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INTELEPEER, INC. INDEX TO FINANCIAL STATEMENTS

As filed with the Securities and Exchange Commission on December 15, 2011

Registration No. 333-174080

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

Amendment No. 4
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

IntelePeer, Inc.
(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of Incorporation or Organization) 7372
(Primary Standard Industrial
Classification Code Number) 68-0556257
(I.R.S. Employer
Identification Number)

2855 Campus Drive, Suite 200
San Mateo, CA 94403
(650) 525-9200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)

Frank Fawzi
Chairman, President and Chief Executive Officer
IntelePeer, Inc.
2855 Campus Drive, Suite 200
San Mateo, CA 94403
(650) 525-9200
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

Copies to:
Peter M. Astiz, Esq. Bradley J. Gersich, Esq. DLA Piper LLP (US) 2000 University Avenue East Palo Alto, CA 94303 (650) 833-2000	Christopher J. Austin, Esq. Anthony J. McCusker, Esq. Bradley C. Weber, Esq. Goodwin Procter LLP 135 Commonwealth Drive Menlo Park, CA 94025 (650) 752-3100

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 of 1933, check the following box. o

          If this form is filed to register additional securities for an offering pursuant to Rule 462(b) 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. o

          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. o

          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. o

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

Large accelerated filer o Accelerated filer o Non-accelerated filer ý
(Do not check if a smaller reporting company) Smaller reporting companyo

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 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), shall determine.

The information in this preliminary prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where such offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED DECEMBER 15, 2011

Preliminary Prospectus

                    Shares

Common Stock

        This is the initial public offering of shares of common stock of IntelePeer, Inc. Prior to this offering, there has been no public market for our common stock. We are offering                                    shares and the selling stockholders identified in this prospectus are offering                        shares of our common stock. We will not receive any proceeds from the sale of shares to be offered by the selling stockholders. The initial public offering price of our common stock is expected to be between $            and $            per share.

        We have applied for listing of our common stock on the Nasdaq Global Market under the symbol "PEER."

Investing in our common stock involves a high degree of risk. Please read "Risk Factors" beginning on page 11.

	Per Share	Total
Initial public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds to IntelePeer, before expenses	$	$
Proceeds to selling stockholders, before expenses	$	$

        The underwriters have an option to purchase a maximum of                                    additional shares of common stock from us and                                    additional shares of common stock from the selling stockholders identified in this prospectus at the public offering price, less underwriting discounts and commissions, to cover over-allotments of shares, if any. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

        The underwriters expect to deliver the shares of common stock to purchasers on                        , 2012.

J.P. Morgan Deutsche Bank Securities Barclays Capital

RBC Capital Markets William Blair & Company

                        , 2012

Table of Contents

	Page
Prospectus Summary	1
Risk Factors	11
Forward-Looking Statements	35
Use of Proceeds	36
Dividend Policy	36
Capitalization	37
Dilution	39
Selected Financial Data	41
Management's Discussion and Analysis of Financial Condition and Results of Operations	43
Business	74
Regulation	94
Management	104
Executive Compensation	110
Certain Relationships and Related Party Transactions	135
Principal and Selling Stockholders	139
Description of Capital Stock	142
Shares Eligible for Future Sale	148
Material U.S. Federal Income and Estate Tax Consequences for Non-U.S. Holders of Common Stock	150
Underwriting	154
Legal Matters	159
Experts	159
Where You Can Find More Information	159
Index to Financial Statements	F-1

        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. Neither we, the selling stockholders, nor the underwriters have authorized anyone to provide you with additional information or information different from that contained in this prospectus or in any free writing prospectus filed with the Securities and Exchange Commission. We and the selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. You should assume that 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 common stock. Our business, financial condition, results of operations, and prospects may have changed since that date.

        Until                        , 2012, U.S. federal securities laws may require all dealers that effect transactions in our common stock, whether or not participating in this offering, to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

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PROSPECTUS SUMMARY

This prospectus summary highlights information contained elsewhere in this prospectus. It does not contain all of the information that may be important to your investment decision. Before making an investment decision, you should carefully read and consider this entire prospectus, including our financial statements and the related notes included elsewhere in this prospectus and the information set forth under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Unless otherwise indicated, the terms "IntelePeer," "we," "us" and "our" refer to IntelePeer, Inc. and its subsidiary.

Business Overview

        We are a provider of on-demand, cloud-based communications services to service providers and enterprises. Our customers can leverage our proprietary Communications-as-a-Service, or CaaS, platform, which we refer to as our CloudWorx CaaS Platform, to deliver multimodal communications services, including voice, unified communications, video and other rich-media applications, to communications devices with reduced cost and improved quality compared to existing alternatives. Our CloudWorx CaaS Platform allows customers to rapidly and easily transition from legacy network infrastructures to our flexible, software-based, multimodal, IP-based solutions. Our service provider customers include wireless and wireline carriers, as well as cable and voice over IP, or VoIP, providers. Our enterprise customers include businesses seeking integrated multimodal communications solutions.

        The global telecommunications industry is undergoing a shift to next-generation IP-based communication technologies from legacy telephone networks. This transition is being driven by the widespread availability of broadband Internet connectivity and the emergence of cloud-based infrastructures and on-demand service delivery models, such as Software-as-a-Service, or SaaS. Cloud-based infrastructures or services refer to services that are delivered from remote servers at shared data centers over the Internet to clients or their customers, in contrast to services delivered using servers and computers controlled and operated by the client on its internal networks at its owned or leased facilities. We believe these trends, along with the inability of legacy infrastructures to support user demand for next-generation multimodal communications services, have created an opportunity and a need for a flexible and high-quality cloud-based communications platform.

        Our on-demand CloudWorx CaaS Platform is fast to implement, easy to administer through our self-service web-based CloudCentral Portal and highly scalable. It is based on a sophisticated and integrated multi-layer approach, which includes:

•

our software-based Media Peering Grid service, providing any-to-any connection capabilities and allowing service providers and enterprises to cost-effectively interconnect and transport communications traffic, at a rate of more than 22 billion minutes annually based on our traffic in the first nine months of 2011;

•

our SuperRegistry directory, currently containing more than 400 million telephone numbers and end-point identifying addresses for wireless, wireline and other communications devices, enabling intelligent routing of communications traffic over our Media Peering Grid service; and

•

our AppWorx open and secure communications application development environment, which allows our customers and partners to build and offer a growing set of multimodal communications applications, which they can use to generate additional revenue or enhanced productivity.

These three layers are fully integrated, allowing simplified delivery of enhanced voice and rich-media services connecting through the industry-standard Session Initiation Protocol, or SIP, to IP devices and enabling connectivity to traditional non-IP communication devices, such as legacy telephones. Our software-based platform scales easily without requiring significant additional capital expenditures to

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create and implement new services for new and existing customers and provides significant benefits versus traditional neutral and direct interconnection arrangements.

        Our CloudWorx CaaS Platform is used by service provider customers, such as Sprint Nextel Corp. and Qwest Communications, and enterprise customers, as well as our channel partners delivering communications services to enterprises using equipment and software supplied by technology partners such as Microsoft, Cisco, Avaya and Siemens.

        We believe that our cloud-based architecture, the scale of our proprietary, multi-layer, fully-integrated CloudWorx CaaS Platform, and the network effects arising out of the breadth of our relationships with service provider customers, enterprise customers and channel partners, provide us with a significant competitive advantage.

        Our revenue is derived principally from the delivery of communications services over our CloudWorx CaaS Platform. Substantially all of our revenue to date has been derived from the transmission of voice traffic and related value-added services. Service provider and enterprise customers direct communications traffic to us, which we route through our peering partners so that the traffic can be delivered to the ultimate recipient of the communication, which is the end-point device. We typically charge our customers based upon minutes of use for traffic delivered through our platform.

        Our customer contracts generally are non-exclusive and have neither volume nor time period commitments. Our top two customers, in the aggregate, represented 45 percent of our revenue during 2010 and our top two customers, in aggregate, represented 33 percent of our revenue in the nine months ended September 30, 2011. In 2010 and the nine months ended September 30, 2011, 2.7 percent and 4.9 percent of our revenue, respectively, was generated from enterprise customers.

        For the nine months ended September 30, 2010 and 2011 our revenue was $80.4 million and $106.2 million, respectively, representing year over year growth of 32 percent, and our net loss was $7.8 million and $9.6 million, respectively. For 2008, 2009 and 2010 our total revenue was $43.4 million, $76.2 million and $111.5 million, representing year-over-year organic growth rates of 57 percent, 76 percent and 46 percent, respectively. For the same periods, our net loss was $5.1 million, $3.3 million and $11.6 million, respectively.

Industry Overview

        Despite significant developments in communications technology, the basic public telephone system, which is known as the Public Switched Telephone Network, or PSTN, continues to rely on legacy networks using many of the same techniques that have been used for decades to connect one voice caller to another. The legacy PSTN structure requires coordination across service providers and creates significant costs, including transit charges and other payments to intermediate service providers. In addition, the transit of communications across multiple service providers can degrade voice quality and reduce reliability. This structure also lacks flexibility to support multimodal communications and creates obstacles to the introduction of new forms of communications services and applications.

        The growth of next-generation communications services, driven by the increasing availability of broadband Internet connections, has led to the development of the SIP standard protocol to provide a uniform standard for controlling multimodal communications sessions among IP networks, unified communications systems and end-user communications devices. Infrastructure investments in, and widespread availability of, broadband Internet connections have led to an increase in the adoption of unified communications systems, offering more advanced features such as VoIP, email, instant messaging, collaboration and video conferencing as well as the ability to combine different forms of multimodal communications such as voice and video. SIP-based communications enable substantial cost savings, operating flexibility and advanced features relative to traditional telephony.

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        However, due to the lack of an end-to-end SIP-based communications platform, the legacy PSTN has had to serve as a bridge for traffic between and among VoIP and other SIP networks as well as for connections to non-IP-based networks and end point devices, thus losing the advantages of SIP. This legacy PSTN infrastructure has become increasingly difficult to support as service providers balance the need to upgrade networks and introduce new communications services, with the goal of reducing operating costs and capital expenditures. Traditional approaches are severely limited by their inadequate support for software-based communications and rich media applications, higher capital and operating costs, reliance on multiple regional and local physical facilities, inefficient routing, lack of dynamic network capacity allocation and the absence of a centralized directory for multimodal communications.

        Some service providers that exchange significant volumes of traffic have used SIP to directly interconnect with other service providers. These direct connect approaches require unique solutions for each individual partner, which are complex to implement and costly to manage because of the large number of direct interconnects required and the inefficiency of managing multiple partner relationships. In addition, existing neutral interconnect solution providers offering peering services use a series of hardware switches that rely on legacy protocols and a hierarchical architecture that must be deployed in every local market where communication services are to be provided. These neutral interconnect solutions require high initial capital expenditures and significant ongoing maintenance. Moreover, these solutions still rely upon the PSTN hierarchical architecture and are not capable of providing large scale multimodal communications solutions.

