrealized losses determined to be other than temporary.
The Company evaluates its investments periodically for possible other-than-temporary impairment. A decline in fair value below the amortized costs of debt securities is considered an other-than-temporary impairment if the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of the entire amortized cost basis. In those instances, an impairment charge equal to the difference between the fair value and the amortized cost basis is recognized in earnings. Regardless of the Company’s intent or requirement to sell a debt security, impairment is considered other than temporary if the Company does not expect to recover the entire amortized cost basis.
Strategic Investments
In December 2015, the Company agreed to commit $13.0 million to a newly formed entity, Slack Fund L.L.C. (“Slack Fund”), in exchange for a 52% voting interest. Slack Fund is in the business of purchasing, selling, investing and trading in minority equity and convertible debt securities of privately-held companies that develop applications that have potential for substantial contribution to Slack and its ecosystem. Slack Fund has a duration of ten years and its duration may be extended for three additional years. At dissolution, Slack Fund will be liquidated and the remaining assets of the Slack Fund will be distributed to the investors based on their voting interest. As of January 31, 2019, the Company had contributed $8.8 million since the inception of the Slack Fund. Additionally, the minority investors in Slack Fund are also investors in the Company. The Company has elected the measurement alternative, defined as cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. These investments are valued using significant unobservable inputs or data in inactive markets which require judgment due to the absence of market prices and inherent lack of liquidity. This could result in volatility in other income (expense), net on the consolidated statements of operations in future periods due to the valuation and timing of identical or similar investments of the same issuer.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk primarily consist of cash and cash equivalents, restricted cash, marketable securities, and accounts receivable. For cash, cash equivalents, restricted cash, and marketable securities, the Company is exposed to credit risk in the event of default by the financial institutions to the extent of the amounts recorded on the accompanying consolidated balance sheets that are in excess of federal

F-12


insurance limits. For accounts receivable, the Company is exposed to credit risk in the event of nonpayment by customers to the extent of the amounts recorded on the accompanying consolidated balance sheets.
No customer accounted for 10% or greater of total accounts receivable as of January 31, 2018 or 2019. There were no customers representing 10% or greater of revenue for the years ended January 31, 2017, 2018 or 2019.
Fair Value of Financial Instruments
The Company records its financial assets and liabilities at fair value. The carrying amounts of the Company’s financial instruments, which include cash, cash equivalents, restricted cash, accounts receivable, and accounts payable, approximate their fair values due to their short-term nature. The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:
Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Accounts Receivable, Net
Trade accounts receivable are recorded at invoiced amounts and do not bear interest. The Company generally does not require collateral and performs ongoing credit evaluations of its customers and provides for expected losses. The expectation of collectability is based on the Company’s review of credit profiles of customers, contractual terms and conditions, current economic trends, and historical payment experience. If events or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectability of those balances and an allowance is recorded accordingly. Past-due receivable balances are written off when internal collection efforts have been unsuccessful in collecting the amount due.
The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available evidence. The Company has not experienced significant credit losses from accounts receivable. The allowance for doubtful accounts and the changes in the allowance for doubtful accounts were not material, for the years ended January 31, 2018 and 2019.
Property and Equipment, Net
Property and equipment, net is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful life of the related asset, which is typically two years for computer equipment and software, five years for furniture, fixtures and office equipment, and in the case of leasehold improvements, the remaining term of the lease, unless the useful life of the asset is shorter. Maintenance and repairs are charged to expense as incurred.
Internal-Use Software Development Costs
The Company capitalizes qualifying internal-use software development costs that are incurred during the application development stage. Capitalization of costs begins when two criteria are met: (i) the preliminary project

F-13


stage is completed and (ii) it is probable that the software will be completed and used for its intended function. Capitalization ceases when the software is substantially complete and ready for its intended use, including the completion of all significant testing. Costs related to preliminary project activities and post-implementation operating activities are expensed as incurred.
Capitalized costs are included in property and equipment. These costs are amortized over the estimated useful life of the software (generally two years) on a straight-line basis. Management evaluates the useful life of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. The amortization of costs related to the platform applications is included in cost of revenue.
Business Combinations
The Company applies the acquisition method of accounting for business combinations. Under this method of accounting, all assets acquired and liabilities assumed are recorded at their respective fair values at the date of the acquisition. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, intangibles, and other asset lives, among other items. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are assumed to be buyers and sellers in the principal (most advantageous) market for the asset or liability. Additionally, fair value measurements for an asset assume the highest and best use of that asset by market participants. As a result, the Company may be required to value the acquired assets at fair value measures that do not reflect its intended use of those assets. Use of different estimates and judgments could yield different results.
Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill. If the fair value of net assets acquired exceeds the fair value of purchase price, a gain on bargain purchase is recognized within the consolidated statements of operations. Although the Company believes the assumptions and estimates it has made are reasonable and appropriate, they are based in part on historical experience and information that may be obtained from the management of the acquired company and are inherently uncertain. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill for facts and considerations that were known at the acquisition date. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded within the Company’s consolidated statements of operations.
Accounting for Impairment of Long-Lived Assets
The Company evaluates long-lived assets, such as property and equipment and acquired intangibles, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset exceeds these estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the assets exceeds the fair value of the asset or asset group, based on discounted cash flows. There were no impairment charges recorded for the years ended January 31, 2017, 2018 and 2019.
Goodwill
Goodwill is not amortized, but rather is tested for impairment at least annually or more frequently if indicators of impairment are present. The Company operates as one reporting unit and performs its annual goodwill impairment analysis as of the first day of the fourth quarter of each year. The Company adopted ASU No. 2017-04,  Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment in the year ended January 31, 2018. In assessing impairment on goodwill, the Company may bypass a qualitative assessment and proceeds directly to performing a quantitative evaluation of the fair value of its single reporting unit, in order to compare it against the carrying value of the reporting unit. A goodwill impairment charge is recognized for the amount by which the reporting unit’s fair value is less than its carrying value. Any loss recognized will not exceed the total amount of goodwill allocated

F-14


to that reporting unit. Based on the results of the goodwill impairment analyses, the Company determined that no impairment charge needed to be recorded for any periods presented.
Operating Leases
The Company leases real estate facilities under operating leases. For leases that contain rent escalation, rent concession provisions, or tenant improvement allowances, the Company records the total rent expense during the lease term on a straight-line basis over the term of the lease. The Company records the difference between the rent paid and the straight-line rent expense as a deferred rent liability within accrued expenses and other current liabilities and long-term liabilities.
Deferred Revenue
Deferred revenue consists of customer billings in advance of revenue being recognized from the Company’s contracts, including credit balances due to the Company’s fair billing policy. Deferred revenue is generally recognized during the succeeding twelve‑month period.
Deferred Costs, Net
Sales commissions earned by the Company’s sales force are considered to be incremental and recoverable costs of obtaining a contract with a customer. As a result, these amounts have been capitalized as deferred costs within prepaid expenses and other current assets and other assets on the consolidated balance sheet. The Company deferred incremental costs of obtaining a contract of $0.4 million, $4.7 million, and $15.8 million during the years ended January 31, 2017, 2018, and 2019, respectively.
Deferred commissions, net included in prepaid expenses and other current assets were $1.3 million and $5.3 million as of January 31, 2018 and 2019, respectively. Deferred commissions, net included in other assets were $3.3 million and $11.9 million as of January 31, 2018 and 2019, respectively.
Deferred costs are amortized over a period of benefit of four years. The period of benefit is estimated by considering factors such as historical customer attrition rates, the useful life of the Company’s technology, and the impact of competition in its industry as well as other factors. Amortized costs are included in sales and marketing expense in the accompanying consolidated statements of operations and were $13,000, $0.6 million, and $3.2 million for the years ended January 31, 2017, 2018, and 2019, respectively. There was no impairment loss in relation to the deferred costs for any period presented.
Recently Adopted Accounting Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Topic 606. Topic 606 supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition, and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. Topic 606 also includes Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers , which requires the deferral of incremental costs of obtaining a contract with a customer. Collectively, Topic 606 and Subtopic 340-40 are referred as the “new standard.”
The Company early adopted the requirements of the new standard as of February 1, 2017, utilizing the full retrospective method of transition. Adoption of the new standard resulted in changes to its accounting policies for revenue recognition, deferred revenue, prepaid expenses and other current assets, and other assets.
In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10) and issued a subsequent amendment to the initial guidance within ASU 2018-03, which requires entities to carry all investments in equity securities at fair value and recognize any changes in fair value in net income. Under the standard, equity investments that do not have readily determinable fair values and do not qualify for the net asset value practical expedient are eligible for the measurement alternative. For our equity investments in private companies, we will elect the measurement alternative, defined as cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the

F-15


same issuer. The guidance was effective for the Company’s fiscal year beginning February 1, 2018 on a prospective basis for the amendments related to equity securities without readily determinable fair values existing as of the date of adoption. The Company adopted the new standard as of February 1, 2018 and it did not have a material impact on its consolidated financial statements. The impact of the new standard going forward could result in volatility in other income (expense), net on the consolidated statements of operations in future periods due to the valuation and timing of identical or similar investments of the same issuer.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740) Intra-Entity Transfers of Assets other than Inventory, which amends the guidance used in the recognition of current and deferred income taxes for an intra-entity transfer of assets other than inventory. The guidance requires an entity recognize the income tax consequences of an intra-entity transfer of an asset other than inventory at the time of transfer. The guidance is effective for annual and interim reporting periods beginning after December 15, 2017 for public entities. The Company adopted ASU No. 2016-06 as of February 1, 2018. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . The guidance requires restricted cash be included with cash and cash equivalents when reconciling the total beginning and ending amounts on the statement of cash flows. The guidance also requires companies who report cash and restricted cash separately on the balance sheet to reconcile those amounts to the statement of cash flows. The Company adopted ASU 2016-18 as of February 1, 2017, utilizing the retrospective method of transition. The adoption of this standard did not have any impact on the Company’s consolidated financial statements, other than a change in presentation within the accompanying consolidated statements of cash flows.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business , which clarifies the definition of a business to determine when a transaction is accounted for as an acquisition (or disposal) of a set of assets or a business. The Company adopted ASU No. 2017-01 as of February 1, 2018, utilizing the prospective method of transition. The adoption of the new standard did not have any impact on the consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment which amends the guidance in ASC Topic 350 by eliminating Step 2 from the goodwill impairment test. Under the new guidance, entities will perform goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The standard is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019 for public entities. Early adoption is permitted and the Company adopted ASU No. 2017-04 as of February 1, 2017. The adoption of the new standard did not have any impact on the consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation: Scope of Modification Accounting , which clarifies when a change to the terms or conditions of a stock-based payment award must be accounted for as a modification. This guidance requires modification accounting if the fair value, vesting condition, or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award. This standard was effective for annual periods beginning after December 15, 2017 and early adoption was permitted. The Company adopted ASU No. 2017-09 as of February 1, 2018, utilizing the prospective method of transition. The adoption of this guidance did not have a material impact on the consolidated financial statements.
Recently Issued Accounting Standards Not Yet Adopted
In February 2016, the FASB issued ASU No. 2016-02 (Topic 842), Leases , which supersedes the guidance in topic ASC 840, Leases. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash

F-16


flows arising from leases. The Company will be required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available. For public companies, Topic 842 is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. The Company has elected to use the extended transition period that allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies under the Jumpstart Our Business Startups Act. For as long as the Company remains an “emerging growth company,” the new guidance is effective for annual reporting periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, and is required to be applied using a modified retrospective approach. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, which requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. This guidance also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU No. 2016-13 is effective for public companies for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently of evaluating the impact of the adoption of this standard on its consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract , which aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software under ASC 350-40, in order to determine which costs to capitalize and recognize as an asset and which costs to expense. ASU No. 2018-15 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2019, and can be applied either prospectively to implementation costs incurred after the date of adoption or retrospectively to all arrangements. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
Note 2.    Cash, Cash Equivalents and Marketable Securities
The carrying amounts and estimated fair value of cash, cash equivalents, and marketable securities consisted of the following (in thousands):
 
As of January 31,
 
2018
 
2019
Cash and cash equivalents:
 
 
 
Cash
$
40,797

 
$
62,033

Money market funds
79,666

 
118,737

Cash and cash equivalents
$
120,463

 
$
180,770

Marketable securities:
 
 
 
Commercial paper
$
167,976

 
$
17,462

U.S. agency securities
15,155

 
44,879

U.S. government securities
11,185

 
370,574

International government securities
59,939

 
36,734

Corporate bonds
174,043

 
190,652

Total marketable securities
$
428,298

 
$
660,301


F-17


The following tables summarize unrealized gains and losses related to available-for-sale securities classified as marketable securities on the Company’s consolidated balance sheets (in thousands):
As of January 31, 2018
 
Amortized
cost
 
Unrealized
gains
 
Unrealized
losses
 
Fair value
Commercial paper
 
$
168,025

 
$

 
$
(49
)
 
$
167,976

U.S. agency securities
 
15,197

 

 
(42
)
 
15,155

U.S. government securities
 
11,207

 

 
(22
)
 
11,185

International government securities
 
60,151

 

 
(212
)
 
59,939

Corporate bonds
 
174,807

 

 
(764
)
 
174,043

Marketable securities
 
$
429,387

 
$

 
$
(1,089
)
 
$
428,298

As of January 31, 2019
 
Amortized
cost
 
Unrealized
gains
 
Unrealized
losses
 
Fair value
Commercial paper
 
$
17,461

 
$
1

 
$

 
$
17,462

U.S. agency securities
 
44,886

 
7

 
(14
)
 
44,879

U.S. government securities
 
370,498

 
143

 
(67
)
 
370,574

International government securities
 
36,810

 

 
(76
)
 
36,734

Corporate bonds
 
190,944

 

 
(292
)
 
190,652

Marketable securities
 
$
660,599

 
$
151

 
$
(449
)
 
$
660,301

The Company periodically evaluates its investments for other-than-temporary declines in fair value. The unrealized losses on the available-for-sale securities were primarily due to unfavorable changes in interest rates subsequent to the initial purchase of these securities. Gross unrealized losses of the Company’s available-for-sale securities that have been in a continuous unrealized loss position for twelve months or longer was immaterial as of January 31, 2018 and 2019. The Company expects to recover the full carrying value of its available-for-sale securities in an unrealized loss position as it does not intend or anticipate a need to sell these securities prior to recovering the associated unrealized losses. As a result, the Company does not consider any portion of the unrealized losses as of January 31, 2018 or 2019 to represent an other-than temporary impairment or credit losses.
The following table classifies marketable securities by contractual maturities (in thousands):
 
As of January 31,
 
2018
 
2019
Due in one year
$
358,015

 
$
506,297

Due in one to two years
70,283

 
154,004

Total
$
428,298

 
$
660,301

Note 3.    Fair Value Measurements
The Company’s money market funds and sweep account are classified within Level 1 of the fair value hierarchy because they are valued using quoted prices in active markets. The Company’s commercial paper, U.S. agency and government securities, international government securities, certificates of deposit, and corporate bonds are classified within Level 2 of the fair value hierarchy because they have been valued using inputs other than quoted prices in active markets that are observable directly or indirectly. The Company’s strategic investments in privately held companies are classified within Level 3 of the fair value hierarchy because they have been valued using unobservable inputs for which the Company has been required to develop its own assumptions. Realized and unrealized gains and losses relating to the strategic investments are recorded in other income (expense), net in the accompanying consolidated statements of operations.

F-18


The following table provides the financial instruments measured at fair value on a recurring basis, within the fair value hierarchy (in thousands):
As of January 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
Total
Cash equivalents:
 
 
 
 
 
 
 
 
Money market funds
 
$
79,666

 
$

 
$

 
$
79,666

Total cash equivalents
 
$
79,666

 
$

 
$

 
$
79,666

Marketable securities:
 
 
 
 
 
 
 
 
Commercial paper
 
$

 
$
167,976

 
$

 
$
167,976

U.S. agency securities
 

 
15,155

 

 
15,155

U.S. government securities
 

 
11,186

 

 
11,186

International government securities
 

 
59,938

 

 
59,938

Corporate bonds
 

 
174,043

 

 
174,043

Total marketable securities
 
$

 
$
428,298

 
$

 
$
428,298

Noncurrent assets:
 
 
 
 
 
 
 
 
Strategic investments
 
$

 
$

 
$
7,623

 
$
7,623

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of January 31, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total
Cash equivalents:
 
 
 
 
 
 
 
 
Money market funds
 
$
118,737

 
$

 
$

 
$
118,737

Total cash equivalents
 
$
118,737

 
$

 
$

 
$
118,737

Marketable securities:
 
 
 
 
 
 
 
 
Commercial paper
 
$

 
$
17,462

 
$

 
$
17,462

U.S. agency securities
 

 
44,879

 

 
44,879

U.S. government securities
 

 
370,574

 

 
370,574

International government securities
 

 
36,734

 

 
36,734

Corporate bonds
 

 
190,652

 

 
190,652

Total marketable securities
 
$

 
$
660,301

 
$

 
$
660,301

Noncurrent assets:
 
 
 
 
 
 
 
 
Strategic investments
 
$

 
$

 
$
12,334

 
$
12,334

The following table presents additional information about Level 3 assets measured at fair value on a recurring basis (in thousands):
 
Year ended January 31,
 
2018
 
2019
Balance at beginning of period
$
4,812

 
$
7,623

Purchases
2,901

 
2,276

Proceeds from liquidation
(117
)
 
(1,266
)
Realized losses
(142
)
 
(131
)
Unrealized gains relating to investments still held at reporting date
169

 
3,832

Balance at end of period
$
7,623

 
$
12,334


F-19


Note 4.    Property and Equipment, Net
The following is a summary of the Company’s property and equipment by category (in thousands):
 
As of January 31,
 
2018
 
2019
Computer equipment and software
$
6,093

 
$
2,222

Furniture and fixtures
10,784

 
19,693

Capitalized internal-use software costs
3,401

 
4,241

Leasehold improvements
26,164

 
86,258

Construction in progress
18,320

 
6,076

Property and equipment, gross
64,762

 
118,490

Less: accumulated depreciation and amortization
(21,765
)
 
(30,131
)
Property and equipment, net
$
42,997

 
$
88,359

Depreciation and amortization expense was $6.2 million, $13.8 million, and $15.0 million for the years ended January 31, 2017, 2018, and 2019, respectively.
The Company capitalized internal-use software costs of $50,000 and $0.8 million for the years ended January 31, 2018 and 2019, respectively. Amortization expense of capitalized internal-use software costs totaled $1.0 million, $1.2 million, and $0.3 million for the years ended January 31, 2017, 2018, and 2019, respectively. The net carrying value of capitalized internal-use software at January 31, 2018 and 2019 was $0.4 million and $0.9 million, respectively.
Note 5.     Acquisitions
Astro Technology
In September 2018, the Company completed its acquisition of all issued and outstanding shares of Astro Technology Inc. (“Astro”), a pre-revenue start-up company that provides artificial-intelligence (AI) enhanced communications solutions, for a total purchase price of $43.3 million in cash.
The Company has accounted for this acquisition as a business combination and has completed the valuation of the assets acquired and liabilities assumed and the allocation of the purchase price to goodwill as of January 31, 2019. A summary of the allocation of the purchase price is presented as follows (in thousands):
Identified intangible asset - developed technology
$
5,300

Goodwill
37,795

Net tangible assets acquired
234

Total purchase price
$
43,329

The goodwill was primarily attributed to the value of synergies created with the Company’s current and future offerings and the value of the assembled workforce. The Company anticipates both goodwill and intangible assets to be fully deductible for income tax purposes.
The Company also agreed to pay additional cash consideration of $10.7 million for unvested securities in return for future services to be provided by certain employees acquired from Astro upon continued employment by the Company. The cash consideration will be paid on each original vesting date of the unvested securities through June 2022. The Company accounted for the cash consideration outside the business combination and recorded compensation expense of $1.6 million in research and development expense in the accompanying consolidated statement of operations for the year ended January 31, 2019.

F-20


The Company incurred other acquisition related expenses of $0.4 million which were recorded in general and administrative expense in the accompanying consolidated statement of operations for the year ended January 31, 2019.
Other acquisitions
During the year ended January 31, 2019, the Company completed other acquisitions and purchases of intangible assets for total consideration of $14.5 million, of which $5.3 million and $5.0 million will be paid in the years ending January 31, 2020 and 2021, respectively. In aggregate, $11.7 million was attributed to intangible assets, $2.2 million was attributed to goodwill, and $0.6 million was attributed to a service agreement.
As part of one of the acquisitions referenced above, the Company concurrently entered into a two-year services agreement, a purchase of technology and a sale of its Class A common stock. Concurrent with this transaction, the Company sold 896,057 shares of Class A common stock to the sellers for $10.0 million. This represented a premium of $3.9 million over the then fair value of the shares which the Company recorded as a reduction to the acquisition price. These arrangements were treated as one transaction as they were executed at the same time and in contemplation of one another. The Company accounted for the transaction as an asset acquisition with $9.9 million being allocated to intangible assets and $0.6 million to the services arrangement.
These acquisitions generally enhance the breadth and depth of the Company’s product offerings, expand its expertise in engineering, and are for defensive purposes to eliminate competition. The Company anticipates both goodwill and intangible assets from other acquisitions to be fully deductible for income tax purposes.
Following are the details of all intangible assets acquired as a result of acquisitions for the year ended January 31, 2019 (dollars in thousands):
 
Amount
 
Weighted
Average Life
Customer relationships
$
9,100

 
7 years
Developed technology
6,700

 
3 years
Assembled workforce
1,198

 
2 years
Fair value of intangible assets acquired
$
16,998

 
5 years
Note 6.    Goodwill and Intangible Assets, Net
Goodwill
The following table reflects the changes in the carrying amount of goodwill (in thousands):
 
Year ended January 31,
 
2018
 
2019
Balance at beginning of year
$
8,653

 
$
8,653

Additions due to acquisitions

 
39,945

Balance at end of year
$
8,653

 
$
48,598


F-21


Intangible Assets, Net
Intangible assets as of January 31, 2019 consist of the following (in thousands, except years):
 
Weighted-average
remaining
amortization period
 
Gross carrying
amount
 
Accumulated
amortization
 
Net carrying
amount
Customer relationships
6.5 years
 
$
9,100

 
$
704

 
$
8,396

Developed technology
2.6 years
 
8,527

 
2,743

 
5,784

Assembled workforce
1.7 years
 
1,198

 
175

 
1,023

Total
 
 
$
18,825

 
$
3,622

 
$
15,203

As of January 31, 2018, the net carrying amount of the Company’s intangible assets acquired from its previous acquisition was zero.
The Company records amortization expense associated with customer relationships, developed technology and assembled workforce in sales and marketing expense, cost of revenue and research and development expense, respectively, in the accompanying consolidated statements of operations. Amortization expense of intangible assets for the years ended January 31, 2017, 2018, and 2019 was $0.6 million , $0.5 million , and $1.8 million , respectively.
As of January 31, 2019, expected amortization expense relating to intangible assets for each of the next five years and thereafter is as follows (in thousands):
Year ending January 31,
 
2020
$
4,132

2021
3,957

2022
2,618

2023
1,300

2024
1,300

Thereafter
1,896

Total
$
15,203

Note 7.    Other Income (Expense), Net
Other income (expense), net for the years ended January 31, 2017, 2018, and 2019 consist of the following (in thousands):
 
Year ended January 31,
 
2017
 
2018
 
2019
Interest income, net
$
2,025

 
$
3,838

 
$
13,400

Unrealized gains (losses) on foreign exchange
851

 
1,970

 
(869
)
Transaction losses on foreign exchange
(998
)
 
(1,503
)
 
(99
)
Change in fair value of strategic investments
(73
)
 
27

 
3,701

Other non-operating income (loss), net
(56
)
 
249

 
13

Other income (expense), net
$
1,749

 
$
4,581

 
$
16,146


F-22


Note 8.    Commitments and Contingencies
Lease Commitments
The Company has entered into various noncancelable operating leases for its facilities expiring between fiscal years 2020 and 2029. Certain operating leases contain provisions under which monthly rent escalates over time. When lease agreements contain escalating rent clauses or free rent periods, the Company recognizes rent expense on a straight-line basis over the term of the lease.
In December 2016, the Company entered into a noncancelable operating lease for an office facility in San Francisco, California. In connection with entering into the lease agreement, the Company agreed to a security deposit of $17.6 million in the form of a standby letter of credit, which is included in restricted cash. The lease term is from November 2017 through August 2028, with future minimum lease payments of approximately $193.5 million as of January 31, 2019 through the year ended January 31, 2029. The Company is entitled to receive tenant incentives of $11.8 million, of which $5.8 million had been received as of January 31, 2019. Leasehold improvements associated with this lease will be amortized over the lease term.
In August 2018, the Company entered into a noncancelable operating lease agreement for an office facility in Denver, Colorado. In connection with entering into the lease agreement, the Company agreed to a security deposit of $2.9 million in the form of a standby letter of credit, which is included in restricted cash. The lease term is from February 2019 through June 2026, with remaining future minimum lease payments of $19.3 million. The Company is entitled to receive tenant incentives of $6.4 million, of which none had been received as of January 31, 2019.
Rent expense, net of sublease income, for the years ended January 31, 2017, 2018 and 2019 was $9.1 million, $17.5 million, and $27.7 million, respectively.
Future minimum lease payments under noncancelable operating leases as of January 31, 2019 are as follows (in thousands):
Year ending January 31,
 
2020
$
27,359

2021
25,832

2022
25,120

2023
24,802

2024
23,525

Thereafter
111,549

Total
$
238,187

Hosting Commitments
In April 2018, the Company executed an amendment to its existing agreement with Amazon Web Services (“AWS”). The amended agreement was effective as of May 1, 2018 and continues through July 31, 2023. The Company has minimum annual commitments of $50.0 million each year of the agreement term for a total minimum commitment of $250.0 million. As of January 31, 2019, the Company had a remaining minimum payment obligation of $212.5 million to AWS through July 31, 2023.
Legal Matters
The Company is involved from time to time in various claims and legal actions arising in the ordinary course of business. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company believes that none of its current legal proceedings will have a material adverse effect on its financial position or results of operations.

F-23


Indemnification Agreements
The Company has signed indemnification agreements with all its directors and certain of its board observers. The agreements indemnify the director or board observer from claims and expenses on actions brought against the individuals, separately or jointly with the Company, for indemnifiable events. Indemnifiable events generally mean any event or occurrence related to the fact that the director or board observer was or is acting in his or her capacity as a director or board observer for the Company or was or is acting or representing the interests of the Company. The terms of obligations under these indemnification agreements may vary.
In the ordinary course of business, the Company enters into contractual arrangements under which the Company agrees to provide indemnification of varying scope and terms to business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties, and other liabilities relating to or arising from its various products, or its acts or omissions. In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract. Further, the Company’s obligations under these agreements may be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments.
Note 9.    Stockholders’ Equity
Convertible Preferred Stock
From August to September 2018, the Company sold 33.5 million shares of Series H convertible preferred stock and 2.4 million shares of Series H-1 convertible preferred stock, each at a purchase price of $11.9053 per share, for aggregate gross proceeds of $427.3 million. The Company incurred $0.4 million in issuance costs, which are recorded as a reduction in the carrying value of the Series H convertible preferred stock.
In December 2017, the Company sold approximately 1.5 million shares of Series G-3 convertible preferred stock at $8.70 per share, for aggregate gross proceeds of $12.7 million.
In November 2017, the Company sold approximately 17.2 million shares of Series G-2 convertible preferred stock at $8.70 per share, for aggregate gross proceeds of $150.0 million.
In October 2017, the Company sold approximately 24.7 million shares of Series G convertible preferred stock and 2.1 million shares of Series G-1 convertible preferred stock at $9.305 per share, for aggregate gross proceeds of $250.0 million. The Company incurred $0.4 million in issuance costs, which are recorded as a reduction in the carrying value of the Series G convertible preferred stock.
In March 2016, the Company sold approximately 19.9 million shares of Series F convertible preferred stock and 6.8 million shares of Series F-1 convertible preferred stock at $7.80 per share, for aggregate gross proceeds of $208.0 million. The Company incurred $0.1 million in issuance costs, which are recorded as a reduction to the carrying value of the Series F convertible preferred stock.

F-24


At January 31, 2018, convertible preferred stock consisted of the following (in thousands):
 
January 31, 2018
 
Shares
 
Net
proceeds
 
Liquidation
preference
 
Authorized
 
Outstanding
 
 
Series A
84,751

 
84,751

 
$
8,011

 
$
8,060

Series B
43,320

 
43,320

 
10,674

 
10,700

Series C
64,805

 
64,805

 
42,678

 
42,750

Series D
47,059

 
42,490

 
108,266

 
108,350

Series D-1
1,235

 
1,235

 
2,561

 
3,149

Series E
26,787

 
22,602

 
134,832

 
135,000

Series E-1
6,047

 
6,047

 
37,940

 
37,950

Series F
19,867

 
19,867

 
154,957

 
155,000

Series F-1
6,793

 
6,793

 
52,940

 
53,000

Series G
24,718

 
24,718

 
229,648

 
230,000

Series G-1
2,149

 
2,149

 
20,000

 
20,000

Series G-2
17,241

 
17,241

 
150,000

 
150,000

Series G-3
1,465

 
1,465

 
12,714

 
8,700

Total
346,237

 
337,483

 
$
965,221

 
$
962,659

At January 31, 2019, convertible preferred stock consisted of the following (in thousands):
 
January 31, 2019
 
Shares
 
Net
 
Liquidation
 
Authorized
 
Outstanding
 
proceeds
 
preference
Series A
84,751

 
84,751

 
$
8,011

 
$
8,060

Series B
43,320

 
43,320

 
10,674

 
10,700

Series C
64,805

 
64,805

 
42,678

 
42,750

Series D
47,059

 
42,490

 
108,266

 
108,350

Series D-1
1,235

 
1,235

 
2,561

 
3,149

Series E
26,787

 
22,602

 
134,832

 
135,000

Series E-1
6,047

 
6,047

 
37,940

 
37,950

Series F
19,867

 
19,867

 
154,957

 
155,000

Series F-1
6,793

 
6,793

 
52,940

 
53,000

Series G
24,718

 
24,718

 
229,648

 
230,000

Series G-1
2,149

 
2,149

 
20,000

 
20,000

Series G-2
17,241

 
17,241

 
150,000

 
150,000

Series G-3
1,465

 
1,465

 
12,714

 
8,700

Series H
35,150

 
33,470

 
398,082

 
398,468

Series H-1
9,202

 
2,419

 
28,798

 
28,798

Total
390,589

 
373,372

 
$
1,392,101

 
$
1,389,925


F-25


Significant rights and preferences of the above convertible preferred stock are as follows:
Conversion
At any time following the date of issuance, each share of convertible preferred stock is convertible, at the option of its holder, into the number of shares of common stock, which results from dividing the applicable original issue price per share for each series by the applicable conversion price per share for such series. The initial conversion prices per share of all series of convertible preferred stock are equal to the original issue prices of each series, and therefore, the conversion ratio is 1:1.
Each share of convertible preferred stock shall be automatically converted into shares of Class B common stock immediately upon the earlier of (i) the closing of the Company’s sale of its common stock in a firm commitment underwritten public offering pursuant to a registration statement on Form S-1 or Form SB-2 under the Securities Act of 1933, as amended, the public offering price of which was not less than $30.0 million in the aggregate or (ii) the date, or the occurrence of an event, specified by vote or written consent or agreement of the holders of at least sixty percent (60%) of the then outstanding shares of convertible preferred stock.
Voting
The holders of convertible preferred stock are entitled to vote on all matters and are entitled to ten votes for each share of Class B common stock into which each share is then convertible. As long as a majority of shares of Series A convertible preferred stock, Series B convertible preferred stock, and Series C convertible preferred stock, remain outstanding the holders of each series are entitled to elect one director. Class A common stock and Class B common stock (voting as one class) are entitled to elect one director. Convertible preferred stock (except for Series F-1 convertible preferred stock and Series G-1 convertible preferred stock which do not vote for directors) and common stock, voting as a single class on an as-converted basis, are entitled to elect the remaining directors.
Dividends
The holders of convertible preferred stock are entitled to receive, when and if declared by the Company’s board of directors, out of any assets legally available therefor, any dividends as may be declared from time to time by the Company’s board of directors. Any remaining dividends shall be paid to the holders of convertible preferred stock and common stock in proportion to the number of shares outstanding on an as-converted basis. The right to receive dividends on shares of convertible preferred stock is noncumulative. No dividends have been declared or paid by the Company as of January 31, 2017, 2018, or 2019.
Liquidation Preference
Each holder of Series A convertible preferred stock, Series B convertible preferred stock, Series C convertible preferred stock, Series D convertible preferred stock, Series E convertible preferred stock, Series E-1 convertible preferred stock, Series F convertible preferred stock, Series F-1 convertible preferred stock, Series G convertible preferred stock, Series G-1 convertible preferred stock, Series G-2 convertible preferred stock, Series G-3 convertible preferred stock, Series H convertible preferred stock, and Series H-1 convertible preferred stock is entitled to receive, prior and in preference to any distribution or payment to the holders of the Series D-1 convertible preferred stock or the common stock, a liquidation preference of $0.10 for each share of Series A convertible preferred stock, $0.25 for each share of Series B convertible preferred stock, $0.66 for each share of Series C convertible preferred stock, $2.55 for each share of Series D convertible preferred stock, $5.97 for each share of Series E convertible preferred stock, $6.27 for each share of Series E-1 convertible preferred stock, $7.80 for each share of Series F convertible preferred stock, $7.80 for each share of Series F-1 convertible preferred stock, $9.305 for each share of Series G convertible preferred stock, $9.305 for each share of Series G-1 convertible preferred stock, $8.70 for each share of Series G-2 convertible preferred stock, $5.97 for each share of Series G-3 convertible preferred stock, $11.9053 for each share of Series H convertible preferred stock, and $11.9053 for each share of Series H-1 convertible preferred stock plus an amount equal to all declared but unpaid dividends on such shares. If, upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation Event”), the assets of the Company are insufficient to make payment in full to the holders of Series A convertible preferred stock, Series B convertible preferred stock, Series C convertible

F-26


preferred stock, Series D convertible preferred stock, Series E convertible preferred stock, Series E-1 convertible preferred stock, Series F convertible preferred stock, Series F-1 convertible preferred stock, Series G convertible preferred stock, Series G-1 convertible preferred stock, Series G-2 convertible preferred stock, Series G-3 convertible preferred stock, Series H convertible preferred stock, and Series H-1 convertible preferred stock as described in the preceding sentence, then such assets shall be distributed among such holders ratably in proportion to the full amounts to which they would otherwise be respectively entitled.
After payment has been made to the holders of Series A convertible preferred stock, Series B convertible preferred stock, Series C convertible preferred stock, Series D convertible preferred stock, Series E convertible preferred stock, Series E-1 convertible preferred stock, Series F convertible preferred stock, Series F-1 convertible preferred stock, Series G convertible preferred stock, Series G-1 convertible preferred stock, Series G-2 convertible preferred stock, Series G-3 convertible preferred stock, Series H convertible preferred stock, and Series H-1 convertible preferred stock, each holder of Series D-1 convertible preferred stock is entitled to receive, prior and in preference to any distribution or payment to the holders of the common stock, a liquidation preference of $2.55 for each share of Series D-1 convertible preferred stock, plus an amount equal to all declared but unpaid dividends on such shares. If, upon any Liquidation Event, the assets of the Company are insufficient to make payment in full to the holders of Series D-1 convertible preferred stock, as described in the preceding sentence, then such assets shall be distributed among the holders of the Series D-1 convertible preferred stock ratably in proportion to the full amounts to which they would otherwise be respectively entitled.
After payment has been made to the holders of all of the series of convertible preferred stock, the remaining assets available for distribution will be distributed ratably among the holders of common stock.
Redemption
The convertible preferred stock is not redeemable.
Common Stock
The Company’s amended and restated certificate of incorporation authorizes the issuance of Class A common stock and Class B common stock. As of January 31, 2019, the Company is authorized to issue 660.0 million shares of Class A common stock and 650.0 million shares of Class B common stock. Holders of Class A common stock and Class B common stock are entitled to dividends on a pro rata basis, when, as, and if declared by the Company’s board of directors, subject to the rights of the holders of the Company’s convertible preferred stock. Holders of Class A common stock are entitled to one vote per share, and holders of Class B common stock are entitled to ten votes per share. Upon a Liquidation Event, as defined in the amended and restated certificate of incorporation, after payments are made to holders of the Company’s convertible preferred stock, any distribution of proceeds to common stockholders will be made on a pro rata basis to the holders of Class A common stock and Class B common stock. Following the completion of an initial public offering of the Company, shares of Class B common stock will automatically convert into shares of Class A common stock upon a sale or transfer (other than with respect to certain estate planning and other transfers). All shares of Class B common stock outstanding on the seventh anniversary of the date of the effectiveness of the Company’s registration statement will automatically convert into shares of Class A common stock. Class A common stock and Class B common stock is not redeemable at the option of the holder.
At January 31, 2019, the Company had reserved shares of Class B common stock for future issuance as follows (in thousands):
Convertible preferred stock
373,372

2009 Stock Plan:
 
Stock options outstanding
18,406

Restricted stock units and awards outstanding
65,403

Shares available for future grants
19,199

Total
476,380


F-27


Equity Incentive Plan
The Company maintains a stock plan, the 2009 Stock Plan (the “Plan”), which allows the Company to grant incentive and nonstatutory stock options, RSUs, and RSAs to employees, directors, and consultants of the Company. Stock options granted under the Plan expire no later than ten years from the date of grant. Stock options and RSAs granted under the Plan usually vest over four years, with 25% vesting on the one-year anniversary and 1/48th vesting monthly thereafter and may include provisions for early exercisability. When stock options are exercised subject to a repurchase right, the Company may buy back any unvested shares at their original exercise price in the event of an employee’s termination prior to full vesting. RSUs granted under the Plan have a service-based vesting period which is typically four years with a cliff vesting period of one year and continued vesting quarterly thereafter and a performance-based requirement that is satisfied on the earlier of: (1) a change in control or (2) the effective date of an initial public offering.
The exercise price of incentive stock options granted under the Plan must be at least equal to 100% of the fair market value of the Company’s common stock at the date of grant, as determined by the Company’s board of directors. The exercise price must not be less than 110% of the fair market value of the Company’s common stock at the date of grant for incentive stock options granted to an employee that owns greater than 10% of the Company stock.
Stock Options
A summary of stock option activity under the Plan and related information is as follows (in thousands, except years and per share data):
 
Number of stock options outstanding
 
Weighted-average exercise price per share
 
Weighted-average remaining contractual term (In years)
 
Aggregate intrinsic value
Outstanding at January 31, 2018
23,720

 
$
0.94

 
7.14

 
$
90,047

Exercised
(4,888
)
 
0.88

 
 
 
 
Cancelled
(426
)
 
1.76

 
 
 
 
Outstanding at January 31, 2019
18,406

 
$
0.94

 
6.12

 
$
177,012

Stock options vested and exercisable at January 31, 2019
16,970

 
$
0.83

 
6.05

 
$
165,149

Stock options vested and expected to vest at January 31, 2019
18,406

 
$
0.94

 
6.12

 
$
177,012

The total fair value of stock options vesting was $7.9 million, $7.0 million, and $4.6 million for the years ended January 31, 2017, 2018, and 2019, respectively. The total grant-date fair value of stock options granted during the years ended January 31, 2017, 2018, and 2019 was $4.1 million, $0.1 million, and $0, respectively.
The total intrinsic value of stock options exercised in the years ended January 31, 2017, 2018, and 2019 was $18.1 million, $13.6 million, and $30.0 million, respectively.
As of January 31, 2019, there was $1.8 million of total unrecognized stock-based compensation related to outstanding stock options, which will be recognized on a straight-line basis over a weighted average period of 0.9 years.
Early Exercise of Nonvested Stock Options
At the discretion of the Company’s board of directors, certain stock options may be exercisable immediately at the date of grant but are subject to a repurchase right, under which the Company may buy back any unvested shares at their original exercise price in the event of an employee’s termination prior to full vesting. The consideration received for an exercise of an unvested option is considered to be a deposit of the exercise price and the related dollar amount is recorded as a liability. The liabilities are reclassified into equity as the awards vest. At January 31, 2018 and 2019, the Company recorded a liability of $0.6 million and $0.2 million, respectively, for 0.4 million and 0.1 million shares that were early exercised by employees as of January 31, 2018 and 2019 that are unvested, respectively.

F-28


RSUs and RSAs
The fair value of RSUs and RSAs are determined using the fair value of the Company’s common stock on the date of grant.
A summary of RSUs and RSAs activity under the Plan is as follows (in thousands, except per share data):
 
Restricted stock units
 
Restricted stock awards
 
Number of shares
 
Weighted-average grant date fair value
(per share)
 
Number of shares
 
Weighted-average grant date fair value
(per share)
Unvested at January 31, 2018
40,594

 
$
3.43

 
894

 
$
2.07

Granted
26,214

 
7.02

 
2,197

 
7.86

Released

 

 
(783
)
 
3.22

Cancelled
(3,694
)
 
4.35

 
(19
)
 
2.09

Unvested at January 31, 2019
63,114

 
4.87

 
2,289

 
7.23

The weighted-average estimated fair value of RSUs granted in the year ended January 31, 2018 was $4.15 per share. No RSAs were granted in the year ended January 31, 2018.
As of January 31, 2019, the Company had $15.5 million of unrecognized stock-based compensation related to RSAs, which will be recognized over the weighted average remaining requisite service period of 3.8 years. As of January 31, 2019, the Company had $308.9 million of unrecognized stock-based compensation related to RSUs. As the RSUs vest upon the satisfaction of both the service condition and performance vesting condition, stock-based compensation will be deferred until the performance vesting condition is satisfied. At the time the performance vesting condition becomes probable, which is not until the performance vesting condition is satisfied, the Company will recognize cumulative stock-based compensation for the outstanding RSUs based on the service-based condition using the accelerated attribution method. As of January 31, 2019, 63.1 million RSUs were outstanding, of which 22.4 million had met their service condition. If the performance vesting condition had been met on January 31, 2019, the Company would have recorded stock-based compensation of $157.5 million , and unrecognized stock-based compensation related to the unvested RSUs as of January 31, 2019 would have been $151.4 million that will be recognized over a weighted-average remaining requisite service period of 2.9 years .
Tender Offers and Repurchases
In connection with the Series G and G-1 convertible preferred stock financing, the Company facilitated a tender offer for all vested and outstanding shares of Class B common stock and all outstanding series of convertible preferred stock. In November 2017, the Company facilitated the sale of an aggregate of 17.9 million shares of vested and outstanding Class B common stock, Series A convertible preferred stock, Series D convertible preferred stock, Series D-1 convertible preferred stock and Series E convertible preferred stock from its existing or former employees and investors at a per share price of $8.37, representing a 10% discount to the Series G and G-1 issuance price, for a total gross sale of $150.0 million. Following the close of the November 2017 tender offer, the Company repurchased an additional 0.8 million shares of Class B common stock from one of the Company’s co-founders at the same price per share of $8.37 for a total gross sale of $6.6 million. At the time of the tender offers, the fair value of the Company’s Class B common stock was $4.24 per share. For shares of Class B common stock repurchased from both current and former employees, the Company recorded compensation expense of $38.9 million related to the excess of the selling price per share of Class B common stock over the fair value of the tendered shares. In addition, the Company recorded deemed dividends of $40.9 million as a reduction to stockholder’s deficit in relation to the selling price per share of Class B common stock and convertible preferred stock paid to existing investors in excess of the original issuance price paid by investors of the shares tendered. Upon close of the tender offer, the Company retired the repurchased shares and subsequently issued the same number of shares in Series G-2 convertible preferred stock and Series G-3 convertible preferred stock to the lead investor of the Series G convertible preferred stock financing.

F-29


In April and June 2017, the Company repurchased 0.1 million shares of common stock from former employees at a purchase price of $7.41 per share. In December 2017, the Company repurchased a combined 0.1 million shares of Class B common stock from one current and one former employee at a purchase price of $8.37 per share. For all the repurchased shares of common stock, the purchase price per share represented an excess to the fair value of the Company’s fair value of common stock at the time of each transaction. In total, the Company recorded $0.5 million of compensation expense and retired all repurchased shares of common stock as of January 31, 2018.
In July 2016, the Company repurchased shares of common stock from two employees at varying share amounts and purchase prices. The first repurchase was for 42,000 shares of common stock at a per share price of $8.00 for an aggregate purchase price of $0.3 million. The second repurchase was for 1.6 million shares of common stock at a per share price of $7.41 for an aggregate purchase price of $12.0 million. The purchase price per share in each repurchase represented an excess to the fair value of the Company’s outstanding common stock as determined by the Company’s most recent valuation of its capital stock at the time of the transactions. At the time of the tender offers, the fair value of the Company’s common stock was $2.59 per share. Upon the completion of the repurchases, the Company recorded $8.0 million as compensation expense related to the excess of the selling price per share of common stock paid to the Company’s employees over the fair value of the repurchased shares. The Company retired the shares repurchased as of January 31, 2017.
A summary of the stock-based compensation related to the tender offers and repurchases, recorded in the accompanying consolidated statements of operations is as follows (in thousands):
 
Year ended January 31,
 
2017
 
2018
 
2019
Cost of revenue
$

 
$
252

 
$

Research and development
8,033

 
30,674

 

Sales and marketing

 
6,549

 

General and administrative

 
1,899

 

Total
$
8,033

 
$
39,374

 
$

Stock Transfers
During the years ended January 31, 2017 and 2019, certain of the Company’s existing investors, or investors to whom the Company waived its right of first refusal with respect to proposed transfers of outstanding common stock, acquired outstanding common stock from current or former employees of the Company for a purchase price greater than the fair value at the time of the transactions. In connection with these stock transfers, the Company waived its right of first refusal and other transfer restrictions applicable to such shares. As a result, the Company recorded stock-based compensation for the difference between the price paid and the fair value on the date of the transaction.
A summary of the stock-based compensation related to the stock transfers recorded in the accompanying consolidated statements of operations is as follows (in thousands):
 
Year ended January 31,
 
2017
 
2018
 
2019
Cost of revenue
$
401

 
$

 
$
533

Research and development
18,360

 

 
6,228

Sales and marketing
5,899

 

 
1,707

General and administrative
1,878

 

 
6,353

Total
$
26,538

 
$

 
$
14,821


F-30


Stock-Based Compensation
A summary of the stock-based compensation excluding tender offers and stock transfers recorded in the accompanying consolidated statements of operations is as follows (in thousands):
 
Year ended January 31,
 
2017
 
2018
 
2019
Cost of revenue
$
229

 
$
239

 
$
199

Research and development
8,153

 
4,586

 
3,720

Sales and marketing
3,845

 
1,495

 
970

General and administrative
3,293

 
2,389

 
3,422

Total
$
15,520

 
$
8,709

 
$
8,311

During the years ended January 31, 2017, 2018, and 2019, the Company capitalized $0.4 million, $0, and $0, respectively, of stock-based compensation as internally-developed software.
The fair value of stock options granted to employees is estimated on the date of grant using the Black-Scholes option valuation model. This stock-based compensation expense valuation model requires the Company to make assumptions and judgments regarding the variables used in the calculation. These variables include the expected term (weighted average period of time that the stock options granted are expected to be outstanding), the expected volatility of the Company’s common stock, expected risk-free interest rate and expected dividends. To the extent actual results differ from the estimates, the difference is recorded as a cumulative adjustment in the period estimates are revised. The Company accounts for forfeitures as they occur.
The Company uses the simplified calculation of expected term, as the Company does not have sufficient historical data to use any other method to estimate expected term. Expected volatility is based on an average of the historical volatilities of the common stock of several entities with characteristics similar to those of the Company. The expected risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The expected dividend yield is 0% as the Company has not paid, and does not expect to pay, cash dividends.
The following assumptions used in the valuation of stock options issued to employees:
 
Year ended January 31,
 
2017
 
2018
Expected Term
5.69 - 6.59 years
 
6.05 years
Expected volatility
48% - 56%
 
41%
Risk-free interest rate
1.32% - 1.45%
 
1.62%
Dividend yield
—%
 
—%
Fair value of common stock on grant date
$2.37 - $3.62
 
$4.24
There were no stock options granted to employees during the year ended January 31, 2019. There were no stock options granted to non-employees during the years ended January 31, 2017, 2018, or 2019.
Note 10.    Net Loss per Share Attributable to Slack Common Stockholders
Basic net loss per share attributable to Slack common stockholders is computed by dividing the net loss attributable to Slack common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is the same as basic loss per share for all years presented because the effects of potentially dilutive items were antidilutive given the Company’s net loss in each period presented.