        By migrating to IP networks, service providers can leverage the flexibility of a software and cloud-based platform to increase the variety of communications services delivered to customers as hosted offerings. Further, customers recognize that, in addition to the many service improvements, adoption of SIP as a protocol for controlling multimedia communication sessions, such as voice and video over IP, provides the potential to drive down telecommunications costs as IP-based networks are more efficient and cost-effective than those that rely on legacy PSTN infrastructure. According to IDC, the total U.S. telecommunications services market is expected to reach $326.5 billion by 2014.⁽¹⁾ Additionally, Infonetics Research has forecasted that the worldwide market for VoIP services could reach $74.5 billion by 2015.⁽²⁾ Connecting IP-based networks to each other or the PSTN, which is referred to as SIP trunking, represents one of the fastest growing segments within the VoIP services market, and is forecasted to increase at a compound annual growth rate of 52 percent from $599 million in 2010 to $4.8 billion in 2015.⁽²⁾ In addition to the migration of communications traffic from the PSTN to IP networks, a number of other trends in the industry are driving the growth in demand for a new cloud-based communications service platform including the proliferation of broadband connectivity, emergence of cloud-based service architectures, the proliferation of SIP/IP-based devices, increased demand for multimodal and unified communications.

(1)

IDC, "U.S. Telecommunications Services 2010-2014 Forecast," IDC #223323, July 2010.

(2)

Infonetics Research, "VoIP and UC Services and Subscribers Biannual Worldwide and Regional Market Share, Size, and Forecasts," March 28, 2011.

Our Competitive Strengths

        Our solutions address the needs of service providers and enterprises while maintaining capital and operating efficiency. We believe the following strengths differentiate us and position us for continued growth:

•

Cloud-based services architecture.  Our solutions are delivered on demand through a cloud-based architecture that can serve customers anytime and anywhere. This flexible and scalable architecture also enables us to customize our services to match each new customer's needs, thereby eliminating the challenges often associated with the adoption and implementation of fixed, one-size-fits-all solutions.

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•

Fully-managed, IP-based Media Peering Grid service.  Our proprietary software-based, fully-managed, distributed Media Peering Grid service provides carrier-grade, high-quality voice and connectivity that can be relied on as a primary communications network. Our flexible Media Peering Grid software supports both legacy and VoIP network interoperability and enables our customers to efficiently and cost-effectively transition their communications infrastructures from the legacy PSTN to an IP network incrementally and on demand, thus reducing expenses associated with legacy architecture as well as call delivery tolls and circuit expenses.

•

Extensive, secure, multimodal SuperRegistry directory.  The scale and multimodal nature of our directory give us the ability to complete a call to any connected end-point device, regardless of whether it is a PSTN-based handset or a SIP-connected device. Using our proprietary intelligent routing software, and the telephone numbers and end-point identifying addresses in our SuperRegistry directory, we are able to determine the interface type necessary to complete the connection and route traffic more efficiently from end-to-end, through our Media Peering Grid service. Furthermore, our SuperRegistry directory enables our enterprise customers to achieve rich media, all-IP unified communications across disparate communications technologies with other enterprises and IP connected devices.

•

AppWorx open application development environment.  Our AppWorx open application development environment provides software developers and channel partners with access to powerful tools for rapid development and integration of new communications services. These applications and new services can be accessed from anywhere, deployed quickly over our platform and easily integrated into existing web services or software applications. Our AppWorx development environment enables our customers to develop and use these applications to provide additional functionality and new and differentiated services to their end-users, which our customers can use to develop a stronger relationship with their end-customers.

•

Powerful network effects.  We benefit from strong network effects driven by the large volume of numbers in our SuperRegistry directory. As our service provider peering partnerships and enterprise customer base grow, the benefits each existing customer realizes by using our platform increase, resulting in reduced costs for our customers and increased traffic through our platform. New features and partnerships broaden our value proposition, attracting more customers, peering partners and channel partners. The scale of our business and depth of our relationships not only attract new customers but also serve as barriers to entry for potential competitors.

•

Fully integrated communications platform.  Our multi-layer platform, which integrates transport, peering, registry services and application programming interfaces, or APIs, offers our customers a one-stop, flexible and full-featured solution for developing and extending their communications services as compared to alternatives that focus on local market, hardware-based solutions. Our fully integrated platform also enables us to be flexible and to easily add and deploy new IP-enabled communications and collaboration services as our customers' needs evolve.

Our Strategy

        Our objective is to continue to leverage our CloudWorx CaaS Platform to establish a position as a leading provider of communications solutions for service providers and enterprises. We intend to accomplish this by pursuing the following strategies:

•

Establish the technology leadership of our CloudWorx CaaS Platform.  We intend to continue to invest in our platform through internal development or by acquiring complementary technology. These activities are expected to broaden our support for new collaboration and communications features, enhance the capabilities of our SuperRegistry directory, and expand our AppWorx application development environment to drive broader adoption among new customers and developer communities.

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•

Extend the reach and breadth of our peering partnerships.  We plan to add additional telephone numbers and end-point identifying addresses to our SuperRegistry directory from new and expanded relationships with service providers and enterprise customers. As we add additional direct peering partners, we expect to increase our communications traffic and revenue without needing to utilize the legacy PSTN, which we expect will reduce our traffic delivery costs.

•

Grow our relationships with existing customers.  Our sales team works closely with our customers to understand their challenges and industry trends, determine the services that we can provide to better serve their needs as well as to identify areas of focus for our ongoing research and development activities. These relationships allow our support team to respond more quickly and effectively to customer needs and our development team to provide customized solutions for our customers. We intend to continue to leverage the work of our sales team to identify and deliver additional services to expand our relationships.

•

Expand our customer base and technology partnerships.  We intend to expand our base of enterprise customers by deepening our existing technology partnerships, developing new technology partnerships and expanding our network of channel partners. We also intend to focus on expanding our service provider customer base by leveraging our CloudWorx CaaS Platform, investing in our direct sales force and educating service providers on the potential opportunity to reduce or eliminate capital expenditures and reduce operating costs by leveraging our platform.

•

Broaden our international presence.  We plan to extend our geographic reach and coverage by expanding our peering partner network and SuperRegistry directory globally through the addition of international service providers, peering partners and global enterprise customers.

Risks

        Investing in our common stock involves significant risks. You should carefully consider the risks in "Risk Factors" before making a decision to invest in our common stock. If any of these risks actually occurs, our business, financial condition or results of operations would likely be materially adversely affected. In such case, the trading price of our common stock would likely decline, and you may lose all or a part of your investment. Below is a summary of some of the principal risks we face.

•

Our recent growth rates may not be indicative of our future growth;

•

We have a history of losses and may not achieve profitability in the future;

•

Our revenue is concentrated in a limited number of customers, and our contracts do not include any fixed commitments to use our services;

•

We face significant competition from both established and new service providers and we may not compete successfully;

•

We operate in a dynamic legal and regulatory environment where changes in laws and regulations could adversely impact our business; and

•

We are subject to federal and state regulation, and we may be subject to enforcement and other adverse proceedings that may have a material adverse effect on our reputation or our future results of operations.

Corporate Information

        We were incorporated in June 2003 under the laws of the State of Washington as Voex, Inc. We were reincorporated under the laws of the State of Delaware in October 2006. We changed our name to IntelePeer, Inc. in September 2007. Our principal executive offices are located at 2855 Campus Drive, Suite 200, San Mateo, California 94403, and our telephone number is (650) 525-9200. We

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maintain a corporate website at www.intelepeer.com. The information on, or accessible through, our website does not constitute a part of, and is not incorporated into, this prospectus.

        Our trademarks include IntelePeer®, our company name and logo, AppWorx®, CloudWorx™, CoreCloud™, CloudCentral™, IntelePeer AppWorx®, Media Peering Grid™ and SuperRegistry®. All other trademarks or service marks appearing in this prospectus are trademarks or service marks of their respective owners.

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THE OFFERING

Common stock offered:
	By us		shares (            shares if the underwriters exercise their over-allotment option in full)
	By the selling stockholders		shares (            shares if the underwriters exercise their over-allotment option in full)
		Total	shares
Common stock to be outstanding after this offering			shares
Over-allotment option			The underwriters have an option to purchase a maximum of              additional shares of common stock from us and              additional shares of common stock from the selling stockholders identified in this prospectus at the public offering price, less underwriting discounts and commissions, to cover over-allotments of shares, if any. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.
Use of proceeds			We estimate that the net proceeds to us from this offering will be approximately $    million, assuming an initial public offering price of $    per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We currently intend to use approximately $25.3 million of the net proceeds from this offering to repay loans outstanding under our existing equipment purchase facilities and any accrued but unpaid interest thereon and other related fees. We currently intend to use the remainder of the net proceeds from this offering for working capital and general corporate purposes.
			We will not receive any proceeds from the sale of common stock by the selling stockholders.
			See "Use of Proceeds" for additional information.
Risk factors			See "Risk Factors" immediately following this prospectus summary to read about factors you should consider before investing in our common stock.
Proposed market symbol			We have applied for listing of our common stock on the Nasdaq Global Market under the symbol "PEER."

        The number of shares of our common stock expected to be outstanding after completion of this offering is based on 26,842,244 shares outstanding as of September 30, 2011, and excludes:

•

7,659,282 shares of common stock issuable upon the exercise of options outstanding as of September 30, 2011 at a weighted average exercise price of $1.65 per share;

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•

1,057,603 shares of common stock reserved for issuance upon the exercise of warrants outstanding as of September 30, 2011 at a weighted average exercise price of $1.67; and

•

1,723,302 shares of common stock reserved for issuance under our equity incentive plan as of September 30, 2011.

Unless otherwise indicated, this prospectus reflects and assumes the following:

•

the conversion of all then-outstanding shares of our convertible preferred stock into an aggregate of 21,569,923 shares of common stock upon the closing of this offering;

•

the conversion of all then-outstanding warrants to purchase shares of convertible preferred stock, which warrants by their express terms do not terminate if not exercised prior to this offering, into warrants to purchase an identical number of shares of common stock upon the closing of this offering;

•

the exercise in full of all then-outstanding warrants to purchase shares of convertible preferred stock and common stock prior to the closing of this offering pursuant to conditional notices of exercise received for warrants which by their express terms terminate if not exercised prior to this offering;

•

a 1.5-to-1 reverse stock split of our outstanding stock effected on August 9, 2011 and a 1.33333333-to-1 reverse stock split effected on September 29, 2011, which together had the effect of an approximately 2-to-1 reverse stock split for securities outstanding prior to August 9, 2011; and

•

no exercise by the underwriters of their over-allotment option.

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SUMMARY FINANCIAL DATA

        The following table summarizes our financial data for the periods presented. We have derived the summary statement of operations data for the years ended December 31, 2008, 2009 and 2010 from our audited financial statements included elsewhere in this prospectus. We have derived the summary statement of operations data for the nine months ended September 30, 2010 and 2011 and the balance sheet data as of September 30, 2011 from our unaudited financial statements included elsewhere in this prospectus. The unaudited financial statements have been prepared on the same basis as the annual audited financial statements, and, in the opinion of management reflect all adjustments necessary for the fair presentation of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results that may be expected in the future. The following summary financial data should be read in conjunction with "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes included elsewhere in this prospectus.