F-31


The following table presents the calculation of basic and diluted net loss per share attributable to Slack common stockholders (in thousands, except per share data):
 
Year ended January 31,
 
2017
 
2018
 
2019
Net loss attributable to Slack
$
(146,864
)
 
$
(140,085
)
 
$
(140,683
)
Less: Deemed dividends to preferred stock stockholders

 
40,883

 

Net loss attributable to Slack common stockholders
$
(146,864
)
 
$
(180,968
)
 
$
(140,683
)
Weighted average common shares outstanding
114,887

 
122,865

 
121,732

Net loss per share attributable to Slack common stockholders, basic and diluted
$
(1.28
)
 
$
(1.47
)
 
$
(1.16
)
The following potential common shares were excluded from the calculation of diluted net loss per share attributable to Slack common stockholders because their effect would have been antidilutive for the periods presented (in thousands):
 
Year ended January 31,
 
2017
 
2018
 
2019
Convertible preferred stock
301,197

 
337,483

 
373,372

Stock options
28,527

 
23,720

 
18,406

Unvested early exercised stock options
705

 
419

 
115

Restricted stock units
25,721

 
40,594

 
63,114

Restricted stock awards
3,539

 
894

 
2,289

Total antidilutive securities
359,689

 
403,110

 
457,296

Pro Forma Net Loss per Share Attributable to Common Stockholders (Unaudited)
The following table presents the calculation of pro forma basic and diluted net loss per share attributable to Slack common stockholders (in thousands, except per share data):
 
Year Ended
January 31, 2019
Numerator:
 
Net loss attributable to Slack common stockholders
$
(140,683
)
Denominator:
 
Weighted-average shares used in computing net loss per share attributable to Slack common stockholders, basic and diluted
121,732

Pro forma adjustment to reflect assumed conversion of convertible preferred stock into common stock
373,372

Pro forma adjustment to reflect assumed vesting of the RSUs with service condition satisfied
22,389

Weighted-average number of shares used in computing pro forma net loss per share attributable to Slack common stockholders, basic and diluted
517,493

Pro forma net loss per share, attributable to Slack common stockholders, basic and diluted
$
(0.27
)

F-32


Note 11.    Income Taxes
Loss before income taxes consisted of the following (in thousands):
 
Year ended January 31,
 
2017
 
2018
 
2019
United States
$
(123,904
)
 
$
(100,364
)
 
$
(85,175
)
Foreign
(22,850
)
 
(38,906
)
 
(52,887
)
Total
$
(146,754
)
 
$
(139,270
)
 
$
(138,062
)
The components of the Company’s provision for income tax are as follows (in thousands):
 
Year ended January 31,
 
2017
 
2018
 
2019
Current:
 
 
 
 
 
Federal
$

 
$

 
$

State
3

 
20

 
355

Foreign
475

 
894

 
279

Total current
478

 
914

 
634

Deferred:
 
 
 
 
 
Federal

 

 
(200
)
State

 

 
(120
)
Foreign
(323
)
 
(121
)
 
526

Total deferred
(323
)
 
(121
)
 
206

Provision for income taxes
$
155

 
$
793

 
$
840

A reconciliation of the U.S. federal statutory tax rate to the Company’s provision for income tax is as follows:
 
Year ended January 31,
 
2017
 
2018
 
2019
Tax at statutory federal rate
34.00
 %
 
33.80
 %
 
21.00
 %
State tax, net of federal benefit
2.75

 
2.19

 
2.12

Stock-based compensation
(8.47
)
 
(2.29
)
 
(2.95
)
Credits
2.78

 
4.34

 
6.01

Foreign rate differential
(5.60
)
 
(9.92
)
 
9.52

Unrecognized tax benefits
(9.20
)
 

 

Other
(3.77
)
 
(0.55
)
 
(3.80
)
Change in statutory tax rates

 
(17.93
)
 
0.13

Change in valuation allowance
(12.62
)
 
(10.21
)
 
(32.64
)
Effective tax rate
(0.13
)%
 
(0.57
)%
 
(0.61
)%



F-33


Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s deferred income tax assets and liabilities consisted of the following (in thousands):
 
Year ended January 31,
 
2017
 
2018
 
2019
Deferred tax assets (liabilities):
 
 
 
 
 
Accrued liabilities
$
2,979

 
$
3,905

 
$
7,907

Accounts receivable
75

 
131

 
70

Deferred rent
204

 
1,438

 
4,304

Net operating losses
44,043

 
46,736

 
65,385

Tax credits
6,538

 
13,510

 
22,116

Intangible assets
(772
)
 
(108
)
 
15,258

Property and equipment
514

 
1,637

 
870

Stock-based compensation
(851
)
 
(275
)
 
(2,549
)
Other
3

 
88

 
(684
)
Total gross deferred tax assets
52,733

 
67,062

 
112,677

Valuation allowance
(52,342
)
 
(66,557
)
 
(112,693
)
Total deferred tax assets, net
$
391

 
$
505

 
$
(16
)
The Company has assessed, based on available evidence, both positive and negative, it is more likely than not that the deferred tax assets will not be utilized, such that a valuation allowance has been recorded, except for certain foreign subsidiaries which generate income. The valuation allowance increased $18.6 million, $14.2 million and $46.1 million in the years ended January 31, 2017, 2018, and 2019, respectively.
As of January 31, 2019, the Company had U.S. federal and state net operating loss carryforwards of $221.4 million and $154.5 million , respectively, available to offset future taxable income. If not utilized, these carryforward losses will expire, in various amounts, for federal and state tax purposes, both beginning in 2029.
The Company had federal and California capital loss carryforwards of $0.1 million and $0.1 million as of January 31, 2019, respectively. In addition, the Company had $17.2 million and $14.4 million of federal and state research and development tax credits, respectively, available to offset future taxes as of January 31, 2019. If not utilized, the federal credits will begin to expire in 2029. California state research and development tax credits may be carried forward indefinitely.
Utilization of the net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the “ownership change” limitations provided by Section 382 and 383 of the Internal Revenue Code of 1986, as amended, and other similar state provisions. Any annual limitation may result in the expiration of net operating loss and tax credit carryforwards before utilization.
The Company attributes net revenue, costs and expenses to domestic and foreign components based on the terms of its agreements with its subsidiaries. The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are to be reinvested offshore indefinitely. If the Company repatriated these earnings, the resulting income tax liability would be insignificant. The Company is subject to taxation in the United States and various states and foreign jurisdictions.
On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law, which changed many aspects of U.S. corporate income taxation. Certain key changes introduced by the Tax Act include the reduction of the corporate income tax rate to 21%, imposition of a tax on deemed repatriated earnings of foreign subsidiaries (“Transition Tax”), acceleration of expensing of certain business assets, and the implementation of a territorial tax system.

F-34


At January 31, 2018, the Company has remeasured its U.S. deferred tax assets and liabilities, offset by valuation allowances, to reflect the lower rate expected to apply when these temporary differences reverse.
As part of the transition to the new territorial tax system, the Tax Act imposes a one-time tax on a deemed repatriation of historical earnings of foreign subsidiaries. The Company does not expect any one-time Transition Tax based on the evaluation of its current operations.
Under the provisions of the Tax Act, all foreign earnings are subject to U.S. taxation. As a result of the Tax Act, the Company intends to repatriate foreign earnings that have been taxed in the United States to the extent that the foreign earnings are not restricted by local laws and accounting rules.
During the fiscal year ended January 31, 2019, the Company completed its accounting for the tax effects of the enactment of the Tax Act. The Company reaffirmed its position that it was not subject to transition tax under the Tax Act as of January 31, 2018, and therefore, the Company did not record any transition tax during the measurement period. The Company’s accounting for these items is now complete.
The Company is required to inventory, evaluate and measure all uncertain tax positions taken or to be taken on tax returns, and to record liabilities for the amount of such positions that may not be sustained, or may only partially be sustained, upon examination by the relevant taxing authorities. As of January 31, 2019, the Company’s total unrecognized tax benefits were $20.5 million, exclusive of interest and penalties described below. A reconciliation of the beginning and ending amount of total unrecognized tax benefits is as follows (in thousands):
 
Year ended January 31,
 
2017
 
2018
 
2019
Balance at beginning of period
$
1,624

 
$
17,767

 
$
18,545

Increase related to prior year tax provisions
515

 
28

 

Decrease related to prior year tax provisions

 
(2,687
)
 
(2,076
)
Increase related to current year tax provisions
15,660

 
3,472

 
4,022

Lapse of statute of limitations
(32
)
 
(35
)
 
(7
)
Balance at end of period
$
17,767

 
$
18,545

 
$
20,484

Included in the balance of unrecognized tax benefits as of January 31, 2017, 2018, and 2019, are $0.1 million, $0.1 million, and $29,000, respectively, of unrecognized tax benefits that, if recognized, would affect the effective tax rate.
The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. During 2017, the Company accrued penalties of $1,000 and interest of $3,000. In total, as of January 31, 2017, the Company had recognized a liability for penalties and interest of $20,000. Related to the unrecognized tax benefits noted above, the Company accrued penalties of $0 and interest of $7,000 during 2018. In total, as of January 31, 2018, the Company recognized a liability for penalties and interest of $14,000. Related to the unrecognized tax benefits noted above, the Company accrued penalties of $0 and interest of $1,000 during 2019. In total, as of January 31, 2019, the Company recognized a liability for penalties and interest of $8,000.
The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease within the next 12 months.
The Company files tax returns in the U.S. (federal and various states) and other foreign jurisdictions. Due to the Company’s U.S. net operating loss carryforwards, its income tax returns generally remain subject to examination by federal and most state tax authorities.
During the year ended January 31, 2019, the Canada Revenue Agency (“CRA”) concluded the audit for the Canadian Scientific Research and Experimental Development Tax Credit reported on tax returns for the period ended January 31, 2016 filed with the CRA. As a result, the associated FIN48 liability has been released as of January, 31, 2019.

F-35


As of January 31, 2019, the Company was subject to audits by the New York Department of Taxation and Finance (“NYTF”) and the Ireland’s Office of the Revenue Commissioner (“Ireland Revenue”). Accordingly, the NYTF will audit the sales and use tax reported on returns for the period from March 1, 2016 to May 31, 2018 filed with the NYTF. The Ireland Revenue will audit the income tax, payroll taxes, and value added taxes reported on returns for the three year period ended January 31, 2018 filed with the Ireland Revenue. The audit may result in an additional tax charge with related penalties and interest if the Company’s position is not upheld during the audit.
Note 12.    Geographic Information
The following table shows the Company’s revenue by geographic areas, as determined based on the billing address of its customers (in thousands):
 
Year ended January 31,
 
2017
 
2018
 
2019
United States
$
69,135

 
$
144,720

 
$
255,155

International
36,018

 
75,824

 
145,397

Total
$
105,153

 
$
220,544

 
$
400,552

No individual foreign country contributed in excess of 10% of revenue for the years ended January 31, 2017, 2018, and 2019.
The following table shows the Company’s tangible long-lived assets by country (in thousands):
 
As of January 31,
 
2018
 
2019
United States
$
33,383

 
$
76,768

Canada
4,610

 
3,978

Other
5,004

 
7,613

Total
$
42,997

 
$
88,359

Note 13.    Defined Contribution Plan
The Company provides a tax-qualified employee savings and retirement plan, commonly known as a 401(k) plan, that allows participating employees in the United States to contribute up to 100% of their pre-tax annual compensation subject to Internal Revenue Service limits. The Company matches employee contributions at a rate of 50%, up to a maximum annual matched contribution of $4,000 per employee. Employee contributions are always fully vested while the matching contributions fully vest following one year of employee’s credited service with the Company. The Company’s matching contributions to its 401(k) plan totaled $1.3 million, $2.2 million, and $3.7 million for the years ended January 31, 2017, 2018, and 2019, respectively.
Note 14.    Subsequent Events
The Company has evaluated subsequent events through April 3, 2019, the date that the report of independent registered public accounting firm as of and for the year ended January 31, 2019 was originally issued and the audited consolidated financial statements were available for issuance.
Subsequent to January 31, 2019, the Company granted stock options to purchase 3,651,000 shares of Class B common stock with an exercise price of $10.56 per share and issued 15,772,936 RSUs and 505,000 RSAs to employees and a non-employee director of the Company.
In March 2019, the Company entered into a noncancelable operating lease for an office facility in San Francisco, California. In connection with entering into the lease agreement, the Company agreed to a security deposit of $18.0 million in the form of a standby letter of credit. The lease term is from March 2019 through June 2030, with

F-36


future minimum lease payments of $170.3 million . The Company is entitled to receive tenant improvement reimbursements not to exceed $25.4 million.
Note 15.    Subsequent Events (Unaudited)
The Company has evaluated subsequent events through April 26, 2019, the date the consolidated financial statements as of and for the year ended January 31, 2019 were available for issuance.
In April 2019, the Company’s board of directors authorized 7,000,000 shares of Class B common stock, subject to shareholder approval, to be reserved for future issuance under the 2009 Stock Plan.

F-37












SLACKLOGOA04.JPG


































Through and including                     , 2019 (the 25th day after the listing date of our Class A common stock), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.




PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13.    OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses to be paid by us in connection with this registration statement and the listing of our Class A common stock. All amounts shown are estimates except for the SEC registration fee and the listing fee.
SEC registration fee
 
*
NYSE listing fee
 
*
Printing fees and expenses
 
*
Legal fees and expenses
 
*
Accounting fees and expenses
 
*
Custodian, transfer agent and registrar fees
 
*
Other advisers’ fees
 
*
Miscellaneous
 
*
Total
$
*
__________________
*
To be provided by amendment.
ITEM 14.    INDEMNIFICATION OF DIRECTORS AND OFFICER S.
Section 145 of the Delaware General Corporation Law authorizes a corporation’s board of directors to grant, and authorizes a court to award, indemnity to officers, directors, and other corporate agents.
Shortly following the effectiveness of this registration statement, we expect to adopt an amended and restated certificate of incorporation which will contain provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for the following:
any breach of their duty of loyalty to our company or our stockholders;
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or
any transaction from which they derived an improper personal benefit.
Any amendment to, or repeal of, these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission, or claim that occurred or arose prior to that amendment or repeal. If the Delaware General Corporation Law is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further limited to the greatest extent permitted by the Delaware General Corporation Law.
In addition, shortly following the effectiveness of this registration statement, we expect to adopt amended and restated bylaws, which will provide that we will indemnify, to the fullest extent permitted by law, any person who is or was a party or is threatened to be made a party to any action, suit, or proceeding by reason of the fact that he or she is or was one of our directors or officers or is or was serving at our request as a director or officer of another corporation, partnership, joint venture, trust, or other enterprise. Our amended and restated bylaws are expected to provide that we may indemnify to the fullest extent permitted by law any person who is or was a party or is threatened to be made a party to any action, suit, or proceeding by reason of the fact that he or she is or was one of our employees or agents or

II- 1



is or was serving at our request as an employee or agent of another corporation, partnership, joint venture, trust, or other enterprise. Our amended and restated bylaws will also provide that we must advance expenses incurred by or on behalf of a director or officer in advance of the final disposition of any action or proceeding, subject to very limited exceptions.
Further, we have entered into indemnification agreements with each of our directors and executive officers that may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements will require us, among other things, to indemnify our directors and executive officers against liabilities that may arise by reason of their status or service. These indemnification agreements will also require us to advance all expenses incurred by the directors and executive officers in investigating or defending any such action, suit or proceeding. We believe that these agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers.
The limitation of liability and indemnification provisions that are expected to be included, or are included, in our amended and restated certificate of incorporation, amended restated bylaws, and in indemnification agreements that we enter into with our directors and executive officers may discourage stockholders from bringing a lawsuit against our directors and executive officers for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and executive officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be harmed to the extent that we pay the costs of settlement and damage awards against directors and executive officers as required by these indemnification provisions. At present, we are not aware of any pending litigation or proceeding involving any person who is or was one of our directors, officers, employees, or other agents or is or was serving at our request as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.
We expect to obtain insurance policies under which, subject to the limitations of the policies, coverage is provided to our directors and executive officers against loss arising from claims made by reason of breach of fiduciary duty or other wrongful acts as a director or executive officer, including claims relating to public securities matters, and to us with respect to payments that may be made by us to these directors and executive officers pursuant to our indemnification obligations or otherwise as a matter of law.
Certain of our non-employee directors may, through their relationships with their employers, be insured and/or indemnified against certain liabilities incurred in their capacity as members of our board of directors.
ITEM 15.    RECENT SALES OF UNREGISTERED SECURITIES.
Since February 1, 2016, we made sales of the following unregistered securities:
Preferred Issuances
In March 2016, we sold an aggregate of 26,659,824 shares of our Series F and F-1 convertible preferred stock to 12 accredited investors at a purchase price of $7.80 per share, for an aggregate purchase price of $207,999,947.
In October 2017 through December 2017, we sold an aggregate of 45,573,328 shares of our Series G, G-1, G-2 and G-3 convertible preferred stock to 12 accredited investors at a purchase price of $9.31 per share for our Series G and G-1 and $8.70 per share for our Series G-2 and G-3, for an aggregate purchase price of $412,742,651.
From August 2018 through September 2018, we sold an aggregate of 35,888,717 shares of our Series H and H-1 convertible preferred stock to 14 accredited investors at a purchase price of $11.91 per share, for an aggregate purchase price of $427,265,943.
Option and Class B Common Issuances
Since February 1, 2016, we granted to our employees, consultants, and other service providers options to purchase an aggregate of 6,797,364 shares of Class B common stock under our 2009 Stock Plan, or our 2009 Plan, at exercise prices ranging from $2.28 to $16.93 per share.

II- 2



Since February 1, 2016, we issued and sold to our employees, consultants, and other service providers an aggregate of 16,490,407 shares of Class B common stock upon the exercise of stock options under our 2009 Plan, at exercise prices ranging from $0.08 to $4.24 per share, for a weighted-average exercise price of $0.91.
Since February 1, 2016, we granted to our employees, consultants, and other service providers restricted stock units, or RSUs, representing an aggregate of 78,076,601 shares of Class B common stock, under our 2009 Plan.
Since February 1, 2016, we granted to our employees, consultants, and other service providers RSUs representing an aggregate of 406,017 shares of Class B common stock.
Since February 1, 2016, we granted to our employees, consultants, and other service providers restricted stock awards, or RSAs, covering an aggregate of 3,430,959 shares of Class B common stock, under our 2009 Plan.
Since February 1, 2016, we granted to our employees, consultants, and other service providers RSAs covering an aggregate of 406,017 shares of Class B common stock.
Other Issuances
In June 2018, we issued an aggregate of 4,299 shares of our Class B common stock to an accredited investor in exchange for a release of claims.
In July 2018, we sold an aggregate of 896,057 shares of our Class A common stock to an accredited investor at a purchase price of $11.16 per share, for an aggregate purchase price of $9,999,996.
We believe these transactions were exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their relationships with us, to information about Slack.

II- 3



ITEM 16.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)    Exhibits.
Exhibit
Number
 
Exhibit Title
3.1
 
 
 
 
3.2*
 
Form of Amended and Restated Certificate of Incorporation of the Registrant to be in effect shortly following to the effectiveness of the registration statement.
 
 
 
3.3
 
 
 
 
3.4*
 
Form of Amended and Restated Bylaws of the Registrant to be in effect shortly following the effectiveness of the registration statement.
 
 
 
4.1
 
 
 
 
4.2*
 
Amended and Restated Investors’ Rights Agreement, dated August 13, 2018, by and among the Registrant and certain of its stockholders.
 
 
 
5.1*
 
Opinion of Goodwin Procter LLP.
 
 
 
10.1
 
 
 
 
10.2#*
 
Amended and Restated 2009 Stock Plan, as amended, and forms of agreements thereunder.
 
 
 
10.3#
 
 
 
 
10.4#*
 
2019 Stock Option and Incentive Plan, and forms of agreements thereunder.
 
 
 
10.5#*
 
2019 Employee Stock Purchase Plan.
 
 
 
10.6#
 
 
 
 
10.7#
 
 
 
 
10.8#
 
 
 
 
10.9#
 
 
 
 
10.10#
 
 
 
 
10.11#
 
 
 
 
10.12
 
 
 
 
21.1
 
 
 
 
23.1
 
 
 
 
23.2*
 
Consent of Goodwin Procter LLP (included in Exhibit 5.1).
 
 
 
24.1
 
__________________
*
To be filed by amendment.
#
Indicates management contract or compensatory plan, contract or agreement.

II- 4



(b)    Financial Statement Schedules.
All schedules are omitted because the required information is either not present, not present in material amounts, or is presented within the consolidated financial statements included in the prospectus that is part of this registration statement.
ITEM 17.    UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)
To include any prospectus required by Section 10(a)(3) of the Securities Act, as amended, or the Securities Act.
(ii)
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement;
(iii)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
Insofar as indemnification by the Registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1)
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2)
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II- 5



SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in San Francisco, California, on April 26, 2019.
SLACK TECHNOLOGIES, INC.
 
 
By:
/s/ Stewart Butterfield
 
Stewart Butterfield
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Stewart Butterfield, Allen Shim and David Schellhase, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign the Registration Statement on Form S-1 of Slack Technologies, Inc., and any or all amendments (including post-effective amendments) thereto and any new registration statement with respect to the offering contemplated thereby filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite or necessary to be done in connection therewith and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their, his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

II- 6



Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.
Signature
 
Title
 
Date
 
 
 
 
 
/s/ Stewart Butterfield
 
Chief Executive Officer and Director
(Principal Executive Officer)
 
April 26, 2019
Stewart Butterfield
 
 
 
 
 
 
 
/s/ Allen Shim
 
Chief Financial Officer
(Principal Financial Officer)
 
April 26, 2019
Allen Shim
 
 
 
 
 
 
 
/s/ Brandon Zell
 
Chief Accounting Officer
(Principal Accounting Officer)
 
April 26, 2019
Brandon Zell
 
 
 
 
 
 
 
/s/ Andrew Braccia
 
Director
 
April 26, 2019
Andrew Braccia
 
 
 
 
 
 
 
/s/ Edith Cooper
 
Director
 
April 26, 2019
Edith Cooper
 
 
 
 
 
 
 
/s/ Sarah Friar
 
Director
 
April 26, 2019
Sarah Friar
 
 
 
 
 
 
 
/s/ John O’Farrell
 
Director
 
April 26, 2019
John O’Farrell
 
 
 
 
 
 
 
/s/ Chamath Palihapitiya
 
Director
 
April 26, 2019
Chamath Palihapitiya
 
 
 
 
 
 
 
/s/ Graham Smith
 
Director
 
April 26, 2019
Graham Smith
 
 

II- 7
Exhibit 3.1

RESTATED CERTIFICATE OF INCORPORATION
OF
SLACK TECHNOLOGIES, INC.
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
SLACK TECHNOLOGIES, INC. , a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”),
DOES HEREBY CERTIFY :
FIRST : That the name of this corporation is SLACK TECHNOLOGIES, INC. and that this corporation was originally incorporated pursuant to the General Corporation Law on February 25, 2009 under the name Tiny Spec, Inc., which name was subsequently amended to Tiny Speck, Inc. on March 5, 2009, which name was subsequently amended to Slack Technologies, Inc. on July 17, 2014.
SECOND : That the Board of Directors duly adopted resolutions proposing to amend and restate the Restated Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:
RESOLVED , that the Restated Certificate of Incorporation of this corporation be amended and restated in its entirety as follows:
ARTICLE I
The name of this corporation is Slack Technologies, Inc.
ARTICLE II
The address of the registered office of this corporation in the State of Delaware is 3500 South DuPont Highway, in the City of Dover, County of Kent, 19901. The name of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

1


ARTICLE IV
A.      Authorization of Stock . This corporation is authorized to issue two classes of stock to be designated, respectively, common stock and preferred stock. The total number of shares that this corporation is authorized to issue is 1,700,588,630 shares. The total number of shares of common stock authorized to be issued is 1,310,000,000 shares, par value $0.0001 per share (the “Common Stock”), 660,000,000 of which shares are designated as “Class A Common Stock” and 650,000,000 of which shares are designated as “Class B Common Stock”. The total number of shares of preferred stock authorized to be issued is 390,588,630, par value $0.0001 per share (the “Preferred Stock”), 84,751,030 of which shares are designated as “Series A Preferred Stock”, 43,319,820 of which shares are designated as “Series B Preferred Stock”, 64,805,370 of which shares are designated as “Series C Preferred Stock”, 47,058,630 of which shares are designated as “Series D Preferred Stock”, 1,235,000 of which shares are designated as “Series D-1 Preferred Stock”, 26,787,204 of which shares are designated as “Series E Preferred Stock”, 6,046,840 of which shares are designated as “Series E-1 Preferred Stock”, 19,866,694 of which shares are designated as “Series F Preferred Stock”, 6,793,130 of which shares are designated as “Series F-1 Preferred Stock”, 24,717,887 of which shares are designated as “Series G Preferred Stock”, 2,149,382 of which shares are designated as “Series G-1 Preferred Stock”, 17,241,379 of which shares are designated as “Series G-2 Preferred Stock”, 1,464,680 of which shares are designated as “Series G-3 Preferred Stock”, 35,149,719 of which shares are designated as “Series H Preferred Stock”, and 9,201,865 of which shares are designated as “Series H-1 Preferred Stock”.
B.      Rights, Preferences and Restrictions of Preferred Stock . The rights, preferences, privileges and restrictions granted to and imposed on the Preferred Stock are as set forth below in this Article IV(B).
1.      Dividend Provisions .
(a)      The holders of shares of Preferred Stock shall be entitled to receive dividends, on a pari passu basis, out of any assets legally available therefor, prior and in preference to any declaration or payment of any dividend (payable other than in Common Stock or other securities and rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock of this corporation) on the Common Stock of this corporation, at the applicable Dividend Rate (as defined below), payable when, as and if declared by the Board of Directors. Such dividends shall not be cumulative. The holders of the outstanding Preferred Stock can waive any dividend preference that such holders shall be entitled to receive under this Section 1 upon the affirmative vote or written consent of the holders of a majority of the voting power of the shares of Preferred Stock then outstanding (voting together as a single class and not as separate series, and on an as-converted basis). For purposes of this subsection 1(a), “Dividend Rate” shall mean $0.0076 per annum for each share of Series A Preferred Stock, $0.019767 per annum for each share of Series B Preferred Stock, $0.052767 per annum for each share of Series C Preferred Stock, $0.204 per annum for each share of Series D Preferred Stock and Series D-1 Preferred Stock, $0.477833 per annum for each share of Series E Preferred Stock, $0.50208 per annum for each share of Series E-1 Preferred Stock, $0.62416 per annum for each share of Series F Preferred Stock, $0.62416 per annum for each share of Series F-1 Preferred Stock, $0.7444 per

2


annum for each share of Series G Preferred Stock, $0.7444 per annum for each share of Series G-1 Preferred Stock, $0.6960 per annum for each share of Series G-2 Preferred Stock, $0.477833 per annum for each share of Series G-3 Preferred Stock, $0.952424 per annum for each share of Series H Preferred Stock and $0.952424 per annum for each share of Series H-1 Preferred Stock (each as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like).
(b)      After payment of such dividends, any additional dividends or distributions shall be distributed among all holders of Common Stock and Preferred Stock in proportion to the number of shares of Common Stock that would be held by each such holder if all shares of Preferred Stock were converted to Class B Common Stock at the then effective conversion rate.
2.      Liquidation Preference .
(a)      In the event of any Liquidation Event (as defined below), either voluntary or involuntary, the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series E-1 Preferred Stock, Series F Preferred Stock, Series F-1 Preferred Stock, Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock, Series G-3 Preferred Stock, Series H Preferred Stock and Series H-1 Preferred Stock shall be entitled to receive out of the proceeds or assets of this corporation available for distribution to its stockholders (the “Proceeds”), on a pari passu basis and prior and in preference to any distribution of the Proceeds to the holders of Common Stock or Series D-1 Preferred Stock by reason of their ownership thereof, an amount per share equal to the sum of the applicable Original Issue Price (as defined below) for such series of Preferred Stock, plus declared but unpaid dividends on such share. If, upon the occurrence of such event, the Proceeds thus distributed among the holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series E-1 Preferred Stock, Series F Preferred Stock, Series F-1 Preferred Stock, Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock, Series G-3 Preferred Stock, Series H Preferred Stock and Series H-1 Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then the entire Proceeds legally available for distribution shall be distributed ratably among the holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series E-1 Preferred Stock, Series F Preferred Stock, Series F-1 Preferred Stock, Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock, Series G-3 Preferred Stock, Series H Preferred Stock and Series H-1 Preferred Stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive under this subsection (a). For purposes of this Restated Certificate of Incorporation, “Original Issue Price” shall mean $0.095133 per share for each share of the Series A Preferred Stock, $0.247 per share for each share of the Series B Preferred Stock, $0.659667 per share for each share of the Series C Preferred Stock, $2.55 per share for each share of the Series D Preferred Stock and Series D-1 Preferred Stock, $5.973 per share for each share of the Series E Preferred Stock, $6.276 per share for each share of the Series E-1 Preferred Stock, $7.802 per share for each share of the Series F Preferred Stock, $7.802 per share for each share of the Series F-1 Preferred Stock, $9.305 per share for each share of the Series G Preferred Stock, $9.305 per share

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for each share of the Series G-1 Preferred Stock, $8.700 per share for each share of the Series G-2 Preferred Stock, $5.973 per share for each share of the Series G-3 Preferred Stock, $11.9053 per share for each share of the Series H Preferred Stock, and $11.9053 per share for each share of the Series H-1 Preferred Stock (each as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like with respect to such series of Preferred Stock).
(b)      Upon completion of the distribution of the full preferential amounts required by subsection (a) of this Section 2, if Proceeds remain available for distribution, the holders of Series D-1 Preferred Stock shall be entitled to receive, prior and in preference to any distribution of the Proceeds to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of the Original Issue Price for the Series D-1 Preferred Stock, plus declared but unpaid dividends on such share. If, upon the occurrence of such event, the Proceeds thus distributed among the holders of the Series D-1 Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then the entire remaining Proceeds legally available for distribution shall be distributed ratably among the holders of the Series D-1 Preferred Stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive under this subsection (b).
(c)      Upon completion of the distributions of the full preferential amounts required by subsections (a) and (b) of this Section 2, all of the remaining Proceeds available for distribution to stockholders shall be distributed among the holders of Common Stock pro rata based on the number of shares of Common Stock held by each.
(d)      Notwithstanding the above, for purposes of determining the amount each holder of shares of Preferred Stock is entitled to receive with respect to a Liquidation Event, each such holder of shares of a series of Preferred Stock shall be deemed to have converted (regardless of whether such holder actually converted) such holder’s shares of such series into shares of Class B Common Stock immediately prior to the Liquidation Event if, as a result of an actual conversion, such holder would receive, in the aggregate, an amount greater than the amount that would be distributed to such holder if such holder did not convert such series of Preferred Stock into shares of Class B Common Stock. If any such holder shall be deemed to have converted shares of Preferred Stock into Class B Common Stock pursuant to this paragraph, then such holder shall not be entitled to receive any distribution that would otherwise be made to holders of Preferred Stock that have not converted (or have not been deemed to have converted) into shares of Class B Common Stock.
(e)      (i)    For purposes of this Restated Certificate of Incorporation, a “Liquidation Event” shall include (A) the closing of the sale, transfer or other disposition of all or substantially all of this corporation’s assets, (B) the consummation of the merger or consolidation of this corporation with or into another entity (except a merger or consolidation in which the holders of capital stock of this corporation immediately prior to such merger or consolidation continue to hold at least 50% of the voting power of the capital stock of this corporation or the surviving or acquiring entity), (C) the closing of the transfer (whether by merger, consolidation or otherwise), in one transaction or a series of related transactions, to a person or group of affiliated persons (other than an underwriter of this corporation’s securities), of this corporation’s securities if, after such closing, such person or group of affiliated persons would hold 50% or more of the outstanding

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voting stock of this corporation (or the surviving or acquiring entity), (D) a liquidation, dissolution or winding up of this corporation; provided, however, that a transaction shall not constitute a Liquidation Event if its sole purpose is to change the state of this corporation’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held this corporation’s securities immediately prior to such transaction or (E) the exclusive, irrevocable licensing of all or substantially all of this corporation’s intellectual property to a third party. The treatment of any particular transaction or series of related transactions as a Liquidation Event may be waived by the vote or written consent of the holders of at least sixty percent (60%) of the voting power of the outstanding Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis); provided, however, that if the waiver of treatment of a particular transaction or series of related transactions as a Liquidation Event will result in the distribution of Proceeds to the holders of shares of Series F Preferred Stock and/or Series F-1 Preferred Stock in respect of such shares in an amount less than such holders would have received in respect of such shares absent such waiver, then such waiver shall, with respect to the Series F Preferred Stock and Series F-1 Preferred Stock, also require the vote or written consent of the holders of at least seventy-eight percent (78%) of the voting power of the outstanding shares of Series F Preferred Stock and Series F-1 Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis); provided, further, however, that if the waiver of treatment of a particular transaction or series of related transactions as a Liquidation Event will result in the distribution of Proceeds to the holders of shares of Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock and/or Series G-3 Preferred Stock in respect of such shares in an amount less than such holders would have received in respect of such shares absent such waiver, then such waiver shall, with respect to the Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock and/or Series G-3 Preferred Stock, also require the vote or written consent of the holders of a majority of the voting power of the outstanding shares of Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock and Series G-3 Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis); and provided, further, however, that if the waiver of treatment of a particular transaction or series of related transactions as a Liquidation Event will result in the distribution of Proceeds to the holders of shares of Series H Preferred Stock and/or Series H-1 Preferred Stock in respect of such shares in an amount less than such holders would have received in respect of such shares absent such waiver, then such waiver shall, with respect to the Series H Preferred Stock and/or Series H-1 Preferred Stock, also require the vote or written consent of the holders of a majority of the voting power of the outstanding shares of Series H Preferred Stock and Series H-1 Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis).
(ii)    In any Liquidation Event, if Proceeds received by this corporation or its stockholders is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows:
(A)      Securities not subject to investment letter or other similar restrictions on free marketability covered by (B) below:
(1)      If traded on a securities exchange, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the

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twenty (20) trading‑day period ending three (3) trading days prior to the closing of the Liquidation Event;
(2)      If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the twenty (20) trading‑day period ending three (3) trading days prior to the closing of the Liquidation Event; and
(3)      If there is no active public market, the value shall be the fair market value thereof, as mutually determined by this corporation and the holders of a majority of the voting power of all then outstanding shares of Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis).
(B)      The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A) (1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by this corporation and the holders of a majority of the voting power of all then outstanding shares of such Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis).
(C)      The foregoing methods for valuing non-cash consideration to be distributed in connection with a Liquidation Event shall, with the appropriate approval of the definitive agreements governing such Liquidation Event by the stockholders under the General Corporation Law and Section 6 of this Article IV(B), be superseded by the determination of such value set forth in the definitive agreements governing such Liquidation Event.
(iii)    In the event the requirements of this Section 2 are not complied with, this corporation shall forthwith either:
(A)      cause the closing of such Liquidation Event to be postponed until such time as the requirements of this Section 2 have been complied with; or
(B)      cancel such transaction, in which event the rights, preferences and privileges of the holders of the Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in subsection 2(e)(iv) hereof.
(iv)    This corporation shall give each holder of record of Preferred Stock written notice of such impending Liquidation Event not later than twenty (20) days prior to the stockholders’ meeting called or record date of a written consent solicited to approve such transaction, or twenty (20) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and this corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than twenty (20) days

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after this corporation has given the first notice provided for herein or sooner than ten (10) days after this corporation has given notice of any material changes provided for herein; provided, however, that subject to compliance with the General Corporation Law such periods may be shortened or waived upon the vote or written consent of the holders of Preferred Stock that represent a majority of the voting power of all then outstanding shares of such Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis).
(f)      Allocation of Escrow and Contingent Consideration . In the event of a Liquidation Event, if any portion of the Proceeds is placed into escrow and/or is payable to the stockholders of this corporation subject to contingencies, notwithstanding the operation of this Section 2 the definitive agreement with respect to such transaction shall provide that the portion of such Proceeds that is placed in escrow and/or is subject to contingencies shall be allocated among the holders of capital stock of this corporation pro rata based on the amount of such consideration otherwise payable to each stockholder pursuant to this Section 2 (such that each stockholder has the same percentage of the Proceeds payable to it placed into escrow and/or subject to contingencies, as applicable).
3.      Redemption . The Preferred Stock is not redeemable at the option of the holder thereof.
4.      Conversion . The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):
(a)      Right to Convert . Each share of Preferred Stock shall be convertible, at the option of the holder thereof and without additional consideration, at any time after the date of issuance of such share, at the office of this corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Class B Common Stock as is determined by dividing the applicable Original Issue Price for such series by the applicable Conversion Price for such series (the conversion rate for a series of Preferred Stock into Class B Common Stock is referred to herein as the “Conversion Rate” for such series), determined as hereafter provided, in effect on the date the certificate is surrendered for conversion. The initial Conversion Price per share for each series of Preferred Stock shall be the Original Issue Price applicable to such series as of the Filing Date; provided, however, that the Conversion Price for the Preferred Stock shall be subject to adjustment as set forth in subsection 4(d).
(b)      Automatic Conversion . Each share of Preferred Stock shall automatically be converted into shares of Class B Common Stock at the Conversion Rate at the time in effect for such series of Preferred Stock immediately upon the earlier of (i) the closing of this corporation’s sale of its Common Stock in a firm commitment underwritten public offering pursuant to a registration statement on Form S-1 under the Securities Act of 1933, as amended, that results in at least $200,000,000 of gross proceeds in the aggregate to this corporation (a “Qualified Public Offering”) or (ii) the date, or the occurrence of an event, specified by vote or written consent or agreement of the holders of at least sixty percent (60%) of the voting power of the then outstanding shares of Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis); provided, however, that if the conversion pursuant to this clause (ii) is in connection with a Liquidation Event and the conversion of shares of Series F Preferred Stock and Series F-1

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Preferred Stock to Class B Common Stock will result in the distribution of Proceeds to the holders of shares of Class B Common Stock issued upon conversion of Series F Preferred Stock and/or Series F-1 Preferred Stock in respect of such shares in an amount less than such holders would have received in respect of such shares of Series F Preferred Stock or Series F-1 Preferred Stock, as applicable, had such shares of Series F Preferred Stock or Series F-1 Preferred Stock not been converted to Class B Common Stock, then the conversion of shares of Series F Preferred Stock and Series F-1 Preferred Stock to Class B Common Stock pursuant to this clause (ii) shall also require the vote or written consent of the holders of at least seventy-eight percent (78%) of the voting power of the outstanding shares of Series F Preferred Stock and Series F-1 Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis); provided, further, however, that if the conversion pursuant to this clause (ii) is in connection with a Liquidation Event and the conversion of shares of Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock and/or Series G-3 Preferred stock to Class B Common Stock will result in the distribution of Proceeds to the holders of shares of Class B Common Stock issued upon conversion of Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock and/or Series G-3 Preferred Stock in respect of such shares in an amount less than such holders would have received in respect of such shares of Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock and/or Series G-3 Preferred Stock, as applicable, had such shares of Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock and/or Series G-3 Preferred Stock not been converted to Class B Common Stock, then the conversion of shares of Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock and/or Series G-3 Preferred Stock to Class B Common Stock pursuant to this clause (ii) shall also require the vote or written consent of the holders of a majority of the voting power of the outstanding shares of Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock and Series G-3 Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis); and provided, further, however, that if the conversion pursuant to this clause (ii) is in connection with a Liquidation Event and the conversion of shares of Series H Preferred Stock and/or Series H-1 Preferred Stock to Class B Common Stock will result in the distribution of Proceeds to the holders of shares of Class B Common Stock issued upon conversion of Series H Preferred Stock and/or Series H-1 Preferred Stock in respect of such shares in an amount less than such holders would have received in respect of such shares of Series H Preferred Stock and/or Series H-1 Preferred Stock had such shares of Series H Preferred Stock and/or Series H-1 Preferred Stock, as applicable, not been converted to Class B Common Stock, then the conversion of shares of Series H Preferred Stock and/or Series H-1 Preferred Stock to Class B Common Stock pursuant to this clause (ii) shall also require the vote or written consent of the holders of a majority of the voting power of the outstanding shares of Series H Preferred Stock and Series H-1 Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis).
(c)      Mechanics of Conversion . Before any holder of Preferred Stock shall be entitled to voluntarily convert the same into shares of Class B Common Stock, he or she shall surrender the certificate or certificates therefor, duly endorsed, at the office of this corporation or of any transfer agent for the Preferred Stock, and shall give written notice to this corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Class B Common Stock are to be issued. This corporation shall, as soon as practicable thereafter, issue and deliver at such office to such

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holder of Preferred Stock, or to the nominee or nominees of such holder, (i) a certificate or certificates for the number of shares of Class B Common Stock to which such holder shall be entitled as aforesaid, (ii) a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Class B Common Stock and (iii) a check payable to the holder in the amount of any cash amounts payable in lieu of any fractional shares pursuant to Subsection 4(g)(i) of Article IV(B) hereto. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Preferred Stock to be converted, and the person or persons entitled to receive the shares of Class B Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Class B Common Stock as of such date. If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act of 1933, as amended, the conversion may, at the option of any holder tendering Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the persons entitled to receive the Class B Common Stock upon conversion of the Preferred Stock shall not be deemed to have converted such Preferred Stock until immediately prior to the closing of such sale of securities. If the conversion is in connection with Automatic Conversion provisions of subsection 4(b)(ii) above, such conversion shall be deemed to have been made on the conversion date described in the stockholder consent approving such conversion, and the persons entitled to receive shares of Class B Common Stock issuable upon such conversion shall be treated for all purposes as the record holders of such shares of Class B Common Stock as of such date.
(d)      Conversion Price Adjustments of Preferred Stock for Certain Dilutive Issuances, Splits and Combinations . The Conversion Price of the Preferred Stock shall be subject to adjustment from time to time as follows:
(i)      (A) If this corporation shall issue, at any time or from time to time, on or after the date upon which this Restated Certificate of Incorporation is accepted for filing by the Secretary of State of the State of Delaware (the “Filing Date”), any Additional Stock (as defined below) without consideration or for a consideration per share less than the Conversion Price applicable to a series of Preferred Stock in effect immediately prior to the issuance of such Additional Stock, the Conversion Price for such series in effect immediately prior to each such issuance shall forthwith (except as otherwise provided in this clause (i)) be adjusted to a price (calculated to the nearest one-thousandth of a cent) determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock Outstanding (as defined below) immediately prior to such issuance plus the number of shares of Common Stock that the aggregate consideration received by this corporation for such issuance would purchase at such Conversion Price; and the denominator of which shall be the number of shares of Common Stock Outstanding (as defined below) immediately prior to such issuance plus the number of shares of such Additional Stock. For purposes of this Section 4(d)(i)(A), the term “Common Stock Outstanding” shall mean and include the following: (1) outstanding Common Stock, (2) Class B Common Stock issuable upon conversion of outstanding Preferred Stock, (3) Common Stock issuable upon exercise of outstanding stock options and (4) Common Stock issuable upon exercise (and, in the case of warrants to purchase Preferred Stock, conversion) of outstanding warrants. Shares described in (1) through (4) above shall be included whether vested or unvested, whether contingent or non-contingent and whether exercisable or not yet exercisable. In the event

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that this corporation issues or sells, or is deemed to have issued or sold, shares of Additional Stock that results in an adjustment to a Conversion Price pursuant to the provisions of this Section 4(d) (the “First Dilutive Issuance”), and this corporation then issues or sells, or is deemed to have issued or sold, shares of Additional Stock in a subsequent issuance other than the First Dilutive Issuance that would result in further adjustment to a Conversion Price (a “Subsequent Dilutive Issuance”) pursuant to the same instruments as the First Dilutive Issuance, then and in each such case upon a Subsequent Dilutive Issuance the applicable Conversion Price for each series of Preferred Stock shall be reduced to the applicable Conversion Price that would have been in effect had the First Dilutive Issuance and each Subsequent Dilutive Issuance all occurred on the closing date of the First Dilutive Issuance.
(B)    No adjustment of the Conversion Price for the Preferred Stock shall be made in an amount less than one-tenth of one cent per share, provided that any adjustment not required to be made because of this sentence shall be included in any subsequent adjustment to the Conversion Price. Except to the limited extent provided for in subsections (E)(3) and (E)(4), no adjustment of such Conversion Price pursuant to this subsection 4(d)(i) shall have the effect of increasing the Conversion Price above the Conversion Price in effect immediately prior to such adjustment.
(C)    In the case of the issuance of Additional Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any reasonable discounts, commissions or other expenses allowed, paid or incurred by this corporation for any underwriting or otherwise in connection with the issuance and sale thereof.
(D)    In the case of the issuance of the Additional Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors irrespective of any accounting treatment.
(E)    In the case of the issuance of options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock or options to purchase or rights to subscribe for such convertible or exchangeable securities, the following provisions shall apply for purposes of determining the number of shares of Additional Stock issued and the consideration paid therefor:
(1)      The aggregate maximum number of shares of Common Stock deliverable upon exercise (assuming the satisfaction of any conditions to exercisability, including without limitation, the passage of time, but without taking into account potential antidilution adjustments) of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subsections 4(d)(i)(C) and (d)(i)(D)), if any, received by this corporation upon the issuance of such options or rights plus the minimum exercise price provided in such options or rights (without taking into account potential antidilution adjustments) for the Common Stock covered thereby.

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(2)      The aggregate maximum number of shares of Common Stock deliverable upon conversion of, or in exchange (assuming the satisfaction of any conditions to convertibility or exchangeability, including, without limitation, the passage of time, but without taking into account potential antidilution adjustments) for, any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration, if any, received by this corporation for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by this corporation (without taking into account potential antidilution adjustments) upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in subsections 4(d)(i)(C) and (d)(i)(D)).
(3)      In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to this corporation upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable securities, the Conversion Price of the Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities.
(4)      Upon the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Conversion Price of the Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities or options or rights related to such securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and convertible or exchangeable securities that remain in effect) actually issued upon the exercise of such options or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities.
(5)      The number of shares of Additional Stock deemed issued and the consideration deemed paid therefor pursuant to subsections 4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either subsection 4(d)(i)(E)(3) or (4).
(ii)      “Additional Stock” shall mean any shares of Common Stock issued (or deemed to have been issued pursuant to subsection 4(d)(i)(E)) by this corporation on or after the Filing Date other than ((A) through (J) below, the “Carve Out Stock”):
(A)      Common Stock issued pursuant to a transaction described in subsection 4(d)(iii) hereof (it being understood that the Conversion Price of the Preferred Stock shall be appropriately adjusted as described in subsection 4(d)(iii));

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(B)      Common Stock issued to employees, directors, consultants and other service providers for the primary purpose of soliciting or retaining their services pursuant to plans or agreements approved by this corporation’s Board of Directors;
(C)      Common Stock issued pursuant to an underwritten public offering in which all of the Preferred Stock is converted to Common Stock;
(D)      Common Stock issued pursuant to the conversion or exercise of convertible or exercisable securities outstanding on the Filing Date, in each case provided such issuance is pursuant to the terms of such convertible or exercisable securities;
(E)      Common Stock issued in connection with a bona fide business acquisition by this corporation, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise, which acquisition is approved by the Board of Directors (including a majority of the Preferred Directors, as defined below);
(F)      Common Stock issued or deemed issued pursuant to subsection 4(d)(i)(E) as a result of a decrease in the Conversion Price of any series of Preferred Stock resulting from the operation of Section 4(d);
(G)      Class B Common Stock issued upon conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series D-1 Preferred Stock, Series E Preferred Stock, Series E-1 Preferred Stock, Series F Preferred Stock, Series F-1 Preferred Stock, Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock, Series G-3 Preferred Stock, Series H Preferred Stock and Series H-1 Preferred Stock;
(H)      Class A Common Stock issued upon conversion of the Class B Common Stock;
(I)      Common Stock issued pursuant to any equipment leasing arrangement or debt financing arrangement, which arrangement is approved by the Board of Directors (including a majority of the Preferred Directors, as defined below) and is primarily for non-equity financing purposes; or
(J)      Common Stock issued to persons or entities with which this corporation has strategic business relationships, provided such issuances are approved by the Board of Directors (including a majority of the Preferred Directors, as defined below) and are primarily for non-equity financing purposes.
(iii)      In the event this corporation should at any time or from time to time after the Filing Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Class B Common Stock or the determination of holders of Class B Common Stock entitled to receive a dividend or other distribution payable in additional shares of Class B Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Class B Common Stock (hereinafter referred to as

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“Common Stock Equivalents”) without payment of any consideration by such holder for the additional shares of Class B Common Stock or the Common Stock Equivalents (including the additional shares of Class B Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price of each series of Preferred Stock shall be appropriately decreased so that the number of shares of Class B Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase of the aggregate of shares of Class B Common Stock outstanding and those issuable with respect to such Common Stock Equivalents.
(iv)      If the number of shares of Class B Common Stock outstanding at any time after the Filing Date is decreased by a combination of the outstanding shares of Class B Common Stock, then, following the record date of such combination, the Conversion Price of each series of Preferred Stock shall be appropriately increased so that the number of shares of Class B Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in outstanding shares.
(e)      Other Distributions . In the event this corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by this corporation or other persons, assets (excluding cash dividends) or options or rights not referred to in subsection 4(d)(iii), then, in each such case for the purpose of this subsection 4(e), the holders of the Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Class B Common Stock of this corporation into which their shares of Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of this corporation entitled to receive such distribution.
(f)      Recapitalizations . If at any time or from time to time there shall be a recapitalization of the Class B Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 4 or in Section 2) provision shall be made so that the holders of the Preferred Stock shall thereafter be entitled to receive upon conversion of the Preferred Stock the number of shares of stock or other securities or property of this corporation or otherwise, to which a holder of Class B Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of the Preferred Stock after the recapitalization to the end that the provisions of this Section 4 (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion of the Preferred Stock) shall be applicable after that event as nearly equivalently as may be practicable.
(g)      No Fractional Shares and Certificate as to Adjustments .
(i)      No fractional shares shall be issued upon the conversion of any share or shares of the Preferred Stock and the aggregate number of shares of Class B Common Stock to be issued to particular stockholders shall be rounded down to the nearest whole share and this corporation shall pay in cash the fair market value of any fractional shares as of the time when entitlement to receive such fractions is determined. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of

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Preferred Stock the holder is at the time converting into Class B Common Stock and the number of shares of Class B Common Stock issuable upon such conversion.
(ii)      Upon the occurrence of each adjustment or readjustment of the Conversion Price of Preferred Stock pursuant to this Section 4, this corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. This corporation shall, upon the written request at any time of any holder of Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Conversion Price for such series of Preferred Stock at the time in effect, and (C) the number of shares of Class B Common Stock and the amount, if any, of other property that at the time would be received upon the conversion of a share of Preferred Stock.
(h)      Notices of Record Date . In the event of any taking by this corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, this corporation shall mail to each holder of Preferred Stock, at least ten (10) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution, and the amount and character of such dividend or distribution.
(i)      Reservation of Stock Issuable Upon Conversion . This corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class B Common Stock, solely for the purpose of effecting the conversion of the shares of the Preferred Stock, such number of its shares of Class B Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Preferred Stock; and if at any time the number of authorized but unissued shares of Class B Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, in addition to such other remedies as shall be available to the holder of such Preferred Stock, this corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Class B Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Restated Certificate of Incorporation.
(j)      Waiver of Adjustment to Conversion Price . Notwithstanding anything herein to the contrary, any downward adjustment of the Conversion Price of (1) the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock may be waived, either prospectively or retroactively and either generally or in a particular instance, by the consent or vote of the holders of a majority of the voting power of the outstanding shares of such series of Preferred Stock, (2) the Series D Preferred Stock or Series D-1 Preferred Stock may be waived, either prospectively or retroactively and either generally or in a particular instance, by the consent or vote of the holders of a majority of the voting power of the outstanding shares of the Series D Preferred Stock and Series D-1 Preferred Stock (voting together as a single class and on an as converted basis), (3) the Series E Preferred Stock and Series E-1 Preferred Stock may be waived, either prospectively or retroactively and either generally or in a particular instance, by the consent or vote

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of the holders of a majority of the voting power of the outstanding shares of the Series E Preferred Stock and Series E-1 Preferred Stock (voting together as a single class and on an as converted basis), (4) the Series F Preferred Stock or Series F-1 Preferred Stock may be waived, either prospectively or retroactively and either generally or in a particular instance, by the consent or vote of the holders of at least seventy-eight percent (78%) of the voting power of the outstanding shares of the Series F Preferred Stock and Series F-1 Preferred Stock (voting together as a single class and on an as converted basis), (5) the Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock or Series G-3 Preferred Stock may be waived, either prospectively or retroactively and either generally or in a particular instance, by the consent or vote of the holders of a majority of the voting power of the outstanding shares of the Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock and Series G-3 Preferred Stock (voting together as a single class and on an as-converted basis), and (6) the Series H Preferred Stock or Series H-1 Preferred Stock may be waived, either prospectively or retroactively and either generally or in a particular instance, by the consent or vote of the holders of a majority of the voting power of the outstanding shares of the Series H Preferred Stock and Series H-1 Preferred Stock (voting together as a single class and on an as-converted basis). Any such waiver shall bind all future holders of shares of such series of Preferred Stock.
5.      Voting Rights .
(a)      General Voting Rights . Except for the election of directors in which the voting rights, if any, of the Common Stock and Preferred Stock, including each designated series of Preferred Stock, are described in subsection 5(b) below, the holder of each share of Preferred Stock shall have the right to ten votes for each share of Class B Common Stock into which such Preferred Stock could then be converted, and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Class B Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the Bylaws of this corporation, and except as provided by law or in subsection 5(b) below with respect to the election of directors by the separate class vote of the holders of Common Stock, shall be entitled to vote, together with holders of Class B Common Stock, with respect to any question upon which holders of Class B Common Stock have the right to vote. Fractional votes shall not, however, be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).
(b)      Voting for the Election of Directors . As long as a majority of the shares of Series A Preferred Stock originally issued remain outstanding (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like), the holders of such shares of Series A Preferred Stock shall be entitled to elect one director of this corporation (the “Series A Director”) at any election of directors. As long as a majority of the shares of Series B Preferred Stock originally issued remain outstanding (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like), the holders of such shares of Series B Preferred Stock shall be entitled to elect one director of this corporation (the “Series B Director”) at any election of directors. As long as a majority of the shares of Series C Preferred