			Year Ended December 31,									Nine Months Ended September 30,
			2008			2009			2010			2010			2011
			(in thousands, except share and per share data)
												(unaudited)			(unaudited)
Statement of Operations Data:
Revenue			$	43,352		$	76,194		$	111,549		$	80,445		$	106,234
Operating expenses:
	Peering partner compensation			29,824			50,232			79,108			56,890			74,927
	Infrastructure costs			2,987			5,265			6,348			4,546			5,691
	Operations(1)			3,353			4,673			5,578			4,181			5,610
	Research and development(1)			2,447			3,567			4,069			3,042			4,688
	Sales and marketing(1)			4,741			6,367			7,693			5,636			10,411
	General and administrative(1)			2,177			4,568			5,547			4,177			5,927
	Depreciation and amortization			1,852			2,373			3,719			2,627			3,960
		Total operating expenses		47,381			77,045			112,062			81,099			111,214
Loss from operations				(4,029	)		(851	)		(513	)		(654	)		(4,980	)
Interest expense, net				(1,274	)		(1,488	)		(2,614	)		(1,842	)		(2,072	)
Change in fair value of warrant liabilities				163			(1,004	)		(8,492	)		(5,260	)		(2,590	)
Net loss			$	(5,140	)	$	(3,343	)	$	(11,619	)	$	(7,756	)	$	(9,642	)
Net loss per share of common stock, basic and diluted(2)			$	(1.17	)	$	(0.76	)	$	(2.65	)	$	(1.77	)	$	(1.98	)
Shares used in computing net loss per share of common stock, basic and diluted(2)				4,378,964			4,378,964			4,381,308			4,378,964			4,864,178
Pro forma net loss per share of common stock, basic and diluted (unaudited)(2)									$	(0.15	)				$	(0.27	)
Shares used in computing pro forma net loss per share of common stock, basic and diluted (unaudited)(2)										25,225,094						26,289,604

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	As of September 30, 2011 (unaudited)
	Actual			Pro Forma(3)			Pro Forma as Adjusted(4)
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	5,093		$	5,093		$
Working capital (deficit)		(14,219	)		(14,219	)
Total assets		61,794			61,794
Total indebtedness(5)		26,074			26,074
Warrant liabilities		7,996			1,617
Redeemable convertible preferred stock		40,386			—
Total stockholders' equity (deficit)		(36,439	)		10,326

(1)

The following table presents stock-based compensation expense included in each expense category (in thousands):

	Year Ended December 31,						Nine Months Ended September 30,
	2008		2009		2010		2010		2011
							(unaudited)
Operations	$	27	$	31	$	144	$	100	$	192
Research and development		16		49		81		56		725
Sales and marketing		185		111		153		99		3,056
General and administrative		91		106		186		138		244
Total stock-based compensation	$	319	$	297	$	564	$	393	$	4,217

(2)

Please see Notes 1 and 12 to our audited financial statements included elsewhere in this prospectus for an explanation of the calculations of our basic and diluted net loss per share of common stock and pro forma net loss per share of common stock.

(3)

The pro forma column in the balance sheet data table above reflects (i) the conversion of all outstanding shares of our convertible preferred stock into 21,569,923 shares of common stock immediately upon the completion of this offering and (ii) the resulting reclassification of the convertible preferred stock warrant liability to additional paid-in capital.

(4)

The pro forma as adjusted column in the balance sheet data table above reflects (i) the conversion of all outstanding shares of our convertible preferred stock into 21,569,923 shares of common stock immediately upon the completion of this offering, (ii) the resulting reclassification of the convertible preferred stock warrant liability to additional paid-in capital and (iii) the receipt of the net proceeds from the sale of                        shares of common stock offered by us in this offering at an assumed initial public offering price of $            per share (the midpoint of the estimated price range set forth on the cover page of this prospectus), after deducting underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $            per share would increase (decrease) our cash and cash equivalents, working capital, total assets and total stockholders' equity by $            , assuming the number of shares offered by us remains the same as set forth on the cover page of this prospectus and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

(5)

Total indebtedness includes $20.1 million in equipment financing obligations, $5.5 million of obligations under our revolving accounts receivable loan facility, and $0.4 million payable under our capital lease obligation. See Notes 4 and 10 to our audited financial statements included elsewhere in this prospectus.

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider all the risks described below before making a decision to invest in our common stock. Our business could be harmed by any of these risks at any time. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.

Risks Relating to Our Business

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, maintain high levels of service and customer satisfaction or adequately address competitive challenges.

        Our revenue has increased substantially since our inception, but we may not be able to sustain revenue growth consistent with recent history, or at all. We believe growth of our revenue depends on a number of factors, including our ability to:

•

Price our services effectively so that we are able to attract and retain customers without compromising our profitability;

•

Attract new customers, increase our existing customers' use of our services and provide our customers with excellent customer support;

•

Continue to increase the number of telephone numbers and end-point identifying addresses in our SuperRegistry directory;

•

Develop new communications applications to increase our customers' use of our services;

•

Efficiently and accurately capture cost and revenue data for the more than 1.8 billion minutes of traffic delivered per month over our platform;

•

Introduce our services to new markets outside of the United States; and

•

Increase awareness of our brand on a global basis.

We can not assure you that we will be able to successfully accomplish any of these tasks.

        Additionally, we currently plan to expand our business significantly to satisfy the anticipated demand for our services. To manage this growth, we must improve operational and financial systems, procedures and controls, and expand, train and manage our employee base. We must maintain and expand relationships with current customers, peering partners and other third parties, while attracting new customers, peering partners and channel partners. If we cannot manage our growth effectively, we may be unable to take advantage of market opportunities, execute our business strategies or respond to competitive pressures.

We have a history of losses and may not achieve or maintain profitability in the future.

        We had net losses of $3.3 million, $11.6 million and $9.6 million in the years ended December 31, 2009 and 2010 and the nine months ended September 30, 2011, respectively. We cannot predict if we will attain profitability in the near future or at all. We expect to continue to make significant expenditures to develop and expand our business. In addition, as a public company, we will incur additional legal, accounting and other expenses that we did not incur as a private company. These increased expenditures will make it more difficult to achieve future profitability. We may incur significant losses in the future for a number of reasons, including the other risks described in this prospectus, and unforeseen expenses, difficulties, complications and delays and other unknown events. Accordingly, we may not be able to achieve or maintain profitability. We will need to generate significant revenue to achieve profitability, and we cannot assure any prospective investor that we will

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be able to do so. Likewise, we cannot assure you of our ability to sustain or increase such profitability on a quarterly or annual basis in the future.

Our revenue is concentrated in a relatively limited number of customers, and our contracts do not include any fixed commitment to use our services. The termination of these contracts by our customers, or a decrease in traffic from those customers, could materially and adversely impact our results of operations and financial condition.

        Our top two customers for the nine months ended September 30, 2011, Sprint and Qwest, represented 21 percent and 12 percent of our revenue for the period, respectively. Our top two customers in 2010, Sprint and Qwest, represented 29 percent and 16 percent of our revenue for the period, respectively. In general, our customer contracts are non-exclusive and have neither volume nor time period commitments. Any customer is able to discontinue the use of all or a portion of our services at any time. If one or more customers were to reduce their demand for our services, our revenue could decline. If we lose one or more of our top customers, or, if one or more of these major customers significantly decreases its use of our services, our business will be materially and adversely affected. From time to time, we have experienced material reductions in revenue from key customers. For example, our revenue from one of our top customers decreased from $35.3 million in 2009 to $18.2 million in 2010. Revenue from another top customer decreased from $2.9 million in 2008 to $0.2 million in 2009. There can be no assurance that we will not have similar substantial decreases in customer revenue in the future, or that the growth in our other customers will make up for any such decreases. As a result, our future revenue is difficult to forecast. Because our expense levels are based on our expectations as to future revenue and to a large extent are fixed in the short term, we might be unable to adjust spending in time to compensate for any shortfall in revenue. Accordingly, any significant shortfall of revenue in relation to our expectations will harm our operating results.

Our pricing and billing systems are complex and errors could adversely affect our revenue and profits.

        We currently route more than 1.8 billion minutes of voice traffic each month and operate in a dynamic market, which makes our pricing and billing efforts complex to develop and challenging to implement. To be profitable, we must have accurate and complete information about the costs associated with connecting data and voice transmissions over our platform, and properly incorporate such information into our pricing model. Our pricing model must also reflect accurate and current information about the market for our services, including the pricing of competitive alternatives for our services, as well as reliable forecasts of traffic volume. We may determine pricing for our services based on data that is outdated or otherwise flawed. Even if we have complete and accurate market information, we may not set prices to optimize both revenue and profitability. If we price our services too high, the amount of traffic that may be routed through our platform may decrease and accordingly our revenue may decline. If we price our services too low, our margins may be adversely affected, which will reduce our ability to achieve and maintain profitability.

        Additionally, we rely heavily on a single third party to provide us with key software and services for our billing. If that third party ceases to provide those services to us for any reason, or fails to perform billing services accurately and completely, we may not be able to deliver accurate invoices promptly. Delays in invoicing can lead to delays in revenue recognition, and inaccuracies in our billing could result in lost revenue. If we fail to adapt quickly and effectively to changes affecting our costs, pricing and billing, our profitability and cash flow will be adversely affected.

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Commercial disputes and collection issues are common in our industry and any disputes with our peering partners or our customers could result in increased expenses or an inability to collect revenue for services provided and any collection problems could result in delays or failures to collect revenue.

        Our direct and indirect peering arrangements are based on commercial agreements with a variety of parties. Disputes concerning payment for services rendered can occur for numerous reasons given the complexities of the regulatory environment and the number of parties involved in handling communications traffic. From time to time, we may dispute an invoice for the amount of traffic that we delivered to our peering partners or the rates that should have been applied to that traffic. Dispute resolution generally requires a review of call detail records and negotiations with our peering partners. If we subsequently determine that the disputed amounts will be settled for an amount in excess of the amount which we originally accrued, we will recognize the difference as an increase in peering partner compensation which would adversely impact our results of operations. For example, for the year ended December 31, 2010, we determined that certain disputed amounts could result in an additional charge of $1.1 million, which resulted in us recognizing this amount as additional peering partner compensation.

        We are also subject to potential billing disputes with customers. Additionally, some customers have failed to pay for services because their financial condition limits their ability to satisfy their obligations. For example, in 2007, a customer that represented 1.6 percent of our revenue defaulted on its obligation of $163,000 and declared bankruptcy. Delays in receiving payments, or our inability to collect payments pursuant to such agreements, can adversely impact our business.

Our financial position, revenue, operating results and profitability may vary significantly from quarter to quarter, which could cause the price of our common stock to decline significantly.

        As our business continues to grow, we believe that our quarterly operating results may be subject to significant fluctuation due to various factors, many of which are beyond our control. Factors that may affect our quarterly operating results in the future include the risk factors discussed in this Risk Factors section, and in particular the following:

•

changes in the amount of voice traffic which major customers route through our CloudWorx CaaS Platform;

•

our failure to properly anticipate changes in the price our customers are willing to pay, or the costs we must pay, to deliver certain traffic;

•

the timing, capacity and breadth of direct peering established to support our customers;

•

decisions by our service provider customers to establish direct connection arrangements with other major service providers rather than route traffic through our CloudWorx CaaS Platform;

•

fluctuations based upon seasonality or the weighted average number of business days in a particular quarter;

•

traffic outages or other failures of our platform; and

•

variability of operating expenses as a percentage of revenue.