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Stock originally issued remain outstanding (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like), the holders of such shares of Series C Preferred Stock shall be entitled to elect one director of this corporation (the “Series C Director,” and together with the Series A Director and Series B Director, the “Preferred Directors”) at any election of directors. The holders of outstanding Common Stock shall be entitled to elect one director of this corporation at any election of directors (voting together as a single class and not as separate series). The holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series D-1 Preferred Stock, Series E Preferred Stock, Series E-1 Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series G-2 Preferred Stock, Series G-3 Preferred Stock, Series H Preferred Stock and Common Stock (voting together as a single class and not as separate series, and on an as-converted basis) shall be entitled to elect any remaining directors of this corporation.
6.      Protective Provisions .
(a)      Preferred Stock Protective Provisions . So long as at least 90,000,000 shares of Preferred Stock remain outstanding (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like), this corporation shall not (by amendment, merger, consolidation or otherwise) without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least sixty percent (60%) of the voting power of the then outstanding shares of Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis):
(i)      consummate a Liquidation Event;
(ii)      amend this corporation’s Restated Certificate of Incorporation or Bylaws;
(iii)      increase or decrease the total number of authorized shares of Common Stock or Preferred Stock or designated shares of any series of Preferred Stock;
(iv)      authorize or issue, or obligate itself to issue, any equity security (including any other security convertible into or exercisable for any such equity security ) having a preference over, or being on a parity with, any series of Preferred Stock with respect to dividends, liquidation or redemption, other than the issuance of any authorized but unissued shares of Series H Preferred Stock and Series H-1 Preferred Stock designated in this Restated Certificate of Incorporation (including any security convertible into or exercisable for such shares of Preferred Stock);
(v)      redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any share or shares of Preferred Stock or Common Stock; provided, however, that this restriction shall not apply to the repurchase of shares of Common Stock from employees, officers, directors, consultants or other persons performing services for this corporation or any subsidiary pursuant to agreements under which this corporation has the option

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to repurchase such shares upon the occurrence of certain events, such as the termination of employment or service, or pursuant to a right of first refusal; or
(vi)      pay or declare any dividend on any shares of capital stock of this corporation other than dividends payable on the Common Stock solely in the form of additional shares of Common Stock.
(b)      Series D Protective Provisions . So long as a majority of the Series D Preferred Stock originally issued remain outstanding (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like), this corporation shall not (by amendment, merger, consolidation or otherwise) without first obtaining the approval (by vote or written consent, as provided by law) of the holders of a majority of the voting power of the then outstanding shares of Series D Preferred Stock (voting as a separate series):
(i)      amend this corporation’s Restated Certificate of Incorporation or Bylaws so as to adversely alter or change the powers, preferences or special rights of the shares of Series D Preferred Stock;
(ii)      increase or decrease the total number of authorized shares of Series D Preferred Stock; or
(iii)      amend the provisions of this Section 6(b) of this Article IV(B).
(c)      Series E and Series E-1 Protective Provisions . So long as at least 16,580,000 shares of Series E Preferred Stock and/or Series E-1 Preferred Stock remain outstanding (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like), this corporation shall not (by amendment, merger, consolidation or otherwise) without first obtaining the approval (by vote or written consent, as provided by law) of the holders of a majority of the voting power of the then outstanding shares of Series E Preferred Stock and Series E-1 Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis):
(i)      amend this corporation’s Restated Certificate of Incorporation or Bylaws so as to adversely alter or change the powers, preferences or special rights of the shares of Series E Preferred Stock or Series E-1 Preferred Stock;
(ii)      increase or decrease the total number of authorized shares of Series E Preferred Stock or Series E-1 Preferred Stock;
(iii)      amend the provisions of this Section 6(c) of this Article IV(B).
(d)      Series F and Series F-1 Protective Provisions . So long as at least 14,000,000 shares of Series F Preferred Stock and/or Series F-1 Preferred Stock remain outstanding (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like), this corporation shall not (by amendment, merger, consolidation or otherwise) without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at

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least seventy-eight percent (78%) of the voting power of the then outstanding shares of Series F Preferred Stock and Series F-1 Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis):
(i)      amend this corporation’s Restated Certificate of Incorporation or Bylaws so as to adversely alter or change the powers, preferences or special rights of the shares of Series F Preferred Stock or Series F-1 Preferred Stock;
(ii)      increase or decrease the total number of authorized shares of Series F Preferred Stock or Series F-1 Preferred Stock; or
(iii)      amend the provisions of this Section 6(d) of this Article IV(B).
(e)      Series A, Series B, Series C, Series D, Series D-1, Series E, Series E-1, Series F Preferred Stock, Series G Preferred Stock, Series G-2 Preferred Stock, Series G-3 Preferred Stock and Series H Preferred Stock Protective Provisions . So long as at least 90,000,000 shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series D-1 Preferred Stock, Series E Preferred Stock, Series E-1 Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series G-2 Preferred Stock, Series G-3 Preferred Stock and/or Series H Preferred Stock remain outstanding (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like), this corporation shall not (by amendment, merger, consolidation or otherwise) without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least sixty percent (60%) of the voting power of the then outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series D-1 Preferred Stock, Series E Preferred Stock, Series E-1 Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series G-2 Preferred Stock, Series G-3 Preferred Stock and Series H Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis):
(i)      change the authorized number of directors of this corporation to a number greater than ten (10) directors.
(f)      Series G, Series G-1, Series G-2 and Series G-3 Protective Provisions . So long as at least 13,500,000 shares of Series G Preferred Stock, Series G-1 Preferred Stock. Series G-2 Preferred Stock and/or Series G-3 Preferred Stock remain outstanding (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like), this corporation shall not (by amendment, merger, consolidation or otherwise) without first obtaining the approval (by vote or written consent, as provided by law) of the holders of a majority of the voting power of the then outstanding shares of Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock and Series G-3 Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis):
(i)      amend this corporation’s Restated Certificate of Incorporation or Bylaws so as to adversely alter or change the powers, preferences or special rights of the shares of Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock and/or Series G-3 Preferred Stock;

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(ii)      increase or decrease the total number of authorized shares of Series G Preferred Stock, Series G-1 Preferred Stock, Series G-2 Preferred Stock or Series G-3 Preferred Stock;
(iii)      issue any of the 4,568,550 shares of Series D Preferred Stock or any of the 4,185,501 shares of Series E Preferred Stock that are authorized but not outstanding as of the date of the first issuance of Series G-3 Preferred Stock, whether or not such shares are issued and held in treasury as of such date (in each case, as may be adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like);
(iv)      within 12 months of October 13, 2017, issue any Additional Stock without consideration or for a consideration per share less than the Original Issue Price for the Series G Preferred Stock, except for the issuance of Carve Out Stock;
(v)      within 12 months of October 13, 2017, set or approve any valuation of this corporation or its capital stock other than pursuant to an independent third-party valuation; provided, however, that this clause (iv) shall not restrict or limit this corporation’s ability to (A) authorize, issue or sell any equity security or (B) consummate a Liquidation Event; or
(vi)      amend the provisions of this Section 6(f) of this Article IV(B).
(g)      Series H and Series H-1 Protective Provisions . So long as at least 8,800,000 shares of the Series H Preferred Stock and Series H-1 Preferred Stock originally issued remain outstanding (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like), this corporation shall not (by amendment, merger, consolidation or otherwise) without first obtaining the approval (by vote or written consent, as provided by law) of the holders of a majority of the voting power of the then outstanding shares of Series H Preferred Stock and Series H-1 Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis):
(i)      amend this corporation’s Restated Certificate of Incorporation or Bylaws so as to adversely alter or change the powers, preferences or special rights of the shares of Series H Preferred Stock and/or Series H-1 Preferred Stock;
(ii)      increase or decrease the total number of authorized shares of Series H Preferred Stock and/or Series H-1 Preferred Stock;
(iii)      issue any of the 4,568,550 shares of Series D Preferred Stock or any of the 4,185,501 shares of Series E Preferred Stock that are authorized but not outstanding as of the date of the first issuance of Series H Preferred Stock, whether or not such shares are issued and held in treasury as of such date (in each case, as may be adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like);
(iv)      issue more than 35,888,717 shares (as may be adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like) of Series H Preferred Stock and Series H-1 Preferred Stock, in the aggregate; or

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(v)      amend the provisions of this Section 6(g) of this Article IV(B).
7.      Status of Converted Stock . In the event any shares of Preferred Stock shall be converted pursuant to Section 4 hereof, the shares so converted shall be cancelled and shall not be issuable by this corporation. The Restated Certificate of Incorporation of this corporation shall be appropriately amended to effect the corresponding reduction in this corporation’s authorized capital stock.
8.      Notices . Any notice required by the provisions of this Article IV(B) to be given to the holders of shares of Preferred Stock shall be deemed given (i) if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his, her or its address appearing on the books of this corporation, (ii) if such notice is provided by electronic transmission in a manner permitted by Section 232 of the General Corporation Law, or (iii) if such notice is provided in another manner then permitted by the General Corporation Law.
C.      Common Stock . The rights, preferences, privileges and restrictions granted to and imposed on the Common Stock are as set forth below in this Article IV(C).
1.      Dividend Rights . Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends, the holders of the Class A Common Stock and Class B Common Stock shall be entitled to receive, on a pari passu basis, when, as and if declared by the Board of Directors, out of any assets of this corporation legally available therefor, any dividends as may be declared from time to time by the Board of Directors; provided, however, that in the event that such dividends are paid in the form of shares of Common Stock or rights to acquire Common Stock, the holders of shares of Class A Common Stock shall receive shares of Class A Common Stock or rights to acquire shares of Class A Common Stock, as the case may be, and the holders of shares of Class B Common Stock shall receive shares of Class B Common Stock or rights to acquire shares of Class B Common Stock, as the case may be.
2.      Liquidation Rights . Upon the liquidation, dissolution or winding up of this corporation, the assets of this corporation shall be distributed as provided in Section 2 of Article IV(B) hereof.
3.      Redemption . The Common Stock is not redeemable at the option of the holder.
4.      Voting Rights . The holder of each share of Class A Common Stock shall have the right to one (1) vote for each such share and the holder of each share of Class B Common Stock shall have the right to ten (10) votes for each such share. Each holder of shares of Common Stock shall be entitled to notice of any stockholders’ meeting in accordance with the Bylaws of this corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of this corporation, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.

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5. Subdivision or Combinations . If this corporation in any manner subdivides or combines the outstanding shares of one class of Common Stock, then the outstanding shares of the other class of Common Stock shall be subdivided or combined in the same manner.
6.      Mergers, Consolidation or Other Combination Transactions . In the event that this corporation shall enter into any consolidation, merger, combination or other transaction or series of related transactions in which shares of Common Stock are exchanged for or converted into other stock or securities, or the right to receive cash or any other property, then, and in such event, the shares of Class A Common Stock and Class B Common Stock shall be entitled to be exchanged for or converted into the same kind and amount of stock, securities, cash or any other property, as the case may be, into which or for which each share of the other class of Common Stock is exchanged or converted; provided, however, that if the stock or securities of the resulting entity issued upon such exchange or conversion of the shares of Common Stock outstanding immediately prior to such consolidation, merger, combination or other transaction would represent a majority of the voting power of such resulting entity (without giving effect to any differences in the voting rights of the stock or securities of the resulting entity to be received by the holders of shares of Class A Common Stock and the holders of Class B Common Stock), then the holders of shares of Class A Common Stock and the holders of shares of Class B Common Stock shall be entitled to receive stock or securities of the resulting entity issuable upon such exchange or conversion that differ with respect to voting rights in a similar manner to which the shares of Class A Common Stock and Class B Common Stock differ under Section 4 of Article IV(C).
7.      Equal Status . Except as expressly provided in this Article IV(C), Class A Common Stock and Class B Common Stock shall have the same rights and privileges and rank equally, share ratably and be identical in all respects as to all matters.
8.      Conversion .
(a)      Certain Definitions . As used in this Section 8, the following terms shall have the following meanings:
(i)      “Affiliate” means with respect to any specified person, any other person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified person, including, without limitation, any general partner, managing member, officer, director or manager of such person and any venture capital, private equity, investment advisor or other investment fund now or hereafter existing that is controlled by one or more general partners or managing members of, or is under common investment management (or shares the same management, advisory company or investment advisor) with, such person.
(ii)      “Class B Stockholder” means (i) the registered holder of a share of Class B Common Stock at the Filing Date and (ii) the registered holder of any shares of Class B Common Stock that are originally issued by this corporation after the Filing Date.
(iii)      “Incapacity” shall mean that such holder is incapable of managing his or her financial affairs under the criteria set forth in the applicable probate code that can be expected to result in death or which has lasted or can be expected to last for a continuous

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period of not less than six (6) months as determined by a licensed medical practitioner. In the event of a dispute regarding whether a Class B Stockholder has suffered an Incapacity, no Incapacity of such holder will be deemed to have occurred unless and until an affirmative ruling regarding such Incapacity has been made by a court of competent jurisdiction.
(iv)      “IPO” shall mean the closing of this corporation’s sale of its Common Stock in a firm commitment underwritten public offering pursuant to a registration statement filed with the Securities and Exchange Commission.
(v)      “Transfer” shall mean, with respect to a share of Class B Common Stock, any sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of such share or any legal or beneficial interest in such share, whether or not for value and whether voluntary or involuntary or by operation of law. A “Transfer” shall also include, without limitation, (i) a transfer of a share of Class B Common Stock to a broker or other nominee (regardless of whether or not there is a corresponding change in beneficial ownership) or (ii) the transfer of, or entering into a binding agreement with respect to, Voting Control over a share of Class B Common Stock by proxy or otherwise; provided, however, that the following shall not be considered a “Transfer”: (a) the grant of a proxy to officers or directors of this corporation at the request of the Board of Directors of this corporation in connection with actions to be taken at an annual or special meeting of stockholders; (b) the pledge of shares of Class B Common Stock by a Class B Stockholder that creates a mere security interest in such shares pursuant to a bona fide loan or indebtedness transaction so long as the Class B Stockholder continues to exercise Voting Control over such pledged shares; provided, however, that a foreclosure on such shares of Class B Common Stock or other similar action by the pledge shall constitute a “Transfer”; or (c) the fact that, as of the Filing Date or at any time after the Filing Date, the spouse of any Class B Stockholder possesses or obtains an interest in such holder’s shares of Class B Common Stock arising solely by reason of the application of the community property laws of any jurisdiction, so long as no other event or circumstance shall exist or have occurred that constitutes a “Transfer” of such shares of Class B Common Stock.
(vi)      “Voting Control” shall mean, with respect to a share of Class B Common Stock, the exclusive power (whether directly or indirectly) to vote or direct the voting of such share of Class B Common Stock by proxy, voting agreement, or otherwise.
(b)      Voluntary Conversion . Each share of Class B Common Stock shall be convertible into one (1) fully paid and nonassessable share of Class A Common Stock at the option of the holder thereof at any time upon written notice to the transfer agent of this corporation.
(c)      Automatic Conversion upon Transfer . Following an IPO, each share of Class B Common Stock shall automatically, without any further action, convert into one (1) fully paid and nonassessable share of Class A Common Stock upon a Transfer of such share; provided, however, that no such automatic conversion shall occur (1) in the case of a transfer by a Class B Stockholder to any of its Affiliates with the prior written approval of the Company or (2) in the case of a Transfer by a Class B Stockholder to any of the persons or entities listed in clauses (i) through (vii) below (each, a “Permitted Transferee”) and from any such Permitted Transferee back to such

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Class B Stockholder and/or any other Permitted Transferee established by or for such Class B Stockholder:
(i)      a family member of such Class B Stockholder, which shall include with respect to any natural person who is a Class B Stockholder, the spouse, domestic partner, parents, grandparents, lineal descendants, siblings and lineal descendants of siblings of such Class B Stockholder; and provided, further , that lineal descendants shall include adopted persons, but only so long as they are adopted while a minor;
(ii)      a trust for the benefit of such Class B Stockholder or persons other than the Class B Stockholder so long as the Class B Stockholder and/or family members of such Class B Stockholder have sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such trust; provided such Transfer does not involve any payment of cash, securities, property or other consideration to the Class B Stockholder (other than as a settlor or beneficiary of such trust) and, provided, further , that in the event such Class B Stockholder and/or family members of such Class B Stockholder no longer have sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such trust, each share of Class B Common Stock then held by such trust shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock;
(iii)      a trust under the terms of which such Class B Stockholder has retained a “qualified interest” within the meaning of §2702(b)(1) of the Internal Revenue Code (or successor provision) and/or a reversionary interest so long as the Class B Stockholder and/or family members of such Class B Stockholder have sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such trust; provided, however, that in the event such Class B Stockholder and/or family members of such Class B Stockholder no longer have sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such trust, each share of Class B Common Stock then held by such trust shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock;
(iv)      an Individual Retirement Account, as defined in Section 408(a) of the Internal Revenue Code (or successor provision), or a pension, profit sharing, stock bonus or other type of plan or trust of which such Class B Stockholder is a participant or beneficiary and which satisfies the requirements for qualification under Section 401 of the Internal Revenue Code; provided that in each case such Class B Stockholder has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held in such account, plan or trust, and provided, further , that in the event the Class B Stockholder no longer has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such account, plan or trust, each share of Class B Common Stock then held by such trust shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock;
(v)      a corporation, partnership or limited liability company in which such Class B Stockholder and/or family members of such Class B Stockholder directly, or indirectly through one or more Permitted Transferees, own shares, partnership interests or

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membership interests, as applicable, with sufficient Voting Control in the corporation, partnership or limited liability company, as applicable, or otherwise have legally enforceable rights, such that the Class B Stockholder and/or family members of such Class B Stockholder retain sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such corporation, partnership or limited liability company; provided, however, that in the event the Class B Stockholder and/or family members of such Class B Stockholder no longer own sufficient shares, partnership interests or membership interests, as applicable, or no longer has sufficient legally enforceable rights to ensure the Class B Stockholder and/or family members of such Class B Stockholder retain sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such corporation, partnership or limited liability company, as applicable, each share of Class B Common Stock then held by such corporation, partnership or limited liability company, as applicable, shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock;
(vi)      any transfer or transfers by a Class B Stockholder to another Class B Stockholder; or
(vii)      an Affiliate of a Class B Stockholder, provided that the person or entity holding sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock being Transferred (the “ Controlling Person ”) retains, directly or indirectly, sole dispositive power and exclusive Voting Control with respect to the shares following such Transfer; provided that in the event the Controlling Person no longer has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock Transferred to such Affiliate, each such share of Class B Common Stock Transferred to such Affiliate shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock unless such transaction is otherwise approved by the Company.
(d)      Automatic Conversion upon Death or Incapacity of Class B Stockholder . Following an IPO, each share of Class B Common Stock held of record by a Class B Stockholder who is a natural person, or by such Class B Stockholder’s Permitted Transferees, shall automatically, without any further action, convert into one (1) fully paid and nonassessable share of Class A Common Stock upon the death or Incapacity of such Class B Stockholder.
(e)      Automatic Conversion of all Outstanding Class B Common Stock . Each share of Class B Common Stock shall automatically, without any further action, convert into one (1) fully paid and nonassessable share of Class A Common Stock upon the date specified by affirmative vote of the holders of at least two thirds (2/3rds) of the outstanding shares of Class B Common Stock, voting as a single class.
(f)      Final Conversion of Class B Common Stock . On the Final Conversion Date (as defined below) each one (1) outstanding share of Class B Common Stock shall automatically, without any further action, convert into one (1) share of Class A Common Stock. Following such conversion, the reissuance of all shares of Class B Common Stock shall be prohibited, and such shares shall be retired and cancelled in accordance with Section 243 of the General Corporation Law and the filing by the Secretary of State of the State of Delaware required thereby, and upon such retirement and cancellation, all references to Class B Common Stock in this

24


Restated Certificate of Incorporation shall be eliminated. “Final Conversion Date” means 5:00 p.m. in New York City, New York on the first day falling on or after the seventh (7th) year anniversary of the IPO on which the securities exchange on which this corporation’s equity securities are then principally listed or traded is open for trading.
(g)      Effect of Conversion . In the event of a conversion of shares of Class B Common Stock to shares of Class A Common Stock pursuant to this subsection 8, such conversion shall be deemed to have been made at the time that this corporation’s transfer agent receives the written notice required, the time that the Transfer of such shares occurred, the death or Incapacity of the Class B Stockholder or the Final Conversion Date, as applicable. Upon any conversion of Class B Common Stock to Class A Common Stock, all rights of the holder of such shares of Class B Common Stock shall cease and the person or persons in whose names or names the certificate or certificates representing the shares of Class B Common Stock are to be issued, if any, shall be treated for all purposes as having become the record holder or holders of such number of shares of Class A Common Stock into which such Class B Common Stock were convertible. Shares of Class B Common Stock that are converted into shares of Class A Common Stock as provided in this subsection 8 shall be retired and shall not be reissued.
(h)      Reservation of Stock . This corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of effecting the conversion of the shares of Class B Common Stock, such number of its shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Class B Common Stock into shares of Class A Common Stock.
9.      Adjustment in Authorized Class A Common Stock . The number of authorized shares of Class A Common Stock may be increased or decreased (but not below the number of shares of Class A Common Stock then outstanding) by an affirmative vote of the holders of a majority of the voting power of this corporation, irrespective of the provisions of Section 242(b)(2) of the Delaware General Corporation Law.
10.      Adjustment in Authorized Class B Common Stock . The number of authorized shares of Class B Common Stock may be increased or decreased (but not below the number of shares of Class B Common Stock then outstanding) by an affirmative vote of the holders of a majority of the voting power of this corporation, irrespective of the provisions of Section 242(b)(2) of the Delaware General Corporation Law.
11.      Administration . This corporation may, from time to time, establish such policies and procedures relating to the conversion of the Class B Common Stock to Class A Common Stock and the general administration of this dual class Common Stock structure, including the issuance of stock certificates with respect thereto, as it may deem necessary or advisable, and may request that holders of shares of Class B Common Stock furnish affidavits or other proof to this corporation as it deems necessary to verify the ownership of Class B Common Stock and to confirm that a conversion to Class B Common Stock has not occurred.

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ARTICLE V
Except as otherwise provided in this Restated Certificate of Incorporation, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of this corporation.
ARTICLE VI
Subject to Section 6(a) of Article IV, the number of directors of this corporation shall be determined in the manner set forth in the Bylaws of this corporation.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws of this corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of this corporation may provide. The books of this corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of this corporation.
ARTICLE IX
A director of this corporation shall not be personally liable to this corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to this corporation or its stockholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. If the General Corporation Law is amended after approval by the stockholders of this Article IX to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of this corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended.
This corporation renounces, to the fullest extent permitted by law, any interest or expectancy of this corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of (i) any director of this corporation who is not an employee of this corporation or any of its subsidiaries, or (ii) any holder of Preferred Stock or any partner, member, director, stockholder, employee or agent of any such holder, other than someone who is an employee of this corporation or any of its subsidiaries (collectively, “Covered Persons”), unless such matter, transaction or interest is presented to, or

26


acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of this corporation.
Any amendment, repeal or modification of the foregoing provisions of this Article IX by the stockholders of this corporation shall not adversely affect any right or protection of a director of this corporation existing at the time of, or increase the liability of any director of this corporation with respect to any acts or omissions of such director occurring prior to, such amendment, repeal or modification.
ARTICLE X
This corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
ARTICLE XI
To the fullest extent permitted by applicable law, this corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers, employees and agents of this corporation (and any other persons to which General Corporation Law permits this corporation to provide indemnification) through Bylaw provisions, agreements with such persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law, subject only to limits created by applicable General Corporation Law (statutory or non-statutory), with respect to actions for breach of duty to this corporation, its stockholders, and others.
Any amendment, repeal or modification of the foregoing provisions of this Article XI shall not adversely affect any right or protection of a director, officer, employee, agent or other person existing at the time of, or increase the liability of any such person with respect to any acts or omissions of such person occurring prior to, such amendment, repeal or modification.
ARTICLE XII
In connection with repurchases by this corporation of its Common Stock from employees, officers, directors, advisors, consultants or other persons performing services for this corporation or any subsidiary pursuant to agreements under which this corporation has the option to repurchase such shares at cost upon the occurrence of certain events, such as the termination of employment, or any other repurchase or redemption of Common Stock or Preferred Stock approved by the holders of at least sixty percent (60%) of the voting power of the shares of Preferred Stock then outstanding (voting together as a single class and not as separate series, and on an as-converted basis), Section 500 of the California Corporations Code shall not apply in all or in part with respect to such repurchases. In the case of any such repurchases, distributions by this corporation may be made without regard to the “preferential dividends arrears amount” or any “preferential rights amount,” as such terms are defined in Section 500(b) of the California Corporations Code.
* * *

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THIRD : The foregoing amendment and restatement was approved by the holders of the requisite number of shares of said corporation in accordance with Section 228 of the General Corporation Law.
FOURTH : That said Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation’s Restated Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.


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IN WITNESS WHEREOF , this Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 13 th day of August, 2018.
  /s/ Daniel Stewart Butterfield
Daniel Stewart Butterfield, President and CEO


Exhibit 3.3












BYLAWS OF
SLACK TECHNOLOGIES, INC.
(A DELAWARE CORPORATION)





TABLE OF CONTENTS
 
 
Page
ARTICLE I OFFICES
1
1.1

Registered Office
1
1.2

Offices
1
ARTICLE II MEETINGS OF STOCKHOLDERS
1
2.1

Location
1
2.2

Timing
1
2.3

Notice of Meeting
1
2.4

Stockholders’ Records
1
2.5

Special Meetings
2
2.6

Notice of Meeting
2
2.7

Business Transacted at Special Meeting
2
2.8

Quorum; Meeting Adjournment; Presence by Remote Means
2
2.9

Voting Thresholds
3
2.10

Number of Votes Per Share
3
2.11

Action by Written Consent of Stockholders; Electronic Consent; Notice of Action
3
ARTICLE III DIRECTORS
4
3.1

Authorized Directors
4
3.2

Vacancies
4
3.3

Board Authority
5
3.4

Location of Meetings
5
3.5

First Meeting
5
3.6

Regular Meetings
5
3.7

Special Meetings
5
3.8

Quorum
6
3.9

Action Without a Meeting
6
3.10

Telephonic Meetings
6
3.11

Committees
6
3.12

Minutes of Meetings
6
3.13

Compensation of Directors
7
3.14

Removal of Directors
7
ARTICLE IV NOTICES
7
4.1

Notice
7
4.2

Waiver of Notice
7
4.3

Electronic Notice
7
ARTICLE V OFFICERS
8
5.1

Required and Permitted Officers
8
5.2

Appointment of Required Officers
8

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5.3

Appointment of Permitted Officers
8
5.4

Officer Compensation
8
5.5

Term of Office; Vacancies
8
5.6

Chairman Presides
8
5.7

Absence of Chairman
9
5.8

Powers of President
9
5.9

President’s Signature Authority
9
5.10

Absence of President
9
5.11

Duties of Secretary
9
5.12

Duties of Assistant Secretary
9
5.13

Duties of Treasurer
10
5.14

Disbursements and Financial Reports
10
5.15

Treasurer’s Bond
10
5.16

Duties of Assistant Treasurer
10
ARTICLE VI CERTIFICATE OF STOCK
10
6.1

Stock Certificates
10
6.2

Facsimile Signatures
11
6.3

Lost Certificates
11
6.4

Transfer of Stock
11
6.5

Fixing a Record Date
11
6.6

Registered Stockholders
12
ARTICLE VII GENERAL PROVISIONS
12
7.1

Dividends
12
7.2

Reserve for Dividends
12
7.3

Checks
12
7.4

Fiscal Year
12
7.5

Corporate Seal
12
7.6

Indemnification
12
7.7

Conflicts with Certificate of Incorporation
14
ARTICLE VIII AMENDMENTS
14
ARTICLE IX LOANS TO OFFICERS
14
ARTICLE X RECORDS AND REPORTS
14

ii


BYLAWS
OF
SLACK TECHNOLOGIES, INC.

ARTICLE I
OFFICES
1.1      Registered Office . The registered office shall be in the City of Dover, County of Kent, State of Delaware.
1.2      Offices . The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require.

ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1      Location . All meetings of the stockholders for the election of directors shall be held in the City of San Francisco, State of California, at such place as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting; provided, however, that the Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211 of the Delaware General Corporations Law (“ DGCL ”). Meetings of stockholders for any other purpose may be held at such time and place, if any, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof, or a waiver by electronic transmission by the person entitled to notice.
2.2      Timing . Annual meetings of stockholders, commencing with the year 2009, shall be held at such date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting.
2.3      Notice of Meeting . Written notice of any stockholder meeting stating the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, shall be given to each stockholder entitled to vote at such meeting not fewer than ten (10) nor more than sixty (60) days before the date of the meeting.
2.4      Stockholders’ Records . The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address (but not the electronic address or other electronic contact information) of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a



period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.
2.5      Special Meetings . Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning at least fifty percent (50%) in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.
2.6      Notice of Meeting . Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not fewer than ten (10) nor more than sixty (60) days before the date of the meeting, to each stockholder entitled to vote at such meeting. The means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting shall also be provided in the notice.
2.7      Business Transacted at Special Meeting . Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
2.8      Quorum; Meeting Adjournment; Presence by Remote Means .
(a)      Quorum; Meeting Adjournment . The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted that might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
(b)      Presence by Remote Means . If authorized by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as the Board of Directors may

2


adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication:
(1)      participate in a meeting of stockholders; and
(2)      be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation.
2.9      Voting Thresholds . When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question.
2.10      Number of Votes Per Share . Unless otherwise provided in the certificate of incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote by such stockholder or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period.
2.11      Action by Written Consent of Stockholders; Electronic Consent; Notice of Action .
(a)      Action by Written Consent of Stockholders. Unless otherwise provided by the certificate of incorporation, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing setting forth the action so taken, is signed in a manner permitted by law by the holders of outstanding stock having not less than the number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Written stockholder consents shall bear the date of signature of each stockholder who signs the consent in the manner permitted by law and shall be delivered to the corporation as provided in subsection (b) below. No written consent shall be effective to take the action set forth therein unless, within sixty (60) days of the earliest dated consent delivered to the corporation in the manner provided above, written consents signed by a sufficient number of stockholders to take the action set forth therein are delivered to the corporation in the manner provided above.

3


(b)      Electronic Consent . A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or a person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this section, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the corporation can determine (1) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder or proxyholder and (2) the date on which such stockholder or proxyholder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by telegram, cablegram or other electronic transmission may be otherwise delivered to the principal place of business of the corporation or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the Board of Directors of the corporation.
(c)      Notice of Action . Prompt notice of any action taken pursuant to this Section 2.11 shall be provided to the stockholders in accordance with Section 228(e) of the DGCL.

ARTICLE III
DIRECTORS
3.1      Authorized Directors . The number of directors that shall constitute the whole Board of Directors shall be determined by resolution of the Board of Directors or by the stockholders at the annual meeting of the stockholders, except as provided in Section 3.2 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders.
3.2      Vacancies . Unless otherwise provided in the corporation’s certificate of incorporation, as it may be amended, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole Board of Directors (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent (10%) of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an

4



election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office.
3.3      Board Authority . The business of the corporation shall be managed by or under the direction of its Board of Directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these bylaws directed or required to be exercised or done by the stockholders.
3.4      Location of Meetings . The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware.
3.5      First Meeting . The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order to legally constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors.
3.6      Regular Meetings . Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors.
3.7      Special Meetings . Special meetings of the Board of Directors may be called by the president upon notice to each director; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two (2) directors unless the Board of Directors consists of only one director, in which case special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director. Notice of any special meeting shall be given to each director at his business or residence in writing, or by telegram, facsimile transmission, telephone communication or electronic transmission (provided, with respect to electronic transmission, that the director has consented to receive the form of transmission at the address to which it is directed). If mailed, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least five (5) days before such meeting. If by telegram, such notice shall be deemed adequately delivered when the telegram is delivered to the telegraph company at least twenty-four (24) hours before such meeting. If by facsimile transmission or other electronic transmission, such notice shall be transmitted at least twenty-four (24) hours before such meeting. If by telephone, the notice shall be given at least twelve (12) hours prior to the time set for the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting, except for amendments to these Bylaws as provided under Section 8.1 of Article VIII hereof. A meeting may be held at any time without notice if all the directors are present (except as otherwise provided by law) or if those not present waive notice of the meeting in writing, either before or after such meeting.

5



3.8      Quorum . At all meetings of the Board of Directors a majority of the directors shall constitute a quorum for the transaction of business and any act of a majority of the directors present at any meeting at which there is a quorum shall be an act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum is not present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
3.9      Action Without a Meeting . Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing, writings, electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee.
3.10      Telephonic Meetings . Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors or any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or any committee, by means of conference telephone or other means of communication by which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at the meeting.
3.11      Committees . The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it, but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval or (ii) adopting, amending or repealing any provision of these bylaws.
3.12      Minutes of Meetings . Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

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3.13      Compensation of Directors . Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
3.14      Removal of Directors . Unless otherwise provided by the certificate of incorporation or these bylaws, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors.

ARTICLE IV
NOTICES
4.1      Notice . Unless otherwise provided in these bylaws, whenever, under the provisions of the statutes or of the certificate of incorporation or of these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram.
4.2      Waiver of Notice . Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
4.3      Electronic Notice .
(a)      Electronic Transmission . Without limiting the manner by which notice otherwise may be given effectively to stockholders and directors, any notice to stockholders or directors given by the corporation under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder or director to whom the notice is given. Any such consent shall be revocable by the stockholder or director by written notice to the corporation. Any such consent shall be deemed revoked if (1) the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent and (2) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
(b)      Effective Date of Notice . Notice given pursuant to subsection (a) of this section shall be deemed given: (1) if by facsimile telecommunication, when directed to a

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number at which the stockholder or director has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the stockholder or director has consented to receive notice; (3) if by a posting on an electronic network together with separate notice to the stockholder or director of such specific posting, upon the later of (i) such posting and (ii) the giving of such separate notice; and (4) if by any other form of electronic transmission, when directed to the stockholder or director. An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
(c)      Form of Electronic Transmission . For purposes of these bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

ARTICLE V
OFFICERS
5.1      Required and Permitted Officers . The officers of the corporation shall be chosen by the Board of Directors and shall be a president, treasurer and a secretary. The Board of Directors may elect from among its members a Chairman of the Board and a Vice-Chairman of the Board. The Board of Directors may also choose one or more vice‑presidents, assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these bylaws otherwise provide.
5.2      Appointment of Required Officers . The Board of Directors at its first meeting after each annual meeting of stockholders shall choose a president, a treasurer, and a secretary and may choose vice‑presidents.
5.3      Appointment of Permitted Officers . The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.
5.4      Officer Compensation . The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors.
5.5      Term of Office; Vacancies . The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
5.6      Chairman Presides . The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present. he

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or she shall have and may exercise such powers as are, from time to time, assigned to him by the Board of Directors and as may be provided by law.
5.7      Absence of Chairman . In the absence of the Chairman of the Board, the Vice-Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present. He or she shall have and may exercise such powers as are, from time to time, assigned to him by the Board of Directors and as may be provided by law.
THE PRESIDENT AND VICE‑PRESIDENTS
5.8      Powers of President . The president shall be the chief executive officer of the corporation; in the absence of the Chairman and Vice-Chairman of the Board he or she shall preside at all meetings of the stockholders and the Board of Directors; he or she shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect.
5.9      President’s Signature Authority . The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation.
5.10      Absence of President . In the absence of the president or in the event of his inability or refusal to act, the vice‑president, if any, (or in the event there be more than one vice‑president, the vice‑presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
5.11      Duties of Secretary . The secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He or she shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or president, under whose supervision he or she shall be. He or she shall have custody of the corporate seal of the corporation and he or she, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature.
5.12      Duties of Assistant Secretary . The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or

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in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
5.13      Duties of Treasurer . The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors.
5.14      Disbursements and Financial Reports . He or she shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and the Board of Directors, at its regular meetings or when the Board of Directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation.
5.15      Treasurer’s Bond . If required by the Board of Directors, the treasurer shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.
5.16      Duties of Assistant Treasurer . The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the treasurer or in the event of the treasurer’s inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

ARTICLE VI
CERTIFICATE OF STOCK
6.1      Stock Certificates . Every holder of stock in the corporation shall be entitled to have a certificate, signed by or in the name of the corporation by, the Chairman or Vice-Chairman of the Board of Directors, or the president or a vice‑president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the corporation.
Certificates may be issued for partly paid shares and in such case upon the face or back of the certificates issued to represent any such partly paid shares, the total amount of the consideration to be paid therefor, and the amount paid thereon shall be specified.

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If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
6.2      Facsimile Signatures . Any or all of the signatures on the certificate may be facsimile. In the event that any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, the certificate may be issued by the corporation with the same effect as if such officer, transfer agent or registrar were still acting as such at the date of issue.
6.3      Lost Certificates . The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing such issuance of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
6.4      Transfer of Stock . Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.
6.5      Fixing a Record Date . In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

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6.6      Registered Stockholders . The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, to vote as such owner, to hold liable for calls and assessments a person registered on its books as the owner of shares and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VII
GENERAL PROVISIONS
7.1      Dividends . Dividends upon the capital stock of the corporation, if any, subject to the provisions of the certificate of incorporation, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to the provisions of the certificate of incorporation.
7.2      Reserve for Dividends . Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their sole discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purposes as the directors think conducive to the interests of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.
7.3      Checks . All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.
7.4      Fiscal Year . The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.
7.5      Corporate Seal . The Board of Directors may adopt a corporate seal having inscribed thereon the name of the corporation, the year of its organization and the words “Corporate Seal, Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced.
7.6      Indemnification . The corporation shall, to the fullest extent authorized under the laws of the State of Delaware, as those laws may be amended and supplemented from time to time, indemnify any director made, or threatened to be made, a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of being a director of the corporation or a predecessor corporation or a director or officer of another corporation, if such person served in such position at the request of the corporation; provided, however, that the corporation shall indemnify any such director or officer in connection with a proceeding initiated by such director or officer only if such proceeding was authorized by the Board of Directors of the corporation. The indemnification provided for in this Section 7.6 shall: (i) not be deemed exclusive of any other rights to which those indemnified may be entitled under these bylaws, agreement or vote of stockholders or disinterested directors or otherwise, both as to action in their official

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capacities and as to action in another capacity while holding such office, (ii) continue as to a person who has ceased to be a director, and (iii) inure to the benefit of the heirs, executors and administrators of a person who has ceased to be a director. The corporation’s obligation to provide indemnification under this Section 7.6 shall be offset to the extent of any other source of indemnification or any otherwise applicable insurance coverage under a policy maintained by the corporation or any other person.
Expenses incurred by a director of the corporation in defending a civil or criminal action, suit or proceeding by reason of the fact that he or she is or was a director of the corporation (or was serving at the corporation’s request as a director or officer of another corporation) shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation as authorized by relevant sections of the DGCL. Notwithstanding the foregoing, the corporation shall not be required to advance such expenses to an agent who is a party to an action, suit or proceeding brought by the corporation and approved by a majority of the Board of Directors of the corporation that alleges willful misappropriation of corporate assets by such agent, disclosure of confidential information in violation of such agent’s fiduciary or contractual obligations to the corporation or any other willful and deliberate breach in bad faith of such agent’s duty to the corporation or its stockholders.
The foregoing provisions of this Section 7.6 shall be deemed to be a contract between the corporation and each director who serves in such capacity at any time while this bylaw is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.
The Board of Directors in its sole discretion shall have power on behalf of the corporation to indemnify any person, other than a director, made a party to any action, suit or proceeding by reason of the fact that he or she, his testator or intestate, is or was an officer or employee of the corporation.
To assure indemnification under this Section 7.6 of all directors, officers and employees who are determined by the corporation or otherwise to be or to have been “fiduciaries” of any employee benefit plan of the corporation that may exist from time to time, Section 145 of the DGCL shall, for the purposes of this Section 7.6, be interpreted as follows: an “other enterprise” shall be deemed to include such an employee benefit plan, including without limitation, any plan of the corporation that is governed by the Act of Congress entitled “Employee Retirement Income Security Act of 1974,” as amended from time to time; the corporation shall be deemed to have requested a person to serve the corporation for purposes of Section 145 of the DGCL, as administrator of an employee benefit plan where the performance by such person of his duties to the corporation also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; excise taxes assessed on a person with respect to an employee benefit plan pursuant to such Act of Congress shall be deemed “fines.”
CERTIFICATE OF INCORPORATION GOVERNS

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7.7      Conflicts with Certificate of Incorporation . In the event of any conflict between the provisions of the corporation’s certificate of incorporation and these bylaws, the provisions of the certificate of incorporation shall govern.

ARTICLE VIII
AMENDMENTS
8.1      These bylaws may be altered, amended or repealed, or new bylaws may be adopted by the stockholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the certificate of incorporation at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new bylaws be contained in the notice of such special meeting. If the power to adopt, amend or repeal bylaws is conferred upon the Board of Directors by the certificate of incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal bylaws.

ARTICLE IX
LOANS TO OFFICERS
9.1      The corporation may lend money to, or guarantee any obligation of or otherwise assist any officer or other employee of the corporation or of its subsidiaries, including any officer or employee who is a director of the corporation or its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be with or without interest and may be unsecured or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in these bylaws shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

ARTICLE X
RECORDS AND REPORTS
10.1      The application and requirements of Section 1501 of the California General Corporation Law are hereby expressly waived to the fullest extent permitted thereunder.


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Exhibit 4.1

EXHIBIT411A.JPG
. ZQCERT#|COY|CLS|RGSTRY|ACCT#|TRANSTYPE|RUN#|TRANS# Class A Common Stock Class A Common Stock PO BOX 43004, Providence, RI 02940-3004 ADD 4 ADD 3 ADD 2 ADD 1 DESIGNATION (IF ANY) MR ASAMPLE PAR VALUE $0.0001 Certificate Shares Number **000000****************** ***000000***************** ZQ00000000 ****000000**************** *****000000*************** SLACK TECHNOLOGIES, INC. ******000000************** INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE ** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample SEE REVERSE FOR CERTAIN DEFINITIONS **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David THIS CERTIFIES THAT Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David SampleMR. **** Mr. Alexander SAMPLE David Sample **** Mr. Alexander & David MRS. Sample **** Mr. Alexander SAMPLE David Sample **** Mr. Alexander & David Sample **** CUSIP 83088V 10 2 Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. AlexanderMR. David SampleSAMPLE **** Mr. Alexander David Sample& MRS.**** Mr. Alexander DavidSAMPLE Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Sample **** Mr. Sample **000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares*** is the owner of *000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares**** 000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****0 THIS CERTIFICATE IS TRANSFERABLE IN 00000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****00 0000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000***ZERO HUNDRED THOUSAND000**Shares****000 CITIES DESIGNATED BY THE TRANSFER 000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****0000 00**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****00000 AGENT, AVAILABLE ONLINE AT 0**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000ZERO HUNDRED AND ZERO*****Shares****000000 www.computershare.com **Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000* *Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000** Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**S FULLY-PAID AND NON-ASSESSABLE SHARES OF CLASS A COMMON STOCK OF DTC Number of Shares Insurance Value Holder ID CUSIP/IDENTIFIER Slack Technologies, Inc. (hereinafter called the “Company”), transferable on the books of the Company in Total Transaction 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 Certificate Numbers person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby, are issued and shall be held subject to all of the provisions of the Certificate of Incorporation, as amended, and the Bylaws, as amended, of the Company (copies of which are on file with the Company and with the Transfer Agent), to all of which each holder, by acceptance hereof, assents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. Witness the facsimile seal of the Company and the facsimile signatures of its duly authorized officers. 12345678 123456789012345 Num/No. DATED DD-MMM-YYYY 6 5 4 3 2 1 NOL FACSIMILE SIGNATURE TO COME CH OG COUNTERSIGNED AND REGISTERED: E IE T RPORA S O TE COMPUTERSHARE TRUST COMPANY, N.A. K C , I C N Denom. President TRANSFER AGENT AND REGISTRAR, A C XXXXXXXXXX XXXXXX XX X L . 1,000,000.00 S 6 5 4 3 2 1 February 25, 2009 123456 D Total FACSIMILE SIGNATURE TO COME ELAWARE 7 6 5 4 3 2 1 By Secretary AUTHORIZED SIGNATURE



EXHIBIT412A.JPG

Exhibit 10.1

SLACK TECHNOLOGIES, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (“ Agreement ”) is made as of ________________ by and between Slack Technologies, Inc., a Delaware corporation (the “ Company ”), and ____________ (“ Indemnitee ”).
RECITALS
WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve the Company;
WHEREAS, in order to induce Indemnitee to [provide or continue to provide] services to the Company, the Company wishes to provide for the indemnification of, and advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Certificate of Incorporation (the “ Charter ”) and the Bylaws (the “ Bylaws ”) of the Company require indemnification of the officers and directors of the Company, and Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (the “ DGCL ”);
WHEREAS, the Charter, the Bylaws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the Board of Directors of the Company (the “ Board ”), officers and other persons with respect to indemnification;
WHEREAS, the Board has determined that the increased difficulty in attracting and retaining highly qualified persons such as Indemnitee is detrimental to the best interests of the Company’s stockholders;
WHEREAS, it is reasonable and prudent for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law, regardless of any amendment or revocation of the Charter or the Bylaws, so that they will [serve or continue to serve] the Company free from undue concern that they will not be so indemnified; [and]
WHEREAS, this Agreement is a supplement to and in furtherance of the indemnification provided in the Charter, the Bylaws and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; [and]
[WHEREAS, Indemnitee has certain rights to indemnification and/or insurance provided by [Name of Fund/Sponsor] which Indemnitee and [Name of Fund/Sponsor] intend to be secondary to the primary obligation of the Company to indemnify Indemnitee as provided in this Agreement, with the Company’s acknowledgment and agreement to the foregoing being a material condition to Indemnitee’s willingness to [serve or continue to serve] on the Board.]

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NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:
Section 1.      Services to the Company . Indemnitee agrees to serve as [a director] [an officer] of the Company. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee.
Section 2.     Definitions .
As used in this Agreement:
(a)    “ Change in Control ” shall mean (i) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (ii) a merger, reorganization or consolidation pursuant to which the holders of the Company’s outstanding voting power and outstanding stock immediately prior to such transaction do not own a majority of the outstanding voting power and outstanding stock or other equity interests of the resulting or successor entity (or its ultimate parent, if applicable) immediately upon completion of such transaction, (iii) the sale of all of the stock of the Company to an unrelated person, entity or group thereof acting in concert, or (iv) any other transaction in which the owners of the Company’s outstanding voting power immediately prior to such transaction do not own at least a majority of the outstanding voting power of the Company or any successor entity immediately upon completion of the transaction other than as a result of the acquisition of securities directly from the Company.
(b)    “ Corporate Status ” describes the status of a person as a current or former [director] [officer] of the Company or current or former director, manager, partner, officer, employee, agent or trustee of any other Enterprise which such person is or was serving at the request of the Company. For purposes of this Agreement, references to “serving at the request of the Company” shall include, but not be limited to, any service as a director, officer, employee or agent of the Company or any other entity which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries, including as a deemed fiduciary thereto.
(c)    “ Enforcement Expenses ” shall include all reasonable attorneys’ fees, court costs, transcript costs, fees of experts, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other out-of-pocket disbursements or expenses of the types customarily incurred in connection with an action to enforce indemnification or advancement rights, or an appeal from such action. Expenses, however, shall not include fees, salaries, wages or benefits owed to Indemnitee.
(d)    “ Enterprise ” shall mean any corporation (other than the Company), partnership, joint venture, trust, employee benefit plan, limited liability company, or other legal entity of which Indemnitee is or was serving at the request of the Company as a director, manager,

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partner, officer, employee, agent or trustee, including without limitation, any subsidiary of the Company.
(e)    “ Expenses ” shall include all reasonable attorneys’ fees, court costs, transcript costs, fees of experts, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other out-of-pocket disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding or an appeal resulting from a Proceeding. Expenses, however, shall not include amounts paid in settlement by Indemnitee, the amount of judgments or fines against Indemnitee or fees, salaries, wages or benefits owed to Indemnitee.
(f)    “ Independent Counsel ” means a law firm, or a partner (or, if applicable, member or shareholder) of such a law firm, that is experienced in matters of Delaware corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company, any subsidiary of the Company, any Enterprise or Indemnitee in any matter material to any such party; or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
(g)    The term “ Proceeding ” shall include any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, regulatory or investigative nature, and whether formal or informal, in which Indemnitee was, is or will be involved as a party or otherwise by reason of the fact that Indemnitee is or was [a director] [an officer] of the Company or is or was serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee of any Enterprise or by reason of any action taken by Indemnitee or of any action taken on his or her part while acting as [a director] [an officer] of the Company or while serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee of any Enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement or advancement of expenses can be provided under this Agreement; provided , however , that the term “Proceeding” shall not include any action, suit or arbitration, or part thereof, initiated by Indemnitee to enforce Indemnitee’s rights under this Agreement as provided for in Section 12(a) of this Agreement.
Section 3.     Indemnity in Third-Party Proceedings . The Company shall indemnify Indemnitee to the extent set forth in this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company

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to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified against all Expenses, judgments, fines, penalties, excise taxes, and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful.
Section 4.     Indemnity in Proceedings by or in the Right of the Company . The Company shall indemnify Indemnitee to the extent set forth in this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery (the “ Delaware Court ”) shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification for such expenses as the Delaware Court shall deem proper.
Section 5.     Indemnification for Expenses of a Party Who is Wholly or Partly Successful . Notwithstanding any other provisions of this Agreement and except as provided in Section 7, to the extent that Indemnitee is a party to or a participant in any Proceeding and is successful in such Proceeding or in defense of any claim, issue or matter therein, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or her in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on his or her behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, motion for summary judgment, settlement (with or without court approval), or upon a plea of nolo contendere or its equivalent shall be deemed to be a successful result as to such claim, issue or matter.
Section 6.     Reimbursement for Expenses of a Witness or in Response to a Subpoena . Notwithstanding any other provision of this Agreement, to the extent that Indemnitee, by reason of his or her Corporate Status, (i) is a witness in any Proceeding to which Indemnitee is not a party and is not threatened to be made a party or (ii) receives a subpoena with respect to any Proceeding to which Indemnitee is not a party and is not threatened to be made a party, the Company shall reimburse Indemnitee for all Expenses actually and reasonably incurred by him or her or on his or her behalf in connection therewith.