        Accordingly, it is difficult for us to accurately forecast our results of operations on a quarterly basis. If we fail to meet expectations of investors or analysts, our stock price may fall rapidly and without notice. Furthermore, the fluctuation of our quarterly operating results may render period-to-period comparisons of our operating results less meaningful and you should not rely upon them as an indication of our future performance.

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We have a limited operating history and a relatively new business in an emerging and rapidly evolving market, making it difficult to evaluate our business and future prospects, thereby increasing the risk of your investment.

        The revenue and income potential of our business and market is unproven, and our limited operating history with our current business model makes an evaluation of our business and prospects difficult. We were incorporated in June 2003 and since inception have been generating revenue from service provider customers. We first began offering applications to enterprise customers in 2008. In 2010 and the nine months ended September 30, 2011, 2.7 and 4.9 percent of our revenue, respectively, was generated from enterprise customers.

        Our ability to grow our business will depend significantly on an increase in the adoption of new technologies, which may not occur or may not occur as quickly as we anticipate. Our CloudWorx CaaS Platform has the ability to deliver multimodal communications services, including voice, video, unified communications and other rich-media applications. If the market for these multimodal and unified communications capabilities does not develop, or develop as fast as we expect, our revenue may not grow.

        We also seek to expand our business through growth in markets outside of the United States. We have no experience in providing services to, or in navigating the regulatory landscape of, those markets. If we fail to execute our business plan and attract new customers from outside of the United States, we may be unable to grow our revenue or offset declines in revenue in the United States.

        Additionally, current or future competitors may develop and offer competing products or services that are, or are perceived to be, superior to our services in some respect. Our services may not be sufficiently competitive with those new products or services and, as a result, our revenue may decrease.

Decreasing telecommunications rates may diminish or eliminate our competitive pricing advantage.

        The market for communications services is highly competitive and is characterized by decreasing rates for services. Even as traffic volumes have increased due to the increasing penetration of broadband Internet access services and consumer demand for content over such services, the rates that service providers pay each other has decreased over time. International and domestic telecommunications rates have decreased significantly over the last few years in most of the markets in which we operate, and we anticipate these rates will continue to decline in all of the markets in which we do business or expect to do business. If we are unable to reduce our operating expenses and adjust the rates we charge for our services, the decreasing market rates for the exchange of traffic may diminish or eliminate our competitive pricing position. Continued rate decreases may require us to lower our rates to remain competitive and could reduce or possibly eliminate any gross profit from our services.

If we fail to accurately forecast our revenue or the commitments we must make to satisfy demand for our services, our results of operations and financial condition could be adversely affected.

        We must continue to invest in our business such that we have sufficient infrastructure and support to transport increasing numbers of minutes through our Media Peering Grid service. Our investment in our infrastructure depends largely on our forecasts of demand for our services, which is based on historical growth in the use of our services. If communications traffic declines or does not grow as fast as it has historically grown, our revenue may be less than we forecast, and we may have incurred infrastructure costs in excess of what was required to facilitate the delivery of communications traffic through our platform. If demand for our services exceeds our forecasts, our infrastructure may not be prepared for such an increase in demand and we may not be able to capitalize fully on the growth opportunity and increase our revenue in an optimal manner. In either case, the results of operations and our financial condition could be adversely affected.

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We may lose customers if we experience system failures that significantly disrupt the availability and quality of the services that we provide.

        Our operations are dependent upon our ability to prevent system interruption. We have experienced system failures from time to time, including loss of power in a commercially hosted facility, software bugs that prevented calls from routing normally and fiber cuts that denied access to a site from our backbone. In the past, these system failures caused periods of low quality service lasting from 10 to 180 minutes and total site unavailability of 10 to 60 minutes. Although we have endeavored to mitigate the potential impact of failures through our distributed platform and redundant operations, there is no guarantee that we will not have system failures in the future, including those that are materially worse in scope or duration. Any interruption in the ability of our customers to use our services reduces our current revenue, could harm our future revenue, and could subject us to additional regulatory scrutiny. Such interruptions could also undermine customer confidence in the reliability of our services and cause us to lose customers or make it more difficult to attract new ones.

        Our business also requires us to protect our infrastructure against damage from human error, fire, earthquakes, floods, power loss, sabotage, intentional acts of vandalism, terrorism and similar events. Despite any precautions we may take, the occurrence of a natural disaster, power outage or other unanticipated problems could result in lengthy interruptions in the availability of our services. We do not carry business interruption insurance sufficient to compensate us for losses that may result from interruptions in the availability of our services as a result of system failures.

Our offerings are dependent upon third-party facilities, equipment and services, and interruptions or delays in service from our third-party facility providers could impair our ability to deliver our services to our customers, resulting in customer dissatisfaction, damage to our reputation, loss of customers, limited growth and reduction in revenue.

        We rely on third parties' facilities and equipment to operate our business as our customers' traffic traverses a variety of facilities controlled by third parties. We principally buy equipment and software to build and update our system infrastructure from one supplier. If our third-party service providers fail to maintain facilities properly, if our equipment fails to perform as expected or if the providers of facilities or equipment fail to respond quickly to problems, our customers may experience service interruptions. Such service interruptions may affect the perceived reliability of our service which could damage our brand and reputation adversely affecting our growth. Additionally, we rely on a single supplier to provide us with key billing and related services. If that supplier stops providing those services to us for any reason, we could experience disruption in our ability to quickly capture the information we need to promptly generate invoices for our services. These delays in invoicing could materially delay our receipt of revenue from our customers.

Our IP telephony offering relies, in some instances, on third parties to originate and deliver all calls placed and received by such customers.

        In offering IP telephony services, we rely on the infrastructure of the third-party network service providers who are our peering partners to provide telephone numbers, PSTN call termination and origination services and local number portability. In relying on such third parties, we are able to offer our services over a greater geographic area and can compete with other providers of such services in a broader marketplace. But in relying on such third parties, we have less control over the quality and reliability of our service. Moreover, if any of these third-party service providers cease operations or otherwise terminate services on which we depend, we could suffer customer loss or increased costs for our services, which could have a material adverse impact on us and our reputation.

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We face significant competition from both established and new service providers, as well as from our customers, and if we do not compete successfully, we could lose market share, experience reduced revenue or suffer losses.

        The services we provide are also offered by others and in the future may be offered by an increasing number of parties. Currently, we face competition from legacy telecommunications service providers as well as emerging providers of voice peering services. Our competitors include traditional telecommunications carriers and other providers of specialized communications services.

        There are few substantial barriers to pursuing business from our customers, and we expect to face additional competition from new market entrants in the future. Many of our current and potential competitors have substantially greater financial, technical and marketing resources, larger customer bases, greater name recognition and more established relationships in the industry than we have. As a result, certain of our competitors may be able to develop and expand their network infrastructures and service offerings more quickly, adapt to new or emerging technologies and changes in customer requirements more quickly, take advantage of acquisitions and other opportunities more readily, devote greater resources to the marketing and sale of their services and adopt more aggressive pricing and incentive policies than we can. Those service providers may attract communications traffic that is currently utilizing our CloudWorx CaaS Platform.

        Moreover, some of the potentially biggest users of our peering services, like incumbent local exchange carriers, competitive local exchange carriers and wireless and cable companies, may enter into direct peering arrangements between and among themselves and with other service providers. Such direct connections may result in lower traffic volumes for us and negatively impact our business.

        Our ability to compete effectively will depend on a number of factors, including without limitation:

•

our ability to offer cost-effective and high-quality services consistently and without delay;

•

our ability to respond quickly and effectively to market demand for new services;

•

our ability to adopt or adapt to changing regulatory standards and industry practices;

•

the number and nature of our competitors and competitiveness of their services; and

•

the entrance of new competitors into our markets.

        Many of these factors are outside of our control. For these reasons, we may not be able to compete successfully against our current or future competitors.

Consolidation in the telecommunications industry could lead to an unexpected and significant reduction in revenue.

        The telecommunications industry has historically been marked by significant consolidation. If two service providers that are currently connecting traffic through our platform become part of a single entity and network infrastructure, those parties may no longer need to route telecommunications traffic through our platform, which will adversely affect the revenue we generate from such traffic.

If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs, our services may become less competitive or obsolete, and we could lose customers or market share.

        Our future success will depend in part on our ability to modify or enhance our services to meet customer needs, to add functionality and to address technological advancements. The telecommunications industry is characterized by rapid technological change and new service offerings, which could make our service offerings obsolete or too costly or inefficient on a relative basis. We must adapt to this rapidly changing market by continually improving the features, functionality, reliability and

16

responsiveness of our services, and by developing new features, services and applications to meet changing customer needs or developing industry standards. We cannot assure you that we will be able to adapt to these challenges or respond successfully or in a cost effective way. Failure to do so would adversely affect our ability to compete and retain customers or market share. In addition, our innovations may not achieve the market penetration or price levels necessary for profitability.

The market for next generation communications services may not develop as we anticipate.

        The market for multimodal communications and unified communications services is at an early stage of development, and the market for these services may not achieve high levels of demand. Our success depends on the willingness of enterprises to adopt these next generation communications services. If demand for these services does not develop as we expect, it may adversely affect our revenue growth from enterprise customers.

Our sales channels may not be effective in selling our communications services to enterprise customers.

        Currently, we rely on sales channels to acquire enterprise customers. If our sales channel partners are not effective in generating demand from enterprise customers for our services, we may have to evaluate alternative customer acquisition models, including introducing a direct sales model for attracting and retaining enterprise customers. As a result, our operating costs may be significantly increased, which may adversely affect our ability to achieve or maintain profitability.

Our CloudWorx CaaS Platform could subject us to litigation and other disputes from third parties.

        Our CloudWorx CaaS Platform relies on multiple service providers to deliver communications traffic. We enter into contractual or other arrangements with the service provider from which we receive traffic and with the peering partner to which we deliver communications traffic. However, we do not have written contractual arrangements with all of the parties that participate in the origination, transit or termination of traffic through our platform. Our partners provide us assurances that they are in compliance with applicable laws and regulations. While our contracts address compensation issues, they also recognize that the market is subject to regulatory uncertainty and changes in law. We may be subject to litigation or other disputes as a result of our indirect peering business. We may not have recourse through contractual indemnification. Our inability to seek recourse either from those with which we enter into written contracts or third parties may adversely impact our business.

We could be subject to litigation that could adversely affect our business or operations.

        We are currently the defendant in one lawsuit, and a second lawsuit has been threatened against us. These current or potential lawsuits allege various failures by our management, and could distract attention from our operation of our business. These matters are described in "Business—Legal Proceedings."

We may be vulnerable to security breaches, which could disrupt our operations and have a material adverse effect on our financial performance and operating results.

        A party who is able to compromise the security of our facilities could misappropriate either our proprietary information or the personal information of our customers, or cause interruptions or malfunctions in our operations. We may be required to expend significant capital and financial resources to protect against such threats or to alleviate problems caused by breaches in security. As techniques used to breach security change frequently, and are generally not recognized until launched against a target, we may not be able to implement security measures in a timely manner or, if and when implemented, these measures could be circumvented. Any breaches that may occur could expose us to increased risk of lawsuits, loss of existing or potential customers, harm to our reputation and

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increases in our security costs, which could have a material adverse effect on our financial performance and operating results.