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Section 7.     Exclusions . Notwithstanding any provision in this Agreement to the contrary, the Company shall not be obligated under this Agreement:
(a)    to indemnify for amounts otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the extent that Indemnitee has otherwise actually received such amounts under any insurance policy, contract, agreement or otherwise[; provided that the foregoing shall not affect the rights of Indemnitee or the Fund Indemnitors (as defined below) as set forth in Section 13(d)]; notwithstanding the foregoing, payment made to Indemnitee pursuant to a personal or independent director liability or similar insurance policy purchased and maintained by Indemnitee at his or her own expense of any amounts otherwise indemnifiable or obligated to be made pursuant to this Agreement shall not reduce the Company’s obligations to Indemnitee pursuant to this Agreement.
(b)    to indemnify for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law;
(c)     to indemnify for any reimbursement of, or payment to, the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company pursuant to any formal policy of the Company adopted by the Board (or a committee thereof), or any other remuneration paid to Indemnitee if it shall be determined by a final judgment or other final adjudication that such remuneration was in violation of law;
(d)    to indemnify with respect to any Proceeding, or part thereof, brought by Indemnitee against the Company, any legal entity which it controls, any director or officer thereof or any third party, unless (i) the Board has consented to the initiation of such Proceeding or part thereof and (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law; provided , however , that this Section 7(d) shall not apply to (A) counterclaims or affirmative defenses asserted by Indemnitee in an action brought against Indemnitee or (B) any action brought by Indemnitee for indemnification or advancement from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company in the suit for which indemnification or advancement is being sought as described in Section 12; or
(e)    to provide any indemnification or advancement of expenses that is prohibited by applicable law (as such law exists at the time payment would otherwise be required pursuant to this Agreement).
Section 8.     Advancement of Expenses . Subject to Section 9(b), the Company shall advance, to the extent not prohibited by law, the Expenses incurred by Indemnitee in connection with any Proceeding, and such advancement shall be made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances (including any invoices received by Indemnitee, which such invoices may be redacted as necessary to avoid the waiver of any privilege accorded by applicable law) from time to time, whether prior to or after final disposition

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of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee’s ability to repay the expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement. Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement which shall constitute an undertaking providing that Indemnitee undertakes to the fullest extent required by law to repay the advance if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. No other form of undertaking shall be required. The right to advances under this paragraph shall in all events continue until final disposition of any Proceeding, including any appeal therein. Nothing in this Section 8 shall limit Indemnitee’s right to advancement pursuant to Section 12(e) of this Agreement.
Section 9.     Procedure for Notification and Defense of Claim .
(a)    Indemnitee agrees to notify promptly the Company in writing of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement; provided, however, that a delay in giving such notice will not deprive Indemnitee of any right to be indemnified under this Agreement unless, and then only to the extent that, the Company did not otherwise learn of the Proceeding and such delay is materially prejudicial to the Company’s ability to defend such Proceeding; and, provided, further, that notice will be deemed to have been given without any action on the part of Indemnitee in the event the Company is a party to the same Proceeding.
(b)    In the event that the Company shall be obligated hereunder to provide indemnification for or make any advancement of Expenses with respect to any Proceeding, the Company shall be entitled to assume the defense of such Proceeding, or any claim, issue or matter therein, with counsel approved by Indemnitee (which approval shall not be unreasonably withheld or delayed) upon the delivery to Indemnitee of written notice of the Company’s election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees or expenses of separate counsel subsequently employed by or on behalf of Indemnitee with respect to the same Proceeding; provided that (i) Indemnitee shall have the right to employ separate counsel in any such Proceeding at Indemnitee’s expense and (ii) if (A) the employment of separate counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of such defense, or (C) the Company shall not continue to retain such counsel to defend such Proceeding, then the fees and expenses actually and reasonably incurred by Indemnitee with respect to his or her separate counsel shall be Expenses hereunder. Indemnitee agrees that any such separate counsel will be a member of any approved list of panel counsel under the Company’s applicable directors’ and officers’ insurance policy, should the applicable policy provide for a panel of approved counsel.
(c)     In the event that the Company does not assume the defense in a Proceeding pursuant to paragraph (b) above, then the Company will be entitled to participate in the Proceeding at its own expense.

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(d)     The Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without its prior written consent (which consent shall not be unreasonably withheld or delayed). The Company shall not, without the prior written consent of Indemnitee (which consent shall not be unreasonably withheld or delayed), enter into any settlement which (i) includes an admission of fault of Indemnitee, any non-monetary remedy imposed on Indemnitee or any monetary damages for which Indemnitee is not wholly and actually indemnified hereunder or (ii) with respect to any Proceeding with respect to which Indemnitee may be or is made a party or may be otherwise entitled to seek indemnification hereunder, does not include the full release of Indemnitee from all liability in respect of such Proceeding.
Section 10.     Procedure Upon Application for Indemnification .
(a)    Upon written request by Indemnitee for indemnification pursuant to Section 9(a), a determination, if such determination is required by applicable law, with respect to Indemnitee’s entitlement to indemnification hereunder shall be made in the specific case by one of the following methods: (x) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Board; or (y) if a Change in Control shall not have occurred: (i) by a majority vote of the disinterested directors, even though less than a quorum; (ii) by a committee of disinterested directors designated by a majority vote of the disinterested directors, even though less than a quorum; or (iii) if there are no disinterested directors or if the disinterested directors so direct, by Independent Counsel in a written opinion to the Board. For purposes hereof, disinterested directors are those members of the Board who are not parties to the action, suit or proceeding in respect of which indemnification is sought. In the case that such determination is made by Independent Counsel, a copy of Independent Counsel’s written opinion shall be delivered to Indemnitee and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within thirty (30) days after such determination. Indemnitee shall cooperate with the Independent Counsel or the Company, as applicable, in making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such counsel or the Company, upon reasonable advance request, any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any out-of-pocket costs or expenses (including reasonable attorneys’ fees and disbursements) actually and reasonably incurred by Indemnitee in so cooperating with the Independent Counsel or the Company shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(b)    If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 10(a), the Independent Counsel shall be selected by the Board if a Change in Control shall not have occurred or, if a Change in Control shall have occurred, by Indemnitee. Indemnitee or the Company, as the case may be, may, within ten (10) days after written notice of such selection, deliver to the Company or Indemnitee, as the case may be, a written objection to such selection; provided , however , that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity

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the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or the Delaware Court has determined that such objection is without merit. If, within twenty (20) days after the later of (i) submission by Indemnitee of a written request for indemnification pursuant to Section 9(a), and (ii) the final disposition of the Proceeding, including any appeal therein, no Independent Counsel shall have been selected without objection, either Indemnitee or the Company may petition the Delaware Court for resolution of any objection which shall have been made by Indemnitee or the Company to the selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate. The person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 10(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 12(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).
Section 11.     Presumptions and Effect of Certain Proceedings .
(a)    To the extent permitted by applicable law, in making a determination with respect to entitlement to indemnification hereunder, it shall be presumed that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 9(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making of any determination contrary to that presumption.
(b)    The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of guilty, nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.
(c)    The knowledge and/or actions, or failure to act, of any director, manager, partner, officer, employee, agent or trustee of the Company, any subsidiary of the Company, or any Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.
Section 12.     Remedies of Indemnitee .
(a)    Subject to Section 12(f), in the event that (i) a determination is made pursuant to Section 10 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 8 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10(a) of this Agreement within sixty (60) days after receipt by the Company of the request for indemnification for which a determination is to be made other than by Independent Counsel,

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(iv) payment of indemnification or reimbursement of expenses is not made pursuant to Section 5 or 6 or the last sentence of Section 10(a) of this Agreement within thirty (30) days after receipt by the Company of a written request therefor (including any invoices received by Indemnitee, which such invoices may be redacted as necessary to avoid the waiver of any privilege accorded by applicable law) or (v) payment of indemnification pursuant to Section 3 or 4 of this Agreement is not made within thirty (30) days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication by the Delaware Court of his or her entitlement to such indemnification or advancement. Alternatively, Indemnitee, at his or her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided , however , that the foregoing time limitation shall not apply in respect of a proceeding brought by Indemnitee to enforce his or her rights under Section 5 of this Agreement. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.
(b)    In the event that a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 12 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 12, the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement, as the case may be.
(c)     If a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.
(d)    The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.
(e)    The Company shall indemnify Indemnitee to the fullest extent permitted by law against any and all Enforcement Expenses and, if requested by Indemnitee, shall (within thirty (30) days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such Enforcement Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advancement from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company in the suit for which indemnification or advancement is being sought. Such written request for advancement shall include invoices received by Indemnitee in connection with such Enforcement Expenses but, in the case of invoices in connection with legal services, any

9


references to legal work performed or to expenditures made that would cause Indemnitee to waive any privilege accorded by applicable law need not be included with the invoice.
(f)    Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding, including any appeal therein.
Section 13.     Non-exclusivity; Survival of Rights; Insurance; [Primacy of Indemnification;] Subrogation .
(a)    The rights of indemnification and to receive advancement as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement than would be afforded currently under the Charter, Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.
(b)    To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, managers, partners, officers, employees, agents or trustees of the Company or of any other Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, manager, partner, officer, employee, agent or trustee under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies.
(c)    In the event of a Change in Control that would cause the Company’s directors and officers insurance polic(ies) to cease providing coverage for acts and events that take place after the Change in Control, the Company shall purchase for all “claims-made” insurance policies then maintained by the Company in providing insurance (directors’ and officers’ liability, fiduciary, employment practices or otherwise) in respect of the individual directors and officers of the Company, for a fixed period of six years thereafter (a “Tail Policy”). Such coverage shall be non-cancellable and shall be placed by the Company’s incumbent insurance broker. Such broker shall place the Tail Policy with the incumbent insurance carriers using the policies that were in place at the time of the Change in Control event (unless the incumbent carriers will not offer such policies, in which case the Tail Policy placed by the

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Company’s insurance broker shall be substantially comparable in scope and amount as the expiring policies, and the insurance carriers for the Tail Policy shall have an AM Best rating that is the same or better than the AM Best ratings of the expiring policies).
(d)    [The Company hereby acknowledges that Indemnitee has certain rights to indemnification, advancement of expenses and/or insurance provided by [Name of Fund/Sponsor] and certain of [its][their] affiliates (collectively, the “ Fund Indemnitors ”). The Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary), (ii) that it shall be required to advance the full amount of expenses incurred by Indemnitee and shall be liable for the full amount of all Expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement and the Charter and/or Bylaws (or any other agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Fund Indemnitors, and (iii) that it irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Fund Indemnitors on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. The Company and Indemnitee agree that the Fund Indemnitors are express third party beneficiaries of the terms of this Section 13(d).]
[(e)][(f)]    [Except as provided in paragraph (d) above,] [I/i]n the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee [(other than against the Fund Indemnitors)], who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
[(f)][(g)]    [Except as provided in paragraph (d) above,] [T/t]he Company’s obligation to provide indemnification or advancement hereunder to Indemnitee who is or was serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement from such other Enterprise.
Section 14.     Duration of Agreement . All agreements and obligations of the Company contained herein shall continue during the period Indemnitee serves as [a director] [an officer] of the Company or current or former director, manager, partner, officer, employee, agent or trustee of any other Enterprise which Indemnitee is or was serving at the request of the Company and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 12(a) hereof) by reason of his or her Corporate Status, whether or not he or she is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification or advancement can be provided under this Agreement. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of

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Indemnitee and his or her heirs, executors and administrators. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement to the fullest extent permitted by law, but in no event to any lesser extent than the Company would be required to perform if no such succession had taken place.
Section 15.     Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.
Section 16.     Enforcement .
(a)    The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to [serve or continue to serve] as [a director] [an officer] of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as [a director] [an officer] of the Company.
(b)    This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided , however , that this Agreement is a supplement to and in furtherance of the Charter, the Bylaws and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.
Section 17.     Modification and Waiver . No supplement, modification or amendment, or waiver of any provision, of this Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver. No supplement, modification or amendment of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee prior to such supplement, modification or amendment.
Section 18.     Notice by Indemnitee . Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to

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indemnification, reimbursement or advancement as provided hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise.
Section 19.     Notices . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (iii) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed or (iv) sent by facsimile transmission, with receipt of oral confirmation that such transmission has been received:
(a)    If to Indemnitee, at such address as Indemnitee shall provide to the Company.
(b)    If to the Company to:
Slack Technologies, Inc.
500 Howard Street
San Francisco, CA 94105
Attention: General Counsel
or to any other address as may have been furnished to Indemnitee by the Company.
Section 20.     Contribution . To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any Proceeding in such proportion as is deemed fair and reasonable in light of all of the circumstances in order to reflect (i) the relative benefits received by the Company and Indemnitee in connection with the event(s) and/or transaction(s) giving rise to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transactions.
Section 21.     Internal Revenue Code Section 409A . The Company intends for this Agreement to comply with the indemnification exception under Section 1.409A-1(b)(10) of the regulations promulgated under the Internal Revenue Code of 1986, as amended (the “ Code ”), which provides that indemnification of, or the purchase of an insurance policy providing for payments of, all or part of the expenses incurred or damages paid or payable by Indemnitee with respect to a bona fide claim against Indemnitee or the Company do not provide for a deferral of compensation, subject to Section 409A of the Code, where such claim is based on actions or failures to act by Indemnitee in his or her capacity as a service provider of the Company. The parties intend that this Agreement be interpreted and construed with such intent.
Section 22.     Applicable Law and Consent to Jurisdiction . This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with,

13


the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 12(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) consent to service of process at the address set forth in Section 19 of this Agreement with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.
Section 23.     Headings . The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
Section 24.     Identical Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.
Section 25.     Monetary Damages Insufficient/Specific Enforcement . The Company and Indemnitee agree that a monetary remedy for breach of this Agreement may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm (having agreed that actual and irreparable harm will result in not forcing the Company to specifically perform its obligations pursuant to this Agreement) and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which he may be entitled. The Company and Indemnitee further agree that Indemnitee shall be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection therewith. The Company acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by the Court, and the Company hereby waives any such requirement of a bond or undertaking.
[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.

Slack Technologies, Inc.
 
 
 
 
By:
 
 
Name:
 
Title:
 
 
 
 
 
[Name of Indemnitee]


Signature Page to Indemnification Agreement
Exhibit 10.3

S LACK T ECHNOLOGIES , I NC .:
N ON -P LAN S UMMARY OF S TOCK G RANT
On September 6, 2017, Slack Technologies, Inc. (the “ Company ”) granted Transferee a restricted stock unit grant for 406,017 shares of the Company’s Class B Common Stock (the “ Trust Grant ”). The Company and the Transferee desire to cancel the Trust Grant in exchange for the Company agreeing to grant a restricted stock award to Transferee, as set forth below. As such, the Transferee acknowledges and agrees to cancel the Trust Grant in its entirety in exchange for the consideration set forth in this Non-Plan Summary of Stock Grant and the Non-Plan Stock Grant Agreement (the “ Agreement ”), and the Transferee further acknowledges that such consideration is good and sufficient consideration for every promise, duty, release, obligation, agreement, and right contained in this Agreement with respect to the cancellation of the Trust Grant. Subject to the Transferee’s acknowledgment and agreement to cancel the Trust Grant in its entirety, effective as of October 28, 2018, by signing below, the Transferee is acquiring shares of the Class B Common Stock of the Company on the following terms:
Name of Transferee:
David Riley and Sarah Friar Revocable Trust dated August 11, 2006
Total Number of Transferred Shares:
406,017
Date of Transfer:
October 28, 2018
Vesting Commencement Date:
March 8, 2017
Vesting Schedule:
The Forfeiture Condition shall lapse with respect to 1/16th of the Transferred Shares when Sarah Friar completes each quarter of continuous Service following the Vesting Commencement Date set forth above. In the event of a Change in Control and subject to Ms. Friar’s continuous Service to the Company through such event, 100% of the Transferred Shares shall vest immediately prior to the consummation of the Change in Control.
The Transferred Shares are granted outside of the Company’s 2009 Stock Plan, as amended (the “ Plan ”), but the relevant terms and definitions of the Plan are incorporated and included in this Agreement and shall govern the grant of the Transferred Shares hereunder. By signing below, the Transferee and the Company agree that the acquisition of the Transferred Shares is governed by the terms and conditions of the Plan, as amended, and the Non-Plan Stock Grant Agreement. Both of these documents are attached to, and made a part of, this Non-Plan Summary of Stock Grant. Electronic acceptance pursuant to the Company’s instructions to the Transferee (including through an online acceptance process) is acceptable. The Transferee further agrees that the Company may deliver by email all documents relating to the Plan or this grant (including, without limitation, a copy of the Plan) and all other documents that the Company is required to deliver to its security holders (including, without limitation, disclosures that may be required by the Securities and Exchange Commission). The Transferee also agrees that the Company may deliver these documents by

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posting them on a website maintained by the Company or by a third party under contract with the Company. If the Company posts these documents on a website, it shall notify the Transferee by email.
TRANSFEREE:
 
SLACK TECHNOLOGIES, INC.
 
 
 
 
 
DAVID RILEY AND SARAH FRIAR REVOCABLE
 
By:
/s/ David Schellhase
TRUST DATED AUGUST 11, 2006
 
 
 
 
 
 
Title:
General Counsel
By:
/s/ Sarah J. Friar
 
 
 
Name:
Sarah Friar
 
 
 
Title:
Trustee
 
 
 
 
 
 
 
 
Address for Mailing Stock Certificate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Acknowledged and Agreed to by:
 
 
 
 
 
 
 
 
SARAH FRIAR
 
 
 
 
 
 
 
 
By:
/s/ Sarah Friar
 
 
 


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S LACK T ECHNOLOGIES , I NC .
S TOCK G RANT A GREEMENT
SECTION 1.     ACQUISITION OF SHARES.
(a)     Transfer . On the terms and conditions set forth in the Non-Plan Summary of Stock Grant and this Agreement, the Company agrees to transfer to the Transferee the number of Shares set forth in the Non-Plan Summary of Stock Grant. The transfer shall occur at the offices of the Company on the date of transfer set forth in the Summary of Stock Grant or at such other place and time as the parties may agree.
(b)     Consideration . The Transferee and the Company agree that the Transferred Shares are being issued to the Transferee and that the Company acknowledges receipt of the par value for such Transferred Shares.
(c)     Stock Plan and Defined Terms . Capitalized terms are defined in Section 12 of this Agreement and capitalized terms used herein but not otherwise defined have the meaning set forth in the Plan.
SECTION 2.     FORFEITURE CONDITION.
(a)     Scope of Forfeiture Condition . All Transferred Shares initially shall be Restricted Shares and shall be subject to forfeiture to the Company. The Transferee shall not transfer, assign, encumber or otherwise dispose of any Restricted Shares without the Company’s written consent, except as provided in Section 5(e) of the Plan.
(b)     Vesting . The Forfeiture Condition shall lapse and the Restricted Shares shall become vested in accordance with the vesting schedule set forth in the Summary of Stock Grant.
(c)     Execution of Forfeiture . The Forfeiture Condition shall be automatic and applicable only if the Ms. Friar’s Service terminates for any reason, with or without cause, including (without limitation) death or disability, before all Restricted Shares have become vested. In the event that Ms. Friar’s Service terminates for any reason, the certificate(s) representing any remaining Restricted Shares shall be delivered to the Company. The Company shall make no payment for Restricted Shares that are forfeited.
(d)     Additional Shares or Substituted Securities . In the event of the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spinoff, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities without receipt of consideration, any new, substituted or additional securities or other property (including money paid other than as an ordinary cash dividend) which are by reason of such transaction distributed with respect to any Restricted Shares or into which such Restricted Shares thereby become convertible shall immediately be subject to the

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Forfeiture Condition. Appropriate adjustments to reflect the distribution of such securities or property shall be made to the number and/or class of the Restricted Shares.
(e)     Termination of Rights as Stockholder . If Restricted Shares are forfeited in accordance with this Section 2, then the person who is to forfeit such Restricted Shares shall no longer have any rights as a holder of such Restricted Shares. Such Restricted Shares shall be deemed to have been forfeited in accordance with the applicable provisions hereof, whether or not the certificate(s) therefor have been delivered as required by this Agreement.
(f)     Escrow . Upon issuance, the certificates for Restricted Shares shall be deposited in escrow with the Company to be held in accordance with the provisions of this Agreement. Any new, substituted or additional securities or other property described in Subsection (d) above shall immediately be delivered to the Company to be held in escrow, but only to the extent the Transferred Shares are at the time Restricted Shares. All regular cash dividends on Restricted Shares (or other securities at the time held in escrow) shall be paid directly to the Transferee and shall not be held in escrow. Restricted Shares, together with any other assets or securities held in escrow hereunder, shall be (i) surrendered to the Company for forfeiture and cancellation in the event that the Forfeiture Condition or Right of First Refusal applies or (ii) released to the Transferee upon the Transferee’s request to the extent the Transferred Shares are no longer Restricted Shares (but not more frequently than once every six months). In any event, all Transferred Shares that have vested (and any other vested assets and securities attributable thereto) shall be released within 60 days after the earlier of (i) the termination of the Ms. Friar’s Service or (ii) the lapse of the Right of First Refusal.
SECTION 3.     RIGHT OF FIRST REFUSAL.
(a)     Right of First Refusal . In the event that the Transferee proposes to sell, pledge or otherwise transfer in accordance with Section 5(e) of the Plan to a third party any Transferred Shares, or any interest in Transferred Shares, the Company shall have the Right of First Refusal with respect to all (and not less than all) of such Transferred Shares. If the Transferee desires to transfer Transferred Shares, the Transferee shall give a written Transfer Notice to the Company describing fully the proposed transfer, including the number of Transferred Shares proposed to be transferred, the proposed transfer price, the name and address of the proposed Subsequent Transferee and proof satisfactory to the Company that the proposed sale or transfer will not violate any applicable federal, State or foreign securities laws. The Transfer Notice shall be signed both by the Transferee and by the proposed Subsequent Transferee and must constitute a binding commitment of both parties to the transfer of the Transferred Shares. The Company shall have the right to purchase all, and not less than all, of the Transferred Shares on the terms of the proposal described in the Transfer Notice (subject, however, to any change in such terms permitted under Subsection (b) below) by delivery of a notice of exercise of the Right of First Refusal within 30 days after the date when the Transfer Notice was received by the Company.
(b)     Transfer of Shares . If the Company fails to exercise its Right of First Refusal within 30 days after receiving the Transfer Notice, the Transferee may, not later than 90 days after the Company received the Transfer Notice, conclude a transfer of the Transferred Shares subject to the Transfer Notice on the terms and conditions described in the Transfer Notice, provided that any such sale is made in compliance with applicable federal, State and foreign securities laws and not in violation

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of any other contractual restrictions to which the Transferee is bound. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by the Transferee, shall again be subject to the Right of First Refusal and shall require compliance with the procedure described in Subsection (a) above. If the Company exercises its Right of First Refusal, the parties shall consummate the sale of the Transferred Shares on the terms set forth in the Transfer Notice within 60 days after the Company received the Transfer Notice (or within such longer period as may have been specified in the Transfer Notice); provided, however, that in the event the Transfer Notice provided that payment for the Transferred Shares was to be made in a form other than cash or cash equivalents paid at the time of transfer, the Company shall have the option of paying for the Transferred Shares with cash or cash equivalents equal to the present value of the consideration described in the Transfer Notice.
(c)     Additional or Exchanged Securities and Property . In the event of a Corporate Transaction, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spinoff, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Transferred Shares subject to this Section 3 shall immediately be subject to the Right of First Refusal. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Transferred Shares subject to this Section 3.
(d)     Termination of Right of First Refusal . Any other provision of this Section 3 notwithstanding, in the event that the Stock is readily tradable on an established securities market when the Transferee desires to transfer Transferred Shares, the Company shall have no Right of First Refusal, and the Transferee shall have no obligation to comply with the procedures prescribed by Subsections (a) and (b) above.
(e)     Permitted Transfers . This Section 3 shall not apply to a Permitted Transfer (as defined in the Plan) in accordance with the terms and conditions of the Plan. If the Transferee transfers any Transferred Shares, either under this Subsection (e) or after the Company has failed to exercise the Right of First Refusal, then this Agreement shall apply to the Subsequent Transferee to the same extent as to the Transferee.
(f)     Termination of Rights as Stockholder . If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be purchased in accordance with this Section 3, then after such time the person from whom such Shares are to be purchased shall no longer have any rights as a holder of such Shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such Shares shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether or not the certificate(s) therefor have been delivered as required by this Agreement.
(g)     Assignment of Right of First Refusal . The Board of Directors may freely assign the Company’s Right of First Refusal, in whole or in part. Any person who accepts an assignment of the Right of First Refusal from the Company shall assume all of the Company’s rights and obligations under this Section 3.

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SECTION 4.     OTHER RESTRICTIONS ON TRANSFER.
(a)     Transfer Restrictions . All Shares acquired under this Agreement shall be subject to the transfer restrictions set forth in Section 5(e) of the Plan.
(b)     Transferee Representations . In connection with the issuance and acquisition of Shares under this Agreement, the Transferee hereby represents and warrants to the Company as follows:
(i)The Transferee is acquiring and will hold the Transferred Shares for investment for his or her account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act.
(ii)The Transferee understands that the Transferred Shares have not been registered under the Securities Act by reason of a specific exemption therefrom and that the Transferred Shares must be held indefinitely, unless they are subsequently registered under the Securities Act or the Transferee obtains an opinion of counsel, in form and substance satisfactory to the Company and its counsel, that such registration is not required. The Transferee further acknowledges and understands that the Company is under no obligation to register the Transferred Shares.
(iii)The Transferee is aware of the adoption of Rule 144 by the Securities and Exchange Commission under the Securities Act, which permits limited public resales of securities acquired in a non-public offering, subject to the satisfaction of certain conditions, including (without limitation) the availability of certain current public information about the issuer, the resale occurring only after the holding period required by Rule 144 has been satisfied, the sale occurring through an unsolicited “broker’s transaction,” and the amount of securities being sold during any three month period not exceeding specified limitations. The Transferee acknowledges and understands that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company has no plans to satisfy these conditions in the foreseeable future.
(iv)The Transferee will not sell, transfer or otherwise dispose of the Transferred Shares in violation of the Securities Act, the Securities Exchange Act of 1934, or the rules promulgated thereunder, including Rule 144 under the Securities Act. The Transferee agrees that he or she will not dispose of the Transferred Shares unless and until he or she has complied with all requirements of this Agreement applicable to the disposition of Transferred Shares and he or she has provided the Company with written assurances, in substance and form satisfactory to the Company, that (A) the proposed disposition does not require registration of the Transferred Shares under the Securities Act or all appropriate action necessary for compliance with the registration requirements of the Securities Act or with any exemption from registration available under the Securities Act (including Rule 144) has been taken and (B) the proposed disposition will not result in the contravention of any transfer restrictions applicable to the Transferred Shares under applicable state law.
(v)The Transferee has been furnished with, and has had access to, such information as he or she considers necessary or appropriate for deciding whether to invest in the Transferred Shares, and the Transferee has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the issuance of the Transferred Shares.

6


(vi)The Transferee is aware that his or her investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss. The Transferee is able, without impairing his or her financial condition, to hold the Transferred Shares for an indefinite period and to suffer a complete loss of his or her investment in the Transferred Shares.
(vii)The Transferee represents and warrants to the Company that he or she is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, as presently in effect.
(c)     Securities Law Restrictions . Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act or have been registered or qualified under the securities laws of any State, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of the Transferred Shares (including the placement of appropriate legends on stock certificates or the imposition of stoptransfer instructions) if, in the judgment of the Company, such restrictions are necessary or desirable in order to achieve compliance with the Securities Act, the securities laws of any State or any other law.
(d)     Market Stand-Off . In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, the Transferee or a Subsequent Transferee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Transferred Shares without the prior written consent of the Company or its managing underwriter. Such restriction (the “Market Stand-Off”) shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such underwriter. In no event, however, shall such period exceed 180 days plus such additional period as may reasonably be requested by the Company or such underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports or (ii) analyst recommendations and opinions, including (without limitation) the restrictions set forth in Rule 2711(f)(4) of the National Association of Securities Dealers and Rule 472(f)(4) of the New York Stock Exchange, as amended, or any similar successor rules. The Market Stand-Off shall in any event terminate two years after the date of the Company’s initial public offering. In the event of the declaration of a stock dividend, a spinoff, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Transferred Shares until the end of the applicable stand-off period. The Company’s underwriters shall be beneficiaries of the agreement set forth in this Subsection (d). This Subsection (d) shall not apply to Shares registered in the public offering under the Securities Act.
(e)     Rights of the Company . The Company shall not be required to (i) transfer on its books any Transferred Shares that have been sold or transferred in contravention of this Agreement or (ii) treat

7


as the owner of Transferred Shares, or otherwise to accord voting, dividend or liquidation rights to, any Subsequent Transferee to whom Transferred Shares have been transferred in contravention of this Agreement.
(f)     Waiver of Statutory Information Rights . The Transferee understands and agrees that, but for the waiver made herein, the Transferee would be entitled, upon written demand under oath stating the purpose thereof, to inspect for any proper purpose, and to make copies and extracts from, the Company’s stock ledger, a list of its stockholders, and its other books and records, and the books and records of subsidiaries of the Company, if any, under the circumstances and in the manner provided in Section 220 of the General Corporation Law of Delaware (any and all such rights, and any and all such other rights of the Transferee as may be provided for in Section 220, the “ Inspection Rights ”). In light of the foregoing, until the first sale of Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act, the Transferee hereby unconditionally and irrevocably waives the Inspection Rights, whether such Inspection Rights would be exercised or pursued directly or indirectly pursuant to Section 220 or otherwise, and covenants and agrees never to directly or indirectly commence, voluntarily aid in any way, prosecute, assign, transfer, or cause to be commenced any claim, action, cause of action, or other proceeding to pursue or exercise the Inspection Rights. The foregoing waiver shall not affect any rights of a director, in his or her capacity as such, under Section 220. The foregoing waiver shall not apply to any contractual inspection rights of the Transferee under any other written agreement between the Transferee and the Company.
SECTION 5.     SUCCESSORS AND ASSIGNS.
Except as otherwise expressly provided to the contrary, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and be binding upon the Transferee and the Transferee’s legal representatives, heirs, legatees, distributees, assigns and transferees by operation of law, whether or not any such person has become a party to this Agreement or has agreed in writing to join herein and to be bound by the terms, conditions and restrictions hereof.
SECTION 6.     NO RETENTION RIGHTS.
Nothing in this Agreement or in the Plan shall confer upon Ms. Friar any right to continue providing services to the Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company or of Ms. Friar, which rights are hereby expressly reserved by each, to terminate her service at any time and for any reason, with or without cause.
SECTION 7.     TAX MATTERS.
(a)     Section 83(b) Election. The acquisition of the Transferred Shares may result in adverse tax consequences that may be avoided or mitigated by filing an election under Code Section 83(b). Such election may be filed only within 30 days after the date of transfer set forth in the Summary of Stock Grant. The form for making the Code Section 83(b) election is attached to this Agreement as an Exhibit. The Transferee should consult with his or her tax advisor to

8


determine the tax consequences of acquiring the Transferred Shares and the advantages and disadvantages of filing the Code Section 83(b) election. The Transferee acknowledges that it is his or her sole responsibility, and not the Company’s, to file a timely election under Code Section 83(b), even if the Transferee requests the Company or its representatives to make this filing on his or her behalf.
(b)     Tax Withholding. As a condition to the transfer of the Transferred Shares to the Transferee, Transferee shall make arrangements to the satisfaction of the Company for the payment of all federal, state, local or foreign withholding tax obligations that may arise in connection with such transfer or in connection with Transferee’s election under Code Section 83(b).
SECTION 8.     LEGENDS.
All certificates evidencing Transferred Shares shall bear the following legends:
“THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES AND IMPOSES CERTAIN FORFEITURE CONDITIONS UPON TERMINATION OF SERVICE WITH THE COMPANY. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.”
“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”
If required by the authorities of any State in connection with the issuance of the Transferred Shares, the legend or legends required by such State authorities shall also be endorsed on all such certificates.
SECTION 9.     NOTICE.
Any notice required by the terms of this Agreement shall be given in writing. It shall be deemed effective upon (i) personal delivery, (ii) deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid or (iii) deposit with Federal Express Corporation, with shipping charges prepaid. Notice shall be addressed to the Company at its principal executive office and to the Transferee at the address that he or she most recently provided to the Company in accordance with this Section 9.

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SECTION 10.     ENTIRE AGREEMENT.
The Summary of Stock Grant, this Agreement and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter hereof.
SECTION 11.     CHOICE OF LAW.
This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State.
SECTION 12.     DEFINITIONS.
(a)    “ Agreement ” shall mean this Non-Plan Stock Grant Agreement.
(b)    “ Board of Directors ” shall mean the Board of Directors of the Company, as constituted from time to time or, if a Committee has been appointed, such Committee.
(c)    “ Change in Control ” shall mean the consummation of (i) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity; (ii) a merger, reorganization or consolidation pursuant to which the holders of the Company’s outstanding voting power immediately prior to such transaction do not own a majority of the outstanding voting power of the surviving or resulting entity (or its ultimate parent, if applicable); or (iii) the acquisition of all or a majority of the outstanding voting stock of the Company in a single transaction or a series of related transactions; provided however that a merger effected solely to change the Company’s domicile shall not constitute a Change in Control.
(d)    “ Code ” shall mean the Internal Revenue Code of 1986, as amended.
(e)    “ Committee ” shall mean a committee of the Board of Directors, as described in Section 2 of the Plan.
(f)    “ Company ” shall mean Slack Technologies, Inc., a Delaware corporation.
(g)    “ Consultant ” shall mean a person who performs bona fide services for the Company, a Parent or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.
(h)    “ Employee ” shall mean any individual who is a commonlaw employee of the Company, a Parent or a Subsidiary.
(i)    “ Fair Market Value ” shall mean the fair market value of a Share, as determined by the Board of Directors in good faith. Such determination shall be conclusive and binding on all persons.
(j)    “ Forfeiture Condition ” shall mean the forfeiture condition described in Section 2.

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(k)    “ Outside Director ” shall mean a member of the Board of Directors who is not an Employee.
(l)    “ Parent ” shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
(m)    “ Plan ” shall mean the Slack Technologies, Inc. 2009 Stock Plan, as amended.
(n)    “ Restricted Share ” shall mean a Transferred Share that is subject to the Forfeiture Condition.
(o)    “ Right of First Refusal ” shall mean the Company’s right of first refusal described in Section 3.
(p)    “ Securities Act ” shall mean the Securities Act of 1933, as amended.
(q)    “ Service ” shall mean Ms. Friar’s service as an Employee, Outside Director or Consultant.
(r)    “ Share ” shall mean one share of Stock, as adjusted in accordance with Section 8 of the Plan (if applicable).
(s)    “ Stock ” shall mean the Class B Common Stock of the Company.
(t)    “ Subsequent Transferee ” shall mean any person to whom the Transferee has directly or indirectly transferred any Transferred Shares.
(u)    “ Subsidiary ” shall mean any corporation (other than the Company) in an unbroken chain or corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
(v)    “ Summary of Stock Grant ” shall mean the document so entitled to which this Agreement is attached.
(w)    “ Transferee ” shall mean the entity named in the Summary of Stock Grant.
(x)    “ Transfer Notice ” shall mean the notice of a proposed transfer of Transferred Shares described in Section 3.
(y)    “ Transferred Shares ” shall mean the Shares acquired by the Transferee pursuant to this Agreement.


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Exhibit 10.6


SLACK TECHNOLOGIES, INC.
SENIOR EXECUTIVE CASH INCENTIVE BONUS PLAN
1.
Purpose
This Senior Executive Cash Incentive Bonus Plan (the “Incentive Plan”) is intended to provide an incentive for superior work and to motivate eligible executives of Slack Technologies, Inc. (the “Company”) and its subsidiaries toward even higher achievement and business results, to tie their goals and interests to those of the Company and its stockholders and to enable the Company to attract and retain highly qualified executives. The Incentive Plan is for the benefit of Covered Executives (as defined below).
2.
Covered Executives
From time to time, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) may select certain key executives (the “Covered Executives”) to be eligible to receive bonuses hereunder. Participation in the Incentive Plan does not change the “at will” nature of a Covered Executive’s employment with the Company.
3.
Administration
The Compensation Committee shall have the sole discretion and authority to administer and interpret the Incentive Plan.
4.
Bonus Determinations
(a)      Corporate Performance Goals . A Covered Executive may receive a bonus payment under the Incentive Plan based upon the attainment of one or more performance objectives that are established by the Compensation Committee and relate to financial and operational metrics with respect to the Company or any of its subsidiaries (the “Corporate Performance Goals”), including but not limited to the following: achievement of cash flow (including, but not limited to, operating cash flow and Free Cash Flow); earnings before interest, taxes, depreciation, and amortization; net income (loss) (either before or after interest, taxes, depreciation, and/or amortization); changes in the market price of our common stock; economic value-added; acquisitions or strategic transactions, including licenses, collaborations, joint ventures, or promotion arrangements; operating income (loss); return on capital, assets, equity, or investment; total stockholder returns; productivity; expense efficiency; margins; operating efficiency; working capital; earnings (loss) per share of our common stock; sales or market shares; revenue; corporate revenue; operating income and/or net annual recurring revenue, any of which may be (A) measured in absolute terms or compared to any incremental increase, (B) measured in terms of growth, (C) compared to another company or companies or to results of a peer group, (D) measured against the market as a whole and/or as compared to applicable market indices, and/or (E) measured on a pre-tax or post-tax basis (if applicable). Further, any Corporate Performance Goals may be used to measure the performance of the Company as a whole or a business unit or other segment of the Company, or one or more product lines or



specific markets.  The Corporate Performance Goals may differ from Covered Executive to Covered Executive.
(b)      Calculation of Corporate Performance Goals . At the beginning of each applicable performance period, the Compensation Committee will determine whether any significant element(s) will be included in or excluded from the calculation of any Corporate Performance Goal with respect to any Covered Executive.  In all other respects, Corporate Performance Goals will be calculated in accordance with the Company’s financial statements, generally accepted accounting principles, or under a methodology established by the Compensation Committee at the beginning of the performance period and which is consistently applied with respect to a Corporate Performance Goal in the relevant performance period.
(c)      Target; Minimum; Maximum . Each Corporate Performance Goal shall have a “target” (i.e., 100 percent attainment of the Corporate Performance Goal) and may also have a “minimum” hurdle and/or a “maximum” amount.
(d)      Bonus Requirements; Individual Goals . Except as otherwise set forth in this Section 4(d): (i) any bonuses paid to Covered Executives under the Incentive Plan shall be based upon objectively determinable bonus formulas that tie such bonuses to one or more performance targets relating to the Corporate Performance Goals, (ii) bonus formulas for Covered Executives shall be adopted in each performance period by the Compensation Committee and communicated to each Covered Executive at the beginning of each performance period and (iii) no bonuses shall be paid to Covered Executives unless and until the Compensation Committee makes a determination with respect to the attainment of the performance targets relating to the Corporate Performance Goals. Notwithstanding the foregoing, the Compensation Committee may adjust bonuses payable under the Incentive Plan based on achievement of one or more individual performance objectives or pay bonuses (including, without limitation, discretionary bonuses) to Covered Executives under the Incentive Plan based on individual performance goals and/or upon such other terms and conditions as the Compensation Committee may in its discretion determine.
(e)      Individual Target Bonuses . The Compensation Committee shall establish a target bonus opportunity for each Covered Executive for each performance period. For each Covered Executive, the Compensation Committee shall have the authority to apportion the target award so that a portion of the target award shall be tied to attainment of Corporate Performance Goals and a portion of the target award shall be tied to attainment of individual performance objectives.
(f)      Employment Requirement . Subject to any additional terms contained in a written agreement between the Covered Executive and the Company, the payment of a bonus to a Covered Executive with respect to a performance period shall be conditioned upon the Covered Executive’s employment by the Company on the bonus payment date. If a Covered Executive was not employed for an entire performance period, the Compensation Committee may pro rate the bonus based on the number of days employed during such period.

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5.
Timing of Payment
(a)      With respect to Corporate Performance Goals established and measured on a basis more frequently than annually (e.g., quarterly or semi-annually), the Corporate Performance Goals will be measured at the end of each performance period after the Company’s financial reports with respect to such period(s) have been published. If the Corporate Performance Goals and/or individual goals for such period are met, payments will be made as soon as practicable following the end of such period, but not later 74 days after the end of the fiscal year in which such performance period ends.
(b)      With respect to Corporate Performance Goals established and measured on an annual or multi-year basis, Corporate Performance Goals will be measured as of the end of each such performance period (e.g., the end of each fiscal year) after the Company’s financial reports with respect to such period(s) have been published. If the Corporate Performance Goals and/or individual goals for any such period are met, bonus payments will be made as soon as practicable, but not later than 74 days after the end of the relevant fiscal year.
(c)      For the avoidance of doubt, bonuses earned at any time in a fiscal year must be paid no later than 74 days after the last day of such fiscal year.
6.
Amendment and Termination
The Company reserves the right to amend or terminate the Incentive Plan at any time in its sole discretion.

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Exhibit 10.7

SLACK TECHNOLOGIES, INC.
EXECUTIVE SEVERANCE PLAN
1.     Purpose . Slack Technologies, Inc.(the “ Company ”) considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. The Board of Directors of the Company (the “ Board ”) recognizes, however, that, the possibility of an involuntary termination of employment, either before or after a Change in Control (as defined in Section 2 hereof), exists and that such possibility, and the uncertainty and questions that it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. Therefore, the Board has determined that the Slack Technologies, Inc. Executive Severance Plan (the “ Plan ”) should be adopted to reinforce and encourage the continued attention and dedication of the Company’s Covered Executives (as defined in Section 2 hereof) to their assigned duties without distraction. Nothing in this Plan shall be construed as creating an express or implied contract of employment and nothing shall alter the “at will” nature of the Covered Executives’ employment with the Company.
2.      Definitions . The following terms shall be defined as set forth below:
(a)     “Accounting Firm” shall mean a nationally recognized accounting firm selected by the Company.
(b)      “Administrator” means the Board or a committee thereof.
(c)      Base Salary ” shall mean the higher of the Covered Executive’s (i) annual base salary in effect immediately prior to the Date of Termination or (ii) annual base salary in effect for the fiscal year immediately prior to the fiscal year in which the Date of Termination occurs.
(d)      Cause ” shall mean, and shall be limited to, the occurrence of any one or more of the following events:
(i)      conduct by the Covered Executive constituting a material act of misconduct in connection with the performance of his or her duties, including, without limitation, misappropriation of funds or property of the Company or any of its subsidiaries or affiliates other than the occasional, customary and de minimis use of Company property for personal purposes;
(ii)      the commission by the Executive of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or any conduct by the Covered Executive that would reasonably be expected to result in material injury or reputational harm to the Company or any of its subsidiaries and affiliates if he or she were retained in his or her position;

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(iii)      continued non-performance by the Covered Executive of his or her duties to the Company (other than by reason of the Covered Executive’s physical or mental illness, incapacity or disability) which has continued for 30 days following written notice of such non-performance from the Company;
(iv)      a material violation by the Covered Executive of the Proprietary Information and Inventions Agreement entered into between the Covered Executive and the Company or any other confidentiality, invention assignment or similar agreement with the Company;
(v)      a material violation by the Covered Executive of one of the Company’s material written employment policies that would reasonably be expected to result in material injury or reputational harm to the Company or any of its subsidiaries and affiliates if he or she were retained in his or her position; or
(vi)      the Covered Executive’s failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the Covered Executive’s willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigation.
(e)      Change in Control ” shall have the same meaning as “Sale Event” as defined in the Company’s 2019 Stock Option and Incentive Plan (as may be amended from time to time).
(f)      Change in Control Period ” shall mean the period beginning on the date of a Change in Control and ending 12 months after the date of a Change in Control.
(g)      “Code” shall mean the Internal Revenue Code of 1986, as amended.
(h)      Covered Executives ” shall mean those officers and other executives or individuals designated by the Board in its discretion to participate in the Plan and who meet the eligibility requirements set forth in Section 4 of this Plan.
(i)      Date of Termination ” shall mean the date that a Covered Executive’s employment, in any and all capacities, with the Company (or any successor) ends, which date shall be specified in the Notice of Termination. Notwithstanding the foregoing, a Covered Executive’s employment shall not be deemed to have been terminated solely as a result of the Covered Executive becoming an employee of any direct or indirect successor to the business or assets of the Company.
(j)      Disability ” means “disability” as defined in Section 422(c) of the Code.
(k)      “Good Reason” shall mean that the Covered Executive has complied with the “Good Reason Process” following the occurrence of any of the following events:

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(i)      a material diminution in the Covered Executive’s position, responsibilities, authority or duties;
(ii)      a reduction in the Covered Executive’s base salary by more than 10% except for across-the-board salary reductions similarly affecting all or substantially all management employees;
(iii)      the relocation of the Company office at which the Covered Executive is principally employed to a location more than 35 miles from such office; or
(iv)      the failure of any successor to the Company to assume and agree to be bound by the terms and conditions of this Plan with respect to the applicable Covered Executive.
For purposes of Section 2(k)(i), a change in the reporting relationship or a change in a title will not, by itself, be sufficient to constitute a material diminution of responsibilities, authority or duty; provided, however, for each of the Company’s Chief Financial Officer and General Counsel, if such individual is no longer directly reporting to the Chief Executive Officer of the surviving corporation immediately following a Change in Control, then such change shall be deemed a material diminution in such Covered Executive’s position for purposes of Section 2(k)(i).
(l)      Good Reason Process ” shall mean:
(i)      the Covered Executive reasonably determines in good faith that a “Good Reason” condition has occurred;
(ii)      the Covered Executive notifies the Company or its successor in writing of the occurrence of the Good Reason condition within 30 days of the occurrence of such condition;
(iii)      the Covered Executive cooperates in good faith with the Company’s or its successor’s efforts, for a period of 30 days following such notice (the “Cure Period”), to remedy the condition;
(iv)      notwithstanding such efforts, the Good Reason condition continues to exist following the Cure Period; and
(v)      the Covered Executive terminates his or her employment and provides the Company or its successor with a Notice of Termination with respect to such termination, each within 30 days after the end of the Cure Period.
If the Company or the successor cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.

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(m)      Notice of Termination ” shall mean a written notice which shall indicate the specific termination provision in this Plan relied upon for the termination of a Covered Executive’s employment and the Date of Termination.
(n)      “Participation Agreement” shall mean an agreement between a Covered Executive and the Company that acknowledges the Covered Executive’s participation in the Plan.
(o)      Public Offering ” shall mean the consummation of the first public offering pursuant to an effective registration statement under the Securities Act covering the offer and sale of the Company’s equity securities, as a result of or following which the Company’s common stock shall be publicly held.
(p)      Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
3.      Administration of the Plan .
(a)      Administrator . The Plan shall be administered by the Administrator.
(b)      Powers of Administrator . The Administrator shall have all powers necessary to enable it properly to carry out its duties with respect to the complete control of the administration of the Plan. Not in limitation, but in amplification of the foregoing, the Administrator shall have the power and authority in its discretion to:
(i)      construe the Plan to determine all questions that shall arise as to interpretations of the Plan’s provisions, including, but not limited to, determination of which individuals are Covered Executives, the benefits to which any Covered Executives may be entitled, the eligibility requirements for participation in the Plan and all other matters pertaining to the Plan;
(ii)      adopt amendments to the Plan which are deemed necessary or desirable to comply with all applicable laws and regulations, including but not limited to Code Section 409A and the guidance thereunder;
(iii)      make all determinations it deems advisable for the administration of the Plan, including the authority and ability to delegate administrative functions to a third party;
(iv)      decide all disputes arising in connection with the Plan; and
(v)      otherwise supervise the administration of the Plan.
(c)      All decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Covered Executives.

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4.      Eligibility . All Covered Executives who have executed and submitted to the Company a Participation Agreement, and satisfied such other requirements as may be determined by the Administrator, are eligible to participate in the Plan.
5.      Termination Benefits Generally . In the event a Covered Executive’s employment with the Company is terminated for any reason, the Company shall pay or provide to the Covered Executive any earned but unpaid salary, unpaid expense reimbursements and accrued but unused leave entitlement, if applicable (collectively, the “ Accrued Benefits ”), within the time required by law but in no event more than 30 days after the Date of Termination.
6.      Termination Not in Connection with a Change in Control . In the event the employment of a Covered Executive is terminated (i) by the Company for any reason other than by reason of death, Disability, or for Cause, or (b) by the Covered Executive for Good Reason, and, in each case, such termination occurs outside of the Change in Control Period, then with respect to such Covered Executive, in addition to the Accrued Benefits, subject to his or her execution of a separation agreement containing, among other provisions, an effective general release of claims in favor of the Company and related persons and entities, confidentiality, return of property and non-disparagement, in a form and manner satisfactory to the Company by the Covered Executive and the expiration of any revocation period with respect thereto within 60 days of the Date of Termination (the “ Release Requirement ”), the Company shall:
(a)      pay the Covered Executive a single lump sum cash amount equal to 12 months’ Base Salary for the Company’s Chief Executive Officer and 6 months’ Base Salary for each other Covered Executive. Such amount shall be paid as soon as reasonably practicable, but not later than 60 days after the Date of Termination occurs; and
(b)      if the Covered Executive was participating in the Company’s group health plan immediately prior to the Date of Termination and elects COBRA health continuation, then for a period of 12 months for the Company’s Chief Executive Officer and 6 months for each other Covered Executive following the date of termination, or until the Covered Executive becomes covered under a group health plan of another employer, whichever is earlier (the “ COBRA Coverage Period ”), the Company shall provide the Covered Executive, at the Company’s sole expense, continued medical, dental and vision insurance benefit coverage in accordance with the provisions of COBRA, provided that the Covered Executive timely executes all necessary COBRA election documentation and remains eligible for COBRA coverage. After the Covered Executive’s COBRA Coverage Period, if the Covered Executive wishes to continue such COBRA coverage and is eligible therefor, the Covered Executive will be required to pay all requisite premiums for such continued coverage.
4.      Termination in Connection with a Change in Control . In the event the employment of a Covered Executive is terminated (i) by the Company for any reason other than by reason of death, Disability, or for Cause or (ii) by the Covered Executive for Good Reason, and, in each case, such termination occurs during the Change in Control Period, then with respect to such Covered Executive, in addition to the Accrued Benefits, subject to his or her satisfaction of the Release Requirement, the Company shall:

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(a)      cause 100% of the outstanding and unvested equity awards held by the Covered Executive to immediately become fully exercisable and vested as of the Date of Termination (or the date of the Change in Control, if later); provided , that the performance conditions applicable to any stock-based awards subject to performance conditions will be deemed satisfied at the higher of the target level specified in the terms of the applicable award agreement or actual achievement;
(b)      pay the Covered Executive a single lump sum cash amount equal to 12 months’ Base Salary for the Company’s Chief Executive Officer and 12 months’ Base Salary for each other Covered Executive. Such amount shall be paid as soon as reasonably practicable, but not later than 60 days after the Date of Termination occurs;
(c)      if the Covered Executive was participating in the Company’s group health plan immediately prior to the Date of Termination and elects COBRA health continuation, then for a period of 12 months for the Company’s Chief Executive Officer and 12 months for each other Covered Executive following the date of termination, or until the Covered Executive becomes covered under a group health plan of another employer, whichever is earlier (the “CiC COBRA Coverage Period”), the Company shall provide the Covered Executive, at the Company’s sole expense, continued medical, dental and vision insurance benefit coverage in accordance with the provisions of COBRA, provided that the Covered Executive timely executes all necessary COBRA election documentation and remains eligible for COBRA coverage. After the Covered Executive’s CiC COBRA Coverage Period, if the Covered Executive wishes to continue such COBRA coverage and is eligible therefor, the Covered Executive will be required to pay all requisite premiums for such continued coverage; and
(d)      pay the Covered Executive a single lump sum cash amount equal to the Covered Executive’s annual target bonus in effect as of the Date of Termination pro-rated to reflect the portion of the year that has elapsed.
For the avoidance of doubt, the severance pay and benefits provided in this Section 7 shall apply in lieu of, and expressly supersede, the provisions of Section 6 and no Covered Executive shall be entitled to the severance pay and benefits under both Section 6 and 7 hereof.
5.      Additional Limitation .
(a)      Anything in this Plan to the contrary notwithstanding, in the event that the amount of any compensation, payment or distribution by the Company to or for the benefit of the Covered Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise, calculated in a manner consistent with Section 280G of the Code and the applicable regulations thereunder (the “ Aggregate Payments ”), would be subject to the excise tax imposed by Section 4999 of the Code, then, (i) if the Company has not consummated an Public Offering, (A) the Aggregate Payments payable to such Covered Executive under this Plan shall be reduced (but not below zero) to the extent necessary so that the maximum Aggregate Payments shall not exceed the Threshold Amount (the “ Reduction Amount ”), and (b) the Company shall use reasonable efforts to satisfy the shareholder approval requirements set forth in Q/A 7 of Treasury Regulations Section 1.280G-1 with respect to such Reduction Amount, and

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if such requirements are satisfied then such Reduction Amount shall become payable hereunder as if subsection (A) above had not applied thereto, and (ii) if the Company has consummated an Public Offering, the Aggregate Payments shall be reduced (but not below zero) so that the sum of all of the Aggregate Payments shall be $1.00 less than the amount at which the Covered Executive becomes subject to the excise tax imposed by Section 4999 of the Code; provided that such reduction shall only occur if it would result in the Covered Executive receiving a higher After Tax Amount (as defined below) than the Covered Executive would receive if the Aggregate Payments were not subject to such reduction. In such event, the Aggregate Payments shall be reduced in the following order, in each case, in reverse chronological order beginning with the Aggregate Payments that are to be paid the furthest in time from consummation of the transaction that is subject to Section 280G of the Code: (i) cash payments not subject to Section 409A of the Code; (ii) cash payments subject to Section 409A of the Code; (iii) equity-based payments and acceleration; and (iv) non-cash forms of benefits; provided that in the case of all the foregoing Aggregate Payments all amounts or payments that are not subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c). For purposes of this Section, “ Threshold Amount ” shall mean three times the Covered Executive’s “base amount” within the meaning of Section 280G(b)(3) of the Code and the regulations thereunder, less one dollar.
(b)      For purposes of this Section 8, the “ After Tax Amount ” means the amount of the Aggregate Payments less all federal, state, and local income, excise, employment and social security taxes imposed on the Covered Executive as a result of the Covered Executive’s receipt of the Aggregate Payments. For purposes of determining the After Tax Amount, the Covered Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes and social security at the highest marginal rates of individual taxation in each applicable state and locality, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.
(c)      The determination as to whether a reduction in the Aggregate Payments shall be made pursuant to Section 8(a) shall be made by the Accounting Firm, which shall provide detailed supporting calculations both to the Company and the Covered Executive within 15 business days of the Date of Termination, if applicable, or at such earlier time as is reasonably requested by the Company or the Covered Executive. Any determination by the Accounting Firm shall be binding upon the Covered Executive.
6.      Proprietary Information and Inventions Agreement . As a condition to participating in the Plan, each Covered Executive shall continue to comply with the terms and conditions contained in the Proprietary Information and Inventions Agreement entered into between the Covered Executive and the Company. If a Covered Executive has not entered into a Proprietary Information and Inventions Agreement or similar agreement with the Company, he or she shall enter into such agreement prior to participating in the Plan.