If our security measures are breached and unauthorized access is obtained to a customer's stored data or any consumer data that we may store from time to time or if data is lost due to hardware failures or errors, our services may be perceived as not being secure, customers may curtail or stop using our services and we may incur significant legal and financial exposure and liabilities.

        Certain of our services involve the storage and transmission of customers' proprietary information, including certain consumer data. Security breaches related to this information could expose us to a risk of loss of this information, forfeiture or other enforcement actions by federal or state regulatory agencies or state attorneys general, litigation and possible liability, as well as damage our relationships with our customers. Our security measures may be breached as a result of third-party action, employee error, malfeasance or otherwise, during transfer of data to additional data centers or at any time, and, as a result, someone may obtain unauthorized access to our data or our customers' data. For example, in October 2011, as a result of employee error, two customers inadvertently received access to data regarding call transmissions unrelated to those customers.

        As a result of a security breach, our reputation could be damaged, our business may suffer and we could incur significant liability. Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our data or our customers' data, which could result in significant legal and financial exposure and a loss of confidence in the security of our service, which would harm our future business prospects. Furthermore, our ability to collect and report data may be interrupted by a number of factors, including our inability to access the Internet, the failure of our platform, security breaches or variability in user traffic on customer websites. In addition, computer viruses may harm our systems causing us to lose data, and the transmission of computer viruses could expose us to litigation. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose sales and customers. Our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our policy may not cover any claim against us for loss of data or other indirect or consequential damages and defending a suit, regardless of its merit, could be costly and divert management's attention.

The loss of key members of our senior management team could prevent us from executing our business strategy and could have a material adverse effect on our business. Additionally, the failure to attract and retain qualified personnel could prevent us from executing our business strategy.

        Our future performance depends substantially on the continued services of our management and other key personnel, including members of our technical, marketing and sales teams, and our ability to retain and motivate those persons. We do not have long-term employment agreements with any of our key personnel and we do not maintain any "key person" life insurance policies. Competition for qualified personnel is intense and we may not be successful in attracting and retaining the key personnel that we need to compete effectively. The value of our common stock may adversely affect our efforts to motivate the performance of our key personnel. It may be difficult to retain those employees who have substantial in-the-money, vested options or other equity awards. Conversely, if options granted to our employees have exercise prices that are substantially above our then-current share price, it may be difficult to motivate and retain those employees. Additionally, if the market price of our common stock does not increase or declines, it may limit our ability to attract new employees with equity incentives.

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We may acquire other companies or technologies, which could divert our management's attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.

        We may in the future seek to acquire or invest in businesses, products or technologies that we believe could complement or expand our application suite, 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.

        In addition, we do not have any 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. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including:

•

unanticipated costs or liabilities associated with the acquisition;

•

incurrence of acquisition-related costs;

•

diversion of management's attention from other business concerns;

•

harm to our existing business relationships with business partners and customers as a result of the acquisition;

•

the potential loss of key employees;

•

use of resources that are needed in other parts of our business; and

•

use of substantial portions of our available cash to consummate the acquisition.

        In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could harm our results of operations.

        Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. In addition, if an acquired business fails to meet our expectations, our operating results, business and financial condition may suffer.

If we are unable to protect our proprietary technology and other intellectual property rights, our ability to compete for business or exclude others from competing with us may be adversely affected. Our solutions and services may infringe on the intellectual property rights of others, which may subject us to legal liability, harm our reputation, prevent us from offering certain solutions and services to our customers or distract management. Any claims or litigation involving intellectual property, whether we ultimately win or lose, could be extremely time-consuming, costly and harmful to our reputation.

        We regard the protection of our trademarks, service marks, copyrights, patents, domain names, trade dress and trade secrets as critical to our success. To protect our intellectual property rights, we rely on national, state and common law rights, as well as a variety of administrative procedures, and we seek protection through trade secrets, confidentiality agreements and other security measures, including patent law protection. To date, we have one issued patent. The process of seeking patent protection takes a long time and is expensive. We are unable to guarantee that additional patents will issue from pending or future applications or that, if patents issue, they will not be challenged, invalidated or circumvented, or that the rights granted under the patents will provide us with meaningful protection or any commercial advantage. Some of our technologies are not covered by any patent or patent application. The confidentiality agreements on which we rely to protect certain technologies may be breached and may not be adequate to protect our proprietary technologies. There can be no assurance that other countries in which we market our services will have applicable laws to protect our intellectual property rights to the same extent as the United States.

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        Our ability to compete successfully also depends on our ability to operate without infringing the proprietary rights of others. We have no means of knowing what patent applications have been filed in the United States until they are published. In addition, the technology sector in which we operate is characterized by frequent claims and litigation regarding patents, trademarks and other intellectual property rights. We may need to file lawsuits to enforce our intellectual property rights, and we may need to defend against claimed infringement of the rights of others. Any litigation could result in substantial costs to us and divert our resources. Despite our efforts in bringing or defending lawsuits, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property, or offering solutions or services that are directly competitive with ours. In the event of an adverse outcome in any such litigation, we may be required to stop our use of infringing technologies, expend significant resources to develop or acquire non-infringing technologies or obtain licenses to the intellectual property we are found to have infringed. There can be no assurance that we would be successful in such development or acquisition or that necessary licenses would be available on reasonable terms, or at all.

Risks Related to Our Industry, Including Regulation by Governmental Authorities

We operate in a dynamic legal and regulatory environment where changes in law and regulations could adversely impact our business.

        Certain of our service offerings are subject to regulation at the international, federal, state and local levels. Regulations affect our business and can change the marketplace. The adoption and enactment of new regulations, or modifications to existing ones, can have a material adverse effect on our business. Additionally, future legislative, judicial and regulatory agency actions could have an adverse effect on our business.

Our communications service offerings depend on complex compensation arrangements between service providers where federal and state regulatory reform and judicial decisions can have unpredictable results and may make our communications service offerings less viable or potentially unsustainable.

        How service providers compensate each other currently varies based on a variety of factors, including

•

whether a call terminates on a wireline or wireless network;

•

whether the call is local or long distance;

•

whether the call is intrastate, interstate or international; and

•

the classification of IP traffic as either traditional telecommunications or information services traffic.

        Depending on the nature of the traffic and the arrangements between the service providers, compensation may be determined by federal or state rules, contracts entered into between service providers, tariffs or other arrangements.

        Regulatory proceedings and litigation at the state and federal levels concerning the appropriate classification of certain traffic and the appropriate compensation for such traffic are ongoing. We cannot predict the outcome of such proceedings or litigation. Depending on the specific rulings or orders and parties involved, we may be subject to retroactive liability for certain charges or, if the relevant rulings or orders have only a prospective effect, certain services we currently offer may become less profitable or unprofitable.

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The FCC's reforms to payments between regulated service providers may result in reducing our profitability or requiring us to materially change our business practices.

        Although we provide our communications services pursuant to contracts with those service providers who connect directly to us, much of the traffic routed using our service is ultimately originated or terminated by other parties with whom we are connected indirectly, and the rights and obligations of these indirectly connected parties, including the rates they pay for the origination and termination of the traffic they carry, are often governed by regulated tariffs rather than by contracts. Those rates, in turn, have a material effect on the rates that we pay our peering partners to transmit and terminate our traffic.

        On November 18, 2011, the Federal Communications Commission, or FCC, released a Report and Order, or the FCC Order, and Further Notice of Proposed Rulemaking that comprehensively reforms the system under which regulated service providers compensate each other for interstate, intrastate, and local traffic origination and termination services. Historically, regulated service providers charge other service providers for various functions performed in handling voice traffic. The express goal of reforming the system of payments made between regulated service providers is to move the industry away from relying on such payments to recoup costs associated with the provision of service and instead permit regulated service providers to seek to recoup their costs from their own end-user customers. Regulated service providers are free to negotiate alternative arrangements, but the FCC Order establishes default rates in the absence of agreements between regulated service providers.

        The rules adopted by the FCC provide for a multiyear transition to a national uniform "bill-and-keep" framework as the ultimate default end state for all telecommunications traffic that is delivered to local exchange carriers for termination, while originating interstate (and some intrastate) switched access default rates are capped at current levels. Under bill-and-keep, providers do not charge an originating or other carrier for terminating traffic and instead generally seek to recover these costs from their own end-user customers.

        Pursuant to the FCC Order, the default rates for certain services provided under tariffs are lowered for the most common termination functions performed by regulated service providers when handling voice traffic. The transition period depends on the type of regulated service provider. For the largest regulated service providers, known as "price cap" carriers (as well as competitive local exchange carriers, or LECs), that benchmark their access rates to these carriers), the transition plan lowers certain termination rates to bill and keep between July 1, 2012, and July 1, 2017. For smaller regulated service providers that offer service in rural and high cost areas, known as "rate-of-return" carriers (as well as competitive LECs that benchmark access rates to these carriers), the transition to lower termination rates begins on July 1, 2012, but extends for eight years until July 1, 2020. After the transition is complete, service providers will be permitted to seek to recoup certain termination costs directly from their customers and not from tariffed charges imposed on other service providers.

        The transition to bill and keep begins by capping default rates that regulated service providers can charge pursuant to tariffs to other service providers for a variety of functions performed to terminate voice traffic (as noted, some originating switched access rates also are capped at this time). Depending on the particular function performed and the type of regulated service provider, the tariffed rate to terminate traffic steps down until a unified rate for inter- and intrastate voice traffic of $0.0007 is established by July 1, 2016 for the most common termination functions performed by price cap regulated service providers and their competitors when processing voice traffic. Beginning July 1, 2017, these regulated service providers will be permitted to seek to recover the costs associated with the provision of service only from their customers and not other regulated service providers. The rules will also cap the tariffed rate for terminating traffic at $0.0007 by July 1, 2017, for additional tandem switching and transport functions performed by these regulated service providers, when the terminating carrier owns the serving tandem switch. Beginning July 1, 2018, the tandem switching tariffed rate for these regulated service providers changes to zero such that both tandem and end office costs will be

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recoverable only from customers rather than service providers, when the terminating carrier owns the serving tandem switch. For smaller carriers located in rural and high cost areas and their competitors, the steps and tariffed rate caps differ and the transition extends until July 1, 2020.

        The FCC Order also addresses wireless service provider traffic. The FCC Order adopts bill and keep as the default compensation for all CMRS-LEC non-access traffic effective December 29, 2011. CMRS providers will be subject to the transition applicable to price cap carriers in the event that CMRS providers' reciprocal compensation default rates are inconsistent with the reforms adopted in the FCC Order.

        The FCC Order establishes new rules concerning traffic exchanged over PSTN facilities that originates or terminates in Internet Protocol format, referred to as "VoIP-PSTN" traffic. As with traditional and wireless telecommunications traffic, regulated service providers will ultimately be subject to bill and keep when terminating such traffic. But as part of the transition to that end point, the FCC Order adopts a VoIP-PSTN initial transitional framework for compensation between regulated service providers. The FCC Order establishes two default rates for such traffic: toll and local. The rate for terminating intrastate and interstate toll traffic will match the relevant tariffed interstate access rate for traditional non-VoIP toll traffic, and the local rate will match the local ("reciprocal compensation") rate associated with traditional non-VoIP local traffic. Further, the FCC Order allows regulated service providers to tariff charges associated with handling VoIP-PSTN traffic in a manner consistent with the rates established by the FCC Order. The VoIP-PSTN reforms become effective December 29, 2011.

        As noted above, the FCC Order broadly reforms the system of default rates that apply to payments between regulated service providers. While the rates for termination of VoIP-PSTN traffic may initially increase, the FCC Order ultimately may reduce default rates for all types of telecommunications traffic and that may impact the rates we are able to negotiate with our partners, may lower our profit margins, may make certain traffic that we handle less profitable than other traffic, may reduce traffic volumes either globally or for certain types of traffic that we currently handle, may require us to find new business partners, or may require us to materially change our business practices. We cannot predict the full impact of the FCC Order at this time.

        The FCC Order is not yet effective and has been appealed by multiple plaintiffs. It could also take some time for regulated service providers to modify their rates when providing service pursuant to commercial agreements as such providers must invoke change in law clauses in the relevant agreements to implement the new rates. We cannot predict whether the FCC Order will become effective in whole or in part. We cannot predict the impact on our business if the FCC Order does not become effective either in whole or in part.

We may be subject to increased liability for Federal Universal Service Fund contributions.

        We are required to contribute to the Federal Universal Service Fund, or USF, a percentage (which varies quarterly) of certain of our revenue derived from providing retail interstate and international telecommunications and communications services. We are required to report our revenue periodically to enable the Universal Service Administrative Company, which administers the Fund on behalf of the FCC, to determine our contribution requirement. Based on these reports, we pass through our estimated contribution obligation to customers in the form of an assessment. We are also required to obtain and maintain exemption certifications for our service provider customers. The rules governing allocation of our revenue between telecommunications services (which are subject to assessment) and information services (which are not) are complex and in some situations ambiguous. If we are determined to have allocated our revenue incorrectly or otherwise failed to report all required revenue from end-users, we could be subject to liability for underpayment of contributions to the Fund, which would be extremely difficult to recover from customers. If the certifications that some of our customers provide to justify the exemption of their charges from USF assessments are found to be defective and we cannot show we reasonably expected such customers be exempt from the Fund, we may be subject

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to additional USF contribution liabilities. While we may be legally entitled to collect any shortfall USF contribution from our customers, we may not be able to do so and this could have a material adverse impact on our business.

The FCC is actively considering reform of the USF and, depending on the reforms adopted, the ultimate cost of our services to our customers may rise.

        The FCC is actively considering ways to reform the USF in a manner that does not require additional statutory authority. The FCC could adopt a number of different reforms that change the methodology for contributing to the USF. Depending on the reform adopted, this could increase what we are required to contribute to the USF, which could result in increasing the price of our offerings. We cannot predict the impact of this proceeding on our business. Additionally, the U.S. Congress, the FCC, state legislatures and/or state agencies may target, among other things, state USF contribution methodologies, access or settlement charges that are exchanged between service providers, imposing taxes related to Internet communications, imposing tariffs or other regulations based on encryption concerns, or the characteristics and quality of products and services that we may offer. New laws or regulations concerning these or other areas of our business could restrict our growth or increase our cost of doing business.

The outcome of pending regulatory proceedings, litigation or other disputes may subject us to retroactive liability for intercarrier compensation arrangements.

        The regulations and other arrangements that govern compensation between service providers are complex and, depending on the traffic at issue, subject to federal and state jurisdiction, including regulation by the FCC and state public utilities commissions. Application of current intercarrier compensation rules is constantly under review. A number of state commissions are actively considering disputes between service providers that could adversely affect us. Additionally, there is ongoing litigation in the industry that could affect certain components of our indirect peering business, such as the charges our indirect peering partners pay to transport and terminate our traffic. Depending on when and how the FCC, state commissions or other entities with jurisdiction and authority ultimately resolve the intercarrier compensation disputes, or interpret regulatory rulings, we may be subject to retroactive liability for intercarrier compensation charges. Due to this legal uncertainty, we are unable to predict the impact on our business. Moreover, it is possible that we may be subject to retroactive liability for certain traffic. It may be difficult to collect from our customers for such retroactive liability. Should we be subject to retroactive liability and be unable to collect on such liabilities from our customers or third parties, our business may be adversely impacted.

We are subject to federal and state regulation for certain of our communications service offerings and we may be subject to enforcement actions or other adverse proceedings that may have a material adverse impact on our reputation or our future results of operations.

        For certain of our communications services offerings, we are subject to regulation by the FCC and state public utilities commissions. Among other requirements, we must obtain and maintain certificates of authority to offer communications services at the state and federal level and we are subject to reporting requirements. Interstate and intrastate telecommunications services are subject to a wide range of frequently changing state and federal regulations, rules and laws and we cannot ensure that we are always in compliance with all of these requirements at any single point in time. The agencies responsible for the enforcement of these laws, rules and regulations have initiated and may continue to initiate inquiries or actions based on customer complaints or on their own initiative. While we believe our actions and positions are in compliance with the related rules and in accordance with accepted industry practices, we cannot predict with certainty the timing or outcome of these various reviews. We may be subject to fines, penalties, forfeitures or other enforcement actions as well as complaints

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seeking damages that could result in monetary or reputational harm. Any of these outcomes could have material adverse impact on our future results of operations.

The FCC could classify some of our offerings as telecommunications services, which could result in additional federal and state regulatory obligations.

        Federal and state authorities are currently considering the appropriate classification of certain of our offerings. For example, on February 12, 2004, the FCC initiated a notice of proposed rulemaking to consider the appropriate regulatory classification for VoIP and other IP-enabled services. On November 9, 2004, the FCC ruled that Vonage DigitalVoice and similar nomadic VoIP services are not subject to state certification, tariffing and other similar common-carrier service provider regulations. This ruling was appealed by several states. On March 21, 2007, the United States Court of Appeals for the Eighth Circuit affirmed the FCC's declaratory ruling.

        The FCC has yet to classify IP-enabled services, particularly interconnected VoIP services, as either telecommunications services or information services. If the FCC classifies certain or all of our IP-enabled service offerings as telecommunications services, we may be subject to additional regulatory obligations at both the federal and state levels and less favorable rates associated with such traffic. It is possible that certain states may classify IP-enabled services like those that we offer as telecommunications services. This may adversely impact our business by increasing the cost of offering such services and the rates we pay to terminate such traffic.

The FCC and certain state regulatory agencies must grant approval before we engage in certain transactions or other activities which may result in delay or increase our transaction costs.

        Certain transactions and agreements, including among other things mergers, acquisitions of other regulated companies, and asset sales, require regulatory approval either at the federal or state level, or sometimes from both federal and state regulatory agencies. Delays in receiving required regulatory approvals (including approvals relating to stock issuance, acquisitions, financing activities, or transactions resulting in transfers of control) and completing interconnection agreements with other carriers may have a material adverse effect on our business.

Internet service providers might restrict our ability to provide services to our customers.

        Some of our offerings depend on the ability of our customers to access our services through broadband Internet connections and certain of our products require significant bandwidth to work effectively. Broadband access to the Internet is provided by companies that have increasing market power in the broadband Internet access marketplace, including incumbent telephone companies, cable companies and mobile communications companies. Some of these providers have stated that they may take measures that could degrade, disrupt or increase the cost of user access to certain of our products by restricting or prohibiting the use of their infrastructure to support or facilitate our offerings, or by charging increased fees to us or our users to provide our offerings, while others, including some of the largest providers of broadband Internet access services, have committed to not engaging in such behavior. The ability of the FCC to regulate broadband Internet access services has been called into question by a recent ruling of the United States Court of Appeals for the District of Columbia.

        On December 23, 2010, the FCC released an order that would impose non-discrimination rules on providers of fixed and wireless broadband Internet access services, with wireless providers subject to a more limited set of rules. While the substance of the rules and the process used by the FCC in adopting the rules differs from the FCC's previous Internet policy principles that were called into question by the United States Court of Appeals for the District of Columbia, questions remain concerning the FCC's legal authority to adopt rules governing the conduct of fixed and wireless broadband Internet access providers. The FCC's rules became effective on November 20, 2011. Appeals were filed in several different federal courts of appeal. The federal courts issued an order that all

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appeals would be heard in the United States Court of Appeals for the District of Columbia. Subsequently, appeals filed in other circuits were transferred to the U.S. Court of Appeals for the District of Columbia and are pending consolidation. Additionally, one party filed a Petition for Reconsideration with the FCC. We cannot predict whether and to what extent these or any other appeals may succeed, whether the appeals will be allowed to move forward in advance of the FCC's consideration of the Petition for Reconsideration, what the FCC may order with respect to the Petition, nor can we predict what impact the rules or lack thereof will have on our business at this time. While we believe that substantial interference with access to our products and services is unlikely, such broadband Internet access provider interference has occurred in very limited circumstances in the U.S., and could result in a loss of existing users and increased costs, and could impair our ability to attract new users, thereby harming our revenue and growth.

Our ability to offer services outside the U.S. is subject to the local regulatory environment, which is different than the U.S. and our growth may be impeded.

        As we expand into new markets outside of the United States, the regulatory structure of foreign markets differs in significant ways from the United States communications marketplace. We will have to adapt our business strategies to reflect the regulatory realities of these marketplaces which could impede our growth.

If our emergency and E911 calling services do not function properly, we may be exposed to significant liability from our users.

        Certain of our IP telephony offerings are subject to FCC rules governing the delivery of emergency calling services. Similar to other providers of similar IP telephony services, our emergency calling and E911 service are different from those associated with traditional telecommunications services. These differences may lead to an inability to make and complete calls that would not occur for users of traditional telephony services. For example, to provide the emergency calling services required by the FCC's rules to our IP telephony consumers, we must use components of both the wireline and wireless infrastructure in unique ways that can result in failed connections and calls. Access to emergency services call centers provided over the Internet may be adversely affected by power outages and network congestion that may not occur for users of traditional telephony services. Emergency call centers may not be equipped with appropriate hardware or software to accurately process and respond to emergency calls initiated by consumers of our IP telephony services. Users that use our IP telephony services nomadically are required to manually update their location information, and failure to do so may result in dispatching of assistance to the wrong location. As a result, we could be subject to enforcement action by the FCC or other entities—possibly exposing us to significant monetary penalties, cease and desist orders, civil liability and other adverse consequences. The FCC's rules also impose other obligations on us, such as properly recording our customers' registered locations. Failure to comply with these requirements may result in FCC enforcement action, potential monetary penalties and other adverse consequences.

The FCC has an open proceeding considering the imposition of additional E911 obligations on providers of Internet protocol telephony.