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7.      Withholding . All payments made by the Company under this Plan shall be subject to any tax or other amounts required to be withheld by the Company under applicable law.
8.      Section 409A .
(a)      Anything in this Plan to the contrary notwithstanding, if at the time of the Covered Executive’s “separation from service” within the meaning of Section 409A of the Code, the Company determines that the Covered Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Covered Executive becomes entitled to under this Plan would be considered deferred compensation subject to the 20 percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Covered Executive’s separation from service, or (B) the Covered Executive’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.
(b)      The parties intend that this Plan will be administered in accordance with Section 409A of the Code and that all amounts payable hereunder shall be exempt from the requirements of such section as a result of being “short term deferrals” for purposes of Section 409A of the Code to the greatest extent possible. To the extent that any provision of this Plan is not exempt from Section 409A of the Code and ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner to comply with Section 409A of the Code. Each payment pursuant to this Plan is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A‑2(b)(2). The parties agree that this Plan may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.
(c)      To the extent that any payment or benefit described in this Plan constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Covered Executive’s termination of employment, then such payments or benefits shall be payable only upon the Covered Executive’s “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).
(d)      All in-kind benefits provided and expenses eligible for reimbursement under this Plan shall be provided by the Company or incurred by the Covered Executive during the time periods set forth in this Plan. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of

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in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses). Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(e)      The Company makes no representation or warranty and shall have no liability to the Covered Executive or any other person if any provisions of this Plan are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.
9.      Notice and Date of Termination .
(a)      Notice of Termination . A termination of the Covered Executive’s employment shall be communicated by Notice of Termination from the Company to the Covered Executive or vice versa in accordance with this Section 12.
(b)      Notice to Covered Executive or the Company . Any notices, requests, demands, and other communications provided for by this Plan shall be sufficient if in writing and delivered in person or sent by registered or certified mail, postage prepaid, to a Covered Executive at the last physical or email address the Covered Executive has filed in writing with the Company, or to the Company at the following physical or email address:
Slack Technologies, Inc.
Attention: David Schellhase, General Counsel
500 Howard Street
San Francisco, CA 94105
dschellhase@slack-corp.com

10.      No Mitigation . The Covered Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Covered Executive by the Company under this Plan.
11.      Benefits and Burdens . This Plan shall inure to the benefit of and be binding upon the Company and the Covered Executives, their respective successors, executors, administrators, heirs and permitted assigns. In the event of a Covered Executive’s death after a termination of employment but prior to the completion by the Company of all payments due to him or her under this Plan, the Company shall continue such payments to the Covered Executive’s beneficiary designated in writing to the Company prior to his or her death (or to his or her estate, if the Covered Executive fails to make such designation).
12.      Enforceability . If any portion or provision of this Plan shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Plan, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Plan shall be valid and enforceable to the fullest extent permitted by law.

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13.      Waiver . No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Plan, or the waiver by any party of any breach of this Plan, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
14.      Non-Duplication of Benefits and Effect on Other Plans . Notwithstanding any other provision in the Plan to the contrary, the benefits provided hereunder shall be in lieu of any other severance payments and/or benefits provided by the Company, including any such payments and/or benefits pursuant to an employment agreement or offer letter between the Company and the Covered Executive.
15.      No Contract of Employment . Nothing in this Plan shall be construed as giving any Covered Executive any right to be retained in the employ of the Company or shall affect the terms and conditions of a Covered Executive’s employment with the Company.
16.      Amendment or Termination of Plan . The Company may amend or terminate this Plan at any time or from time to time, but no such action shall adversely affect the rights of any Covered Executive without the Covered Executive’s written consent.
17.      Governing Law . This Plan shall be construed under and be governed in all respects by the laws of the State of California.
18.      Obligations of Successors . In addition to any obligations imposed by law upon any successor to the Company, any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company shall expressly assume and agree to perform this Plan in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
19.      Effectiveness . This Plan shall be effective as of the effectiveness of the Company’s registration statement on Form S-1.

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Exhibit 10.8

Slack Technologies, Inc.
Non-Employee Director Compensation Policy
The purpose of this Non-Employee Director Compensation Policy (the “ Policy ”) of Slack Technologies, Inc., a Delaware corporation (the “ Company ”), is to provide a total compensation package that enables the Company to attract and retain, on a long-term basis, high-caliber directors who are not employees or officers of the Company or its subsidiaries (“ Outside Directors ”). This Policy will become effective at the time the registration statement on Form S-1 that is filed by the Company is declared effective by the U.S. Securities and Exchange Commission (the “ Effective Date ”). In furtherance of the purpose stated above, all Outside Directors shall be paid compensation for services provided to the Company as set forth below:
I.
Cash Retainers
(a)     Annual Retainer for Board Membership :  $35,000 for general availability and participation in meetings and conference calls of our Board of Directors. No additional compensation for attending individual Board meetings.
(b)      Additional Annual Retainers for Committee Membership :
Audit and Risk Committee Chairperson:
$
20,000

 
 
Audit and Risk Committee member:
$
10,000

 
 
Compensation Committee Chairperson:
$
15,000

 
 
Compensation Committee member:
$
7,500

 
 
Nominating and Corporate Governance Committee Chairperson:
$
8,000

 
 
Nominating and Corporate Governance Committee member:
$
4,000

(c)      Additional Retainer for Lead Director of the Board : $20,000 to acknowledge the additional responsibilities and time commitment of the Lead Director role.
II.
Equity Retainers
All grants of equity retainer awards to Outside Directors pursuant to this Policy will be automatic and nondiscretionary and will be made in accordance with the following provisions:
(a)      Value .  For purposes of this Policy, “ Value ” means with respect to (i) any award of stock options the grant date fair value of the option (i.e., Black-Scholes Value) determined in accordance with the reasonable assumptions and methodologies employed by the Company for calculating the fair value of options under ASC 718; and (ii) any award of restricted stock and restricted stock units the product of (A) the average closing market price on The New York Stock Exchange (NYSE) (or such other market on which the Company’s Class A common stock is then



principally listed) of one share of the Company’s Class A common stock over the trailing 30-day period ending on the last day of the month immediately prior to the month of the grant date, or if the Company’s Class A common stock has been listed and traded for less than 30 days, then the average closing market price on the NYSE (or such other market on which the Company’s Class A common stock is then principally listed) of one share of the Company’s Class A common stock over the total trailing period ending on the day immediately prior to the grant date, and (B) the aggregate number of shares pursuant to such award.
(b)      Revisions .  The Compensation Committee in its discretion may change and otherwise revise the terms of awards to be granted under this Policy, including, without limitation, the number of shares subject thereto, for awards of the same or different type granted on or after the date the Compensation Committee determines to make any such change or revision.
(c)      Sale Event Acceleration .  In the event of a Sale Event (as defined in the Company’s 2019 Stock Option and Incentive Plan (the “ 2019 Plan ”)), the equity retainer awards granted to Outside Directors pursuant to this Policy shall become 100% vested and exercisable.
(d)      Initial Grant .  For each Outside Director joining the Board of Directors after the Effective Date, upon initial election to the Board of Directors, each new Outside Director will receive an initial, one-time restricted stock unit grant, with a Value of $300,000 (the “ Initial Grant ”), that vests in three equal annual installments on each anniversary date on which the Outside Director was appointed to the Board of Directors; provided, however, that all vesting ceases if the director resigns from our Board of Directors or otherwise ceases to serve as a director, unless the Board of Directors determines that the circumstances warrant continuation of vesting.
(e)      Annual Grant .  On the date of the Company’s annual meeting of stockholders, each Outside Director who will continue as a member of the Board of Directors following such annual meeting of stockholders will receive a restricted stock unit grant on the date of such Annual Meeting (the “ Annual Grant ”) with a Value of $180,000 that vests in full on the earlier of (i) the one-year anniversary of the grant date or (ii) the next annual meeting of stockholders; provided, however, that all vesting ceases if the director resigns from our Board of Directors or otherwise ceases to serve as a director, unless the Board of Directors determines that the circumstances warrant continuation of vesting.
III.
Expenses
The Company will reimburse all reasonable out-of-pocket expenses incurred by Outside Directors in attending meetings of the Board of Directors or any Committee thereof.
IV.
Maximum Annual Compensation
The aggregate amount of compensation, including both equity compensation and cash compensation, paid to any Outside Director in a calendar year period shall not exceed $1,000,000. For this purpose, the “amount” of equity compensation paid in a calendar year shall be determined based on the grant date fair value thereof, as determined in accordance with ASC 718 or its successor



provision, but excluding the impact of estimated forfeitures related to service-based vesting conditions.
Date Policy Approved : April 22, 2019

Exhibit 10.9

EXHIBIT109A01.GIF

March 7, 2019

Daniel Stewart Butterfield
Sent Electronically


Dear Stewart:

Slack Technologies, Inc. (the “Company”) is pleased to confirm the terms of your continued employment, effective as of January 1, 2019:

1.
Position​ . Your title will continue to be Chief Executive Officer and you will continue to report to the Company’s Board of Directors (the “Board”). This is a full-time position and your primary place of business will be San Francisco, California. While you render services to the Company, you will not engage in any other employment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company. By signing this letter agreement, you confirm to the Company that you have no contractual commitments or other legal obligations that would prohibit you from performing your duties for the Company.

2.
Cash Compensation​ . The Company will continue to pay you a salary at the rate of $430,000 USD per year, payable in accordance with the Company’s standard payroll schedule. This salary will be subject to adjustment from time to time.

3.
Slack’s Incentive Plan.​ In addition, you will be eligible to participate in the applicable Slack cash incentive plan (the “Plan”). Your bonus target under the Plan for FY19 is 40% of your adjusted base salary, and for FY20 will be 60% of your adjusted base salary. Your actual bonus will be based upon the criteria set forth in the Plan and may change at the discretion of the Company. Slack will be reviewing the Plan from time to time, and may amend it at any time in its sole and absolute discretion. In accordance with applicable state law, any bonus payment earned in accordance with an applicable Plan will be paid in your regular pay-cycle after you are determined to have “earned” the bonus payment, less applicable taxes and other authorized or required withholdings. Other terms regarding the Plan and payment of bonuses will be as per any Plan and any related terms entered into between the parties from time to time.

4.
Employee Benefits​ . As a regular employee of the Company, you will continue to be eligible to participate in a number of Company-sponsored benefits, subject to

1


the terms and conditions of such benefit plans. In addition, you will be entitled to unlimited paid time off in accordance with the Company’s PTO policy for senior executives, as in effect from time to time.

5.
Expenses​ . You shall be entitled to receive prompt reimbursement for any and all reasonable expenses incurred by you during your employment in performing services hereunder, in accordance with the policies and procedures then in effect and established by the Company for its senior executive officers. Any reimbursement that you are entitled to receive shall (i) be paid as soon as practicable and in any event no later than the last day of your tax year following the tax year in which the expense was incurred, (ii) not be affected by any other expenses that are eligible for reimbursement in any tax year, and (iii) not be subject to liquidation or exchange for another benefit.

6.
Equity Awards​ . You and the Company acknowledge that the Company has previously issued equity awards to you under the Company’s 2009 Stock Plan, as amended. Such awards will continue to be subject to their existing terms.

7.
Other Agreements. You previously signed the Company’s standard Proprietary Information and Inventions Agreement, the executed copy of which is electronically attached hereto as Exhibit A. This agreement will continue to remain in full force and effect.

8.
Employment Relationship. Employment with the Company is for no specific period. Your employment with the Company will be “at will,” meaning that either you or the Company may terminate your employment at any time and for any reason, with or without cause. Any contrary representations that may have been made to you are superseded by this letter agreement. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and a duly authorized officer of the Company (other than you).

9.
Taxes​ . All forms of compensation referred to in this letter agreement are subject to reduction to reflect applicable withholding and payroll taxes and other deductions required by law. You agree that the Company does not have a duty to design its compensation policies in a manner that minimizes your tax liabilities, and you will not make any claim against the Company or its Board related to tax liabilities arising from your compensation.

10.
Interpretation, Amendment and Enforcement​ . This letter agreement and Exhibit A constitute the complete agreement between you and the Company, contain all

2


of the terms of your employment with the Company and supersede any prior agreements, representations or understandings (whether written, oral or implied) between you and the Company. This letter agreement may not be amended or modified, except by an express written agreement signed by both you and a duly authorized officer of the Company (other than you). The terms of this letter agreement and the resolution of any disputes as to the meaning, effect, performance or validity of this letter agreement or arising out of, related to, or in any way connected with, this letter agreement, your employment with the Company or any other relationship between you and the Company (the “Disputes”) will be governed by California law, excluding laws relating to conflicts or choice of law.

You may indicate your agreement with these terms and accept this confirmatory offer of continued employment by signing and dating the enclosed duplicate original of this letter agreement and returning it to me.

As required by law, your employment with the Company is contingent upon your providing legal proof of your identity and authorization to work in the United States.



SLACK TECHNOLOGIES, INC.

/s/ Allen shim

By: Allen Shim

Title: CFO, Chief Financial Officer


I have read and accept this offer of continued employment:


/s/ Daniel Stewart Butterfield
Signature of Daniel Stewart Butterfield


Dated: 3/7/2019  



Electronic Attachments
Exhibit A: Proprietary Information and Inventions Agreement


3


PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
The following confirms and memorializes an agreement that Slack Technologies, Inc., a Delaware corporation (the "'Company'') and I ( Stewart Butterfield         ) have had since the commencement of my employment (which term, for purposes of this agreement, shall be deemed to include any relationship of service to the Company that I may have had prior to actually becoming an employee) with the Company in any capacity and that is and has been a material part of the consideration for my employment by Company:
1. I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict with this Agreement or my employment with Company. I will not violate any agreement with or rights of any third party or, except as expressly authorized by Company in writing hereafter, use or disclose my own or any third party's confidential information or intellectual property when acting within the scope of my employment or otherwise on behalf of Company. Further, I have not retained anything containing any confidential information of a prior employer or other third party whether or not created by me.
2. Company shall own all right, title and interest (including patent rights, copyrights, trade secret rights, mask work rights, sui generis database rights and all other intellectual property rights of any sort throughout the world) relating to any and all inventions (whether or not patentable), works of authorship, mask works, designs, know­-how, ideas and information made or conceived or reduced to practice, in whole or in part, by me during the term of my employment with Company to and only to the fullest extent allowed by California Labor Code Section 2870 (which is attached as Appendix A) (collectively ''Inventions'') and I will promptly disclose all Inventions to Company. Without disclosing any third party confidential information, I will also disclose anything I believe is excluded by Section 2870 so that the Company can make an independent assessment. I hereby make all assignments necessary to accomplish the foregoing. I shall further assist Company, at Company's expense, to further evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce, and defend any rights specified to be so owned or assigned. I hereby irrevocably designate and appoint Company as my agent and attorney-in-fact, coupled with an interest and with full power of substitution, to act for and in my behalf to execute and file any document and to do all other lawfully permitted acts to further the purposes of the foregoing with the same legal force and effect as if executed by me. If I wish to clarify that something created by me prior to my employment that relates to Company's actual or proposed business is not within the scope of the foregoing assignment, I have listed it on Appendix B in a manner that does not violate any third party rights or disclose any confidential information. Without limiting Section l or Company's other rights and remedies, if, when acting within the scope of my employment or otherwise on behalf of Company, I use or (except pursuant to this Section 2) disclose my own or any third party's confidential information or intellectual property (or if any Invention cannot be fully made, used, reproduced, distributed and otherwise exploited without using or violating the foregoing), Company will have and I hereby grant



Company a perpetual, irrevocable, worldwide royalty-free, non-exclusive, sublicensable right and license to exploit and exercise all such confidential information and intellectual property rights.
3. To the extent allowed by law, paragraph 2 includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as "moral rights," ''artist's rights," "droit moral," or the like (collectively "Moral Rights"). To the extent I retain any such Moral Rights under applicable law, I hereby ratify and consent to any action that may be taken with respect to such Moral Rights by or authorized by Company and agree not to assert any Moral Rights with respect thereto. I will confirm any such ratifications, consents and agreements from time to time as requested by Company.
4. I agree that all Inventions and all other business, technical and financial information (including, without limitation, the identity of and information relating to customers or employees) I develop, learn or obtain during the term of my employment that relate to Company or the business or demonstrably anticipated business of Company or that are received by or for Company in confidence, constitute "Proprietary Information." I will hold in confidence and not disclose or, except within the scope of my employment, use any Proprietary Information. However, I shall not be obligated under this paragraph with respect to information I can document is or becomes readily publicly available without restriction through no fault of mine. Upon termination of my employment, I will promptly return to Company all items containing or embodying Proprietary Information (including all copies), except that I may keep my personal copies of (i) my compensation records, (ii) materials distributed to shareholders generally and
(iii) this Agreement. I also recognize and agree that I have no expectation of privacy with respect to Company's telecommunications, networking or information processing systems (including, without limitation, stored computer files, email messages and voice messages) and that my activity and any files or messages on or using any of those systems may be monitored at any time without notice.
5. Until one year after the term of my employment, I will not encourage or solicit any employee or consultant of Company to leave Company for any reason (except for the bona fide firing of Company personnel within the scope of my employment).
6. I agree that during the term of my employment with Company (whether or not during business hours), I will not engage in any activity that is in any way competitive with the business or demonstrably anticipated business of Company, and I will not assist any other person or organization in competing or in preparing to compete with any business or demonstrably anticipated business of Company.
7. I agree that this Agreement is not an employment contract for any particular term and that I have the right to resign and Company has the right to terminate my employment at will, at any time, for any or no reason, with or without cause. In addition, this Agreement does not purport to set forth all of the terms and conditions of my employment, and, as an employee of Company, I have obligations to Company which are not set forth in this Agreement. However, the terms of this Agreement govern over any inconsistent terms



and can only be changed by a subsequent written agreement signed by the President of Company.
8. I agree that my obligations under paragraphs 2, 3, 4 and 5 of this Agreement shall continue in effect after termination of my employment, regardless of the reason or reasons for termination, and whether such termination is voluntary or involuntary on my part, and that Company is entitled to communicate my obligations under this Agreement to any future
employer or potential employer of mine. My obligations under paragraphs 2, 3 and 4 also shall be binding upon my heirs, executors, assigns, and administrators and shall inure to the benefit of Company, its subsidiaries, successors and assigns.
9. Any dispute in the meaning, effect or validity of this Agreement shall be resolved in accordance with the laws of the State of California without regard to the conflict of laws provisions thereof. I further agree that if one or more provisions of this Agreement are held to be illegal or unenforceable under applicable California law, such illegal or unenforceable portion(s) shall be limited or excluded from this Agreement to the minimum extent required so that this Agreement shall otherwise remain in full force and effect and enforceable in accordance with its terms. This Agreement is fully assignable and transferable by Company, but any purported assignment or transfer by me is void. I also understand that any breach of this Agreement will cause irreparable harm to Company for which damages would not be an adequate remedy, and, therefore, Company will be entitled to injunctive relief with respect thereto in addition to any other remedies and without any requirement to post bond.
I HAVE READ THIS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS WHICH IT IMPOSES UPON ME WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO ME TO INDUCE ME TO SIGN THIS AGREEMENT. I SIGN THIS AGREEMENT VOLUNTARILY AND FREELY, IN DUPLICATE, WITH THE UNDERSTANDING THAT THE COMPANY WILL RETAIN ONE COUNTERPART AND THE OTHER COUNTERPART WILL BE RETAINED BY ME.
Employee
 
Stewart Butterfield
 
Signature
/s/ Stewart Butterfield
 
Name (Printed)
9/23/2009
Date



Accepted and Agreed to:
Slack Technologies, Inc.
By
/s/ Allen Shim
Name
Allen Shim
Title
VP, Business Operations





APPENDIX A

California Labor Code Section 2870. Application of provision providing that employee shall assign or offer to assign rights in invention to employer.
(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either:
(1)    Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or
(2)    Result from any work performed by the employee for his employer.
(b) To-the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.




APPENDIX B
PRIOR MATTER



Exhibit 10.10
TINYSPECKA01.JPG

March 9, 2014
All e n Shim
***
Dear Allen :
Tiny Speck, Inc . (the "Company") is p l eased to offer you employment on the following terms :
1. Position . Your initial title will be Vice President of Busin e ss Operations and you will report to the Comp a ny's Chief Executive O f ficer. This i s a full-time posit i on . While you r e nder services t o the Company, you will not engage in any other employment, consulting or other business activity (whether full-time or part-time) that would create a conflict of inter e st with the Company . By signing this letter agreement , you con fi rm to the Company that you have no contractual commitments or other legal obliga t ions t hat would prohibit you from performing your duties fo r the Comp a ny .
2. Cash Compensation. The Company will pay you a sal a ry a t the rate of $200,000 per year, payable in accordance with the Company 's s t a ndard payro ll schedul e. This s ala ry will b e subject to a djustment pursuant to the Company ' s employe e compens a tion policie s in effect from time to time .
3. Employee Benefits . A s a regul a r employee of the Comp a ny, you will be eligibl e to participat e in a number of Company-sponsored benefits. In addition, you will be ent i tl e d to paid v a cation in accordance with the Company's vacation policy, as in effect from time to time .
4. Stock Options. Subject to the a pproval of the Comp a ny' s Board of Directors or its Com pe nsation Committee, you will be granted an option to purchase shares o f t h e Comp a ny's Common Stoc k. The number of shares subject to t h e option and the exercise price per share will be determined by the Bo a rd of Dir e ctors or th e Comp e ns a tion Committee when the option is g ra nted. Th e option will b e subject to t h e terms and condition s a pplicable to options grant e d under the Company's Stock Plan (th e "Plan") , as described in the Plan and the applic a bl e Stock Option Agreem e nt. You will v est in 25 % of th e option shar es after 12 months of continuou s s e rvice, and the ba l anc e will v e s t in e qual monthly installment s over th e next 36 months of continuous service , as describ e d in the appli ca ble Stock Option Agreem en t.

360 CLEMENTINA ST. Ÿ SAN FRANCISCO, CA Ÿ 94103


5. Proprietary Information and Inventions Agreement. Like all Company emp l oyees, you will be required, as a condition of your employment with the Company, to sign the Company's standard Proprietary Information and Inventions Agreement , a copy of which is attached hereto as Exhibit A.
6. Employment Relationship. Employment with the Company is for no specific period of time. Your employment with the Company will be "at will," meaning that either you or the Company may terminate your employment at any time and for any reason, with or without cause. Any contrary representations that may have been made to you are superseded by this letter agreement. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits , as well as the Company's personnel policies and procedures, may change from time to time, the "at will" nature of your employment may only be changed in an express written agreement signed by you and a duly authorized officer of the Company (other than you).
7. Taxes. All forms of compensation referred to in this letter agreement are subject to reduction to reflect applicable withholding and payroll taxes and other deductions required by law. You agree that the Company does not have a duty to design its compensation policies in a manner that minimizes your tax liabilities, and you will not make any claim against the Company or its Board of Directors related to tax liabilities arising from your compensation.
8. Interpretation, Amendment and Enforcement. This letter agreement and Exhibit A constitute the complete agreement between you and the Company, contain all of the terms of your employment with the Company and supersede any prior agreements, representations or understandings (whether written, oral or implied) between you and the Company . This letter agreement may not be amended or modified, except by an express written agreement signed by both you and a duly authorized officer of the Company . The terms of this letter agreement and the resolution of any disputes as to the meaning, effect, performance or validity of this letter agreement or arising out of, related to, or in any way connected with, this letter agreement, your employment with the Company or any other r e lationship between you a nd the Company (the "Disputes") will be governed by California law, excluding laws relating to conflicts or choice of law. You and the Company submit to the exclusive personal jurisdiction of the federal and state courts l ocated in San Mateo Coun t y in connection with any Dispute or any claim related to any Dispute.
* * * * *
We hope that you will accept our offer to join the Company. You may indicate your agreement with these terms and accept this offer by signing and dating both the enclosed

360 CLEMENTINA ST. Ÿ SAN FRANCISCO, CA Ÿ 94103


duplicate original o f this letter agreement a nd the enclosed Propriet a ry Information and Inventions Agreement a nd returning them to me . This offer, if not accepted, will expire at the c lose of business on M a rc h 14 , 2014. As requir e d by law, your employm e nt with the Company i s contingent upon your pro v iding legal proof o f your identity and authorization to work in the United Stat e s . Your e mployment is also c ontingent upon y our starting work with the Company on or before March 24 , 2014 .
If y o u h a v e any questions, pl e as e call me at              .
Very truly yours,
 
TINY SPECK, INC.
 
 
 
/s/ Stewart Butterfield
 
 
By:
Stewart Butterfie l d
Title :
Chief Executive Of fi cer

I have read and accept this employment offer:
 
 
/s/ Allen Shim
 
Sign a tu re o f All e n Shim
 
 
Dated:
3/10/14
Attachment
Exhibit A : Proprietary Inform a tion and Invention s Agreement

360 CLEMENTINA ST. Ÿ SAN FRANCISCO, CA Ÿ 94103
Exhibit 10.11
SLACKA01.JPG


March 23, 2016


Robert Frati
Sent Electronically

Dear Robert:

Slack Technologies, Inc. (the "Company") is pleased to offer you employment on the following terms:

1.     Position . Your initial title will be Vice President of Sales, and you will initially report to the Chief Executive Officer. This is a full-time position. While you render services to the Company, you will not engage in any other employment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company. By signing this letter agreement, you confirm to the Company that you have no contractual commitments or other legal obligations that would prohibit you from performing your duties for the Company.

2.     Base Pay . The Company will pay you a starting salary at the rate of USD$420,000.00 per year, payable in accordance with the Company's standard payroll schedule. This salary will be subject to adjustment pursuant to the Company's employee compensation policies in effect from time to time.

3.     Incentive Pay Eligibility . You will be eligible for variable compensation under the rules of the incentive plan issued by the Company. Under the Plan, your variable compensation at 100% of target achievement would be USD $280,000 on an annualized basis, such that your total on-target annualized earnings, including your base pay would be USD $700,000.00. Whether or not you will receive any compensation under the Plan will be determined at the discretion of the Company. In exercising its discretion, the Company will consider objectives set out under the Plan, and your performance against the targets that will be set by the Company from time to time and provided to you. The Company will be reviewing the Plan from time to time, and may amend it at any time in its sole and absolute discretion.

4.     Sign-On Bonus . You will also be paid a one-time signing bonus of $250,000.00 USD, which will be included in your first paycheck. While paid at the start of your employment, this bonus will not be earned unless you remain employed by the Company for one year, and will be treated as an advance on the salary payable to you on the completion of one year's employment. You agree to repay this bonus to the Company if you terminate your employment with the Company or you are dismissed for cause within ( 1) year of your start date, either by deducting this amount from your final paycheck(s) or by check prior to your employment date.




Robert Frati
March 23, 2016
Page 2

5.     Relocation Reimbursement . The Company will provide relocation services administered through our relocation partner, MoveGuides, up to a maximum of USD $75,000.00. Should you voluntarily choose to leave the Company prior to one (1) year after your start date, you agree to repay any relocation reimbursements pro-rata back to the Company, either by deducting this amount from your final paycheck(s) or by you providing check prior to your last day of employment.

6.     Employee Benefits . As a regular employee of the Company, you will be eligible to participate in a number of Company-sponsored benefits. In addition, you will be entitled to paid vacation in accordance with the Company's vacation policy, as in effect from time to time.

7.     Stock Options and RSUs . Subject to the approval of the Company's Board of Directors or its Compensation Committee, you will be granted 682,080 Restricted Stock Units (the "RSUs"). The RSUs will initially be unvested but shall be eligible to become vested under the Company's standard terms. The RSUs will be subject to the terms and conditions applicable to restricted stock units granted under the Company's Stock Plan (the "Plan"), as described in the Plan and the applicable Restricted Stock Unit Agreement. The RSUs require both time-based vesting and performance-based vesting (the completion of a Change in Control or IPO) in order to vest. You will time-vest in 25% of the RSUs after 12 months of continuous service, and the balance will vest in equal [quarterly] installments over the next 12 quarters of continuous service, as described in the applicable Restricted Stock Unit Agreement. Moreover, the Company must complete a Change in Control or an IPO before the RSUs expire in order to be fully vested, also as described in the applicable Restricted Stock Unit Agreement.

8.     Proprietary Information and Inventions Agreement . Like all Company employees, you will be required, as a condition of your employment with the Company, to sign the Company's standard Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A .

9.     Employment Relationship . Employment with the Company is for no specific period of time. Your employment with the Company will be "at will," meaning that either you or the Company may terminate your employment at any time and for any reason, with or without cause. Any contrary representations that may have been made to you are superseded by this letter agreement. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Company's personnel policies and procedures, may change from time to time, the "at will" nature of your employment may only be changed in an express written agreement signed by you and a duly authorized officer of the Company (other than you).

10     Taxes . All forms of compensation referred to in this letter agreement are subject to reduction to reflect applicable withholding and payroll taxes and other deductions required by law. You agree that the Company does not have a duty to design its compensation policies in a



Robert Frati
March 23, 2016
Page 3

manner that minimizes your tax liabilities, and you will not make any claim against the Company or its Board of Directors related to tax liabilities arising from your compensation.

11.     Interpretation, Amendment and Enforcement . This letter agreement and Exhibit A constitute the complete agreement between you and the Company, contain all of the terms of your employment with the Company and supersede any prior agreements, representations or understandings (whether written, oral or implied) between you and the Company. This letter agreement may not be amended or modified, except by an express written agreement signed by both you and a duly authorized officer of the Company. The terms of this letter agreement and the resolution of any disputes as to the meaning, effect, performance or validity of this letter agreement or arising out of, related to, or in any way connected with, this letter agreement, your employment with the Company or any other relationship between you and the Company (the "Disputes") will be governed by California law, excluding laws relating to conflicts or choice of law. You and the Company submit to the exclusive personal jurisdiction of the federal and state courts located in San Francisco County in connection with any Dispute or any claim related to any Dispute.

* * * * *



Robert Frati
March 23, 2016
Page 4

We hope that you will accept our offer to join the Company. You may indicate your agreement with these terms and accept this offer by signing and dating both the enclosed duplicate original of this letter agreement and the enclosed Proprietary Information and Inventions Agreement and returning them to me. This offer, if not accepted, will expire at the close of business on March 31, 2016. As required by law, your employment with the Company is contingent upon your providing legal proof of your identity and authorization to work in the United States. Slack Technologies, Inc. conditions this offer upon successfully passing a background check. Your employment is also contingent upon your starting work with the Company on or before May 2, 2016.

Very truly yours,
 
 
SLACK TECHNOLOGIES, INC.
 
 
 
/s/Allen Shim
 
 
By:
Allen Shim
 
 
Title:
SVP, Finance & Operations

I have read and accept this employment offer:
 
 
/s/Robert Frati
Signature of Robert Frati
 
 
Dated:
3/30/2016


Exhibit 10.12






RETAIL LEASE AGREEMENT
BETWEEN
HART FOUNDRY SQUARE IV, LLC,
as Landlord
AND
SLACK TECHNOLOGIES, INC.,
as Tenant
500 HOWARD STREET, SAN FRANCISCO, CALIFORNIA








RETAIL LEASE
BASIC LEASE INFORMATION
Date:
January 24, 2018
 
 
Landlord:
HART FOUNDRY SQUARE IV, LLC, a Delaware limited liability company
 
 
Tenant:
SLACK TECHNOLOGIES, INC., a Delaware corporation
 
 
Building:
The building located at 500 Howard Street, San Francisco, California 94105, commonly known as Foundry Square IV
 
 
Premises:
Suite 100 of the Ground Floor
 
 
Rentable Area of Premises:
Approximately 3,425 rentable square feet
 
 
Scheduled Delivery Date:
May 1, 2018
 
 
Rent Commencement Date:
Four (4) calendar months from the Delivery Date, as such date may be extended as provided in Section 2(d)
 
 
Expiration Date:
The last day of the one hundred twentieth (120th) Lease Month following the Rent Commencement Date, subject to adjustment as provided in Section 1 (f)
 
 
 
 
 
Base Rent:
Year of Lease
Annual Rent
Annual
Monthly
 
Term
per sq. ft.
Rent
Rent
 
 
 
 
 
 
Year 1
$82.00
$280,850.00
$23,404.17
 
Year 2
$84.46
$289,275.50
$24,106.29
 
Year 3
$86.99
$297,953.77
$24,829.48
 
Year 4
$89.60
$306,892.38
$25,574.36
 
Year 5
$92.29
$316,099.15
$26,341.60
 
Year 6
$95.06
$325,582.12
$27,131.84
 
Year 7
$97.91
$335,349.59
$27,945.80
 
Year 8
$100.85
$345,410.08
$28,784.17
 
Year 9
$103.88
$355,772.38
$29,647.70
 
Year 10
$106.99
$366,445.55
$30,537.13
 
 
 
Subject to Section 3(c), Base Rent for the first full calendar month
 
following the Rent Commencement Date is abated.
 
 
Base Year:
2018
 
 
Tenant’s Expense Share:
1.4283%
 
 
Tenant’s Tax Share:
1.4283%
 
 

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Permitted Use of Premises:
High quality retail use promoting and showcasing Tenant’s products and
offerings, subject to Section 6, including apparel, electronics and
technology applications and accessories, as well as in-store
presentations and events showcasing Tenant’s brand and technology
partners.
 
 
Minimum Days and Hours Open for Business:
9:00 a.m. through 6:00 p.m., Monday through Friday, subject to Section 6.
 
 
Tenant’s Address for Notices:
Prior to the Commencement Date:
 
 
 
Slack Technologies, Inc.
155 5th Street
San Francisco, CA 94103
Attn: Chief Executive Officer
 
 
 
From and after Commencement Date:
 
 
 
Slack Technologies, Inc.
500 Howard Street
San Francisco, CA 94105
Attn: Chief Executive Officer
 
 
 
in each case with a copy to:
 
 
 
Shartsis Friese LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Attn: Jonathan M. Kennedy
 
 
Landlord’s Address for Notices:
HART Foundry Square IV, LLC
c/o HEITMAN
191 North Wacker Drive, Suite 2500
Chicago, IL 60606
Attn: Asset Manager
 
 
 
With a copy to:
 
 
 
HART Foundry Square IV, LLC
c/o CBRE, Inc.
500 Howard Street, Suite 104
San Francisco, CA 94105
Attn: Property Manager
 
 
Address for Payment of Rent:
HART Foundry Square IV, LLC
26287 Network Place
Chicago, IL 60673-1262
 
 
Extension Options:
Two (2) extension terms of five (5) years each

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Exhibit(s) and Schedules:
Exhibit A:
Floor Plan
 
Exhibit B:
Building Rules
 
Exhibit C:
Work Letter and Construction Agreement
 
Exhibit D:
Commencement Date Memorandum
 
Exhibit E:
Tenant Estoppel
 
 
Real Estate Brokers:
CBRE, Inc., representing Landlord, and Colliers International, representing Tenant
 
 
Tenant Improvement Allowance:
$171,250.00 based on $50.00 per rentable square foot of the Premises as reimbursement for Approved Tenant Improvement Costs in accordance with Exhibit C .
The provisions of the Lease identified above in parentheses are those provisions where references to particular Basic Lease Information appear. Each such reference shall incorporate the applicable Basic Lease Information. In the event of any conflict between any Basic Lease Information and the Lease, the latter shall control.
TENANT
LANDLORD
 
 
SLACK TECHNOLOGIES, INC.,
HART FOUNDRY SQUARE IV, LLC,
a Delaware corporation
a Delaware limited liability company
 
 
By: /s/ Stewart Butterfield
By: /s/ George Rumel
Name: Stewart Butterfield
Name: George Rumel
Its: Chief Executive Officer
Its: Senior Vice President


- iii -


TABLE OF CONTENTS
 
 
Pages
22
24
27
29
30
30
30
30
33
36
36
37
37
37
39
Exhibit A:    Floor Plan
Exhibit B:    Building Rules
Exhibit C-l:    Work Letter and Construction Agreement
Exhibit D:    Commencement Date Memorandum

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RETAIL LEASE
THIS RETAIL LEASE (this “ Lease ”), dated January 24, 2018, for purposes of reference only, is made and entered into by and between HART FOUNDRY SQUARE IV, LLC, a Delaware limited liability company (“ Landlord ’’), and SLACK TECHNOLOGIES, INC., a Delaware corporation (“ Tenant ”).
WITNESSETH:
Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the premises described in Section 1(b) below for the term and subject to the terms, covenants, agreements and conditions hereinafter set forth, to each and all of which Landlord and Tenant hereby mutually agree.
1.     Terms . Unless the context otherwise specifies or requires, the following terms shall have the meanings herein specified:
(a)    “ Building ” shall mean the building or buildings described in the Basic Lease Information, and the parcel or parcels of land on which such building or buildings are situated, together with all other improvements and other real property located on such parcel or parcels, as well as any property interest in the area of the streets bounding the parcel described in the Basic Lease Information, and all other improvements on or appurtenances to said parcel or said streets.
(b)    “ Business Day ” shall mean the days Monday through Friday, excluding Holidays. “ Holidays ” shall mean the dates of observation of New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and other locally or nationally recognized holidays on which federally insured national banks doing business in the State of California are required or permitted under applicable laws to close for business
(c)    “ Common Areas ” shall mean all areas and facilities outside the Premises and within the exterior boundary line of the Project, excluding areas within the Building, that are, from time to time, provided and designated by Landlord for the non-exclusive use of Landlord, Tenant, other tenants of the Project and their respective employees, guests and invitees, including, without limitation, sidewalks, landscaping, court yards and exterior stairs and walkways.
(d)    “ Default Rate ” shall mean the lesser of: (1) four percent (4%) over the prime rate as quoted in The Wall Street Journal as the base rate charged by the nation’s largest banks on corporate loans as of the date such Rent payment was due; or (2) ten percent (10%) per annum. Notwithstanding the foregoing, the aggregate liability for any interest accruing under this Lease shall not exceed the limits, if any, imposed by applicable Laws. Any interest paid in excess of such limits shall be credited to Tenant by application of the amount of excess interest paid against any outstanding Rent obligations in any order that Landlord elects. If the amount of excess interest paid exceeds the amount of outstanding Rent, such excess portion shall be refunded to Tenant by Landlord. To ascertain whether any interest payable exceeds the limits imposed, any non-principal payment (including late charges) shall be considered to the extent permitted by Law to be an expense or a fee, premium or penalty, rather than interest.
(e)    “ Delivery Date ” shall mean the later to occur of (i) the Scheduled Delivery Date, and (ii) the actual date of delivery of possession of the Premises by Landlord in Ready for Occupancy Condition.
(f)    “ Expiration Date ” shall, initially be based on the date provided in the Basic Lease Information, and shall be subject to adjustment as follows: (i) once the Phase II Premises Commencement Date is determined under the Office Lease, the Expiration Date shall be adjusted to be coterminous with the Expiration Date of the Office Lease, (ii) if the Phase II Premises Commencement Date does not occur, by October 15, 2018 (as such date is extended under the terms of the Office Lease), and Tenant elects to terminate

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the Office Lease, this Lease shall terminate coterminously with the termination of the Office Lease, and such date shall be deemed the Expiration Date under this Lease.
(g)    “ FF&E ” shall mean any and all of Tenant’s furnishings, equipment, and trade fixtures installed in the Premises
(h)    “ Force Majeure ” shall mean any event of (i) civil commotion, terrorism or threat thereof, act of a public enemy, war, riot, sabotage, blockade or embargo, and (ii) lightning, earthquake, fire, storm, hurricane, tornado, flood, washout, explosion or act of God
(i)    “ Lease Month ” shall mean a full calendar month. If the Rent Commencement Date is other than the first day of a calendar month, said partial month shall be disregarded solely for purposes of calculating the number of Lease Months in the Term, and the first Lease Month shall be the first full calendar month following the Rent Commencement Date. Notwithstanding anything to the contrary in the foregoing, (i) Base Rent for any partial calendar month in which the Rent Commencement Date occurs shall be prorated based on a 30-day month, and (ii) the period of time from the Delivery Date to the Rent Commencement Date shall be determined based on the actual passage of a month from the day of the month on which the Delivery Date occurs to the next calendar month of the same date.
(j)    “ Normal Business Hours” for the Building shall mean 8:00 a.m. to 6:00 p.m. Mondays through Fridays, exclusive of holidays.
(k)    “ Office Lease ” shall mean that certain Office Lease Agreement dated December 22, 2017, as amended, entered into by Landlord and Tenant for other premises of the Building.
(l)    “ Permitted Use ” shall mean the permitted use described in the Basic Lease Information, as more particularly described in, and subject to the limitations and restrictions of, Section 6.
(m)    “ Premises ” shall mean the portion of the Building located on the Ground Floor of the Building referenced in the Basic Lease Information and generally shown on the floor plan attached to this Lease as Exhibit A . Landlord and Tenant agree that the Premises consist of the number of square feet of rentable area set forth in the Basic Lease Information. All the outside walls and windows of the Premises and any space in the Premises used for shafts, stacks, pipes, conduits, ducts, electric or other utilities, sinks or other Building facilities, and the use thereof and access thereto through the Premises for the purposes of operation, maintenance and repairs, are reserved to Landlord.
(n)    “ Project ” shall mean that certain office/retail project with a Street address of 500 Howard Street, San Francisco, California, commonly known as the “Foundry Square IV , ” together with any buildings, improvements and land on adjacent parcels that Landlord may, in the future, elect to own or operate jointly with the Buildings and designate as Common Area.
(o)    “ Ready for Occupancy Condition ” shall mean (1) broom clean, and (2) all Building mechanical and utility systems serving the Premises are in good working order and condition.
(p)    “ Specialized Alterations ” shall mean any of the following as and to the extent installed by Tenant: (i) trade fixtures, (ii) plumbing and HVAC lines exclusively serving the Premises, (iii) unique architectural design elements that alter the general use of the Premises for general retail use, including ceiling tiles and wall coverings, and (iv) any retail signage installed by Tenant within or outside of the Premises, including all electrica1lines and connections supporting the same.
(q)     “Tenant Parties” shall mean Tenant, any Permitted Transferee of Tenant, and each of their respective agents, employees, contractors and invitees.

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To the extent a term is defined or described in the Basic Lease Information, such term shall incorporate the definition and/or description set forth in the Basic Lease Information.
2.     Lease Term; Condition of Premises .
(a)    The Lease term (the “Lease Term”) shall commence on the Delivery Date and, unless ended sooner as herein provided, shall expire on the Expiration Date. Landlord and Tenant hereby agree to confirm the actual Delivery Date and Expiration Date by executing and delivering to each other counterparts of a Commencement Date Memorandum in the form of Exhibit D attached hereto, but the Lease Term shall commence on the Delivery Date and end on the Expiration Date whether or not such memorandum is executed. From the Delivery Date through the Rent Commencement Date, Tenant’s occupancy of the Premises shall be on and subject to all of the covenants in this Lease, all of which shall be binding on and apply to Tenant during such occupancy, except that Tenant’s obligation to pay Base Rent and any Additional Rent chargeable to Tenant under Section 3(a)(ii) shall commence on the Rent Commencement Date.
(b)    If Landlord for any reason whatsoever cannot deliver possession of the Premises to Tenant on the Scheduled Delivery Date, this Lease shall not be void or voidable, no obligation of Tenant shall be affected hereby and Landlord shall not be liable to Tenant for any loss or damage resulting therefrom; provided that any Monthly Rental shall only commence as of, and shall be prorated for the period beginning from, the date Landlord actually delivers possession of the Premises to Tenant in the condition required by this Lease.
(c)    Landlord shall deliver possession of the Premises to Tenant in Ready for Occupancy Condition; provided, however, with respect to the portion of the Premises formerly known as Suite 101 (in which the previous tenant in occupancy conducted business therein as a dentist), prior to delivery of the Premises to Tenant Landlord shall cause to be removed, at Landlord's sole cost and expense, any of said previous tenant's furniture, trade fixtures and equipment (including specialized dentistry equipment), together with any associated plumbing serving any such trade fixtures or specialized equipment (“Landlord’s Demolition Work”), but leaving in place the restrooms and fixtures in said space and associated plumbing serving said restrooms. Except for the completion of Landlord’s Demolition Work, (i) Landlord shall have no obligation to construct or install any improvements in the Premises, and (ii) Tenant’s possession of the Premises shall constitute Tenant’s acknowledgment that the Premises are in all respects in the condition in which Landlord is required to deliver the Premises to Tenant under this Lease and that Tenant has examined the Premises and is fully informed to Tenant’s satisfaction of the physical and environmental condition and the utility of the Premises for its business purposes. Tenant acknowledges that Landlord, its agents and employees and other persons acting on behalf of Landlord have made no representation or warranty of any kind in connection with any matter relating to the physical or environmental condition, value, fitness, use or zoning of the Premises upon which Tenant has relied directly or indirectly for any purpose, except as specifically set forth in this Lease.
(d)    Subject to terms of the Work Letter and Construction Agreement attached to this Lease as Exhibit C-1 (the “Work Letter ”), Tenant shall be entitled to improve the Premises with Tenant Improvements suitable for the conduct of Tenant’s Permitted Use.
(e)    Landlord and Tenant acknowledge that all references in this Lease to specific figures of RSF and Tenant’s Share shall be final and binding on Landlord and Tenant and that such acknowledgment is supported by adequate consideration; provided, however, that if Tenant exercises any Option (as defined below in Section 36), Landlord shall have the right, but not the obligation, to remeasure the Premises and the Building to recalculate references to RSF and Tenant’s Share in this Lease, as determined by Landlord’s architect in accordance with the then current standard of measurement developed by the American National Standard Institute of Building Owners and Managers Association International (ANSI/BOMA), in connection with the exercise of any Option.