        The FCC is considering modifying the emergency calling rules applicable to providers of IP telephony services. In June 2007, the FCC released a Notice of Proposed Rulemaking to consider whether it should impose additional obligations on interconnected VoIP providers. Among other things, the FCC is considering requiring that certain providers of IP telephony—including some of our offerings—implement a solution to automatically determine the location of their customers for purposes of E911 rather than allowing customers to manually update their existing location. The FCC notice includes a tentative conclusion that certain IP telephony offerings that allow their service to be

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used in more than one location—including some of our offerings—be required to meet the same customer location accuracy standards applicable to providers of mobile telecommunications services.

        In September 2010, the FCC released a Notice of Inquiry again requesting comment on auto-location obligations and standards for certain IP telephony offerings which would include some of our offerings. The Notice of Inquiry sought comment on whether the FCC's rules concerning the delivery of emergency services should be extended to non-interconnected VoIP services as well as to mobile IP telephony applications used on smartphones, computers and other devices. In July 2011, the FCC released a Second Further Notice of Proposed Rulemaking, seeking comment on various issues including (i) whether to apply the FCC's 911 rules to "outbound-only" interconnected VoIP services (i.e., services that support outbound calls to the PSTN but not inbound voice calling from the PSTN); (ii) whether to develop a framework for ensuring that all covered VoIP providers can provide automatic location information for VoIP 911 calls; and (iii) whether to revise the FCC's definition of interconnected VoIP service to require an "Internet connection" rather than a broadband connection, and to "define connectivity in terms of the ability to terminate calls to all or substantially all United States E.164 telephone numbers." As part of the same release, the FCC included a Notice of Proposed Rulemaking that sought comment on whether any amendment of the definition of interconnected VoIP service should be limited to 911 purposes, or should apply more broadly to other contexts. In September 2011, the FCC released a Notice of Proposed Rulemaking seeking comment on what role the FCC should play to facilitate the implementation of "next generation" 911 capabilities, including, for example, the short-term implementation of text-to-911 solutions; the prioritization of 911 traffic, especially during times of natural and manmade disasters; long-term implementation of IP-based alternatives for delivering text, photos, videos, and other data to 911; and the path towards integration and standardization of IP-based text-to-911. We are currently unable to predict the outcome of these proceedings and the impact on our business.

States are attempting to regulate certain forms of IP telephony which could result in making such offerings less competitive with traditional offerings of telecommunications services and states are imposing additional surcharges and fees on providers of IP telephony services.

        We offer certain services through IP telephony. IP telephony is subject to less regulation than traditional telecommunications services. IP telephony has grown substantially over the last few years leading to increased scrutiny by federal and state legislatures and regulatory agencies. Historically, the FCC has preempted states from imposing entry, tariffing and other traditional common carrier requirements on nomadic IP telephony offerings and instead subjects such offerings to discrete regulatory obligations. But the FCC has recently allowed states to impose certain state-related funding obligations on providers of IP telephony. Additionally, a number of states are aggressively trying to exert jurisdiction over certain forms of IP telephony, including some of our offerings, making the legal status of our services uncertain and subject to change as a result of future regulatory action, judicial decisions or legislation in any of the jurisdictions in which we operate. Increased regulation at the state level could increase the costs associated with our service offerings.

        Our retail offerings of both telecommunications and IP telephony require us to collect and remit various federal and state surcharges. We pass these regulatory fees along to our customers consistent with federal and state law. With respect to our IP telephony offering, an increasing number of states are considering the imposition of additional state-based surcharges and fees. We would likely pass such surcharges and fees along to our customers resulting in increasing the overall bill for our customers. The resulting increase in cost associated with our service may make our services less competitive with traditional providers of telecommunications services and may also put us at a competitive disadvantage to providers of IP telephony that choose not to comply with these obligations.

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There may be risks associated with our ability to comply with the requirements of federal and other regulations related to Customer Proprietary Network Information.

        The FCC's existing rules provide that service providers may not use customer proprietary network information, or CPNI, without customer approval except under specific circumstances, and must comply with detailed customer approval processes when using CPNI outside of such circumstances. The FCC's CPNI rules also impose, among other obligations, data security requirements on service providers and interconnected VoIP providers like us.

        At the present time, we do not utilize our customer's CPNI in a manner which would require us to obtain consent from our customers but, in the event that we do in the future, we will be required to adhere to specific CPNI rules targeted at marketing such services. Our failure to achieve compliance with any future CPNI orders, rules, filings or standards, or any enforcement action initiated by the FCC, other federal agencies, state public utilities commissions, or other state entities, against us could have a material adverse effect on our business, financial condition or operating results.

User concerns about our use and protection of personal data and the privacy of their communications and data protection breaches could harm our brand, reduce demand for our products and expose us to government proceedings and actions. Failure or perceived failure by us to comply with our privacy policy or legal or regulatory requirements in one or multiple jurisdictions could result in proceedings, actions or penalties against us.

        The effectiveness of our solutions relies on our customers' storage and use of data concerning their customers, including financial, personally identifying and other sensitive data. Our customers' collection and use of data for consumer profiling may raise privacy and security concerns and negatively impact the demand for our solutions. We have implemented various features intended to enable our customers to better comply with privacy and security requirements, such as opt-out messaging and checking, the use of anonymous identifiers for sensitive data, and restricted data access, but these security measures may not be effective against all potential privacy concerns and security threats. If a breach of customer data security were to occur, our solutions may be perceived as less desirable, which would negatively affect our business and operating results.

        In addition, governments in some jurisdictions have enacted or are considering enacting consumer data privacy legislation, including laws and regulations applying to the solicitation, collection, processing and use of consumer data. This legislation could reduce the demand for our solutions if we fail to design or enhance our solutions to enable our customers to comply with the privacy and security measures required by the legislation. Moreover, we may be exposed to liability under existing or new consumer data privacy legislation.

Our business is subject to certain risks associated with our ability to comply with the Communications Assistance for Law Enforcement Act.

        When we provide certain services we are subject to the Communications Assistance for Law Enforcement Act, or CALEA. CALEA requires us to have the capability to provide to law enforcement agencies certain information about traffic that our customers originate. This requires, among other things, that we have the capability to provide information concerning the origination and destination of communications traffic as well as the ability to provide real-time surveillance. CALEA further requires that we have the capability to deliver such information in a specific format and to a particular destination identified by law enforcement. The FCC's rules allow us to use third parties to comply with these obligations but we are ultimately responsible for compliance. We may be unable to comply with CALEA in all instances, subjecting us to fines, penalties and other enforcement actions.

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The FCC may regulate transit service offerings and may subject transit to a regulated framework which may reduce our profitability or require us to substantially change our business practices.

        The FCC Order presents numerous questions and proposals regarding a wide range of issues. The process associated with the FCC Order is just beginning and we cannot predict how long it will take for the FCC to issue an order concerning the issues raised, nor can we predict what specific issues any order adopted by the FCC will address.

        Among many other issues, the FCC is seeking comment on whether it should regulate transit traffic, which is the exchange of non-access traffic routed through an intermediary carrier, typically through commercially-negotiated agreements that may be subject to state oversight and arbitration. Additionally, since transit services include the same functionalities as tandem switching and transport services subject to a default bill-and-keep methodology, the FCC is seeking comment on whether the rates charged for transit services should be subject to a different approach from what applies to tandem switching and transport. Transport service is a tariffed exchange access service. At this time, we cannot predict whether the FCC will regulate transit services, will subject such services to bill-and-keep, and if it does subject services to bill-and-keep, whether there would be a transition period and how long the transition would last. We cannot predict the impact that any of these potential reforms to transit services would have on our business at this time.

The FCC may transition all rate elements to a "bill-and-keep" framework which may reduce our profitability or require us to substantially change our business practices.

        As part of the FCC Order, the FCC is considering additional reforms that would impact additional rate elements. Certain rate elements (such as originating switched access, dedicated transport and tandem switching and tandem transport for some carriers) were not included in the transition to bill and keep by the FCC Order, but may be addressed in a future FCC order. The FCC Order states that the FCC will transition to a bill-and-keep framework for all of these rate elements. Under a comprehensive bill-and-keep approach, providers would not charge another carrier for originating or terminating traffic and instead generally would seek to recover such costs of origination and termination from their own end-user customers. At this time, we cannot predict the timing of any future FCC action, the specific reforms that may be adopted by the FCC, whether there will be a transition period for such rate elements and, if so, how long such a transition would last, nor the impact on our business at this time.

The FCC may adopt rules governing "network edges" which may impact certain lines of business.

        The FCC Order seeks comment on a number of additional reforms including whether the FCC should adopt competitively neutral locations as "network edges," the point where bill-and-keep applies. Should the FCC require call delivery to competitively neutral locations rather than incumbent providers' network points, the market may transition to direct interconnection at such neutral locations, reducing demand for the services we offer in this market which may decrease our overall profitability or require us to substantially change our business practices. At this time, we cannot predict what specific actions, if any, the FCC may take, nor can we predict the timing of any FCC action with respect to competitively neutral locations for network edges.

The FCC may subject IP-to-IP interconnection to statutory provisions that impose specific obligations on regulated service providers to engage in IP-to-IP interconnection as well as adopt other measures that may promote direct IP-to-IP interconnection. If the market transitions to direct IP-to-IP interconnection, the demand for our services may decrease, negatively impacting our profitability, and we may have to substantially change our business practices.

        Among many other issues, the FCC Order seeks comment on issues relating to measures the FCC can take to facilitate IP-to-IP interconnection. Specifically, for example, the FCC seeks comment on

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what statutory provisions IP-to-IP interconnection should be based and whether there are additional measures the FCC should adopt to encourage IP-to-IP interconnection. Should the FCC require IP-to-IP interconnection under stringent regulatory requirements and/or adopt other measures to encourage IP-to-IP interconnection, the market may transition to direct IP-to-IP interconnection, reducing demand for the services we offer in this market which may decrease our overall profitability or require us to substantially change our business practices. At this time, we cannot predict what specific actions, if any, the FCC may take, nor can we predict the timing of any FCC action with respect to IP-to-IP interconnection.

The FCC is considering adopting call signaling rules for one-way Voice over Internet Protocol Services that may increase our costs for handling and offering such services which may result in reducing our profit.

        The FCC Order seeks additional comment on whether the FCC should adopt call signaling rules for one-way Voice over Internet Protocol ("VoIP") traffic. Currently, one-way VoIP traffic is subject to limited regulation at the federal and state level and none of the other call signaling rules adopted in the FCC Order apply to such traffic. It is unclear from the FCC Order what specific rules the FCC may adopt, what parties would be responsible for providing call signaling information, how such rules would be implemented, and how unique issues related to such traffic, like the absence of a telephone number, would be addressed by such rules. We cannot predict what rules the FCC may ultimately adopt, nor when the FCC may adopt such rules. Depending on the rules adopted, the costs associated with handling such traffic and offering such services may increase, reducing our profitability.

Risks Related to Our Common Stock and this Offering

Being a public company will increase the administrative costs of operating our business, including maintaining and improving our financial controls and complying with rules and regulations, and may be a significant burden on our management team, thus requiring considerable expenditures of our resources.