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3.     Rent .
(a)     Rent . Tenant shall pay to Landlord the following amounts as rent for the Premises:
(i)     Base Rent . Tenant shall pay to Landlord Base Rent for the Premises on the Rent Commencement Date and thereafter on or before the first day of each calendar month of the Lease Term, subject to abatement as expressly provided in this Lease.
(ii)     Additional Rent . During each calendar year after the Base Year, Tenant shall pay to Landlord as “Additional Rent ” Tenant’s Share of increases in Property Taxes and Operating Expenses (as such terms are defined below) incurred by Landlord in the operation of the Project over the Project Taxes and Operating Expenses incurred by Landlord in the operation of the Project during the applicable Base Year.
(iii)     Utility Rent . Tenant shall pay to Landlord Utility Rent. “ Utility Rent” shall mean all charges incurred for the use and consumption of the utilities provided in Sections 7(a) and 7(e) of this Lease. Landlord may estimate the Utility Rent monthly, by meter readings, and invoice Tenant therefor, in arrears. All Utility Rent charges shall be due and payable monthly, together with the next payment of Base Rent (as defined below) that is not less than twenty-one (21) days following Landlord’s invoice for such charges. Landlord’s failure to bill Tenant for any such amounts shall not waive Landlord’s right to bill Tenant for such amounts at a later time, provided that, except if due to the delayed or any restated invoices received from the utility provider, Tenant shall not be responsible for invoices submitted to Tenant for payment more than three (3) months in arrears. Tenant’s right to object to Utility Rent shall be subject to the same audit rights in Section 4(h) below. Utility Rent does not include charges for utilities consumed in connection with Common Area which are separately billed as an element of Operating Expenses as provided in Section 4(b) of this Lease.
(iv)     Janitorial Rent . Tenant shall pay to Landlord Janitorial Rent. “Janitorial Rent” shall mean all charges incurred by Landlord for the provision of janitorial services in connection with Tenant’s use of the Premises as provided in Section 7(a) of this Lease. All Janitorial Rent charges shall be due and payable monthly, together with the next payment of Base Rent (as defined below) that is not less than twenty-one (21) days following Landlord’s invoice for such charges; provided, however, that no Janitorial Rent shall be due in connection with janitorial services procured by and paid for by Tenant directly. Landlord’s failure to bill Tenant for any such amounts shall not waive Landlord’s right to bill Tenant for such amounts at a later time. Tenant’s right to object to Janitorial Rent shall be subject to the same audit rights in Section 4(h) below.
All sums of money required to be paid by Tenant to Landlord under this Lease are deemed to be obligations in the nature of rent whether or not such obligations are expressly so designated, and are collectively referred to herein as “ Rent. ” Except as expressly provided in this Lease, all Rent shall be payable to Landlord as provided in this Section 3, without any invoice, notice, or other demand therefor, and without any abatement, deduction, credit or offset whatsoever, except as expressly provided for in this Lease. All Rent shall be paid by check in lawful money of the United States of America to Landlord (or to any other person designated by Landlord in a notice to Tenant) at Landlord’s Notice Address for the payment of Rent, or by ACH wire transfer pursuant to a notice from Landlord to Tenant of Landlord’s wire transfer instructions. No payment shall be made in cash. Tenant shall not pay any Rent more than one (1) month in advance without the prior written consent of Landlord and any Holder of which Tenant has notice and whose consent to such payment is required. Tenant shall pay Landlord, as Additional Rent, in addition to any interest and late charges payable by Tenant, the sum of One Hundred Dollars ($100.00) for each check that is returned to Landlord for non-sufficient funds or that is otherwise dishonored. If any check of Tenant is dishonored, any or all subsequent

4


payments of Rent shall, at Landlord’s option, be made by certified check or other form of guaranteed payment acceptable to Landlord.
(b)     Late Payment Charges . Any amount due from Tenant to Landlord under this Lease which is not paid within ten (10) days of the date due, shall bear interest from the date such payment is due until paid (computed on the basis of a 365-day-year) at the Default Rate. The payment of such interest shall not excuse or cure a default by the Tenant hereunder.
(c)     Base Rent Abatement . Notwithstanding anything to the contrary in Section 3(a)(i) above, Landlord agrees to waive payment of Base Rent for the first full Lease Month following the Rent Commencement Date. If the Rent Commencement Date occurs on a day other than the first day of the calendar month, Base Rent for the partial month in which the Rent Commencement Date occurs shall be due and payable on the Rent Commencement Date.
4.     Operating Expenses: Taxes .
(a)     Landlord’s Estimate . Prior to or promptly after the commencement of each calendar year following each applicable Base Year, Landlord shall give Tenant a good faith written estimate of the anticipated increases in Property Taxes and Operating Expenses over the applicable Base Year and of Tenant’s Share of such increases. Tenant shall pay such estimated amount to Landlord in equal monthly installments, in advance on or before the first day of each calendar month with the monthly installment of Base Rent payable under Section 3 above. If Landlord determines that its good faith estimate of Tenant’s Share of the increases in Property Taxes and Operating Expenses was incorrect, Landlord may provide Tenant with a revised written estimate. After receipt of the revised estimate, Tenant’s monthly payments shall be based on the revised written estimate. Within six (6) months after the end of each calendar year other than the Base Year, Landlord shall furnish to Tenant a statement showing in reasonable detail the actual increases over the Base Year in Property Taxes and Operating Expenses incurred by Landlord during the applicable calendar year and Tenant’s Share thereof and the payments made by Tenant with respect to such period (the “Landlord’s Statement” ). If the Landlord’s Statement is timely delivered and shows that the amount paid by Tenant was less than Tenant’s Share of the actual increases in Property Taxes and Operating Expenses as to the Premises, Tenant shall pay the amount of the deficiency to Landlord within thirty (30) days after receiving the Landlord’s Statement. If the Landlord’s Statement shows Tenant has overpaid, provided no Event of Default is uncured at such time, the amount of the excess shall be credited against installments of Rent next coming due under this Lease; provided, however, if the Lease expires or is terminated prior to the distribution of the Landlord’s Statement for a given year, and further provided Tenant is not then in default under this Lease, Landlord shall refund any excess Additional Rent to Tenant within thirty (30) days after Tenant’s receipt of Landlord’s Statement, after first deducting the outstanding amount of Rent due, if any. Landlord and Tenant’s obligations to pay for or credit any increase or decrease in payments pursuant to this Lease shall survive the expiration or earlier termination of this Lease.
(b)     Operating Expenses . For purposes of this Lease, the term “Operating Expenses” shall mean the actual costs of and expenses paid or incurred by Landlord for maintaining, operating, repairing, replacing and administering the Project, including all common areas and facilities, and shall include the following costs, by way of illustration but not limitation:
(i)    Cost of all utilities, including surcharges, for the Building and Project, including the cost of water, gas, sewer, heat, light, power, steam and air conditioning, not actually paid directly by Tenant or any other tenant of the Building or third party;

5


(ii)    Cost of all insurance which Landlord or Landlord’s lender deems necessary or appropriate;
(iii) License, permit, and inspection fees;
(iv) Cost of maintenance and service contracts (including without limitation, for security and management services, window cleaning, floor waxing, elevator maintenance and repair, landscaping, Common Area janitorial service, engineers and trash removal services);
(v)    Labor costs, including wages and salaries of all employees engaged in the operation, management, maintenance and security of the Building and Project at or below the level of Building Manager, as reasonably allocated to the Building and Project;
(vi)    All property management costs, including office rent for any property management office and professional property management fees, as such are allocated to the Premises in accordance with good property management practices;
(vii)
Cost of maintenance and repair of driveways and surface areas;
(viii) Cost of supplies, materials, equipment, tools and the cost of capital replacements (as opposed to capital improvements) used in the operation, repair, replacement and maintenance of the Building and Project;
(ix)    Cost of any capital improvements or modifications made to the Project by Landlord that are designated as Permitted Capital Expenses;
(x)    Cost of implementation of environmental sustainability practices, including energy efficiency and waste management to the extent such are intended to reduce Operating Expenses;
(xi)    Cost of operation, maintenance and repair of the parking garage for the Building, provided, however, if Landlord leases or contracts for the management of the parking garage to or with a third party operator, the foregoing costs shall be limited to the cost of capital improvements, repairs and modifications to the parking garage (amortized as hereinafter provided);
(xii)    Project-related legal and accounting expenses incurred solely with respect to Landlord’s operation of the Project (and not incurred with respect to expenses excluded from Operating Expenses under Section 4(c) below); and
(xiii)    All other expenses or charges which, in accordance with generally accepted management practices for commercial office projects comparable to the Project, would be considered a reimbursable expense of maintaining, operating, repairing, replacing or administering the Project.
Capital costs included in Operating Expenses shall be limited to Permitted Capital Expenses. As used herein, “Permitted Capital Expenses” shall mean and refer to capital improvements undertaken in (or capital assets acquired for) the Project or any portion thereof during or after the Base Year, to the extent such capital items (i) are primarily undertaken to effect savings in the cost of operations or maintenance of the Project or any portion thereof over the useful life thereof; (ii) are undertaken for the purpose of enhancing the security, health and safety of the occupants of the Project and are of a type and quality then currently found or then being adopted or implemented in commercial office projects comparable to the Project; or (iii) are incurred for purposes of compliance with or because required under any applicable Law, other than where a notice of violation has been served on Landlord as of any Commencement Date. Such Permitted Capital Expenses

6


shall be amortized over their useful life, together with interest at the actual interest rate incurred by Landlord; all other capital expenditures, improvements and repairs shall be excluded from Operating Expenses. In addition, however, capital costs included in Operating Costs shall also include the cost of any capital improvements made to or capital assets acquired for the Building during or after the Base Year to the extent that the cost of any such improvement or asset is less than ten thousand dollars ($10,000) or has a useful life of five (5) years or less. Capital costs included in Operating Expenses shall be amortized over the useful life of the improvements, as reasonably determined by Landlord, together with a return on capital at the current market rate per annum on the unamortized balance. Permitted Capital Expenses, to the extent first undertaken in the 2018 Base Year, shall be excluded from Operating Expenses in said Base Year.
(c)     Exclusions . Notwithstanding anything to the contrary contained in Section 4(b) above, Operating Expenses shall not include: (i) costs required to be paid for directly by Tenant or any other tenant of the Building (including any janitorial service contracted for and paid by Tenant); (ii) the cost of additional or extraordinary services provided to other tenants of the Building, including, without limitation, above Building standard heating, ventilation and air conditioning and janitorial services; (iii) principal and interest payments and any other charges on loans secured by deeds of trust recorded against the Project and any costs associated with any refinancing of the Building (or any unsecured debt), including attorneys’ fees, environmental investigations or reports, points, fees and other lender costs and closing costs or amortization; (iv) any costs associated with the sale of the Building, including, without limitation, advertising, marketing, consulting and brokerage commissions; (v) executive salaries of off-site personnel employed by Landlord except for the charge (or pro rata share) of the Project employees otherwise permitted under Section 4(b) above; (vi) the cost of capital improvements (except for Permitted Capital Expenses) or rentals for items which if purchased, rather than rented, would constitute a capital improvement or equipment; (vii) the cost of repairs or other work to the extent (1) Landlord is reimbursed by insurance or condemnation proceeds, or (2) the same is required as a result of the active negligence of Landlord or its agents; (viii) costs and expenses incurred in connection with procuring tenants, including lease marketing and advertising expenses, concessions, lease takeover or rental assumption obligations, brokerage commissions, and professional and legal fees incurred in connection with lease negotiations, sublease and/or assignment negotiations and transaction with present or prospective tenants or other occupants of the Project; (ix) design and engineering fees and construction costs (including permit, license and inspection fees) incurred in connection with the leasing of specific space in the Building to tenants; (x) except for normal, budgeted legal and accounting costs attributed to the normal operation of the Building, legal and accounting fees, monetary damages, awards, judgments or settlement amounts incurred or paid by Landlord as a result of and for any leases or disputes with tenants, occupants or third parties relating to the Building; (xi) depreciation of the Building (except as otherwise set forth above as a Permitted Capital Expense); (xii) expenditures for repairing or replacing any defect in the design or construction of Building; (xiii) leasehold amortization or other non-cash items (except as set forth in Section 4(b) above); (xiv) costs arising from the presence or removal of any Hazardous Materials located in the Building or the Project including, without limitation, any costs incurred pursuant to the requirements or any governmental laws, ordinances, regulations or orders relating to health, safety or environmental conditions, regulations concerning asbestos, soil and ground water conditions or contamination regarding hazardous materials or substances; ( xv) any bad debt loss, rent loss, or reserves for bad debts or rent loss; (xvi) costs relating to maintaining Landlord’s legal existence, either as a corporation, partnership or other entity; (xvii) all costs of Landlord’s general corporate and general administrative and overhead expenses (except as to items specifically included in Operating Expenses above); (xviii) costs of goods and/or services rendered by affiliates of Landlord to the extent the same exceeds the cost of such goods and/or services rendered by unaffiliated third parties on a competitive bid basis for comparable buildings with institutional owners in San Francisco, California; (xix) management fees, whether paid to

7


Landlord or to an outside managing agent, in excess of the range of prevailing management fees per rentable square foot charged in comparable buildings with institutional owners in San Francisco, California; (xx) ground rent or payments under ground leases, if any; (xxi) costs incurred by Landlord to bring any portion of the Building into compliance with any applicable Laws or governmental or regulatory agency’s rules or regulations based on violations as of the Effective Date, and any fines or fees imposed or assessed against Landlord for Landlord’s failure to comply with any law or governmental or regulatory agency’s rules or regulations; (xxii) reserves of any kind, including replacement reserves, and reserves for bad debts or lost rent or any similar charge; (xxiii) costs incurred by Landlord in connection with rooftop communications equipment of Landlord; (xxiv) costs incurred in connection with the original construction of the Building or the Project or any addition to the Project or in connection with any renovation, alteration or major change in the Building or the Project including, but not limited to, the addition or deletion of floors; (xxv) any costs, fees, dues, contributions or similar expenses for industry associations or similar organizations; (xxvi) any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord in the Building or Project; (xxvii) the entertainment expenses and travel expenses of Landlord, its employees, agents, partners and affiliates; (xxviii) any costs associated with the purchase or rental of furniture, fixtures or equipment for any management office, offices associated with the Project or for Landlord’s corporate or administrative offices; (xxix) costs incurred by Landlord due to the violation by Landlord of the terms and conditions of any contract or agreement relating to the original construction of the Building or any part thereof; (xxx) costs of traffic studies, environmental impact reports, transportation system management plans and reports, and traffic mitigation measures or due to studies or reports relating to the original construction of the Building; (xxx) any improvements installed or work performed or any other cost or expense incurred by Landlord in order to comply with the requirements for obtaining a certificate of occupancy for the Building or Project or any space therein in connection with the original construction of the Building; (xxxi) any fees, bond costs or assessments levied on the Project by any transit district (or any other governmental entity having the authority to impose such fees, bond costs or assessments for mass transit improvements) in connection with the original construction of the Building; and (xxxii) any costs or expenses relating to any provisions of any development agreements, owner’s participation agreement, conditional use permits, easements or other instruments entered into in connection with the original construction of the Building (collectively, the “Project Documents”), including any initial payments or costs made in connection with any child care facilities, traffic demand management programs, transportation impact mitigation fees, art programs, or parking requirements and programs. Nothing contained in this Section 4(c) shall restrict Landlord from passing through to Tenant as Operating Expenses all increases in assessments, special assessments, fees, bond costs, transportation impact mitigation fees, child-care facilities costs, or other similar charges that are first assessed or incurred after the original construction of the Building or that are assessed based on current occupancies, uses or impacts of the Project or any portion thereof or are assessed pursuant to requirements of the CC&Rs, including pursuant to the requirements of commercially reasonable modifications to the CC&Rs.
(d)     Real Property Taxes . For purposes of this Lease, the term “Property Taxes” shall mean all assessment, license, fee, rent, tax, levy, interest, or tax (other than Landlord’s net income, estate, succession, inheritance, gift, excise, transfer or franchise taxes) charges, imposed by any authority having the direct or indirect power to tax, or by any city, county, state or federal government or any improvement or other district or division thereof, on the real property comprising the Project, including any land and improvements thereon, whether such tax is: (i) determined by the value or area of the Project or any part thereof (or any improvements now or hereafter made to the Project or any portion thereof by Landlord, Tenant or other tenants); (ii) upon any legal or equitable interest of Landlord in the Project or any part thereof; (iii) upon this transaction or any document to which tenant is a party creating or transferring any interest in

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the Project; (iv) levied or assessed in lieu of, in substitution for, or in addition to, existing or additional taxes against the Project whether or not now customary or within the contemplation of the parties; or (v) assessed upon real property generally for the purpose of constructing or maintaining or reimbursing the cost of construction of any streets, utilities, or other public improvements. Notwithstanding anything to the contrary contained herein, Property Taxes shall not include any amounts payable by Tenant under Section 4(e) below. With respect to any taxes or assessments which may be levied against or upon the Project, or which under the Laws then in force may be evidenced by improvements or other bonds or may be paid in annual installments only the amount of such annual installment (with appropriate proration for any partial year) and interest due thereon shall be included within the computations of the annual taxes and assessments levied against the Project (but any credit given by the taxing authorities against any such installation arising from earlier payments or earlier funding or reserves shall be disregarded in the calculation of any such annual assessments). If Landlord receives a reduction in Real Property Taxes attributable to the Base Year as a result of commonly called Proposition 8 application, then Real Property Taxes for the Base Year shall be calculated as if no Proposition 8 reduction in Real Property Taxes were received.
(e)     Other Taxes Payable by Tenant . In addition to, and notwithstanding anything to the contrary in, this Section 4, Tenant shall pay, prior to delinquency, one hundred percent (100%) of any(a) rent tax, gross receipts tax, sales or use tax, service tax, value added tax, or any other applicable tax based on Landlord’s receipt, or the payment by Tenant, of any Rent or services herein, including any taxes charged in connection with Tenant’s use of or payment of Rent for the parking facilities of the Building if not separately charged to Tenant; (b) taxes assessed upon or with respect to the possession, leasing, alteration, repair, use or occupancy by Tenant of the Premises or any portion of the Project;(c) [intentionally omitted]; (d) taxes assessed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises; and (e) any increase in taxes attributable to inclusion of value placed on Tenant’s personal property, trade fixtures, or Alterations. Without limiting the generality of the foregoing, any reassessment of the Project attributable to the Tenant Improvements constructed by Tenant pursuant to the Work Letter shall be chargeable entirely to Tenant. If any such taxes are chargeable or assessed against Landlord on a monthly basis, such taxes shall be due and payable together with Tenant’s payment of Base Rent, based on Landlord’s statement therefore given to Tenant by Notice at least twenty-one (21) days prior to the date Base Rent is due under this Lease. In the event that it shall not be lawful for Tenant to so reimburse Landlord, the Base Rent payable to Landlord under this Lease shall be revised to net to Landlord the same amount after imposition of any such tax upon Landlord as would have been received by Landlord under this Lease prior to the imposition of such tax .
(f)     Cost Pools . Landlord reserves the right, in good faith, to establish classifications for the equitable allocation of Operating Expenses that are incurred for the direct benefit of specific types of tenants or users in the Building, and the specific buildings located within the Project (“ Cost Pools ”). Such Cost Pools may include, but shall not be limited to, general office tenants and retail tenants of the Building. Landlord’s determination of such allocations shall be made in a manner consistent with its good faith business judgment as to the management of the Project and shall be final and binding on Tenant. Tenant acknowledges that the allocation of Operating Expenses among Cost Pools does not affect all such items and is limited to specific items that are incurred or provided to tenants of Cost Pools which Landlord determines, in good faith, it would be inequitable to share, in whole or in part, among tenants of other Cost Pools in the Project.
(g)     Operating Expense Adjustments . Notwithstanding any other provision to the contrary, it is agreed that if the Building is less than one-hundred percent (100%) occupied during any calendar year, an adjustment shall be made by Landlord with respect to such Operating Expenses that vary

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with occupancy for such year so that Tenant’s Share of Operating Expenses shall be equivalent to the Operating Expenses calculated as though the Building had been one hundred percent (100%) occupied during such year. In addition, if the Operating Expenses in any year other than the Base Year increase due to a change of policy or practice in operating the Building, such as a determination to carry earthquake insurance or provide 24-hour security guard service, such increase shall be included in Operating Expenses only to the extent of the increase in cost over the projected costs that would have been included in Operating Expenses for the Base Year if such policy or practice had been in effect during the entire Base Year. Conversely, if the Operating Expenses in any year other than the Base Year decrease due to an elimination of the service underlying the Operating Expense, then the cost of such service shall be deleted from the Base Year Operating Expenses for purposes of determining the Operating Expenses payable for subsequent years that the service is not included; provided, however, in no event shall the amount payable by Tenant as an Expense Increase attributable to Operating Expenses decrease below zero. Adjustments to Operating Expenses and Property Taxes shall be determined separately, and a reduction in the aggregate amount of Operating Expenses or Property Taxes in any calendar year shall not be applied to reduce any increase otherwise applicable to the other category. Tenant shall not be entitled to any reduction, refund, offset, allowance or rebate in Base Rent due hereunder if Operating Expenses or Property Taxes for any calendar year following the applicable Base Year are less than Operating Expenses and Property Taxes incurred relating to Operating Expenses and/or Property Taxes, as applicable, during the applicable Base Year.
(h)     Tenant’s Audit Right . If Tenant disputes the amount of Additional Rent stated in the Landlord’s Statement, Tenant, within six (6) months of receipt of Landlord’s Statement, may itself, through its own employees, or through a nationally recognized property management firm designated by Tenant and reasonably acceptable to Landlord (the “Approved Inspection Firm”), inspect Landlord’s books and records directly related to Operating Expenses and Property Taxes for the applicable calendar year only and, only in connection with the first such inspection during the Lease Term or in connection with comparing the Operating Expenses and Taxes for the applicable Base Year to a subsequent year, the Operating Expenses and Taxes for the applicable Base Year; provided, however, that Tenant is not entitled to request that inspection if Tenant is then in monetary default under this Lease (as to which notice has been previously given) or if Tenant has not paid all amounts required to be paid under the applicable Landlord Statement. As a condition to any such inspection, Tenant and, if applicable the Approved Inspection Firm, shall execute a confidentiality agreement, in form and substance reasonably acceptable to Tenant, agreeing to keep the results of any such inspection and the results thereof, confidential. Tenant may disclose the information obtained from such audit and examination to Tenant’s accountants, attorneys and others reasonably required by Tenant to perform, analyze and/or enforce such audit and examination and this Lease. Landlord shall provide Tenant’s designated representative, or the Approved Inspection Firm, access to Landlord’s books and records directly related to Operating Expenses and Property Taxes during Landlord’s regular business hours and upon reasonable prior notice at the Building management office in San Francisco. Tenant’s Approved Inspection Firm must not be retained on a contingency fee basis. Tenant shall have the right to copy and duplicate such information as Tenant may require. If Landlord disputes the results of an audit done by Tenant, Landlord shall send Tenant a notice thereof within ten (10) days after receipt of the results of such audit. To the extent Landlord disputes a portion of the results of such audit, Landlord shall credit the undisputed portion of the overcharge against the next monthly rent payments of Tenant or if the Term has expired or otherwise has been terminated, shall refund the undisputed portion of the overcharges to the Tenant. Following receipt of Landlord’s notice, either party may submit the dispute for arbitration, provided that Tenant shall continue to pay to Landlord all rent, including any adjustments pursuant to this Article, until a final decision is rendered pursuant to arbitration. If after Tenant’s or its Approved Inspection Firm’s inspection, Tenant still disputes the Landlord’s Statement, Landlord and Tenant shall for a period of thirty (30) days seek to agree on the amount subject to dispute,

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and if no agreement is reached, then, either party may submit such dispute to binding arbitration by notice to the other party (“Arbitration Notice ”). The failure of Tenant to provide an Arbitration Notice within sixty (60) days of Tenant’s delivery of the Tenant’s Approved Inspection Firm’s report to Landlord shall constitute a waiver by Tenant of its right to arbitrate hereunder, and except for such adjustments as have been agreed to by Landlord, Landlord’s Statement shall be conclusive and binding to Tenant. Within thirty (30) days of the Arbitration Notice, Landlord and Tenant shall jointly select an arbitrator, who shall be unaffiliated in any manner with either Landlord or Tenant and shall be a certified public accountant that shall have been active over the five (5) year period ending on the date of such appointment in the analysis of operating expenses in commercial office buildings in San Francisco. Neither Landlord nor Tenant shall consult with such arbitrator as to his or her opinion as to the disputed matters prior to the appointment. The determination of the arbitrator shall be limited solely to issues raised by Tenant’s Approved Inspection Firm’s report or by Landlord’s response to Tenant’s Approved Inspection Firm’s report . Such arbitrator may hold hearings and require such briefs as the arbitrator, in his or her sole discretion, determines is necessary. In addition, Landlord or Tenant may submit to the arbitrator with a copy to the other party within five (5) business days after the appointment of the arbitrator any data and additional information that such party deems relevant to the determination by the arbitrator and the other party may submit a reply in writing within five (5) business days after receipt of such data and additional information. The arbitrator shall conduct such evidentiary hearings as the arbitrator deems necessary or appropriate. The arbitrator shall, within thirty (30) days of his or her appointment, reach a decision as to the disputed matters in Tenant’s Approved Inspection Firm’s report, and shall notify Landlord and Tenant of such determination. The decision of the arbitrator shall be binding upon Landlord and Tenant. If Landlord and Tenant fail to agree upon and appoint such arbitrator, then the appointment of the arbitrator shall be made by JAMS . If Landlord and Tenant fail to agree upon other matters relating to the arbitration, then the rules of JAMS shall govern such arbitration. The cost of arbitration shall be paid by the substantially unsuccessful party, as determined by the arbitrator. The arbitration proceeding and all evidence given or discovered pursuant thereto shall be maintained in confidence by all parties. Judgment upon the award rendered by the arbitrator may be entered by either party into any court having jurisdiction, or application may be made to such court for a judicial recognition of the award or an order of enforcement thereof, as the case may be. If such arbitration reveals that Tenant has made an overpayment, Landlord shall credit the amount of the overpayment the next monthly rent payment of Tenant, or if the Term has expired or otherwise been terminated, refund such overpayment to Tenant. If the certification shows that the amount payable by Tenant attributable to Tenant’s Share of actual Property Taxes and Operating Expenses was less than reported in Landlord’s Statement, Tenant shall be credited against the next installment of Rent in the amount of any overpayment by Tenant, and, if the amount reported in Landlord’s Statement exceeded the amount determined by the certification as payable by Tenant attributable to Tenant’s Share of Property Taxes and Operating Expenses for the period subject to the certification by more than the greater of $7,500 or four percent (4%), Landlord shall reimburse Tenant for its actual and reasonable audit expenses incurred in aUditing such statement, and a reimbursement of attorneys’ fees incurred in determining and recovering the overpayment in addition to the credit, or when appropriate, a refund of the overpayment. Likewise, if the certification shows that the amount payable by Tenant attributable to Tenant’s Share of actual Property Taxes and Operating Expenses was greater than reported in Landlord’s Statement, Tenant shall pay Landlord the amount of any underpayment within thirty (30) days . If Tenant fails to timely exercise its audit rights in accordance with this Section 4(h), the failure shall be conclusively deemed to constitute Tenant’s approval of Landlord’s Statement for the calendar year in question. In no event shall this Section 4(h) be deemed to allow any review of any of Landlord’s books and records by any subtenant of Tenant. The provisions of this Section 4(h) are intended as the sole and exclusive remedy of Tenant for the resolution of disputes relating to Additional Rent stated in any Landlord’s Statement and shall survive the termination or expiration of this Lease for such period as hereinabove

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provided for Tenant to exercise such right during the year prior to such termination or expiration of the Lease Term. Landlord’s failure to submit a Landlord’s Statement to Tenant within one (1) year after the expiration of any calendar year shall be deemed a conclusive waiver of Landlord’s right to any Additional Rent relating to such Landlord’s Statement for such year (except for Additional Rent due in connection with Property Taxes, to the extent that the associated delay was attributable to with a failure by the taxing authority to provide the assessment required to invoice Tenant for Additional Rent within such period of time). Landlord’s failure to submit a Landlord’s Statement shall not deprive Tenant of its right to recover from Landlord if Tenant’s estimated payments exceed the amounts actually due from Tenant for Operating Expenses or Property Taxes. Subject to the preceding sentence, the obligations of Landlord and Tenant with respect to any Additional Rent shall survive the expiration or any sooner termination of the Term.
5.     Security Deposit .
(a)    Landlord and Tenant acknowledge that Landlord holds a letter of credit issued by Wells Fargo Bank to secure Tenant’s obligations under the Office Lease (the “ Letter of Credit ,” and the cash proceeds such thereof and other funds held by Landlord in accordance with Paragraph 6 of the Office Lease, being referred to therein as the “ Security Deposit” ). By its execution hereof, Tenant agrees that the Letter of Credit shall also serve as security for the faithful performance of all its obligations to be performed and observed by Tenant under this Lease, that Landlord may make a draw under the Letter of Credit based on a default under this Lease, and that the Security Deposit funds may be applied by Landlord as provided in this Lease.
(b)    If Tenant fails to pay any Rent, or otherwise defaults with respect to any provision of this Lease, and such failure results in an Event of Default, Landlord may (but shall not be obligated to) draw on the Letter of Credit, and use, apply or retain all or any portion of the proceeds of a draw under the Letter of Credit (and said proceeds shall be deemed a Security Deposit) for the payment of any Rent in default or for the payment of any other sum to which Landlord may become entitled by reason of Tenant's default, or to compensate Landlord for any loss or damage which Landlord may suffer thereby, including any amounts Landlord is obligated or elects to spend in order to cure any such Events of Default or to mitigate its damages following an Event of Default or the termination of this Lease (including, without limitation, damages arising under California Civil Code Section 1951.2). Upon the occurrence of an event entitling Landlord to draw upon the Letter of Credit, Landlord shall be entitled to draw on the entire Letter of Credit, and apply any portion of the proceeds to cure said Event of Default, and hold the remainder as a Security Deposit under this Lease. If Landlord so uses or applies all or any portion of the Security Deposit or the proceeds of a draw under the Letter of Credit (and the Lease Term is still in effect), Tenant shall within ten (10) days after demand therefor deposit cash with Landlord in an amount sufficient to restore the Security Deposit and/or replace the Letter of Credit, to the full amount thereof stated in the Summary provided, however, that if Landlord has drawn upon the Letter of Credit such that Landlord is then holding any Security Deposit, upon Tenant’s reinstatement of the Letter of Credit in the required amount described herein, Landlord will immediately return to Tenant any Security Deposit then held by Landlord. Landlord’s application of all or any portion of the Security Deposit and/or the proceeds under the Letter of Credit to any obligation of Tenant hereunder shall not limit Landlord’s damages or constitute a waiver by Landlord of any claims against or obligations of Tenant, other than the specific monetary obligations to which the Security Deposit is applied, and then only to the extent such obligations are thereby satisfied. Landlord shall not be required to keep the Security Deposit separate from its general funds, Tenant shall not be entitled to interest thereon, and Tenant waives the benefit of any Law to the contrary. Tenant waives the provisions of California Civil Code Section 1950.7 (which restricts application of a security deposit only to those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage caused by Tenant, or to clean premises) and all similar Laws now in force or subsequently adopted which restrict application of security deposits to specific purposes.

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(c)    The Security Deposit, or so much thereof as has not theretofore been applied by Landlord, without payment of interest or other increment for its use, and/or the Letter of Credit, as reduced by any draws thereunder made by Landlord pursuant to this Section 5, shall be returned to Tenant (or, at Landlord’s option, to the last assignee, if any, of Tenant’s interest hereunder) within thirty (30) days following the expiration of the Lease Term and after Tenant has vacated the Premises; provided, however, prior to the surrender and cancellation thereof, to the extent that Landlord reasonably anticipates substantial reconciliation expenses associated with calculation of Additional Rent for the final year of the Lease Term that are not invoiced to Tenant, Landlord may draw upon the Letter of Credit an amount up to Ten Thousand Dollars ($10,000.00) and hold such proceeds as a deposit on account of any amounts due from Tenant attributable to Tenant’s Share for the calendar year in which this Lease terminates or expires, and any unapplied funds so held by Landlord shall be refunded to Tenant within thirty (30) days following Tenant’s approval or deemed approval of Landlord’s Statement for the calendar year in which the Lease expiration or termination occurs. Landlord’s return of the Security Deposit and/or the Letter of Credit, as the case may be, shall not be construed as an admission that Tenant has performed all of its obligations under this Lease. No trust relationship is created herein between Landlord and Tenant with respect to the Security Deposit and/or the Letter of Credit. If Landlord disposes of its interest in the Premises, Landlord shall deliver or credit the Security Deposit or the Letter of Credit to Landlord’s successor in interest in the Premises and give Notice thereof to Tenant, and the transferring Landlord shall thereupon be relieved of further responsibility with respect to the Security Deposit, and Tenant shall look solely to the successor Landlord for any claims therefor. Upon request of Landlord, and in accordance with this Section 5, Tenant shall cooperate with Landlord, in causing the issuing bank of any Letter of Credit to acknowledge the transfer of the beneficiary’s rights thereunder to Landlord’s successor in interest.
(d)    Within ten (10) business days following the due execution and delivery of this Lease, Tenant shall cause Wells Fargo Bank to issue an amendment to the Letter of Credit evidencing the right of Landlord to draw the funds in the event of a default under this Lease in form and substance reasonably satisfactory to Landlord.
6.     Use .
(a)    The Premises shall be used only for the Permitted Use and shall be used for no other purpose without the prior written consent of Landlord, which consent shall not be unreasonably withheld. For purposes of example, and without otherwise limiting other activities that may be included in the Permitted Use, Tenant (subject to the other limitations of this Section 6) may screen videos or film in the Premises promoting Tenant’s products and services, and provide workshops and events that directly promote and provide technical assistance in the use of Tenant’s products and services. Tenant acknowledges that the Permitted Use is not exclusive. Tenant further acknowledges and agrees that it is not relying on the fact, nor does Landlord represent, that any specific tenant or occupant or number of tenants, or types of tenants, or occupants shall during the Term occupy any space in the Building or the Project. In connection with any request to modify or change such Permitted Use, Tenant acknowledges and agrees that any such retail use must be of the type typically found in and consistent with the character of comparable first class office buildings in the San Francisco, South of Market, metropolitan area at that time (but specifically excluding any “off-price” or “discount” operation or a store that sells irregular, seconds or factory damaged goods), taking into account ground floor visibility and proximity to the main entrance of the building; provided further that such proposed new use may not: (i) conflict with or violate any exclusive use rights or prohibited uses then in effect for the Building; (ii) conflict with, or be substantially similar to, the primary use of any then-existing tenant in the Building; (iii) violate any Requirements; or (iv) overburden any Building facilities, including but not limited to lighting, security, maintenance or common areas.
(b)    As further consideration to Landlord to enter into this Lease, Tenant covenants and agrees as follows:

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(i)    Tenant shall not use any part or all of the Premises for the conduct of any adult entertainment business or a business primarily engaged in sexually explicit products or services.
(ii)    Tenant shall not conduct or permit to be conducted in the Premises any sale by auction, or any fire, distress or bankruptcy sale.
(iii)    Tenant shall not keep, display or sell, or suffer or permit the display or sale, of any merchandise outside the Premises, or otherwise obstruct any common areas or sidewalks in and about the Project.
(iv)    Tenant shall not operate a restaurant or food or beverage market, or offer take-out food or beverage service (including any sale of alcoholic beverages, sale of coffee drinks or other hot or cold drinks, such as soda, juices or water), or sale of other food products; provided that the foregoing shall not prevent Tenant from offering such items in connection with specific events held at the Premises for Tenant’s customers, clients or invitees for on premises consumption
(v)    Tenant shall not install any audio system on the exterior of the Premises or within the Premises if the same is primarily directed towards the outside of the Premises, or play music (live or recorded) in a manner that creates noise or disturbances that can be heard outside the Premises.
(vi)    As soon as practicable and in any event within three (3) business days after any exterior glass in the Premises facing onto the street is broken or cracked, including a so-called “bull’s eye” break in the glass, Tenant shall, at its sole cost and expense, replace such glass with glass of the same kind and quality and, as may be necessary or desirable in connection with such replacement, repair or replace the frames for such glass. In the event that Tenant shall fail to so replace such glass and, if necessary, repair or replace such frames within said three (3)-day period, Landlord may at any time thereafter replace such glass and, if necessary, replace or repair such frames on Tenant’s behalf and Tenant shall promptly pay to Landlord, as additional rent, the reasonable cost incurred by Landlord in so doing.
(vii)    At all times the business transacted in the Premises shall be conducted, and the appearance of the Premises (including lighting, displays, store front windows, and cleanliness) will be dignified and befitting the quality of the Project. The visual appearance of the interior of the Premises from the surrounding exterior area shall be clean, visually attractive and open, and in keeping with the quality historic image of the Project.
(viii)    All deliveries to and from the Premises shall be made through the Premises of the loading dock area of the Building, and not through any other portion of the Building.
(c)    Tenant acknowledges that Landlord and/or its authorized representatives have not made any warranties and/or representations as to the permitted use that can be made of the Premises under existing laws, ordinances, rules, regulations or codes (including zoning ordinances), and that responsibility for confirming any permitted use of the Premises is the sole responsibility of Tenant and is not a condition to the effectiveness of this Lease.
(d)    Tenant shall, at Tenant’s expense, faithfully observe and comply with, and shall cause all Tenant Parties to so observe and comply with, (i) all laws, statutes, codes, rules, regulations, ordinances, requirements, guidelines and orders, now in force or hereafter promulgated or adopted, by any Governmental Authority (collectively, “ Laws ”) that are applicable to the particular use and occupancy of the Premises by Tenant, the conduct of Tenant’s business therein, and the use by Tenant or any Tenant Party of the Premises or any other portion of the Project; (ii) all recorded covenants, conditions and restrictions affecting the Project, whether presently existing or subsequently recorded (collectively, “ CC&Rs ”) written notice and a copy of which is provided to Tenant; and (iii) all current and future requirements of any applicable

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fIre rating bureau or other body exercising similar functions (collectively, “ Requirements ”), in each case regardless of cost, the permanency of any required improvements to comply therewith and/or the ability of the parties hereto to contemplate the enactment of said Laws. Landlord shall not modify any presently existing CC&Rs or enter into new CC&Rs in any manner that would result in a material adverse effect or would result in a material impairment or loss of any of Tenant’s rights under or in the use or occupancy of the Premises by Tenant in accordance with this Lease. Tenant acknowledges and agrees that its obligation to comply with Laws includes compliance with all present or future programs intended to manage parking, transportation or traffIc in and around the Project, and in connection therewith, Tenant shall take responsible action for the transportation planning and management of all Tenant’s employees at the Project by working directly with Landlord, Governmental Authorities, and any applicable transportation-related committees and entities.
(e)    Subject to permitted closures following a casualty or exercise by landlord of Landlord’s right to temporary close Common Areas necessary for access to the Premises, or for Permitted Closures (as hereinafter defIned), Tenant shall remain open for business continuously and uninterruptedly for the purpose or purposes specifIed herein during minimum hours of operation comparable to other retail tenants at the Building (which is currently 9:00 a.m. through 6:00 p.m., Monday through Friday, excluding Holidays) (the “ Minimum Hours of Operation ”). As used herein, “ Holidays ” shall mean the dates of observation of New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and other locally or nationally recognized holidays on which federally insured national banks doing business in the State of California are required or permitted under applicable laws to close for business (“ Holidays ”) and “ Permitted Closures ” shall mean the cessation of business (i) for fixturing, remodeling, repairing or refurbishing the Premises (not to exceed thirty (30) days at any one time), or (ii) during any period of Force Majeure. Notwithstanding anything to the contrary in the foregoing, Tenant may elect to not operate in the Premises during the following periods: (i) the week between Christmas and New Years, and (ii) during the Thanksgiving week.
7.     Utilities and Services . Subject to the terms and conditions of this Section 7, Landlord shall furnish the following services at a level of service comparable in quality to those customarily provided by landlords in buildings of a similar design in the area in which Project is located.
(a)     Standard Utilities . Subject to interruptions beyond Landlord’s control, Landlord agrees to furnish or cause to be furnished to the Premises, the utilities and services described below, subject to the conditions and in accordance with the standards set forth below:
(i)
Electricity for light and power in the Premises
(ii) During Normal Building Hours, heat, and air ventilation and conditioning (“HVAC”) for the comfortable occupancy of the Premises in accordance with standards of thermal environmental comfort (i.e., maintaining a temperature between 68 and 72 degrees Fahrenheit),air velocity, air quality, and ventilation consistent with other “Class A” office buildings in San Francisco, CA. The parties agree and understand that the HVAC will be provided during Normal Business Hours. Landlord agrees, for so long as Tenant (or any Permitted Transferee) is the sole occupant of the office space in the Building, that Landlord will implement changes in the Normal Business Hours for operating the Building upon reasonable advance written notice from Tenant (subject to compliance with applicable Laws); provided, however, that any and all costs and expenses incurred or payable by Landlord due to a change in or expansion of Normal Business Hours (including engineering, labor, property management, and any excess wear and tear on Building Systems) shall be at the sole cost of Tenant and shall be chargeable to Tenant as Additional Rent and not as an Operating Expense.
(iii) Hot and cold water for drinking, cleaning, and lavatory purposes only.

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(iv) Janitorial services to the Premises in accordance with the Janitorial Specifications and Green Cleaning Policy attached hereto as Exhibit F (collectively, the “Janitorial Specifications ”). At any time during the Lease Term and upon sixty (60) days prior written notice to Landlord, Tenant may independently contract for the provision of janitorial services for the Premises in which case Landlord’s obligations under this Section 7(a)(iv) shall be waived (and payment of Janitorial Rent shall be abated). Any such janitorial services obtained by Tenant shall be performed in accordance with the Janitorial Specifications, and any such janitorial services obtained by Tenant shall utilize exclusively union labor. If Landlord provides janitorial services to the Premises, and to the premises leased by Tenant under the Office Lease, an equitable allocation (on a square footage basis) of the total cost of janitorial services provided by Landlord to Tenant at the Building shall be made to the Premises for purposes of determining Janitorial Rent.
(b)     Direct Billing for Utilities . It is the intent of Landlord to separately meter the Premises (either through existing submeters or through a Landlord installed meter (such as an E-monmeter) for electrical consumption, in which event Tenant shall pay for all charges for electricity consumption (including Excess HVAC and electricity for Supplemental Equipment) supplied to the Premises directly to Landlord as Utility Rent.
(c)     Electrical Service Provider . Landlord shall have the sole right during the Lease Term to contract for electricity service from such providers of such services as Landlord shall elect (each being an “ Electric Service Provider ”). Tenant shall cooperate with Landlord, and the applicable Electric Service Provider, at all times and, as reasonably necessary, shall allow Landlord and such Electric Service Provider reasonable access to the Building’s electric lines, feeders, risers, wiring, and any other machinery within the Premises. Landlord shall endeavor to utilize the benefits of any energy efficiency program or incentive directly or indirectly applicable to Tenant’s consumption of energy or reduction in energy usage or similar matters to reduce the Operating Expenses of the Project. Notwithstanding the foregoing, if during the Term it becomes feasible for Tenant to directly contract with an Electric Service Provider, Landlord shall cooperate with Tenant to facilitate Tenant’s engagement of such Electric Service Provider.
(d)     Electrical Service Disclosure; Certifications; Efficiency . Tenant acknowledges that current and future disclosures and information may be required by applicable Law in connection with Landlord’s lease of the Premises. Tenant shall provide Landlord any and all information reasonably requested by or on behalf of Landlord in connection with the utilities used at, and energy and water consumption from, the Premises and/or any other energy efficiency related information, as necessary for Landlord to comply with applicable Law and as necessary for Landlord to maintain or obtain energy efficiency and other certifications for the Building, including, without limitation, Energy Star, LEED, and other certifications. Tenant shall cooperate with Landlord in maintaining all such certifications and in maintaining maximum efficiency of the Building, including, without limitation, by taking reasonable steps to minimize its energy and water consumption within the Premises, minimizing Tenant’s waste, and participating in any recycling, waste management, energy efficiency, water conservation, and transportation management programs as may be instituted by Landlord from time to time.
(e)     After-Hours HVAC; Excess Use . Tenant’s use of electricity shall not exceed the capacity of the feeders , risers or wiring serving the Premises. Tenant shall not, without Landlord’s prior written consent, use heat-generating machines or equipment in the Premises, other than normal fractional horsepower office machines or equipment, or lighting, other than Building’s standard lights, that individually or collectively may affect the temperature otherwise maintained by the Building’s existing HVAC system, require dedicated HVAC services or increase the amount of HVAC normally furnished to the Premises (any such dedicated or increased HVAC being referred to herein as “ Excess HVAC ”), or, except as provided above, are operated by Tenant substantially on a continuous or semi-continuous basis during any hours other than Normal Business Hours (any such heat-generating machines and equipment being referred to herein as

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Supplemental Equipment ”). Upon request, Landlord shall make available, at Tenant’s expense, after hours HVAC. The minimum use of after-hours HVAC and the cost thereof shall be reasonably determined by Landlord, and confirmed in writing to Tenant as the same may change from time to time. If Tenant uses, and Landlord elects to provide, water, electricity, heat, or HVAC in excess of that required to be supplied by Landlord under this Section 7 (including the use of Excess HVAC services or the use of Supplemental Equipment) or uses the Premises outside of Normal Business Hours, (i) Tenant shall pay Landlord for all costs of: (x) the excess utility service (based on actual amounts chargeable to Landlord); (y) Landlord’s estimated cost of the increased wear and tear on existing equipment caused by Tenant’s excess consumption; and (z) Landlord’s cost of engineering, maintenance, security, and janitorial services that are required by Landlord as a result of Tenant’s use of the Premises outside of Normal Business Hours, and (ii) Landlord shall have the right to require Tenant to install supplementary air conditioning units and other supplemental facilities in the Premises, the cost, installation, operation and maintenance of which shall be paid by Tenant to Landlord. Subject to Tenant’s obligation to reimburse Landlord for all costs as described in this Section 7(e), if Tenant requires dedicated HVAC services, Landlord shall cooperate in allocating condensed water and other utilities to Tenant’s dedicated HVAC services. Notwithstanding the foregoing, for so long as Tenant (or any Permitted Transferee) is the sole occupant of the office space in the Building, Tenant may establish regular times outside of Normal Business Hours during which Excess HVAC services, the use of Supplemental Equipment, and engineering, maintenance, security, and janitorial services shall be provided by Landlord (at Tenant’s expense), without requiring the confirmation of such times on a rolling daily basis.
(f)     Telecommunications Services . All telephone and telecommunications services desired by Tenant shall be ordered and utilized by Tenant at its sole cost and expense. Tenant shall separately contract with a telephone or telecommunications provider (a “ Provider ”) to provide telephone and telecommunications services to the Premises. By its acceptance of possession of the Premises, Tenant is deemed to have agreed that the existing number and type of Lines serving the Premises is adequate for Tenant’s occupancy. As used herein, “ Lines ” shall mean communications and computer wires and cables which service the Premises (including electronic, fiber, phone and data cabling). In connection with Tenant’s rights hereunder, Tenant shall have the non-exclusive right, free of charge, to (i) use all Lines and related equipment in the Building; (ii) use all risers, chaseways, pathways, and spaces within the Building; and to (iii) install, maintain, repair, replace, or remove Lines all as necessary to connect Tenant’s telecommunications, data and cable networks/services to the telecommunications, data and cable networks/services found within the Building or to Tenant’s telecommunications, data and cable networks/services providers. If Tenant desires to utilize the services of a Provider whose equipment is not presently servicing the Building, such Provider must obtain the written consent of Landlord, which shall not be unreasonably withheld, before it will be permitted to install its Lines or other equipment within the Building and all such Lines shall be installed within the Building’s existing vertical and horizontal riser pathways as designated by Landlord. Landlord’s consent to the installation of Lines or equipment within the Building by any Provider shall be evidenced by a written agreement between Landlord and the Provider, which contains terms and conditions reasonably acceptable to Landlord. Landlord may engage a third party riser management company to manage access to and maintenance of the Building’s vertical and horizontal pathways and Lines in such pathways and Tenant shall cooperate with such third party riser management company. Any charges specifically allocated to Tenant’s use of, installation, maintenance and repair of Lines shall be for the account of and separately payable Tenant. Landlord makes no warranty or representation to Tenant as to the suitability, capability or financial strength of any Provider whose equipment is presently serving the Building, and Landlord’s consent to a Provider whose equipment is not presently serving the Building shall not be deemed to constitute such a representation or warranty.
(g)     No Liability . Landlord shall use reasonable diligence to remedy an interruption in the furnishing of utilities or other services to the Premises; however, Landlord shall have no responsibility

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or liability for damages and, except as hereinafter provided, Tenant shall not be entitled to any abatement or reduction of Rent by reason of any failure or interruption of any utility service (including service by a Provider) or other services furnished to the Premises, notwithstanding any act or omission of Landlord or any of Landlord’s employees, agents or contractors. Notwithstanding anything to the contrary in this 7(g), provided no Event of Default shall then be declared under this Lease, if elevator access, electrical power or HVAC is interrupted due to the active negligence of Landlord or any of Landlord’s employees, contractors or agents (other than in an occurrence that constitutes a casualty, in which case the terms of Section 14 shall apply and not the terms of this Section 7(g) (a “Utility Interruption”), and Tenant is unable to carry on its business in a reasonably normal manner due to the failure of any of such utilities and services, and as a consequence vacates all or the affected portion of the Premises for a period in excess of five (5) consecutive Business Days, the Base Rent payable pursuant to Section 3(a) shall be abated thereafter (in proportion to the area of the Premises vacated by Tenant by reason of such failure, if less than all of the Premises is affected) for as long as such inability to carry on Tenant’s business continues, until such time as the service is restored or Tenant reoccupies the Premises or affected portion thereof, whichever is earlier. The foregoing abatement of Rent shall be the sole and exclusive remedy of Tenant for a Utility Interruption.
8.
Access Control; Project Safety .
(a)     Access Control and Other Landlord Rights . Landlord shall have the right to implement any and all access control or other security measures that Landlord, in the exercise of its sole discretion, deems necessary or appropriate for the protection of the Building or Project and Landlord’s interests therein (including the right to disallow any person from entering the Premises), and Tenant acknowledges and agrees that such measures, if any, are undertaken by Landlord solely for the protection of Landlord and its interest in the Building and the Project. No interruption of Tenant’s business or loss of access to the Premises resulting from Landlord’s exercise of any such measures shall constitute an eviction of Tenant or a disturbance of Tenant’s right of quiet enjoyment. Tenant acknowledges that (i) no person performing access control or other security services for Landlord at the Project is or will be an on-duty law enforcement officer; (ii) no such person is authorized by any governmental authority to exercise police powers; and (iii) Landlord makes no representation or warranty whatsoever that any access control or other security requirements of Landlord, whether required by this Lease or discretionary on the part of Landlord, will be sufficient to protect Tenant, any Tenant Parties, or any other person, or to deter or prevent bodily injury (including death resulting therefrom) or the loss of or damage to property from any cause (including the commission or attempted commission of any crime or terrorist act). Accordingly, no failure or inadequacy of any security measures undertaken by Landlord shall relieve Tenant of any of its obligations under this Lease, or give rise to any liability on the part of Landlord, and Tenant hereby waives any and all claims and defenses against Landlord arising therefrom.
(b)     No Access to Building Lobby . Except for Tenant employees who have proper Tenant identification, no direct access from the Premises to the Building lobby shall be permitted or allowed, and all customers, invitees and licensees of Tenant at the Premises shall enter and exit the Premises from the front door facing Howard Street; provided, however, so long as the Tenant under this Lease (or a Permitted Transferee under a Permitted Transfer) occupies the entire office portion of the Building under the Office Lease, Tenant may adopt such modifications to such access requirements as Tenant deems suitable for its business operations.
(c)     Labor Harmony . Tenant agrees not to employ any person, entity or contractor for any work in the Premises (including moving Tenant’s equipment and furnishings in, out or around the Premises) whose presence may give rise to a labor or other disturbance in or about the Building and, if necessary to prevent such a disturbance in a particular situation, Landlord may require Tenant to employ union labor for the work.

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9.
Alterations and Mechanic’s Liens .
(a)    Tenant shall not make any alterations, improvements or changes to the Premises, other than the Tenant Improvements ( “Alterations” ), without Landlord’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed, which consent shall be given by Landlord if at all, within five (5) Business Days after Landlord’s receipt of Tenant’s request to make such Alterations and all other information required to be submitted to Landlord pursuant to this Section 9(a). Any such Alterations shall be completed by Tenant at Tenant’s sole cost and expense: (i) with due diligence, in a good and workmanlike manner, using new materials; (ii) in compliance with plans and specifications reasonably approved by Landlord; (iii) in compliance with the construction rules and regulations reasonably promulgated by Landlord from time to time; and (iv) in accordance with all applicable Laws (including all work, whether structural or non-structural, inside or outside the Premises, required to comply fully with all applicable Laws and necessitated by Tenant’s work). Landlord shall notify Tenant in writing at the time that Landlord consents to the Alterations, or, if no consent is required, within ten (10) days after Tenant’s written request, as to whether Tenant must remove the Alterations at the end of the Lease Term; provided, however, that Tenant shall not be required to remove any general office improvements but shall remove and repair to its original state, all high density filing systems, server rooms, computer mainframes, libraries, telecom nodes, satellite dishes and signs erected with Landlord’s approval under this Lease. Notwithstanding anything to the contrary contained in this Section 9(a), Tenant shall have the right, without Landlord’s consent, to make non-structural Alterations to the Premises (which shall be defined as alterations, additions and improvements that do not affect the Building structure, Building systems, the HVAC, or the Common Areas or exterior of the Building if such Alterations do not require building permits. If any work outside the Premises, or any work on or adjustment to any of the Building systems, is required in connection with or as a result of Tenant’s work, such work shall be performed at Tenant’s expense by contractors reasonably approved by Landlord. Landlord’s right to review and approve (or withhold approval of) Tenant’s plans, drawings, specifications, contractor(s) and other aspects of construction work proposed by Tenant is intended solely to protect Landlord, the Project and Landlord’s interests. No approval or consent shall be deemed or construed to be a representation or warranty by Landlord as to the adequacy, sufficiency, fitness or suitability thereof or compliance thereof with applicable Laws or other requirements. Except as otherwise provided in Landlord’s consent, all Alterations shall upon installation become part of the realty and be the property of Landlord.
(b)    Before making any Alterations which require Landlord’s consent, Tenant shall submit to Landlord for Landlord’s prior approval schematic drawings of the work to be performed, and the name of the contractor and all subcontractor proposed by Tenant to make the Alterations. Tenant shall reimburse Landlord within thirty (30) days of receipt of a written invoice for all reasonable and actual out-of-pocket expenses incurred by Landlord in connection with any Alterations made by Tenant, including actual and reasonable fees charged by Landlord’s contractors or consultants to review plans and specifications prepared by Tenant and to update the existing as-built plans and specifications of the Building to reflect the Alterations. Tenant shall obtain all applicable permits, authorizations and governmental approvals and deliver copies of the same to Landlord before the commencement of any Alterations. Tenant shall give Landlord at least ten (10) days’ notice prior to the commencement of any Alterations and cooperate with Landlord in posting and maintaining notices of non-responsibility in connection therewith.
(c)    Tenant shall keep the Premises and the Project free and clear of all liens arising out of any work performed, materials furnished or obligations incurred by Tenant. If any such lien attaches to the Premises or the Project, and Tenant does not cause the same to be released by payment, bonding or otherwise within ten (10) Business Days after the attachment thereof, Landlord shall have the right but not the obligation to cause the same to be released, and any sums expended by Landlord in connection therewith shall be payable by Tenant within thirty (30) days after receipt of written notice as Additional Rent with interest thereon from the date of expenditure by Landlord at the Default Rate. Tenant shall within ten (10)

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days of receiving such notice of lien or claim have such lien or claim released of record by providing a bond. Tenant’s failure to comply with the provisions of the foregoing sentence shall be deemed an Event of Default entitling Landlord to exercise all of its remedies therefor without the requirement of any additional notice or cure period.
(d)    Tenant hereby waives and releases its right to make repairs at Landlord’s expense under Sections 1932(1), 1933(4), 1941 and 1942 of the California Civil Code or any similar or successor Laws now or hereinafter in effect.
10.     Maintenance and Repairs .
(a)    Except to the extent such obligations are imposed upon Landlord hereunder, Tenant shall, at its sole cost and expense, maintain the Premises in good order, clean and healthful condition, in compliance with all Laws (including, without limitation, Disability Access Laws), and repair throughout the entire Lease Term, ordinary wear and tear excepted. Tenant agrees to keep the areas visible from outside the Premises in a neat, clean and attractive condition at all times. Tenant shall, within thirty (30) days after Landlord’s written demand therefor, reimburse Landlord for the cost of all repairs, replacements and alterations (collectively, “ Repairs ”) in and to the Premises, Building and Project and the facilities and systems thereof, plus an administration charge of ten percent (10%) of such cost, the need for which Repairs arises out of the act, omission, misuse or negligence of Tenant, its agents, contractors, employees or invitees.
(b)    Without limiting the generality of the terms of Section 10(a) above, Tenant shall be responsible, at its sole cost and expense, for the making of all alterations, additions and improvements to the Premises, as are required to comply with applicable Laws, including, without limitation, Disability Access Laws, whether now in effect or enacted in the future and regardless of the scope of the work required to achieve such compliance, including without limitation, regardless of whether or not such Law was foreseeable, the period of time remaining in the Term, the relative benefits of compliance with such Law to Tenant or Landlord, and the relationship of the cost of compliance to the Rent payable under this Lease; provided, however, that Tenant shall not be required to make any structural changes to the Premises unless such changes are triggered by the Tenant Improvements, any Alterations or by Tenant’s specific use of the Premises for retail purposes. 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 Laws, shall be conclusive of that fact as between Landlord and Tenant. Tenant shall advise Landlord in writing, with copies of all notices and other correspondence, within ten (10) days following the date Tenant first has knowledge of any claim, action or investigation (whether oral or written, actual or threatened) by any person or Governmental Authority, with respect to any real or alleged noncompliance by Landlord or Tenant with any Law relating to the Premises, the Building or the Project. As used herein, the term “ Disability Access Laws ” shall mean and refers to the building code requirements enacted by the State of California and the City and County of San Francisco governing accessibility and barrier removals applicable to persons protected under the Americans With Disabilities Act of 1990 (42 U.S.C. § 12101, et seq.).
(c)    Landlord shall maintain the Common Areas of the Project, as well as all Building systems serving the Premises, and the structural elements of the Building in reasonably good order and condition; provided however any damage occasioned by the acts of Tenant, its employees, agents, contractors or invitees shall be repaired by Landlord at Tenant’s expense. Without limiting the generality of the foregoing, Landlord shall be responsible for compliance with Disability Access Laws (subject to reimbursement as an Operating Expense to the extent permitted under Section 4 of this Lease) relating to the Common Areas of the Project and path of travel to the Premises. Landlord shall promptly make repairs for which Landlord is responsible. Landlord shall provide at least sixty (60) days prior written notice to Tenant of any non-

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emergency, “ major repairs”. For purposes of this Section 10(c), “major repairs” shall mean any repair (or concurrently performed repairs) that cost in excess of Ten Thousand Dollars ($ 10,000).

11.     Insurance .
(a)    Landlord shall, at all times during the Lease Term, procure and maintain: (i) policies of insurance covering loss or damage to the Project in an amount equal to the full replacement cost of the Building, including Tenant Improvements in the Premises, which shall provide protection against loss by fire and other special form casualties including earthquake and flood and such other property insurance as may be required by Landlord’s mortgagee or as otherwise desired by Landlord, and (ii) commercial general liability insurance applicable to the Building and the Common Areas, providing a minimum limit of $5,000,000.00 per occurrence and in the aggregate.
(b)    Tenant shall procure and maintain, at its expense, (i) causes of loss - special form property insurance in an amount equal to the full replacement cost of Tenant’s FF&E located in the Premises; (ii) a policy or policies of commercial general liability and umbrella or excess liability insurance applying to Tenant’s operations and use of the Premises, providing a minimum limit of $5,000,000.00 per occurrence and $5,000,000.00 in the aggregate, naming Landlord, Landlord’s Building manager and any lender whose loan is secured by a lien against the Building (as such lender shall be identified to Tenant by Landlord in writing) as additional insureds, (iii) automobile liability insurance covering owned, non-owned and hired vehicles in an amount not less than a combined single limit of $1,000,000.00 per accident, and (iv) workers’ compensation insurance covering Tenant’s employment of workers and anyone for whom Tenant may be liable for workers’ compensation claims (workers’ compensation insurance is required and no alternative forms of insurance are permitted) and employer’s liability insurance in an amount not less than $1,000,000.00 each accident, $1,000,000.00 disease-each employee and policy limit, with the insurance policies required under this Section 11(b) to be endorsed to waive the insurance carriers’ right of subrogation. Tenant shall maintain the foregoing insurance coverages in effect commencing on the Delivery Date for the Phase I Premises and continuing to the end of the Lease Term.
(c)    The insurance requirements set forth in this Section 11 are independent of the waiver, indemnification, and other obligations under this Lease and will not be construed or interpreted in any way to restrict, limit or modify the waiver, indemnification and other obligations or to in any way limit any party's liability under this Lease. In addition to the requirements set forth in Sections 11(a) and 11(b), the insurance required of Tenant under this Lease must be issued by an insurance company with a rating of no less than A-/VIII in the current Best’s Insurance Guide or that is otherwise acceptable to Landlord, and admitted to engage in the business of insurance in the state in which the Building is located; be on a form that does not limit the coverage provided under such policy (i) to any additional insured by reason of such additional insured’s negligent acts or omissions (subject to the current form of the additional insured endorsement issued by Insurance Services Office, Inc.), or (ii) to claims for which a primary insured has agreed to indemnify the additional insured; be primary insurance for all claims under it and provide that any insurance carried by Landlord, Landlord’s Building manager, and Landlord's lenders is strictly excess, secondary and noncontributing with any insurance carried by Tenant; and provide that no insurance policy required to be carried by Tenant shall be subject to cancellation (with a material modification or reduction in coverage being deemed a cancellation), nonrenewal, or a change in coverage of available limits of coverage, except upon thirty (30) days’ prior written notice from the insurance carrier to the insured, Landlord and Landlord's lenders, if any. Tenant shall provide prompt written notice (in all events prior to the effective date of cancellation) of any cancellation in coverage to Landlord. Tenant shall deliver to Landlord, on or before the Delivery Date for the Phase I Premises and at least thirty (30) days before the expiration dates thereof, certificates from Tenant's insurance company on the forms currently designated “ACORD 25” (Certificate

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of Liability Insurance) and “ACORD 28” (Evidence of Commercial Property Insurance) or the equivalent. Attached to the ACORD 25 (or equivalent) there shall be an endorsement (or an excerpt from the policy) naming the Additional Insured Parties as additional insureds, and attached to the ACORD 28 (or equivalent) there shall be an endorsement (or an excerpt from the policy) designating Landlord as a loss payee with respect to tenant's property insurance on any Premises Improvements, and each such endorsement (or policy excerpt) shall be binding on Tenant's insurance company. As used herein, “Additional Insured Parties” shall mean (A) Landlord, (B) Landlord’s agents for asset and property management, (C) Landlord’s parent entity and its subsidiaries, and (D) any Holders (as defined below) of which Tenant has been given notice. Tenant shall obtain endorsements to all insurance policies required under this Section 11 in which the insurance company agrees to give Landlord prior written notice before any such policy is cancelled. Any Holders designated by Landlord shall be named as additional insureds (or as mortgagee, as required), as their interests may appear. Landlord shall have the right to approve all deductibles and self-insured retentions under Tenant’s policies in excess of One Hundred Thousand Dollars ($100,000.00), which approval shall not be unreasonably withheld.
(d)    Notwithstanding anything to the contrary set forth herein, except as provided for in this Section 11(d), neither Landlord nor Tenant shall be liable (by way of subrogation or otherwise) to the other party (or to any insurance company insuring the other party) for any loss or damage to any of the property of Landlord or Tenant, as the case may be, with respect to their respective property, the Building, the Project or the Premises or any addition or improvements thereto, or any contents therein, to the extent covered by insurance carried or required to be carried by a party hereto EVEN THOUGH SUCH LOSS MIGHT HAVE BEEN OCCASIONED BY THE NEGLIGENCE OR WILLFUL ACTS OR OMISSIONS OF THE LANDLORD OR TENANT OR THEIR RESPECTIVE EMPLOYEES, AGENTS, CONTRACTORS OR INVITEES. Landlord and Tenant shall give each insurance company which issues policies of insurance, with respect to the items covered by this waiver, written notice of the terms of this mutual waiver, and shall have such insurance policies properly endorsed, if necessary, to prevent the invalidation of any of the coverage provided by such insurance policies by reason of such mutual waiver. For the purpose of the foregoing waiver, the amount of any deductible, co-insurance, or any other similar retention of risk, applicable to any loss or damage shall be deemed covered by, and recoverable by the insured under the insurance policy to which such deductible relates. Notwithstanding the foregoing, Landlord and Tenant acknowledge that costs incurred by Landlord that are intended to be passed-through to Tenant as Operating Expenses subject to Section 4(b) (such as maintenance and repair of the Building or any Common Areas, including, without limitation, any maintenance and repair of elevators, loading docks, and other Common Areas attributable to the transport of bicycles and other goods therein by Tenant or its employees or agents) are not subject to Tenant’s waiver in this Section 11(d)).
12.     Indemnity . To the extent not expressly prohibited by law, Tenant (referred herein, the “Indemnitor” ) agree to indemnify, defend, and hold harmless Landlord and its agents, partners, shareholders, members, officers, directors, beneficiaries and employees (collectively hereinafter referred to as the “Indemnitees” ) from any losses, damages, judgments, claims, expenses, costs and liabilities imposed upon or incurred by or asserted against the Indemnitees, including without limitation reasonable actual attorneys’ fees and expenses, for death or injury to, or damage to property of, third parties, other than the Indemnitees, that may arise from any act or occurrence in the Premises, and from the negligent act or omission of Indemnitor elsewhere on and about the Project, EVEN IF SUCH LOSS, INJURY OR DAMAGE RESULTS FROM THE NEGLIGENCE (BUT NOT THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF LANDLORD OR LANDLORD’S INDEMNITEES. Such third parties shall not be deemed third-party beneficiaries of this Lease. If any action, suit or proceeding is brought against any of the Indemnitees by reason of the negligence or willful misconduct of Indemnitor or any of Indemnitor’s agents, members, partners or employees, then Indemnitor will, at Indemnitor’s expense and at the option of said Indemnitees, by counsel reasonably approved by said Indemnitees, resist and defend such action, suit

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or proceeding. In addition, to the extent not expressly prohibited by law, Tenant agrees to indemnify, defend, and hold harmless Landlord and Landlord’s Indemnitees from any losses, damages, judgments, claims, expenses, costs and liabilities imposed upon or incurred by or asserted against Landlord or Landlord’s Indemnitees, including reasonable actual attorneys’ fees and expenses, for death or injury to, or damage to property of, third parties (other than Landlord’s Indemnitees) that may arise from any from. Except to the extent directly arising out of any negligent or willfully wrongful act or omission of Tenant, and any of Tenant’s agents, partners, shareholders, members, officers, directors, beneficiaries and employees, or by anyone else acting at the direction, with the permission, or under the control, of Tenant, Landlord shall defend, protect, indemnify and hold harmless Tenant from and against any and all losses, damages, judgments, claims, expenses, costs and liabilities based in whole or in part on the negligence or willful misconduct of Landlord or any of Landlord’s agents, partners, shareholders, members, officers, directors, beneficiaries and employees arising out of or relating to (i) the use or occupancy, or manner of use or occupancy, of any of the Common Areas and (ii) any act of Landlord or any of Landlord’s agents, partners, shareholders, members, officers, directors, beneficiaries and employees in the Premises.
13.     Limitation of Liability.
(a)    To the fullest extent permitted by law, and as a material part of the consideration to Landlord for this Lease, except to the extent directly arising out of the gross negligence or willful misconduct of Landlord, Tenant hereby releases Landlord and Landlord’s agents, partners, shareholders, members, officers, directors, beneficiaries and employees from responsibility for, and waives as against Landlord and Landlord’s agents, partners, shareholders, members, officers, directors, beneficiaries and employees, and assumes all risk of all losses, damages, judgments, claims, expenses, costs and liabilities from any cause (including, without limitation, except to the extent excluded herein, losses, damages, judgments, claims, expenses, costs and liabilities based in whole or in part on the negligence of Landlord or any of Landlord’s agents, partners, shareholders, members, officers, directors, beneficiaries and employees) resulting from any accident or occurrence in the Premises or any other portion of the Building or based on any defect in or failure of equipment, pipes, or wiring, or by broken glass, or by the backing up of drains, or by gas, water, steam, electricity, or oil leaking, escaping or flowing into the Premises, EVEN IF SUCH DAMAGE RESULTS FROM THE NEGLIGENCE (BUT NOT THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF LANDLORD OR ITS PARTNERS OR THEIR RESPECTIVE PARTNERS, MEMBERS, AGENTS OR EMPLOYEES; provided, however, nothing in this Section 13(a) shall release Landlord from any of its obligations of maintenance and repair under this Lease). Landlord shall not be liable to Tenant for any loss or damage that may be occasioned by or through the acts or omissions of other tenants of the Building or of any other persons whomsoever, including, but not limited to riot, strike, insurrection, war, court order, requisition, order of any governmental body or authority, acts of God, fire or theft.
(b) Except (1) to the extent of the exercise by Landlord of its remedies under Section 18 or any liability of Tenant arising therefrom, (2) to the extent of the exercise by Landlord of its remedies for any breach by Tenant of any of its obligations under Section 36 of this Lease or any liability of Tenant arising therefrom, or (3) to the extent of the exercise by Landlord of its remedies for any failure by Tenant to timely surrender possession of the Premises to Landlord upon expiration or sooner termination of the Term in the manner and condition required under this Lease or any liability of Tenant arising therefrom, neither Tenant nor any of Tenant’s agents, partners, shareholders, members, officers, directors, beneficiaries and employees shall be liable to Landlord for, and Landlord releases and waives as against Tenant and all of Tenant agents, partners, shareholders, members, officers, directors, beneficiaries and employees from, any and all losses, damages, judgments, claims, expenses, costs and liabilities for any consequential, indirect, special or punitive damages, whether arising out of any injury or damage to, or interference with, Landlord’s

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business, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use under Section 12.
(c)    Notwithstanding anything to the contrary in this Lease, in no event and under no theory of allocation of risk or liability shall Landlord be responsible for, and Tenant releases and waives as against Landlord and agents, partners, shareholders, members, officers, directors, beneficiaries and employees from, any and all losses, damages, judgments, claims, expenses, costs and liabilities for any consequential, indirect, special or punitive damages, whether arising out of any injury or damage to, or interference with, Tenant’s business, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use.
14.     Casualty Damage . If the Premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give prompt written notice thereof to Landlord. Landlord shall notify Tenant of the estimated repair period within ninety (90) days after the date of such casualty. However, in case the Building shall be damaged to the extent greater than fifty percent (50%) of the replacement value of the Building (whether or not the Premises shall have been damaged by such casualty) or in the event there is less than two (2) years of the Lease Term remaining or in the event Landlord’s mortgagee should require that the insurance proceeds payable as a result of a casualty be applied to the payment of the mortgage debt or in the event of any material uninsured loss to the Building, Landlord may, at its option, terminate this Lease by notifying Tenant in writing of such termination within ninety (90) days after the date of such casualty. If Landlord does not elect to terminate this Lease, but if the Premises are damages to the extent that Tenant reasonably estimates that it will be unable to conduct business in the Premises for a period of one hundred eighty (180) days, then Tenant shall have the right to terminate this Lease by notifying Landlord in writing of such termination within thirty (30) days following receipt of Landlord’s notice that Landlord does not elect to terminate this Lease as a consequence of said casualty. If neither Tenant nor Landlord thus elects to terminate this Lease, Landlord shall commence and proceed with reasonable diligence to restore the Building, and the improvements located within the Premises to substantially the same condition in which it was immediately prior to the happening of the casualty. When the repairs described in the preceding two sentences have been completed by Landlord, Tenant shall complete the restoration of all furniture, fixtures and equipment which are necessary to permit Tenant’s reoccupancy of the Premises. Landlord shall not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant resulting in any way from such damage or the repair thereof, except that Rent shall be abated from the date of the damage or destruction for any portion of the Premises that is unusable by Tenant, which abatement shall be in the same proportion that the RSF in the Premises which is unusable by Tenant bears to the total RSF in the Premises; provided that Tenant shall not be entitled to any abatement of Rent if the damage or destruction in the Premises is restored within five (5) business days after Landlord’s receipt of written notice from Tenant of the occurrence of the damage or destruction. The provisions of this Lease, including this Section 14, 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 Project, and any statute or regulation of the state in which the Project 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 Project.
15.     Condemnation .
(a)    If the whole or any substantial part of the Premises shall be taken or condemned for any public or quasi-public use under governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof, then each of Landlord and Tenant may, at its option, terminate this Lease so long, and Rent shall be abated during the unexpired portion of this Lease, effective when the physical taking of said Premises or said portion of the Building or land shall occur. If this Lease is not

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terminated, the rent for any portion of the Premises so taken or condemned shall be abated during the unexpired Lease Term effective when the physical taking of said portion of the Premises shall occur. All compensation awarded for any taking or condemnation, or sale proceeds in lieu thereof, shall be the property of Landlord, and Tenant shall have no claim thereto, the same being hereby expressly waived by Tenant, except for any portions of such award or proceeds which are specifically allocated by the condemning or purchasing party to compensate Tenant for the taking of or damage to trade fixtures of Tenant, Tenant installed alterations or additions, Tenant’s goodwill, and moving costs, which Tenant specifically reserves to itself. Tenant hereby waives any and all rights it might otherwise have pursuant to Section 1265.130 of the California Code of Civil Procedure.
(b)    Notwithstanding anything to the contrary in Section 15(a), if all of the Premises shall be temporarily condemned or taken for governmental occupancy for a period of less than one (1) year, this Lease shall remain in full force and effect and Tenant shall be entitled to any and all compensation, damages, income, rent and awards in connection therewith.
16.     Assignment and Subletting .
(a)    Except in connection with a Permitted Transfer (defined in Section 16 (c) below), Tenant shall not assign, sublease, transfer or encumber any interest in this Lease or allow any third party to use any portion of the Premises (such assignment, sublease, transfer or encumbrance, collectively or individually, a “ Transfer ”; each transferee, a “ Transferee ”) without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed with respect to a proposed sublease or assignment (other than a collateral assignment, in which case Landlord may withhold its consent in its sole and absolute discretion). Without limitation, it is agreed that Landlord’s consent shall not be considered unreasonably withheld if: (1) the proposed Transferee’s financial condition is not adequate for the obligations such Transferee is assuming in connection with the proposed Transfer; (2) the Transferee’s business is not a retail use permitted by this Lease or is otherwise suitable for the Building considering the business and reputation of the other tenants and the Building’s prestige, or would result in a violation of another tenant’s rights under its lease at the Building; (3) the Transferee is a governmental agency; (4) in case of subletting, such subletting is of less than the entire Premises; or (5) an uncured Event of Default under this Lease is in effect,. Any attempted Transfer in violation of this Section 16(a), shall, exercisable in Landlord’s sole and absolute discretion, be void. Consent by Landlord to one or more Transfers shall not operate as a waiver of Landlord’s rights to approve any subsequent Transfers. Any assignee shall assume in writing, for the express benefit of Landlord, all of the obligations of Tenant under this Lease, provided that no such assumption shall be deemed a novation. Following any assignment, the obligations for which the prior Tenant remains liable under this Lease shall include any obligations arising in connection with any amendments to this Lease executed by Landlord and the assignee, whether or not such amendments are made with knowledge or consent of the prior Tenant.
(b)    Except for a Permitted Transfer as defined in Section 16(c) below, a “Transfer” shall include any direct or indirect Transfer of fifty percent (50%) or more of any one of the voting, capital or profits interests in Tenant (other than through the sales of shares on a nationally recognized securities exchange); and (iii) any Transfer of this Lease from Tenant by merger, consolidation, transfer of assets, or liquidation or any similar transaction under any law pertaining to corporations, partnerships, limited liability companies or other forms of organizations. For avoidance of doubt, none of the following will constitute a Transfer of this Lease and shall be permitted without Landlord’s consent: (i) a public offering of Tenant’s stock, (ii) the sale or other transfer of voting shares of Tenant to immediate family members by reason of gift or death which do not result in a change of control of Tenant or (iii) the investment in Tenant by any venture capital firm or similar private investor which do not result in a change of control of Tenant.
(c)    Notwithstanding anything to the contrary in Section 16(a) above, for so long as the Tenant is the named Tenant or a Permitted Transferee of the named Tenant under the Office Lease, Tenant

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may assign its entire interest under this Lease or sublet the Premises to a Permitted Transferee in a Permitted Transfer as defined in the Office Lease (and the same shall be deemed a “ Permitted Transfer ” under this Lease, subject to and on the terms and conditions of a Permitted Transfer under the Office Lease and subject to the assumption of Lease obligations provided in Section 16(a) above; provided, however, if the Transferee is an entity other than the then named Tenant under the Office Lease, any such Permitted Transfer shall be subject to the then tenant under the Office Lease executing Guaranty of Lease in favor o r Landlord, in form and substance satisfactory to Landlord.
(d)    If, at any time during the Lease Term, Tenant desires to assign its interest in this Lease or sublet all or any part of the Premises, other than in connection with a Permitted Transfer, Tenant shall give notice to Landlord (“ Tenant’s Notice ”) setting forth the terms of the proposed transaction, which shall be expressly subject to the provisions of this Lease, the identity of the parties to the transaction, the proposed documentation for the transaction and reasonably detailed information regarding the business and financial condition of the parties involved as requested by Landlord. Landlord shall have the option, exercisable by notice given to Tenant (“ Landlord’s Election Notice ”) within thirty (30) days after Tenant’s Notice is given (“ Landlord’s Option Period ”), to either (i) consent to the assignment or subletting subject to the terms and conditions of this Lease; (ii) disapprove the proposed assignment or subletting, subject to the terms and conditions of Section 16(a); or (iii), terminate this Lease in its entirety, in which event Tenant shall, on the date specified by Landlord (which shall be no less than forty-five (45) and no more than ninety (90) days after Landlord’s Election Notice) surrender the Premises, .
(e)    If Tenant requests Landlord’s consent to a Transfer, Tenant shall submit to Landlord (i) financial statements for the proposed Transferee, (ii) a copy of the proposed assignment or sublease, and (iii) such other information as Landlord may reasonably request. After Landlord’s receipt of the required information and documentation, Landlord shall either consent or reasonably refuse consent to the Transfer in writing. Tenant shall pay Landlord a review fee of $1,500.00 for Landlord’s review of any Permitted Transfer or proposed Transfer. In addition, Tenant shall reimburse Landlord for its actual reasonable costs and expenses (including, without limitation, reasonable attorney’s fees not to exceed $1,500) incurred by Landlord in connection with Landlord’s review of such proposed Transfer or Permitted Transfer.
(f)    As a condition to Landlord's consent to any Transfer, Tenant shall pay Landlord, as Additional Rent, fifty percent (50%) of any Transfer Premium. “Transfer Premium” means the gross revenue received from the assignee or subtenant during the assignment or sublease term, less: the sum of (i) the gross revenue (excluding any Transfer Premium) paid to Landlord by Tenant during the period of the assignment or the sublease term; (ii) any reasonable improvement allowance or other economic concession (space planning allowance, moving expenses, etc.) paid by Tenant to its assignee or subtenant; (iii) reasonable broker’s commissions; (iv) reasonable attorneys’ fees; (v) costs required to be paid by Tenant to Landlord under the Lease in connection with such assignment or sublease; and (vi) costs of advertising the Premises for rent (collectively “Transaction Costs” ); provided, however, in no event shall the expenses described in clauses (ii) through (vi) of this Subsection 16(f) be deducted from gross “Transfer Premium” unless such expenses are reasonable, and actually quantifiable, and provided further that under no circumstance shall Landlord be paid any Transfer Premium until Tenant has recovered all of the items set forth in clause (i) through (vi) of this Subsection 16(f), it being understood that if in any year the gross revenues in connection with a Transferred Space are less than the Transaction Costs, in which event, the amount of the excess Transaction Costs shall be carried over to the next year and then deducted from gross revenue with the procedure repeated until a the gross revenue attributable to that Transferred Space exceeds the Transaction Costs. Subject to the foregoing, the Transfer Premium shall be calculated and paid by Tenant monthly on a cash basis, along with Tenant’s payment of Base Rent. Within ten (lO) days following the effective date of the Transfer, Tenant shall furnish a complete statement, certified by an independent certified public accountant or Tenant’s chief financial officer, and sworn to by Tenant, describing in detail the consideration payable by the Transferee in connection with the Transfer and the computation of the Transfer Premium

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payable by Tenant to Landlord, all of which shall be determined in accordance with generally accepted accounting principles. All books and records of Tenant that are reasonably necessary in order to perform an audit to determine whether the Transfer Premium was correctly calculated shall be made available to Landlord for review or audit upon request. If Landlord’s independent certified public accountant finds that the Transfer Premium for any Transfer has been understated, Tenant shall, within thirty (30) days following written notice from Landlord, pay the deficiency and, if the Transfer Premium is found to be understated by more than ten percent (10%), Landlord’s costs of such audit
(g)    No sublessee (other than Landlord if it exercises its option pursuant to Section 16(d) above) shall have a right further to sublet without Landlord’s prior consent, which Tenant acknowledges may be withheld in Landlord’s absolute discretion, and any assignment by a sublessee of its sublease shall be subject to Landlord’s prior consent in the same manner as if Tenant were entering into a new sublease. No sublease, once consented to by Landlord, shall be modified or terminated by Tenant without Landlord’s prior consent, which consent shall not be unreasonably withheld.
(h)     Regardless of Landlord's consent and regardless of whether Landlord consent is required pursuant to the terms hereof, no subletting or assignment shall release Tenant of Tenant's obligation or alter the primary liability of Tenant to pay the Base Rent and to perform all other obligations to be performed by Tenant hereunder. The acceptance of Rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting. In the event of default by any assignee of Tenant or any sublessee of Tenant in the performance of any of the terms hereof, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against such assignee or sublessee. Landlord may consent to subsequent assignments or subletting of this Lease or amendments or modifications to this Lease with assignees of Tenant, without notifying Tenant, or any successor of Tenant, and without obtaining its or their consent thereto, and such action shall not relieve Tenant of liability under this Lease.
17 .     Events of Default .
(a)    The following events shall be deemed to be “Events of Default” under this Lease: (i) any failure by Tenant to pay any Rent (or deliver any Security Deposit, Letter of Credit, or similar credit enhancement required hereunder) when due unless such failure is cured within five (5) days after written notice, (ii) Tenant fails to perform any other provision of this Lease not described in this Section 17, and such failure is not cured within thirty (30) days (or as soon as practicable if the failure involves a hazardous condition) after notice from Landlord, however, other than with respect to a hazardous condition, if Tenant’s failure to comply cannot reasonably be cured within thirty (30) days, Tenant shall be allowed additional time (not to exceed one hundred twenty (120) additional days) as is reasonably necessary to cure the failure so long as Tenant begins the cure within thirty (30) days and diligently pursues the cure to completion; (iii) Tenant fails to observe or perform any of the covenants with respect to (a) assignment and subletting as set forth in Section 16, (b) mechanic’s liens as set forth in Section 9, (c) insurance as set forth in Section 13 or (d) delivering subordination agreements or estoppel certificates as set forth in Section 25, unless such failure is cured within three (3) Business days after written notice, (iv) the leasehold interest of Tenant is levied upon or attached under process of law; (v) Tenant abandons or vacates the Premises; (vi) commencement of proceedings for winding up or dissolving (whether voluntary or involuntary) Tenant, if Tenant is a corporation, partnership or limited liability company; (vii) any voluntary or involuntary proceedings are filed by or against Tenant under any bankruptcy, insolvency or similar Laws and, in the case of any involuntary proceedings, are not dismissed within sixty (60) days after filing; or (viii) any guarantor of Tenant’s obligations under this Lease shall become insolvent, file a petition in bankruptcy, have an involuntary bankruptcy petition filed against said guarantor, be in default of its obligations under said guaranty beyond any applicable notice and cure period, fail to execute and deliver a reaffirmation of the guaranty if requested by Landlord, or die, if the guarantor is an individual.

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(b)    Tenant shall pay all reasonable attorneys’ fees and other costs incurred by Landlord, if it becomes necessary for Landlord to employ an attorney or other agent to (i) collect the Rent due by Tenant hereunder whether or not a suit is brought thereon, or (ii) enforce any provisions of this Lease (which shall expressly include, without limitation, the costs to prepare any demand notices).
18.     Remedies . Upon any Default, Landlord shall have, in addition to any other remedies available to Landlord at law or in equity (which shall be cumulative and nonexclusive), the option to pursue any one or more of the following remedies (which shall be cumulative and nonexclusive) without any notice or demand:
(a)    Landlord may 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 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 of damages therefor; and Landlord may recover from Tenant the following:
(i)    The worth at the time of award of the unpaid Rent which had 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 Rent loss that Tenant proves could be reasonably avoided; plus
(iv)    Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations hereunder or which in the ordinary course of things would be likely to result therefrom, including brokerage commissions, advertising expenses, expenses of remodeling any portion of the Premises for a new tenant (whether for the same or a different use), and any special concessions made to obtain a new tenant; plus
(v)    At Landlord’s option, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable Laws.
(b)    As used in Sections 18(a)(i) and (a)(ii), the “worth at the time of award” shall be computed by allowing interest at a rate per annum equal to the lesser of (1) the Default Rate, and (2) the highest rate permitted by applicable law. As used in Section 18(a)(iii), 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 1%. For the purposes of determining Rent, Tenant’s obligation to pay Additional Rent shall be calculated for the remainder of the Lease Term based on the current estimated payments therefore for the calendar year of the default, and each future calendar year in the Lease Term shall be assumed to be equal to the Tenant’s Share for the calendar year prior to the year in which default occurs compounded at a rate equal to the mean average rate of inflation for the three (3) calendar years preceding the calendar year of the default, as determined by using the United States Department of Labor, Bureau of Labor Statistics Consumer Price Index (All Urban Consumers, all items, 1982-84 equals 100) for the metropolitan area or region of which the Project is located. If such index is discontinued or revised, during the Lease Term, such other government index or computation with which it is replaced shall be used in order to obtain substantially the same result as would be obtained if the index had not been discontinued or revised.

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If no replacement index exists then Landlord shall select as a replacement index that index which, in Landlord’s opinion, is generally recognized as the successor index.
(c)    Landlord shall have the remedy described in California Civil Code § 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 hereunder, including the right to recover all Rent as it becomes due.
(d)    Landlord shall at all times have the rights and remedies (which shall be cumulative with each other and cumulative and in addition to those rights and remedies available under Section 18(a), (b) and (c) above, or any applicable Laws or other provision hereof), without prior demand or notice except as required by applicable Laws, to seek any declaratory, injunctive or other equitable relief, and specifically enforce this Lease, or restrain or enjoin a violation or breach of any provision hereof.
(e)    Unless Landlord provides Tenant with express notice to the contrary, no re-entry, repossession, repair, maintenance, change, alteration, addition, reletting, appointment of a receiver or other action or omission by Landlord shall (i) be construed as an election by Landlord to terminate this Lease or Tenant’s right to possession, or to accept a surrender of the Premises, or (ii) operate to release Tenant from any of its obligations hereunder. Tenant waives, for Tenant and for all those claiming by, through or under Tenant, California Civil Code § 3275, California Code of Civil Procedure §§ 1174(c) and 1179, and any existing or future rights to redeem or reinstate, by order or judgment of any court or by any legal process or writ, this Lease or Tenant’s right of occupancy of the Premises after any termination hereof.
(f)    Landlord shall in no event be responsible or liable for any failure to relet the Premises or any part thereof, or for any failure to collect any rent due upon a reletting.
(g)    The receipt by Landlord of less than the full Rent due shall not be construed to be other than a payment on account of Rent then due, nor shall any statement on Tenant’s check or any letter accompanying Tenant’s check be deemed an accord and satisfaction, and Landlord may accept such payment without prejudice to Landlord’s right to recover the balance of the Rent due or to pursue any other remedies provided in this Lease. The acceptance by Landlord of Rent hereunder shall not be construed to be a waiver of any breach by Tenant of any term, covenant or condition of this Lease.
(h)    All property of Tenant removed from the Premises by Landlord pursuant to any provision of this Lease or applicable law may be handled, removed or stored by Landlord at the cost and expense of Tenant, and Landlord shall not be responsible in any event for the value, preservation or safekeeping thereof. Tenant shall pay Landlord for all expenses incurred by Landlord with respect to such removal, handling and/or storage so long as the same is in Landlord’s possession or under Landlord’s control. All or any portion of such property not removed from the Premises or retaken from storage by Tenant within thirty (30) days after the end of the Lease Term or termination of Tenant’s right to possession of the Premises, however terminated, at Landlord’s option, shall be conclusively deemed to have been conveyed by Tenant to Landlord by bill of sale with general warranty of title without further payment or credit by Landlord to Tenant, and/or be deemed to have been abandoned by Tenant.
19.     Landlord’s Default . The occurrence of the following constitutes a “Landlord’s Default” under this Lease: Landlord’s failure to perform any obligation required to be performed by Landlord hereunder after (a) Tenant gives written notice to Landlord of such failure, (b) Landlord fails to commence and diligently prosecute the cure of such failure within thirty (30) days (or three (3) days in the event of a failure threatening the health or safety of the occupants of the Building) of such notice, (c) Tenant gives a second written notice

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to Landlord of such failure and (d) Landlord fails to commence and diligently prosecute the cure of such failure within ten (10) days (or three (3) days in the event of a failure threatening the health or safety of the occupants of the Building) of such second notice; provided, that if the nature of Landlord’s obligation is such that more than the designated time to cure such failure is required to effect such cure, then Landlord shall not be in default so long as Landlord is diligently pursuing such cure to completion. In the event of a Landlord’s Default, Tenant’s sole remedy shall be an action for damages or injunctive relief and the right to cure Landlord’s default at Tenant’s expense and set off against Rent coming due, subject to this Section 19; provided, however, that Tenant shall have no right to terminate or rescind this Lease upon the occurrence of a Landlord’s Default.
20.     No Waiver . Failure of either party to declare any default immediately upon its occurrence, or delay in taking any action in connection with an event of default, shall not constitute a waiver of such default, nor shall it constitute an estoppel against the non-defaulting party, but the non-defaulting party shall have the right to declare the default at any time and take such action as is lawful or authorized under this Lease. Failure by non-defaulting party to enforce its rights with respect to any one default shall not constitute a waiver of its rights with respect to any subsequent default.
21.     Peaceful Enjoyment; No Light, Air or View Easement . Tenant shall, and may peacefully have, hold, and enjoy the Premises, subject to the other terms hereof, provided that Tenant pays the Rent and other sums herein recited to be paid by Tenant and timely performs all of Tenant’s covenants and agreements herein contained. Any diminution or shutting off of light, air or view by any structure which may be erected on lands adjacent to the Building over which Landlord has no control shall in no way affect this Lease or impose any liability on Landlord.
22.     Holding Over . If Tenant continues to occupy the Premises after the expiration or other termination of this Lease or the termination of Tenant’s right of possession, such occupancy shall be that of a tenancy at sufferance. Tenant shall, throughout the entire holdover period, be subject to all the terms and provisions of this Lease and shall pay for its use and occupancy an amount (on a per month basis without reduction for any partial months during any such holdover) equal to one hundred twenty-five percent (125%) of the Base Rent and Additional Rent due under this Lease for the last full month of the term hereof during the first thirty (30) days of such holdover, and one hundred fifty percent (150%) of such Base Rent and the Additional Rent thereafter during such holdover. No holding over by Tenant or payments of money by Tenant to Landlord after the expiration of the Lease Term shall be construed to extend the Lease Term or prevent Landlord from recovery of immediate possession of the Premises by summary proceedings or otherwise Tenant shall also be liable to Landlord for all direct and consequential damages which Landlord may suffer by reason of any holding over by Tenant. Landlord and Tenant each hereby (a) agree that the terms of this Lease shall govern any holdover of the Premises, and (b) waive the terms of California Civil Code § 1945, and any successor statute.
23.     Subordination; Attornment; Estoppel Certificate .
(a)     Subordination . Landlord certifies that, as of the Effective Date, it has not entered into or granted any ground lease, mortgage, deed of trust, or other security instrument of any kind that encumbers the Project or any portion thereof for the benefit of any third party to secure any financing transaction to which Landlord or any affiliate is a party (collectively, an “ Encumbrance ”). From and after the Effective Date, if the holder of any Encumbrance (“ Holder ”) desires that this Lease be subordinate to said Encumbrance, Landlord shall cause the Holder thereof to deliver to Tenant a subordination, non-disturbance and attornment agreement (the “ SNDA ”) on such form as then generally used by the Holder, and providing for customary nondisturbance language, which (1) may contain exclusions with respect to certain obligations of Landlord not assumed by the Holder as well as extensions of time for the Holder to

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cure any defaults of Landlord under this Lease before Tenant is entitled to exercise any remedies available to it under this Lease, at law or in equity) to the effect that, notwithstanding such subordination, Tenant’s right to quiet possession of the Premises shall not be disturbed so long as Tenant shall pay the Rent and all other sums due hereunder and observe and perform all of the provisions of this Lease to be observed and performed by Tenant, and (2) shall provide that such Holder recognizes this Lease, and that so long as the Lease shall be in full force and effect (a) the Lease and Tenant’s leasehold interest will not be extinguished or terminated nor will the possession or rights thereunder of Tenant be disturbed, affected, or impaired by the foreclosure of such mortgage arising out of any default thereunder or by delivery of a deed in lieu of foreclosure of such mortgage or otherwise or by termination of such ground lease or default by Landlord thereunder; (b) Tenant shall not be named or joined as a party defendant or otherwise in any proceeding for the foreclosure of any such mortgage or to enforce any rights thereunder or any proceeding to enforce any rights under any such ground lease; (c) all condemnation awards and payments and all proceeds of insurance paid or payable with respect to the Premises shall be applied and used in the manner set forth in the Lease; and (d) neither the mortgage nor any other security instrument executed in connection therewith nor any ground lease shall cover or be construed as subjecting in any manner to the lien thereof of any trade fixtures, business equipment, signs, or other personal property at any time supplied or installed by Tenant in or on the Premises, regardless of the manner or mode of attachment thereof to the Premises. All nondisturbance agreements shall acknowledge that, to the extent the Improvement Allowance (including allowances for expansion, renewals, and initial construction) is not fully funded by Landlord, Tenant may deduct the amount of the unfunded portion of the Improvement Allowance, subject to Exhibit C-1 . Tenant shall execute and deliver such instrument to Landlord within ten (10) Business Days following demand by Landlord. Any cost or fee required to be paid to Holder to obtain the SNDA, including any attorneys’ fees incurred in the negotiation thereof, shall be paid for by Tenant, as and when requested by Holder; provided, however, Landlord shall pay for any application or processing fee required under the terms of its loan documents with Holder as a condition to the issuance of an SNDA.
(b)     Attornment . If any Holder or successor or assign of a Holder, shall hereafter succeed to the rights of Landlord under this Lease, whether by foreclosure, deed in lieu of foreclosure, or otherwise, then (i) such successor landlord shall not be subject to any offsets or defenses which Tenant might have against Landlord except for those offsets or defenses expressly set forth in the Lease; (ii) such successor landlord shall not be bound by any prepayment by Tenant of more than one month’s installment of Rent; (iii) such successor landlord shall not be subject to any liability for any act or omission of or default by Landlord under this Lease except for any continuing obligations of Landlord (to the extent of such lender’s or successor’s interest in the Property), and subject to expiration of any cure periods provided to Landlord; (iv) Tenant shall attorn to and recognize such successor landlord as Tenant’s landlord under this Lease provided that such party assumes Landlord’s obligations under this Lease in writing; (v) Tenant shall promptly execute and deliver any commercially reasonable instruments that may be necessary to evidence such attornment; (vi) upon such attornment, this Lease shall continue in effect as a direct lease (whether separately documented or not) between such successor landlord and Tenant upon and subject to all of the provisions of this Lease; and (vii) Tenant shall be entitled to quiet enjoyment of the Premises for so long as Tenant is not in default under the terms of this Lease.
(c) Estoppel Certificates . Tenant shall at any time and from time to time within ten (10) Business Days after written demand by Landlord, execute and deliver to Landlord a statement in writing certifying that (i) this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the modifications), (ii) the dates to which the Base Rent, Additional Rent and other charges have been paid in advance, if any, and the amount of any security deposit, (iii) stating whether or not to the best knowledge of Tenant, there are any uncured defaults on the part of Landlord and, if so, specifying each such default of which Tenant may have knowledge and

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containing such other accurate statements or certifications of fact as Landlord may reasonably request, (iv) acknowledging that Tenant does not have any claim or right of offset against Landlord (or if Tenant does have any such claim or right of offset, the nature of such claim or right of offset), (v) stating that Tenant Improvements, if any, are complete, and (vi) setting forth such other matters as may reasonably be requested by Landlord. Any such statement delivered pursuant to this Section 23 may be relied upon by any prospective purchaser of the Building or any mortgagee, ground lessor or other like encumbrancer thereof or any assignee of any such encumbrancer upon the Building.
24.     Notice . Any notice required or permitted to be given under this Lease or by law (each, a “ Notice ”) shall be deemed to have been given if it is written and delivered in person or mailed by registered or certified mail, postage prepaid, or sent by a nationally recognized overnight delivery service to the party who is to receive such Notice at the address specified in Basic Lease Information. When so mailed, the Notice shall be deemed to have been given two (2) Business Days after the date it was mailed. When sent by overnight delivery service, the notice shall be deemed to have been given on the next Business Day after deposit with such overnight delivery service. Each party may change its notice address specified in the Basic Lease Information from time to time by giving written notice thereof to the other party.
25.     Surrender of Premises . On or before the termination of the Lease Term, or upon any termination of Tenant’s right to possession of the Premises, Tenant shall surrender the Premises to Landlord in good condition and repair, normal wear and tear excepted, with all interior walls, floors and floor coverings cleaned, and otherwise in the condition required under this Section 27. The term “normal wear and tear” does not, and shall not be deemed to, include any damage or deterioration that could have been prevented through proper maintenance, or by Tenant’s full and timely performance of all its obligations under this Lease. On or before the expiration or sooner termination of the Lease Term (or such later date following any earlier termination of this Lease as hereinafter provided), Tenant shall (a) remove (i) all Tenant Improvements constructed by Tenant under the Work Letter and Construction Agreement that Landlord identifies at the time Landlord approves the Final Plans that Landlord deems Specialized Alterations, (ii) all of Tenant’s FF&E and phone and data cabling from the Project; except those that Landlord has, if at all, confirmed in writing (within the time period hereinafter provided) shall be left in place; and any other Alterations that Landlord required in writing be removed at the time Landlord gave its consent thereto Pursuant to Section l0(a); and (b) fully repair any damage to the Premises or other portions of the Project caused by the removal of any of the foregoing items. Landlord may, by written notice to Tenant given at any time at least nine (9) months prior to the Expiration Date (or, in the event of a termination of this Lease prior to the scheduled Expiration Date, at any time within thirty (30) days following written notice of such termination), confirm the obligation of Tenant to either remove or leave in place any or all Specialized Alterations, but failure to provide any such written notice shall not change any of Tenant’s obligations with respect to the removal of Tenant’s property and the other matters hereinabove provided in accordance with this Section 25. Any of Tenant’s property not removed from the Project by Tenant as required herein shall be deemed abandoned and may be retained, used, stored, removed or disposed of by Landlord as Landlord sees fit in the exercise of its sole discretion, and Tenant waives all claims against Landlord resulting therefrom. Without limiting the generality of the foregoing, Tenant waives any of the rights and benefits under Civil Code Sections 1980-1993 relating to the disposition of abandoned personal property and agrees that title to any such personal property, free and clear of any liens, shall pass to Landlord upon written notice to Tenant of Landlord’s exercise of its right to retain any such personal property. Within ten (10) days following Landlord’s invoice therefor, Tenant shall reimburse Landlord for all costs incurred by Landlord in (x) storing, removing or disposing of any abandoned Tenant’s property; and (y) repairing any damage to the Premises or Project caused by Tenant, but only to the extent the making of (or payment for) such repairs is the responsibility of Tenant under this Lease; and (z) removing any Tenant Improvements that Tenant was required to remove, and all repair and restoration work necessitated by such removal. Tenant represents and warrants that no

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other person shall have any ownership or use interest in Tenant’s FF&E, Alterations, Specialized Alterations and Tenant Improvements as of the Expiration Date or sooner termination of this Lease. Tenant shall surrender to Landlord all keys to the Premises and make known to Landlord the combination of all combination locks which Tenant is required to leave on the Premises. All Tenant’s obligations under this Section 25 shall survive the expiration or sooner termination of this Lease.
26.     Signs; Advertising .
(a)    Tenant, at Tenant’s sole cost and expense, shall be permitted to maintain on windows of and entrance to the Premises a sign or signs in a type, color, style and size approved by Landlord and consistent with other retail tenants of the Project. Tenant shall comply, at its sole cost and expense, with any and all laws, statutes, ordinances and governmental rules, regulations or requirements applicable to such signage, and all such signage shall be subject to Landlord’s prior approval, which approval shall not be unreasonably withheld. Any sign and/or advertising matter must be prepared by a professional sign company or advertising organization. Tenant shall not permit, allow or cause to be used in or at the Building any advertising media or device such as phonographs, radios, public address systems, sound production or reproduction devices, neon lights, excessively bright lights, changing, flashing, flickering or moving lights or lighting devices or any similar devices the effect of which shall be visible or audible from the exterior of the Premises.
(b)    Tenant shall maintain all signs at its cost and expense. If Tenant fails to maintain its signs and such failure continues for a period of ten (10) days after notice thereof by Landlord, Landlord may, but shall not be obligated, to perform any such required maintenance. Tenant shall promptly pay to Landlord the cost of such required maintenance as additional rent. At the termination of the Lease, Tenant shall remove all its signs, and all damage caused by such removal shall be at Tenant’s expense. All of Tenant’s signs shall remain Tenant’s personal property.
27.     Miscellaneous .
(a)    If any term or provision of this Lease, or the application thereof, shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision, shall not be affected thereby, and each term and provision of this Lease shall be valid and enforced to the fullest extent permitted by law.
(b)    Tenant agrees not to record this Lease. Tenant may require Landlord and Tenant to execute a short form or memorandum hereof in the Official Records of the San Francisco County Recorder, provided that the costs of recording such short form or memorandum hereof shall be paid by Tenant.
(c)    This Lease and the rights and obligations of the parties hereto shall be interpreted, construed, and enforced in accordance with the laws of the State of California. Landlord and Tenant irrevocably submit to the jurisdiction of: (i) any state or federal court sitting in the state of California over any suit, action, or proceeding, arising out of or relating to this Lease; and (ii) any state court sitting in the county where the Premises are located over any suit, action, or proceeding, arising out of or relating to this Lease. Landlord and Tenant irrevocably waive, to the fullest extent permitted by law: (i) any objection that Tenant may now or hereafter have to the laying of venue of any such suit, action, or proceeding brought in any such court; (ii) any claim that any such suit, action, or proceeding, bought in any such court, has been brought in an inconvenient forum; and (iii) any claim that any such suit, action, or proceeding, brought in any such court does not have jurisdiction over Tenant.
(d)    Except as expressly otherwise herein provided, time is of the essence of this Lease.

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(e)    Landlord shall have the right to transfer and assign, in whole or in part, all of its rights and obligations hereunder and in the Building and Project referred to herein, and in such event and upon such transfer, and such transferees assumption of Landlord’s obligations under this Lease in writing, Landlord shall be released from any further obligations hereunder, and Tenant agrees to look solely to such successor in interest of Landlord for the performance of such obligations.
(f)    If either party institutes a suit against the other for violation of or to enforce any covenant, term or condition of this Lease, the prevailing party shall be entitled to all of its costs and expenses, including, without limitation, reasonable attorneys’ fees.
(g)    Landlord and Tenant each represents and warrants to the other that it has had no dealings with any real estate broker or agent in connection with the negotiation or making of this Lease, except for the Brokers. Each party shall indemnify, protect, defend, and hold harmless the other party from all claims, including attorney fees, arising out of any leasing commission, finder’s fee, or equivalent compensation alleged to be owing to any person on account of the indemnifying party’s dealings with any real estate broker or agent other than the Brokers. No broker or agent (including the Brokers) shall be deemed to have earned, or be entitled to receive, any commission or fee as a result of the making of this Lease or the occupancy by Tenant of any space in the Project, except in accordance with the express terms of a separate written agreement, if any, executed by the Brokers entitled to receive such commission or fee and the party obligated to pay it. Landlord shall be responsible for the payment of any and all leasing commissions to the Brokers named herein in connection with this Lease and pursuant to separate written agreement. The terms of this Section 29(g) shall survive the expiration or earlier termination of this Lease.
(h)    Tenant acknowledges that the financial capability of Tenant to perform its obligations hereunder is material to Landlord and that Landlord would not enter into this Lease but for its belief, based on its review of Tenant’s financial statements, that Tenant is capable of performing such financial obligations. Tenant hereby represents, warrants and certifies to Landlord that its financial statements previously furnished to Landlord were at the time given true and correct in all material respects and that there have been no material subsequent changes thereto as of the Effective Date. Tenant, within 15 days after request, shall provide Landlord with a current financial statement and such other information as Landlord may reasonably request in order to create a “business profile” of Tenant and determine Tenant’s ability to fulfill its obligations under this Lease. Landlord, however, shall not require Tenant to provide such information unless Landlord requires the information in connection with a proposed financing or sale of the Project, or if an Event of Default by Tenant exists hereunder.
(i)    Notwithstanding anything to the contrary contained in this Lease, the expiration of the Lease Term, whether by lapse of time or otherwise, shall not relieve Tenant from Tenant’s obligations accruing prior to the expiration of the Lease Term, and such obligations shall survive any such expiration or other termination of the Lease Term.
(j)    Landlord and Tenant understand, agree and acknowledge that (i) this Lease has been freely negotiated by both parties; and (ii) in any controversy, dispute or contest over the meaning, interpretation, validity, or enforceability of this Lease or any of its terms or conditions, there shall be no inference, presumption, or conclusion drawn whatsoever against either party by virtue of that party having drafted this Lease or any portion thereof.
(k)    The headings and titles to the paragraphs of this Lease are for convenience only and shall have no effect upon the construction or interpretation of any part hereof. The term “including” shall be deemed to mean “including without limitation.”

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(l)    This Lease shall only become effective and binding upon full execution hereof by Landlord and delivery of a signed copy to Tenant and the signed Letter of Credit to Landlord. This Lease may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but such counterparts shall together constitute one and the same instrument.
(m)    During the Lease Term, should a real estate investment trust become Landlord hereunder, all provisions of this Lease shall remain in full force and effect except as modified by this Section 19(m).
(i)    If Landlord in good faith determines that its status is a real estate investment trust under the provisions of the Internal Revenue Code of 1986, as heretofore or hereafter amended, will be jeopardized because of any provision of this Lease, Landlord may request reasonable amendments to this Lease and Tenant will not unreasonably withhold, delay or defer its consent thereto, provided that such amendments do not (a) increase the monetary obligations of Tenant or decrease the rights of Tenant pursuant to this Lease or (b) in any other manner materially adversely affect Tenant’s interest in the Premises.
(ii)    Landlord and Tenant agree that all rental payable by Tenant to Landlord, which includes all sums, charges, or amounts of whatever nature to be paid by Tenant to Landlord in accordance with the provisions of this Lease, shall qualify as “rents from real property” within the meaning of both Sections 512(b)(3) and 856(d) of the Internal Revenue Code of 1986, as amended (the “ Code ”) and the U.S. Department of Treasury Regulations promulgated thereunder (the “ Regulations ”). In the event that Landlord, in its sole discretion, determines that there is any risk that all or part of any rent shall not qualify as “rents from real property” for the purposes of Sections 512(b)(3) or 856(d) of the Code and the Regulations promulgated thereunder, Tenant agrees (A) to cooperate with Landlord by entering into such amendment or amendments as Landlord deems reasonably necessary to qualify all rental as “rents from real property”; and B) to permit an assignment of this Lease by Landlord; provided, however, that any adjustments required pursuant to this Section 29(m) shall be made so as to produce the equivalent rental (in economic terms) payable prior to such adjustment.
(iii)    Landlord shall have the right at any time and from time to time to unilaterally amend the provisions of this Lease if Landlord is advised by its counsel that all or any portion of the monies paid by Tenant to Landlord hereunder are, or may be deemed to be, unrelated business income within the meaning of the Code or the Regulations, and Tenant agrees that it will execute all documents or instruments necessary to effect such amendment or amendments, provided that no such amendment shall result in Tenant having to pay in the aggregate more money on account of its occupancy of the Premises under the terms of this Lease, as so amended, and provided further that no such amendment shall result in Tenant having materially greater obligations or receiving less services than it was previously obligated for or entitled to receive under this Lease, or services of a lesser quality.
(iv)    Any services which Landlord is required to furnish pursuant to the provisions of this Lease may, at Landlord’s option, be furnished from time to time, in whole or in part, by employees of Landlord or Landlord’s managing agent or its employees or by one or more third persons hired by Landlord or Landlord’s managing agent. Tenant agrees that upon Landlord’s written request it will enter into direct agreements with Landlord’s managing agent or other parties designated by Landlord for the furnishing of any such services required to be furnished by Landlord hereunder, in the form and content approved by Landlord, provided however that no such contract shall result in Tenant having to pay in the aggregate more money on account of its occupancy of the Premises under the terms of this Lease, and provided further that no such contract shall result in Tenant having materially greater obligations or receiving less services than it is presently obligated for or entitled to receive under this Lease, or services of a lesser quality.

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28.     No Offer . Landlord has delivered a copy of this Lease to Tenant for Tenant’s review only, and the delivery hereof does not constitute an offer to Tenant or an option. Execution and delivery of this Lease by Tenant to Landlord shall, in consideration of the time and expense incurred by Landlord in reviewing this Lease and Tenant’s credit, constitute an offer by Tenant to lease the Premises upon the terms and conditions set forth herein (which offer to Lease shall be irrevocable for twenty (20) Business Days following the date of delivery). This Lease shall not be effective until an original of this Lease executed by both Landlord and Tenant.
29.     California Civil Code Section 1938 . In accordance with California Civil Code Section 1938, Landlord hereby discloses that the Premises has not undergone inspection by a Certified Access Specialist. As required by Section 1938(e) of the California Civil Code, Landlord hereby states as follows: “A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the premises.” In furtherance of the foregoing, by their execution of the Lease, Landlord and Tenant hereby agree that that in the event that Tenant elects to perform a CASp inspection of the Premises hereunder (the “ Inspection ”), such Inspection shall be (a) performed at Tenant’s sole cost and expense, (b) limited to the Premises, and (c) performed by a CASp who has been approved or designated by Landlord prior to the Inspection. Any Inspection must be performed at a time reasonably approved by Landlord. Landlord reserves the right to be present during the Inspection. Tenant, at its sole cost and expense, shall be solely responsible for making any improvements, alterations, modifications and/or repairs within or to the Premises to correct violations of construction-related accessibility standards as disclosed by any Tenant-performed CASp inspection. Subject to the foregoing, nothing herein shall affect the allocation for responsibility for compliance with Disability Access Laws as provided in Sections l0(b) and (c) of this Lease.
30.     OFAC Compliance .
(a)    Tenant represents and warrants that (a) Tenant and each person or entity owning an interest in Tenant is (i) not currently identified on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control, Department of the Treasury (“ OFAC ”) and/or on any other similar list maintained by OFAC pursuant to any authorizing statute, executive order or regulation (collectively, the “ List ”), and (ii) not a person or entity with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or Executive Order of the President of the United States, (b) none of the funds or other assets of Tenant constitute property of, or are beneficially owned, directly or indirectly, by any Embargoed Person (as hereinafter defined), (c) no Embargoed Person has any interest of any nature whatsoever in Tenant (whether directly or indirectly), (d) none of the funds of Tenant have been derived from any unlawful activity with the result that the investment in Tenant is prohibited by law or that the Lease is in violation of law, and (e) Tenant has implemented procedures, and will consistently apply those procedures, to ensure the foregoing representations and warranties remain true and correct at all times. The term “Embargoed Person” means any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. § 1701, et seq. The Trading with the Enemy Act, 50 U.S.C. App.1, et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Tenant is prohibited by law or Tenant is in violation of law.

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(b)    Tenant covenants and agrees (i) to comply with all requirements of law relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect, (ii) to immediately notify Landlord in writing if any of the representations, warranties or covenants set forth in this Section 30(b) or Section 30(a) are no longer true or have been breached or if Tenant has a reasonable basis to believe that they may no longer be true or have been breached, (iii) not to use funds from any “Prohibited Person” (as such term is defined in the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) to make any payment due to Landlord under the Lease and (iv) at the request of Landlord, to provide such information as may be requested by Landlord to determine Tenant’s compliance with the terms hereof.
(c)    Tenant hereby acknowledges and agrees that Tenant’s inclusion on the List at any time during the Lease Term shall be a default of the Lease. Notwithstanding anything herein to the contrary, Tenant shall not permit the Premises or any portion thereof to be used or occupied by any person or entity on the List or by any Embargoed Person (on a permanent, temporary or transient basis), and any such use or occupancy of the Premises by any such person or entity shall be a default of the Lease. Simultaneously with the execution of the Lease, Tenant will provide to Landlord the names of the persons holding an ownership interest in Tenant, for purposes of compliance with Presidential Executive Order 13224 (issued September 24, 2001).
31. Entire Agreement . This Lease, including the Exhibits attached hereto, constitutes the entire agreement between the parties hereto with respect to the subject matter of this Lease and supersedes all prior agreements and understandings between the parties related to the Premises, including all lease proposals, letters of intent and similar documents. Tenant expressly acknowledges and agrees that Landlord has not made and is not making, and Tenant, in executing and delivering this Lease, is not relying upon, any warranties, representations, promises or statements, except to the extent that the same are expressly set forth in this Lease. This Lease may be modified only by a written agreement signed by Landlord and Tenant. Landlord and Tenant expressly agree that there are and shall be no implied warranties of merchantability, habitability, suitability, fitness for a particular purpose or of any other kind arising out of this Lease, all of which are hereby waived by Tenant, and that there are no warranties which extend beyond those expressly set forth in this Lease.
32.     Waiver of Trial By Jury; Waiver of Counterclaims . TO THE EXTENT PERMITTED BY APPLICABLE LAW, LANDLORD AND TENANT HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, AND TENANT’S USE OR OCCUPANCY OF THE PREMISES. IF LANDLORD COMMENCES ANY SUMMARY PROCEEDING OR ACTION FOR NON-PAYMENT OF RENT, TENANT HEREBY WAIVES ANY RIGHT TO INTERPOSE, AND SHALL NOT INTERPOSE, ANY COUNTERCLAIM OF ANY NATURE OR DESCRIPTION (UNLESS SUCH COUNTERCLAIM SHALL BE MANDATORY) IN ANY SUCH PROCEEDING OR ACTION, AND ANY SUCH COUNTERCLAIM SHALL BE RELEGATED TO AN INDEPENDENT ACTION AT LAW.
33.     Limitation of Liability . EXCEPT AS EXPRESSLY SET FORTH HEREIN, THE EXCLUSIVE REMEDY OF TENANT FOR FAILURE OF LANDLORD TO PERFORM ANY OF ITS OBLIGATIONS UNDER THIS LEASE SHALL BE AN ACTION FOR DAMAGES AGAINST LANDLORD. ANY LIABILITY OF LANDLORD UNDER THIS LEASE SHALL BE LIMITED SOLELY TO ITS INTEREST IN THE PROJECT, AND IN NO EVENT SHALL ANY PERSONAL LIABILITY BE ASSERTED AGAINST LANDLORD, ITS MEMBERS, OR THEIR RESPECTIVE MEMBERS, PARTNERS, SHAREHOLDERS, OFFICERS, DIRECTORS, AGENTS OR EMPLOYEES, IN

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CONNECTION WITH THIS LEASE NOR SHALL ANY RECOURSE BE HAD TO ANY OTHER PROJECT OR ASSETS OF LANDLORD, ITS MEMBERS, OR THEIR RESPECTIVE MEMBERS, PARTNERS, SHAREHOLDERS, OFFICERS, DIRECTORS, AGENTS OR EMPLOYEES. IN NO EVENT SHALL LANDLORD BE LIABLE FOR CONSEQUENTIAL OR SPECIAL DAMAGES AS A RESULT OF A BREACH OR DEFAULT UNDER THIS LEASE.
34. Option to Extend . Landlord hereby grants to Tenant two (2) options (each, an “ Option ”) to extend the Lease Term for an additional period of five (5) years (the “ Option Term ”), all on the following terms and conditions:
(a)     Option Notice . Each Option must be exercised, if at all, by written notice irrevocably exercising the Option (“ Option Notice ”) delivered by Tenant to Landlord not earlier than fifteen (15) months nor later than twelve (12) months prior to the Expiration Date. Further, the Option shall not be deemed to be properly exercised if, as of the date of the Option Notice or at the Expiration Date (i) an Event of Default has occurred and is continuing, (ii) Tenant has assigned this Lease or its interest therein, other than to a Permitted Transferee, (iii) Tenant and/or any Permitted Transferee has not exercised the option to extend as to at least one “Tranche” (as that term is defined in the Office Lease) of the premises demised under the Office Lease and is not in physical occupancy of, and conducting business in, said Tranche, or (iv) the Letter of Credit has been terminated (without the delivery of a replacement letter of credit as contemplated by the Office Lease). Provided Tenant has properly and timely exercised an Option, the Lease Term shall be extended for the period of the Option Term and all terms, covenants and conditions of this Lease shall remain unmodified and in full force and effect, except that the Base Rent shall be modified as set forth below and that the Base Year shall be reset to the calendar year in which the applicable Option Term will commence.
(b)     FMRR Determination . The Base Rent per RSF payable for the Option Term shall be equal to the then-current rental rate per RSF (as further defined below, “ FMRR ”) being agreed to by institutional or comparably creditworthy, portfolio-managed, owners (“ Comparable Landlords ”) of comparable South of Market properties in San Francisco, California (the “ Comparable Buildings ”), with Qualifying Leases in Comparable Buildings during the Market Determination Period, in each case on a full service gross lease basis. As used herein, “ FMRR ” shall mean the rental rate per RSF for which Comparable Landlords are entering into Qualifying Leases within the time period of three (3) months prior to the date of Tenant’s Option Notice through the date that FMRR is being determined (“ Market Determination Period ”), for space in the Comparable Buildings, which space is comparable to the Premises in size, quality, utility, location, views and tenant improvements, and, to the extent available, with commencement dates approximately equal to the commencement date of the Option Terms, and only taking into account Affected Monetary Terms (“ Comparative Transactions ”). In no event will any leasehold improvements, Alterations, Tenant Improvements, or other modifications to the Premises made by Tenant (in excess of the Improvement Allowance) have the effect of raising FMR” above what it would be in the absence of such improvements or modifications (in excess of the Improvement Allowance), and such improvements or modifications shall be disregarded. “ Qualifying Leases ” shall mean, in the first instance, ground floor retail leases being renewed with existing unaffiliated first class national retail tenants in arms-length transactions or if sufficient renewal leases are not available, then as a supplement to any such renewal leases, new leases for space with unaffiliated national retail tenants in arms-length transactions. The intent is that Tenant will obtain the same rent and other economic benefits that Landlord would otherwise give in Comparative Transactions and that Landlord will make, and receive the same economic payments and concessions that Landlord would otherwise make, and receive in Comparative Transactions. “ Affected Monetary Terms ” shall mean and refer to those monetary terms that support the determination of Base Rent, and shall include, without limitation, the amount of Security Deposit, additional forms of credit enhancement, any concessions being offered, and/or the amount of any allowance extended to renewal or, if applicable, new tenants in Comparative Transactions for refurbishment to leased premises or for new improvements under new leases. Landlord shall provide its

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determination of the FMRR to Tenant within thirty (30) days after Landlord receives the Option Notice. Tenant shall have twenty (20) days (“ Tenant’s Review Period ”) after receipt of Landlord’s notice of the FMRR within which to reasonably object thereto in writing (“ Objection Notice ”). Tenant shall be deemed to have accepted Landlord’s determination of FMRR unless Tenant timely delivers an Objection Notice to Landlord that sets forth Tenant’s proposed FMRR. In the event Tenant timely delivers an Objection Notice, Landlord and Tenant shall attempt to agree upon such FMRR. If Landlord and Tenant fail to reach agreement on such FMRR within fifteen (15) days following Tenant’s Review Period (the “ Outside Agreement Date ”), then each party shall place in a separate sealed envelope its final proposal as to FMRR and such determination shall be submitted to arbitration in accordance with Section 34(c) below.
(c)     Arbitration of Dispute of FMRR . Landlord and Tenant shall meet with each other within five (5) Business Days of the Outside Agreement Date and exchange the sealed envelopes and then open such envelopes in each other’s presence. If Landlord and Tenant do not mutually agree upon the FMRR within three (3) Business Days of the exchange and opening of envelopes, then, within ten (10) Business Days of the exchange and opening of envelopes, Landlord and Tenant shall agree upon and jointly appoint one arbitrator who shall be by profession be a real estate appraiser or broker who shall have been active over the ten (10) year period ending on the date of such appointment in the leasing of comparable commercial properties in the vicinity of the Building. Neither Landlord nor Tenant shall consult with such broker or appraiser as to his or her opinion as to FMRR prior to the appointment. The determination of the arbitrator shall be limited solely to the issue of whether Landlord’s or Tenant’s last submitted FMRR (as contained in the sealed envelope exchanged between the parties as hereinabove provided) for the Premises is the closer to the actual rental rate per RSF for Qualifying Leases within the market Determination period for Comparative Transactions. Such arbitrator may hold such hearings and require such briefs as the arbitrator, in his or her sole discretion, determines is necessary. In addition, Landlord or Tenant may submit to the arbitrator with a copy to the other party within ten (10) Business Days after the appointment of the arbitrator any data and additional information concerning Comparative Transactions within the Market Determination Period (“ Data ”) and the other party may submit a reply in writing within five (5) Business Days after receipt of such Data. The arbitrator shall, within sixty (60) days of his or her appointment, reach a decision as to whether the parties shall use Landlord’s or Tenant’s submitted FMRR for purposes of determining Base Rent per RSF payable for the Option Term, and shall notify Landlord and Tenant of such determination, and shall base his or her decision solely on the evidence presented with respect to Comparative Transactions. The decision of the arbitrator shall be binding upon Landlord and Tenant. If Landlord and Tenant fail to agree upon and appoint such arbitrator, then the appointment of the arbitrator shall be made by the Presiding Judge of the Superior Court for the City and County of San Francisco, or, if he or she refuses to act, by any judge having jurisdiction over the parties. The cost of arbitration shall be paid by Landlord and Tenant equally.
D.     Determination of FMRR Beyond Option Term . If the determination of the FMRR is delayed beyond the Option Term commencement date, Tenant shall pay Base Rent at the then prevailing rate until the FMRR is determined in accordance with terms of this Section 34. Following the determination of the FMRR, if FMRR is determined to be other than as designated by Landlord, there shall be an adjustment made to the next payment of Base Rent then due under this Lease to account for the difference between the amount of Base Rent Tenant has paid to Landlord since the Option Term commencement and the amount that Tenant would have paid if the Base Rent as adjusted pursuant to this Section 34 had been in effect as of the Option Term commencement.
35. Name of Building . Tenant shall not use the name of the Building for any purpose other than as the address of the business conducted by Tenant in the Premises without the written consent of Landlord. Landlord reserves the right to change the name of the Building and Landlord shall not be liable to Tenant for any loss, cost or expense in account of any such change of name.

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36.
Hazardous Substance Disclosure .
(a)    Tenant represents, warrants, covenants and agrees that, except as otherwise expressly provided herein, Tenant and its employees, agents, contractors and/or invitees (i) shall not (a) bring into the Building or the Premises or conduct any activity or activities in or on the Premises or the Building involving, directly or indirectly, the use, generation, treatment or storage of any hazardous or toxic chemical, material, substance or waste (collectively, “ Hazardous Materials ”), or (b) cause or permit the escape, disposal or release of any Hazardous Materials in, on or about the Premises or the Building and the Project, and (ii) shall not be, nor permit the Premises to be, in violation of any applicable local, state or federal Laws, statutes or ordinances (or the rules and regulations promulgated thereunder) pertaining to (1) the protection of health against environmental hazards; (2) the protection of the environment, including air quality, and from contamination by any substance that may have any adverse health effect; (3) the manufacture, possession, presence, use, generation, storage, transportation, treatment, release, emission, discharge, disposal, abatement, cleanup, removal, remediation or handling of any Hazardous Materials (“ Environmental Laws ”); provided that Tenant may use customary office and cleaning supplies so long as the same are used, stored and disposed of in compliance with, and in quantities not reportable under, all applicable Environmental Laws. Tenant shall execute affidavits, representations and the like from time to time at Landlord’s request concerning Tenant’s best knowledge and belief regarding the presence of Hazardous Materials in, on or about the Premises. As used herein, the term Hazardous Materials shall include any chemical, material, element, compound, solution, substance or other mater of any kind which is now or later designated, classified, listed or regulated as a hazardous, toxic, or radioactive substance (or words of similar meaning and regulatory effect) under any law, statute, ordinance, rule, regulation or order of any agency of the State of California, the United States of America or any local governmental authority, Tenant shall notify Landlord of any notice of violation of Environmental Laws which it receives from any governmental agency having jurisdiction, including, without limitation, asbestos, petroleum hydrocarbons and petroleum based products, polychlorinated biphenyls (“ PCBs ”) and chlorofluorocarbons. In no event shall Landlord be designated as the “generator” on, nor shall Landlord be responsible for preparing, any manifest relating to Hazardous Materials generated or used by Tenant or any other Tenant Parties. In the event of a release of any Hazardous Materials caused by, or due to Tenant or any Tenant Parties in violation of Environmental Laws, Tenant shall immediately notify Landlord and take such remedial actions as Landlord may direct in Landlord’s sole discretion as necessary or appropriate to abate, remediate and/or clean up the same. If so elected by Landlord by notice to Tenant, Landlord may take such remedial actions on behalf of Tenant, at Tenant’s sole cost and expense. In any event, Landlord shall have the right, without liability or obligation to Tenant, to direct and/or supervise Tenant’s remedial actions and to specify the scope thereof and specifications therefore. Tenant will indemnify, defend, protect and hold harmless and defend Landlord from and against any and all loss, cost, damage, or liability (including, without limitation, any claims, fines, penalties, charges, administrative and judicial proceedings and orders, judgments, remedial action requirements and enforcement actions of any kind) and all costs and expenses incurred in connection therewith), arising out of any activity carried on or undertaken on the Project (or required to be carried on or undertaken under applicable Environmental Laws) by Tenant or its contractors, agents or employees in connection with the handling, treatment, removal, storage, decontamination, clean-up, transport or disposal of any Hazardous Materials located on or under the Project, or arising out of any release or emission of Hazardous Materials attributable to the use or occupancy of the Premises by Tenant, by Tenant, Tenant’s employees, contractors, assignees or subtenants, on or after to the Delivery Date. The provisions of this Section 36 shall survive the expiration or earlier termination of the Lease.
(b)    Tenant acknowledges and agrees that, without limitation as to the other provisions of this Lease (including, without limitation, Section 36(a) above), any use or occupancy of the Premises (or any portion thereof) which would be a violation of any state and/or federal Laws relating to the use, sale, possession, cultivation and/or distribution of any controlled substances, including, without limitation, any engagement or intent to engage in activities (whether for commercial or personal purposes) regulated under any California law or other applicable law relating to the medicinal use and/or distribution of marijuana

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(otherwise known as the Compassionate Use Act of 1996) (collectively, the “Prohibited Drug Law Activities ”) are expressly prohibited and Tenant shall not engage nor permit others to engage in any such Prohibited Drug Law Activities in or about the Premises or Project. A breach of this Section 36(b) shall be deemed a material Default by Tenant under this Lease.
(c)    California law requires landlords to disclose to tenants the existence of certain Hazardous Materials. Accordingly, the existence of gasoline and other automotive fluids, asbestos containing materials, maintenance fluids, copying fluids and other office supplies and equipment, certain construction and finish materials, tobacco smoke, cosmetics and other personal items must be disclosed. Gasoline and other automotive fluids are found in the garage area of the Building. Cleaning, lubricating and hydraulic fluids used in the operation and maintenance of the Building are found in the utility areas of the Building not generally accessible to Building occupants or the public. Building occupants may use copy machines and printers with associated fluids and toners, and pens, markers, inks, and office equipment that may contain Hazardous Materials. Certain adhesives, paints and other construction materials and finishes used in portions of the Building may contain Hazardous Materials. Although smoking is prohibited in the public areas or the Building, these areas may from time to time be exposed to tobacco smoke. Building occupants and other persons entering the Building from time to time may use or carry prescription and non-prescription drugs, perfumes, cosmetics and other toiletries, and foods and beverages, some of which may contain Hazardous Materials. By its execution of this Lease, Tenant acknowledges that the notice set forth hereinabove shall constitute the notice required under California Health and Safety Code Section 25915.5.
IN WITNESS WHEREOF, the parties have executed this Lease on the respective dates indicated below:
TENANT
LANDLORD
 
 
SLACK TECHNOLOGIES, INC.,
HART FOUNDRY SQUARE IV, LLC,
a Delaware corporation
a Delaware limited liability company
 
 
By: /s/ Stewart Butterfield
By: /s/ George Rumel
Name: Stewart Butterfield
Name: George Rumel
Its: Chief Executive Officer
Its: Senior Vice President

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EXHIBIT A
FLOOR PLAN
IMAGE0A01.JPG


A-1


EXHIBIT B
BUILDING RULES (RETAIL)
[To be Provided]

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EXHIBIT C-l
WORK LETTER AND CONSTRUCTION AGREEMENT
This Work Letter and Construction Agreement (this “ Work Agreement ”) is attached to and made a part of that certain Office Lease Agreement (the “ Lease ”), dated January _ , 2018 (the “ Effective Date ”), between HART FOUNDRY SQUARE IV, LLC , a Delaware limited liability company ( “Landlord” ), and SLACK TECHNOLOGIES, INC. , a Delaware corporation (“ Tenant ”) relating to certain premises (the “ Premises ”), more particularly described in the Lease. Capitalized terms used in this Work Agreement shall have the meaning set forth in the Lease, unless otherwise defined herein. Supplementing the provisions of the Lease, but without limiting those provisions, Landlord and Tenant agree as follows with respect to the Tenant Improvements to be installed in the Premises.
1.
Tenant’s and Landlord’s Work .
1.1      Tenant Improvements . Subject to approval by Landlord of the Final Plans (as defined below) with respect thereto as provided in this Work Agreement, Tenant shall perform and construct, in accordance with the terms of this Work Agreement, the Tenant Improvements (as defined below).
1.2      Landlord’s Work . Landlord shall perform Landlord’s Demolition Work prior to delivery of possession of the Premises, in the manner provided in the Lease. In addition, prior to the Rent Commencement Date, Landlord shall install and construct a new corridor adjacent to the Premises in the location shown on Exhibit A to the Lease.
2. Preparation of Space Plan, Working Drawings and Final Plans .
2.1 Tenant’s Architect . Subject to Landlord’s consent, not to be unreasonably withheld, conditioned, or delayed, Tenant shall engage a registered architect (“ Tenant’s Architect ”) as Tenant’s architect for the design and construction of Tenant Improvements.
2.2 Space Plan . Prior to the Delivery Date, Tenant shall cause Tenant’s Architect to prepare and deliver to Landlord for Landlord’s approval a space plan showing the general layout of the Premises and Tenant’s contemplated improvements to be constructed and installed therein, and Landlord’s Work (the “ Space Plan ”). Landlord shall not unreasonably withhold its consent to the Space Plan provided that the proposes build out is consistent with the initial Permitted Use for the named Tenant under this Lease. The Space Plan, as approved by Landlord and Tenant, is referred to herein as the “ Approved Space Plan.
2.3      Working Drawings .
( a)     Working Drawings . Promptly following the approval of the Approved Space Plan, Tenant shall cause Tenant’s Architect to prepare and deliver to Landlord for Landlord’s approval plans, specifications and working drawings for the construction of the improvements shown on the Approved Space Plan, as the same may be subsequently revised by Tenant and approved by Landlord, in such form and detail as may be reasonably required by Landlord (the “ Initial Working Drawings ” and the “ Working Drawings ”). The Working Drawings shall be based on, and shall be consistent with, the Approved Space Plan or logical extensions thereof. The Working Drawings shall include all construction plans and specifications including electrical, mechanical, plumbing, lighting, and exiting, and be compatible with the existing Building systems, Building structure and appearance.
( b)     Stages of Deliverv of Drawings . Tenant shall cause Tenant’s Architect to submit to Landlord, for its review and approval, Working Drawings not less frequently than at the following stages of detail and completion: fifty percent (50%) (the “ Fifty Percent Tenant Drawings ”), and one hundred percent (100%) (the “ One Hundred Percent Tenant Drawings ”), as such stages are reasonably estimated by Tenant’s Architect. Each stage of the Working Drawings shall be delivered to Landlord for its approval.

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(c)     Permit Drawings . Promptly following approval of the One Hundred Percent Tenant Drawings, Tenant shall cause to be prepared and submitted to Landlord for approval, a complete set of “permit drawings” required for submittal to local governmental agencies in connection with such approvals and permits required for the Tenant Improvements.
2.4      Review and Approval of Working Drawings .
(a)    Landlord’s approval or disapproval of any particular stage of the Working Drawings shall be delivered to Tenant by written notice within a reasonable time period not to exceed fifteen (15) days after Tenant’s delivery of the applicable stage of the Working Drawings and shall be limited to matters relating to the compatibility of the improvements with all existing Building mechanical, electrical and life safety systems, Building structure and appearance, and consistency with the Approved Space Plan. If Landlord shall reasonably disapprove of any portion of the revised Working Drawings, Landlord shall advise Tenant in writing of such disapproval and the reasons therefore. Tenant shall then submit the revised Working Drawings to Landlord, incorporating those revisions required by Landlord, for Landlord’s approval, which approval shall be granted or withheld by written notice to Tenant delivered not later than five (5) Business Days following Landlord’s receipt of the revised Working Drawings. The foregoing process shall be repeated until the Working Drawings have been approved by both Landlord and Tenant; provided, however, any revisions to the Working Drawings following the first such revision which are due to Tenant’s or Tenant’s Architect’s failure to modify the Working Drawings to incorporate Landlord’s reasonable objections shall be deemed a Tenant delay, and not a Landlord Delay (as defined below). Once approved by Landlord at an initial stage of the Working Drawings, Landlord shall not subsequently disapprove of said previously approved matters unless a material change in the scope of work is disclosed by a subsequent stage of the Working Drawings that adversely affects the matter previously approved. The Working Drawings, as approved by Landlord and Tenant, are referred to herein as the “ Final Plans ,” and the improvements noted therein to be constructed or installed by Tenant’s Contractor are referred to herein as the “ Tenant Improvements .” Any changes made to the approved Final Plans shall require Landlord’s written consent. Landlord failure to timely deliver a disapproval and/or written response giving grounds for disapproval as aforesaid shall be deemed to be Landlord’s consent to the Working Drawings in question.
(b)    Without limiting the generality of Section 2.4(a) above, any out-of-pocket cost or expense incurred by Landlord in connection with the review of Tenant’s Working Drawings by Landlord’s designated mechanical, electrical and structural engineers, should Tenant elect to engage engineers other than Landlord’s designated engineers for the preparation of Tenant’s Working Drawings, shall be chargeable to Tenant (and deducted from the Improvement Allowance), provided Tenant receives reasonable documentation for such charges.
2.5      Authorized Representatives .
(a)     Tenant’s Representative . Tenant shall designate in writing to Landlord one individual who will work with Landlord throughout the period of the design, development and construction of the Tenant Improvements (“ Tenant’s Representative ”). Tenant’s Representative shall be authorized to bind Tenant with respect to all matters arising under this Work Agreement and Landlord shall be entitled to rely on the actions of Tenant’s Representative in proceeding with all design, development and construction activities under this Work Agreement.
(b)     Landlord’s Representative . Landlord shall have the right to retain a consulting project manager (the “ Consulting PM ”) to act as Landlord’s representative for the purpose of reviewing all drawings and monitoring the Tenant Improvements. Landlord may designate a Landlord employee as the Consulting PM. Unless otherwise designated in writing, Landlord’s Consulting PM shall be Landlord’s

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representative during the period of the design and construction of Tenant Improvements (“ Landlord’s Representative ”). Landlord’s Representative shall be authorized to bind Landlord with respect to all matters arising under this Work Agreement and Tenant shall be entitled to rely on the actions of Landlord’s Representative in proceeding with all design, development and construction activities under this Work Agreement. Tenant agrees to pay to Landlord a reasonable management fee not to exceed One Dollar ($1.00) per RSF to be paid as each Phase of the Premises is delivered. Landlord may charge Landlord’s management fee against, and deduct the same from, the Improvement Allowance.
2.6      Change Orders . In the event that Tenant requests any changes to any previously Landlord approved plans, Landlord shall not unreasonably withhold its consent to any such changes, provided the changes do not adversely affect the Building’s structure, systems, equipment or appearance.
3 .     Tenant’s Contractor .
Subject to Landlord’s consent, not to be unreasonably withheld, conditioned, or delayed, Tenant shall engage a licensed general contractor for the construction of the Tenant Work (“ Tenant’s Contractor ’’). Tenant shall not proceed with construction of Tenant Improvements until such time as Landlord has approved Tenant’s construction budget, which approval shall not be unreasonably withheld, conditioned or delayed. Tenant’s Contractor and any subcontractors performing construction of Tenant Improvements shall exclusively use union labor.
4. Governmental Approvals .
4.1      Approvals .
(a)     Approvals . As soon as reasonably practicable following the approval of the Final Plans, Tenant’s Architect and/or Contractor shall diligently obtain all governmental and quasi-governmental approvals and permits required for the Tenant Improvements. Landlord shall cooperate with Tenant, at no out of pocket cost or expense, in procuring approvals and permits hereunder relating to Tenant Improvements, including signing applications therefore as necessary or required. Any changes to the Final Plans required by the governmental and quasi-governmental agencies necessary to obtain the approvals and permits for the Tenant Improvements (the “ Governmental Requirements ”) shall require Landlord’s and Tenant’s approval. Upon receiving the necessary approvals from the local jurisdiction, Tenant shall submit to Landlord a full set of the Final Plans, as approved by the local jurisdiction, together with a copy of each construction or other permit related thereto issued by said jurisdiction.
(b)     Compliance with Laws . After obtaining all required governmental approvals and permits, Tenant shall cause Tenant Improvements to be performed by Tenant’s Contractor in accordance with the approved Final Plans and in compliance with all applicable building codes and other state, federal, local or quasi-governmental Laws. If any governmental agency imposes any compliance obligations or additional work on Landlord or any portion of the Building other than the Premises as a condition to the issuance of any building permit or authorization to proceed with Tenant Improvements, such work shall be the responsibility of Tenant. Prior to incurring any such expense Landlord shall give notice thereof to Tenant which shall specify the work required and the cost thereof, and Tenant shall have a reasonable opportunity to cause the Final Plans to be revised so as to eliminate the required work in whole or in part.
5. Construction .
5.1     Work Schedule and Construction Meetings .
(a)    Landlord and Tenant and their respective construction representatives shall meet and confer, in good faith, to coordinate the performance of the Tenant Improvements in accordance with

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sound design and construction practices, and so as to limit any interference with any of the other retail tenants of the Building, with the intent and purpose of minimizing the avoidable delays and cost inefficiencies that would be associated with the performance of the Tenant Improvements.
(b)    Meetings shall be held at a location reasonably acceptable to Landlord and Tenant. In addition, minutes shall be taken at all such meetings, a copy of which minutes shall be promptly delivered to Landlord. One such meeting each month shall include the review of Contractor’s current request for payment and lien release package.
5.2     Manner of Construction . Tenant shall cause the Tenant Improvements to be constructed with diligence and in a workmanlike manner in accordance with the Final Plans, and in compliance with all applicable Laws, ordinances, rules and regulations. Tenant’s Contractor, and the subcontractors, laborers, material men and suppliers used by Tenant’s Contractor, shall be under the control of Tenant, and are sometimes hereinafter referred to collectively as “Tenant’s Agents.” Entry by Tenant or Tenant’s Agents into the Building or any part of the Premises for purposes relating to Tenant Improvements shall be deemed to be under all the terms, covenants, conditions, provisions and agreements of the Lease (including Tenant’s obligations to indemnify and hold Landlord harmless, which shall apply with respect to any matter arising out of or connected with such entry). Tenant acknowledges that the Building is currently certified as LEED Existing Buildings: Operations & Maintenance (LEED-EBOM) “Gold” by the U.S. Green Building Council. Tenant shall perform and cause Tenant’s Contractor to perform the construction of the Tenant Improvements using materials and design that do not jeopardize the Building’s current LEED certification. Tenant shall comply with applicable building codes and ordinances applicable to such work, including the San Francisco Construction & Demolition Debris Recovery Program.
5.3 Landlord Liability . Landlord’s approval or consent to any of the Tenant Improvements shall not impose any liability upon Landlord, and no action taken by Landlord in connection with such approval, including, without limitation, attending construction meetings of Tenant’s contractors, shall render Tenant the agent of Landlord for purposes of constructing Tenant Improvements.
5.4 Inspection by Landlord . Landlord shall have the right, upon reasonable notice to Tenant, to inspect Tenant Improvements at all times. Should Landlord disapprove of any portion of such work, Landlord shall notify Tenant in writing of such disapproval and shall specify the items disapproved. Landlord shall have the right to disapprove Tenant Improvements only to the extent such work (a) is not in compliance with the Final Plans, (b) has not been completed in a workmanlike manner, or (c) is not in compliance with Laws. Any items of Tenant Improvements validly disapproved by Landlord shall be rectified by Tenant at no expense to Landlord.
5.5     Lien Protection . Landlord has the right at all times to post and keep posted on the Premises any notice that it considers necessary for protection from liens, and Tenant shall give Landlord at least ten (10) days prior notice of the date Tenant intends to commence construction to permit Landlord to post and record a notice of nonresponsibility. If any such lien attaches or Tenant receives notice of any such lien, Tenant shall cause the lien to be immediately released and removed of record, either by payment of the claim or by posting of a proper bond. If any such lien is not released and removed of record within ten (10) days following notice from Landlord to do so, Landlord may take any and all action necessary to release and remove the lien of record (excluding payment of the claim), without any duty to investigate the validity thereof or to provide any further notice to Tenant, and all out-of-pocket expenses (including attorneys’ fees and costs) incurred by Landlord in connection therewith shall be payable by Tenant as Additional Rent under the Lease.

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6.
Insurance Requirements .
6.1      General Coverage . All of Tenant’s Agents shall carry worker’s compensation insurance covering all of their respective employees, and shall also carry commercial general public liability insurance, including property damage, all with limits, in form and with companies as are approved by Landlord.
6.2 Special Coverage . Tenant shall carry “Builder’s All Risk” insurance in an amount approved by Landlord covering the construction of Tenant Improvements, and such other insurance as Landlord may require, it being understood and agreed that Tenant Improvements shall be insured by Tenant pursuant to Section 14 of the Lease immediately upon completion thereof. Such insurance shall be in amounts and shall include such extended coverage endorsements as may be reasonably required by Landlord including, but not limited to, the requirement that all of Tenant’s Agents shall carry excess liability and Products and Completed Operation Coverage insurance, each in amounts not less than $2,000,000.00 per incident, $5,000,000.00 in aggregate, and in form and with companies as are approved by Landlord.
6.3 General Terms . Certificates for all insurance carried pursuant to this Section 6 shall be delivered to Landlord before the commencement of construction of Tenant Improvements and before Tenant’s Contractor’s equipment is moved onto the site. All such policies of insurance must contain a provision that the company writing said policy will give Landlord thirty (30) days prior written notice of any cancellation or lapse of the effective date or any reduction in the amounts of such insurance. In the event that the Demised Premises or any portion thereof is damaged by any cause during the course of the construction of Tenant Improvements, Tenant shall immediately repair the same at Tenant’s sole cost and expense. Tenant’s Agents shall maintain all of the foregoing insurance coverage in force until Tenant Improvements is fully completed, except for any Products and Completed Operation Coverage insurance required by Landlord, which is to be maintained for five (5) years following completion of the work and acceptance by Landlord. All policies carried under this Section 6.3 shall insure Landlord and Tenant, as their interests may appear, as well as Landlord’s Consulting PM. All insurance, except Workers’ Compensation, maintained by Tenant’s Agents shall preclude subrogation claims by the insurer against anyone insured thereunder. Such insurance shall provide that it is primary insurance as respects to Landlord and Landlord’s Agent and that any other insurance maintained by Landlord and Landlord’s Agent is excess and noncontributing with the insurance required hereunder. The requirements for the foregoing insurance shall not derogate from the provisions for indemnification of Landlord by Tenant under the Lease.
7.
Cost of Construction .
7.1      Tenant Allowance . As an inducement to Tenant to enter into the Lease, but subject to Section 7.3 below, Landlord shall pay up to One Hundred Seventy One Thousand Two Hundred Fifty Dollars ($171,250.00), based on Fifty Dollars ($50) per rentable square foot of the Premises (the “ Improvement Allowance ”), for the following costs associated with Tenant Improvements (the “ Approved Tenant Improvement Costs ”):
( i)    all amounts paid or payable to Tenant’s Contractor for construction of Tenant Improvements;
(ii)    the cost of any governmental permits, fees, charges or other expenses required for construction of the Tenant Improvements;
(iii)    the cost any special or any after-hours Building services, provided to the Premises at Tenant’s request during the construction of the Tenant Improvements; and
(iv)    the fees and costs of Landlord’s Consulting PM.

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If the full amount of the Improvement Allowance is not utilized as hereinabove provided within two (2) years following the Delivery Date, no portion of the unused amount thereof shall be available to Tenant for any purpose and the same shall revert to Landlord. Without limiting the generality of the foregoing, the intention of the parties is that the Improvement Allowance is solely for the improvements to be constructed in connection with the named Tenant’s initial occupancy of the Premises, and the Improvement Allowance is not available to pay for any additional improvements undertaken by Tenant following Tenant’s initial occupancy of the Premises under the Lease (including, without limitation, Alterations performed under the Lease).
7.2 Excess Cost . If the projected cost of Tenant Improvements exceeds the Improvement Allowance (the funds for the cost of construction of the Tenant Improvements in excess of the Improvement Allowance being referred to hrein as the “ Excess Cost Funds ”, and provided Tenant shall not be in default of any of its obligations under this Work Agreement, Landlord agrees to fund, on a pro rata basis with Tenant, disbursements of the Improvement Allowance (less retainage amounts as provided in this Work Agreement) concurrently with Tenant’s funding of its pro rata share of the Excess Costs; provided, however, in the event of a default by Tenant under this Work Letter, Landlord shall be entitled to demand payment by Tenant of the Excess Cost Funds in a construction escrow established by Landlord (whhich escrow may be administrerd by Landlord’s attorny or propert ymanagement company) to pay for the cost of the Tenant Improvements over and above the amount of the Improvement Allowance prior to advancing any funds comprising the Improvement Allowance under the terms of this Work Agreement. For avoidance of doubt, Landlord and Tenant acknowledge that Landlord’s pro rata share of a payment due towards the cost of the Tenant Improvements (where there are costs over and above the Improvement Allowance) shall be based on the ratio that the Improvement Allowance bears to the total projected cost of the Tenant Improvements, and Tenant’s pro rata share shall be the percentage share remaining after subtracting Landlord’s pro rata share from 100.
7.3 Disbursement . Landlord shall pay the Excess Cost Funds (if Tenant is required to establish a construction escrow as provided in Section 7.2 above) and the Improvement Allowance to Tenant in progress payments during the course of the construction of Tenant Improvements, in the following manner.
(a)    The Excess Cost Funds (if Tenant is required to establish a construction escrow as provided in Section 7.2 above) and Improvement Allowance shall be payable by Landlord to Tenant during the course of construction of Tenant Improvements within fifteen (15) days after Tenant makes application therefore (made not more than once each month) accompanied by (i) an AIA Document G 702 Application and Certificate for Payment for that portion of Tenant Improvements covered thereby, showing the schedule, by trade, of percentage of completion of Tenant Improvements, detailing the portion of the work completed and the portion not completed; (ii) invoices from all of Tenant’s Agents for labor rendered and materials delivered to the Premises; and (iii) executed partial mechanic’s lien releases from all of Tenant’s Agents which shall comply with the appropriate provisions of California Civil Code Sections 8120-8134. Unless Landlord reasonably disputes any amount payable under clause (i) above, Landlord shall within fifteen (15) days after receipt of the items under clauses (i) through (iii) above, deliver a check to Tenant in payment of the lesser of: (A) the amounts so requested by Tenant, as set forth in this Section 7.3(a) , less a ten percent (10%) retention (the aggregate amount of such retentions to be known as the “ Final Retention ”); and (B) the balance of any remaining available portion of the Excess Funds (if Tenant is required to establish a construction escrow as provided in Section 7.2 above) and Improvement Allowance (not including the Final Retention). If Landlord reasonably disputes any amount payable under clause (i) above, the parties shall promptly meet and confer in good faith to resolve such disputes as soon as possible. Landlord’s payment of such amounts shall not be deemed Landlord’s approval or acceptance of the work furnished or materials supplied as set forth in Tenant’s payment request.

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(b)    Subject to the provisions of this Work Agreement, a check for the Final Retention payable jointly to Tenant and Tenant's Contractor shall be delivered by Landlord to Tenant following the completion of construction of Tenant Improvements, provided that (i) Tenant delivers to Landlord properly executed mechanics lien releases in compliance with both California Civil Code Section 8134 and either Civil Code Section 8136 or Civil Code Section 8138, (ii) Tenant's Architect delivers to Landlord a certificate, in a form reasonably acceptable to Landlord, certifying that the construction of Tenant Improvements in the Premises has been Substantially Completed, and (iii) Tenant delivers to Landlord the drawings, warranties and other documentation required by Section 9 hereof.
7. 4     Tenant Offset Rights . Notwithstanding anything to the contrary in this Work Agreement, if Landlord fails to timely disburse any portion of the Improvement Allowance and the conditions of this Section 7.4 are satisfied by Tenant, Tenant may deduct the portion of the Improvement Allowance that Landlord has defaulted in disbursing from Rent due and payable under the Lease. Notwithstanding anything to the contrary in this Section 7.4 , Landlord shall not be deemed in default under its obligation to disburse any portion of the Improvement Allowance if (i) Landlord gives written notice to Tenant of any defective condition in the construction of the Tenant Improvements and Landlord’s determination that any one or more disbursements of the Improvement Allowance is not payable with respect to such defective work, (ii) Tenant is default under the terms of this Work Agreement (beyond notice and any applicable cure period) and Landlord withholds disbursement of any portion of the Improvement Allowance as a result of such uncured default, (iii) Tenant fails to satisfy the conditions for disbursement of the Final Retention, or (iv) a bona fide dispute exists between Landlord and Tenant as to whether a cost item is subject to reimbursement or payment as a part of the Cost of the Work. As a condition to Tenant’s right to withhold Rent based on a default by Landlord in disbursement of any portion of the Allowance, Tenant shall be required to send to Landlord a written notice that states in reasonable detail the basis for Tenant’s determination that Tenant is entitled to offset from Rent an amount of the Improvement Allowance (“ Tenant’s First Offset Notice ”) and the Response Period (as defined below) expires or lapses without a written response from Landlord disputing Tenant’s right to a Rent offset based on the terms of this Section 7.4 . Landlord shall have ten (10) Business Days to respond to Tenant, and no offset shall be taken unless Landlord fails to respond to Tenant’s First Offset Notice to dispute Tenant’s right to assert a Rent offset from the unpaid Improvement Allowance. If Landlord does not give Tenant a written response within said ten (10) Business Day period, Tenant shall be required to send a second written notice (“ Tenant’s Second Offset Notice ”) that states in capital letters in at least 12 point type “LANDLORD HAS FAILED TO RESPOND TO A RENT OFFSET NOTICE UNDER THAT CERTAIN LEASE WITH BANK OF NEW YORK MELLON AND TENANT CLAIMS A RIGHT OF RENT OFFSET UNDER THE LEASE.” Tenant’s Second Offset Notice shall include a copy of Tenant’s First Offset Notice. Tenant shall send a copy of Tenant’s First Offset Notice and Second Offset Notice to and Lender to whom Landlord has given Tenant prior written notice. If Landlord does not provide a written response to Tenant asserting a basis for disputing Tenant’s right to asset a Rent offset under this Section 7.4 within five (5) Business Days following the receipt of Tenant’s Second Offset Notice (the expiration of said period being referred to herein as the “ Response Period ”), Tenant shall have the right to offset any portion of the unpaid Improvement Allowance against any Rent due and payable under the Lease. Landlord may at any time cut off Tenant’s Rent offset claim by paying to Tenant the amount of the unpaid disbursement of the Improvement Allowance.
8.      General Conduct of Work .
Landlord shall provide Tenant, at no charge, elevator access and loading dock access during the course of the construction of the Tenant Improvements, during normal business hours of the Building, subject to Landlord’s construction rules and regulations for the use thereof (including, at Tenant’s sole cost), the use of appropriate floor and wall protections for the transportation of construction material and the move-in of

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Tenant’s furniture, fixtures and equipment into the Premises. Tenant shall be solely responsible for any damage to any Building elements resulting from such use of the loading dock.
9.      Notice of Completion . Within ten (10) days after completion of construction of Tenant Improvements, Tenant shall 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 shall furnish a copy thereof of Landlord upon such recordation. If Tenant fails to do so, as Landlord’s sole remedy, Landlord may execute and file the same on behalf of Tenant as Tenant’s agent for such purpose, at Tenant sole cost and expense. At the conclusion of construction, (i) Tenant shall cause Tenant’s Architect and Tenant’s Contractor (A) to update the Final Plans as necessary to reflect all changes made to the Working Drawings during the course of construction (which may include field comments marked on such plans), (B) to certify to the best of their knowledge that the “record-set” of as-built drawings are true and correct, and (C) to deliver to Landlord two (2) sets of copies of such record set of drawings (or CADD drawings on disc) within ninety (90) days following substantial completion of Tenant Improvements, and (ii) Tenant shall deliver to Landlord a copy of all warranties, guaranties, and operating manuals and information relating to the improvements, equipment, and systems in the Premises.
10.
Delays .
10.1      General Rules Governing Delays . By its execution of this Work Agreement, Tenant acknowledges its agreement that, except as expressly provided in this Section 10, Tenant assumes all risk of delays associated with the construction of the Tenant Improvements, including delays attributable to Force Majeure (as that term is defined under the Lease), inability to secure building permits or other required approvals despite diligent efforts to do so; (d) changes in Laws, or changes in the interpretation thereof.
10.2      Landlord Delays . Notwithstanding anything to the contrary in this Work Agreement or in the Lease, the Rent Commencement Date shall be extended on a day for day basis for any period of Landlord Delays. As used herein, the term “Landlord Delays” shall mean and refer to any actual delay in the completion of the Tenant Improvements and/or the Landlord Demolition Work attributable to or caused by (i) the request of Landlord, or (ii) Landlord’s failure to provide or give approvals to the Tenant Improvements within the time periods specified in this Work Agreement, or (iii) the discovery and required abatement of any Hazardous Materials during the performance of the Tenant Improvements and/or the Landlord Demolition Work not otherwise disclosed in Landlord’s operations and management plan for the Building, or (iv) any other intentional act of Landlord where Tenant has given Landlord written notice of the potential for such delay and Landlord has not corrected the basis for such delay within two (2) Business Days following such written notice, and provided that in all instances an actual delay in substantial completion beyond the Rent Commencement Date results from said Landlord Delay.
11 .     Default .
Any default under the terms of this Work Agreement shall entitle the non-defaulting party to exercise all remedies set forth in the Lease.
12 .     Notices .
Any request, approval, consent, notice or other communication, including but not by way of limitation, authorizations and demands (collectively “ Construction Communication ”) of any kind whatsoever which either party may be required or may desire to give to or serve upon the other under this Work Agreement shall be in writing and delivered to the address and in the manner provided in the Lease, except that any Construction Communication required or otherwise given under this Work Agreement shall be served personally or sent by a reputable and nationally recognized overnight delivery service providing for next Business Day delivery, with confirmation of delivery and receipt (the “ Carrier ”), and any

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Construction Communication shall be effective upon receipt of same as evidenced in written form by the Carrier.


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EXHIBIT D
COMMENCEMENT DATE MEMORANDUM
Date
Slack Technologies, Inc.
155 5th Street
San Francisco, CA 94103
Attn: _____________________
Re:     Commencement Letter with respect to that certain Lease dated January ___, 2018, by and between, HART Foundry Square IV, LLC, a Delaware limited liability company, as Landlord, and Slack Technologies, Inc., a Delaware corporation, as Tenant, for a RSF in the Premises of the Ground Floor of the Building located at 500 Howard Street, San Francisco, California 94105.
Dear ___________:
In accordance with the terms and conditions of the above referenced Lease, Tenant hereby accepts possession of the Premises and agrees as follows:
The Delivery Date of the Premises was __________________ ;
The Commencement Date of the Premises is __________________;
The Expiration Date of the Lease is __________________; and
Tenant accepts the Premises as being in “Ready for Occupancy Condition” required under the Lease.
Please acknowledge your acceptance of possession and agreement to the terms set forth above by signing all three (3) copies of this Commencement Letter in the space provided and returning two (2) fully executed copies of the same to my attention.
Sincerely,
__________________
Project Manager
[Tenant Signature Page Follows]

D-1


Agreed and Accepted:
SLACK TECHNOLOGIES, INC.,
a Delaware corporation
By: ___________________________________
Name: _________________________________
Its: ___________________________________
 
 
By: ___________________________________
Name: _________________________________
Its: ___________________________________
 
 
Date executed: _____________________, 201__

D-2
Exhibit 21.1


List of Subsidiaries of Slack Technologies, Inc.

Astro Technology, Inc. (Delaware)
Slack UK Limited (England and Wales)
Slack Australia Pty Limited (Australia)
Slack Canada Ltd. (Canada)
Slack France (France)
Slack Fund L.L.C. (Delaware)
Slack Japan KK (Japan)
Slack Singapore PTE LTD (Singapore)
Slack Technologies Limited (Ireland)



Exhibit 23.1

The Board of Directors
Slack Technologies, Inc.
We consent to the use of our report included herein and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ KPMG LLP
San Francisco, California
April 26, 2019