        As a public company, we will incur additional legal, accounting and other expenses that we do not incur as a private company. The Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the rules of the Nasdaq Global Market, will apply to us as a public company. Compliance with these rules and regulations will necessitate significant increases in our legal and financial budgets and may also strain our personnel, systems and resources. The Exchange Act requires, among other things, filing of annual, quarterly and current reports with respect to our business and financial results and condition. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Satisfying these requirements involves a commitment of significant resources and management oversight. As a result of management's efforts to comply with such requirements, other important business concerns may receive insufficient attention, which could have a material adverse effect on our business, financial condition and results of operations. Failure to meet certain of these regulatory requirements may also cause us to be delisted from the Nasdaq Global Market. In addition, we currently have a relatively small finance staff and may have difficulty recruiting additional legal, accounting and financial staff with appropriate public company experience and technical accounting knowledge. The hiring of such personnel will also increase our operating expenses in future periods.

        We also expect these rules and regulations to make it more difficult and 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 maintain coverage. If we are unable to maintain adequate director and officer insurance, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.

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If we are unable to successfully remediate material weaknesses in our internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected.

        In connection with the audit of our financial statements for the year ended December 31, 2010, our management and independent registered public accounting firm identified two material weaknesses in our internal control over financial reporting and in connection with the review of our financial statements for the six months ended June 30, 2011, our management and independent registered public accounting firm identified an additional material weakness in our internal control over financial reporting. A material weakness is a control deficiency, or a combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Our management and independent registered public accounting firm did not perform an evaluation of our internal control over financial reporting as of December 31, 2010 in accordance with the provisions of the Sarbanes-Oxley Act. Had we and our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional control deficiencies may have been identified by management or our independent registered public accounting firm, and those control deficiencies could have also represented one or more material weaknesses.

        Our management and independent registered public accounting firm identified material weaknesses related to (i) a lack of adequate control over the accounting for complex financial instruments, including accounting for certain stock warrants and convertible instruments, (ii) a lack of adequate control to identify, evaluate, monitor and adjust our accrued liability for peering partner disputes, and (iii) a lack of adequate control to record non-plan stock option grants in the appropriate period. These control deficiencies resulted in a more than remote likelihood that a material misstatement of our annual and interim financial statements would not be prevented or detected. As a result, audit adjustments to our financial statements were identified during the course of the audit. In an effort to remediate these material weaknesses, with respect to complex financial instruments, we have retained consultants to assist us in properly accounting for complex financial instruments and have also developed in-house knowledge and expertise related to the accounting literature surrounding complex financial instruments. With respect to peering partner disputes, we have developed, documented and initiated enhanced procedures over our peering partner disputes to improve our ability to make reasonable estimates with respect to the amounts for which such disputes will ultimately be settled. With respect to non-plan stock option grants, we have outsourced our stock administration function to a third party and we have implemented additional procedures to review non-plan grants to correctly assess the grant date.

        We cannot assure you that these measures will significantly improve or remediate the material weakness described above. We also cannot assure you that we have identified all or that we will not in the future have additional material weaknesses. Accordingly, material weaknesses may still exist when we report on the effectiveness of our internal control over financial reporting for purposes of our attestation required by reporting requirements under the Exchange Act or Section 404 of the Sarbanes-Oxley Act after this offering. The standards required for a Section 404 assessment under the Sarbanes-Oxley Act will require us to implement additional corporate governance practices and adhere to a variety of reporting requirements and complex accounting rules. These stringent standards require that our audit committee be advised and regularly updated on management's review of internal controls. Our management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that will be applicable to us as a public company. If we fail to staff our accounting and finance function adequately or maintain internal controls adequate to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable to report our financial results accurately or in a timely manner and our business and stock price may suffer.

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We may need additional capital in the future and such capital may be limited or unavailable. Failure to raise capital when needed could prevent us from growing in accordance with our plans.

        We may require more capital in the future from equity or debt financings to fund our operations, finance investments in equipment and infrastructure, acquire complementary businesses and technologies, and respond to competitive pressures and potential strategic opportunities. We believe that our existing working capital, together with the proceeds of this offering, will be sufficient to fund our working capital requirements, capital expenditures and operations for at least the next 12 months. However, the assumptions on which this assessment has been made may prove to be wrong, and it is possible that we could expend available financial resources sooner than we currently expect. Likewise, in the event that this offering is delayed, we will likely seek additional equity or debt financing. If we are required to raise additional funds through further issuances of equity or other securities convertible into equity, our existing stockholders could suffer significant dilution, and any new shares we issue could have rights, preferences or privileges senior to those of the holders of our common stock, including the shares of common stock sold in this offering. The additional capital we may seek may not be available or, if available, may not be available on favorable terms. In addition, our existing debt instruments limit our ability to incur additional indebtedness under certain circumstances. If we are unable to obtain capital on favorable terms, or if we are unable to obtain capital at all, we may have to reduce our operations or forego opportunities, and this may have a material adverse effect on our business, financial condition and results of operations.

Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.

        We will be subject to rules adopted by the Securities and Exchange Commission, or SEC, pursuant to Section 404 of the Sarbanes-Oxley Act, which require us to include in our Annual Report on Form 10-K our report on, and assessment of the effectiveness of, our internal controls over financial reporting beginning with our year ending December 31, 2012. Our independent auditors will also be required to attest to and report on the effectiveness of our internal controls over financial reporting. If we fail to achieve and maintain the adequacy of our internal controls, there is a risk that we will not comply with all of the requirements imposed by Section 404. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our financial statements and could result in investigations or sanctions by the SEC, our stock exchange or other regulatory authorities or in stockholder litigation. Any of these factors ultimately could harm our business and could negatively impact the market price of our securities. Ineffective control over financial reporting could also cause investors to lose confidence in our reported financial information, which could adversely affect the trading price of our common stock.

        Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. However, our management, including our chief financial officer and chief executive officer, does not expect that our disclosure controls and procedures can prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

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There is no existing market for our common stock, and an active, liquid and orderly market for our common stock may not develop.

        Currently, there is no public market for our common stock. Investor interest in us may not lead to the development of an active trading market. The initial public offering price for the shares of our common stock will be negotiated between us and representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. You may not be able to resell our common stock at or above the initial public offering price.

The trading value of our common stock may be volatile, and you might not be able to sell your shares at or above the initial public offering price.

        Though our common stock has no prior trading history, the trading prices of technology company securities in general have been highly volatile. Accordingly, the trading price of our common stock is likely to be subject to wide fluctuations, and you may not be able to resell our common stock at or above the initial public offering price. Factors, in addition to those outlined elsewhere in this prospectus, that may affect the trading price of our common stock include:

•

actual or anticipated variations in our operating results;

•

changes in recommendations by any securities analysts that elect to follow our common stock;

•

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

•

the loss of, or significant decrease in use of our services by, a key customer;

•

market conditions in industry categories that we serve and the economy as a whole;

•

the loss of key personnel;

•

regulatory changes affecting the delivery or overall value of our services;

•

lawsuits filed against us;

•

price and volume fluctuations in the overall stock market; and

•

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

Future sales of shares by existing stockholders could cause our stock price to decline.

        Attempts by existing stockholders to sell substantial amounts of our common stock in the public market after the contractual lock-up and other legal restrictions on resale discussed in this prospectus lapse could cause the trading price of our common stock to decline significantly. Based on shares outstanding as of September 30, 2011, upon completion of this offering, we will have outstanding             shares of common stock, assuming no exercise of the underwriters' over-allotment option. Of these shares, only shares of common stock sold in this offering to investors other than those subject to a 180-day contractual lock-up will be freely tradable, without restriction, in the public market. J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. may, in their sole discretion, permit our officers, directors, employees and current stockholders who are subject to a 180-day contractual lock-up to sell shares prior to the expiration of the lock-up agreements. The lock-up is subject to extension under certain circumstances. For additional information, see "Underwriting."

        After the lock-up agreements pertaining to this offering expire, substantially all of our shares will be eligible for sale in the public market, including shares held by directors, executive officers and other affiliates, which will be subject to volume limitations under Rule 144 under the Securities Act. In addition, shares subject to outstanding options and reserved for future issuance under our stock option

32

plan will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements, the lock-up agreements and Rules 144 and 701 under the Securities Act. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline. See "Shares Eligible for Future Sale" for more information regarding shares of our common stock that existing stockholders may sell after this offering.

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

        The research and reports that industry or financial analysts publish about us or our business will likely have an effect on the trading price of our common stock. If an industry analyst decides not to cover our company, or if an industry analyst decides to cease covering our company at some point in the future, we could lose visibility in the market, which in turn could cause our stock price to decline. If an industry analyst downgrades our stock, our stock price would likely decline rapidly in response.

The concentration of our capital stock ownership with insiders upon the completion of this offering will likely limit your ability to influence corporate matters including the ability to influence the outcome of director elections and other matters requiring stockholder approval.

        We anticipate that our executive officers, directors, current five percent or greater stockholders and affiliated entities will together beneficially own approximately        percent of our common stock outstanding after this offering, assuming full exercise of the underwriters' over-allotment option. As a result, these stockholders, acting together, will have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. Corporate action might be taken even if other stockholders, including those who purchase shares in this offering, oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.

        In addition, we have entered into a Stockholder Agreement with VantagePoint Venture Partners 2006(Q), L.P., or VantagePoint, and Kennet II L.P., or KII, pursuant to which, subject to maintaining specified stock ownership levels, they each have a right to designate a director and to approve certain specified transactions unless such transactions are approved by our stockholders. See "Description of Capital Stock—Stockholder Agreement" for additional information regarding the Stockholder Agreement. This Stockholder Agreement could prevent or delay a transaction that is otherwise deemed beneficial by a majority of our Board of Directors.

Our management will have broad discretion over the use of the proceeds from this offering and might not apply the proceeds of this offering in ways that increase the value of your investment.

        Our management will have broad discretion to use the net proceeds from this offering. We expect to use the net proceeds from this offering for general corporate purposes, including working capital and the repayment of indebtedness. We may also use net proceeds for other purposes, including possible investments in, or acquisitions of, complementary products or technologies, although we have no specific plans at this time to do so. We may fail to use these funds effectively to yield a significant return, or any return, on any investment of these net proceeds.

You will incur immediate and substantial dilution and may experience further dilution.

        The initial public offering price of our common stock is substantially higher than $0.28, the pro forma net tangible book value per share of our common stock as of September 30, 2011, calculated on a pro forma basis for this offering. Therefore, if you purchase our common stock in this offering, you will incur an immediate dilution of $            in net tangible book value per share from the price you

33

paid, based on the initial offering price of $            per share. The exercise of options to purchase shares of our common stock outstanding as of September 30, 2011 at a weighted average exercise price of $1.65 per share will result in further dilution.

Provisions of our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, as a result, depress the trading price of our common stock.

        Our certificate of incorporation and bylaws contain provisions that could discourage, delay or prevent a change of control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions:

•

establish a classified board of directors so that not all members of our board are elected at one time;

•

require super-majority voting to amend some provisions in our certificate of incorporation and bylaws;

•

authorize the issuance of "blank check" preferred stock that our board could issue to increase the number of outstanding shares and to discourage a takeover attempt;

•

limit the ability of our stockholders to call special meetings of stockholders;

•

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 adopt, alter or repeal our bylaws; and

•

establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings.

        These anti-takeover defenses could discourage, delay or prevent a transaction involving a change of control of our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take corporate actions other than those you desire.

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 development 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 common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

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FORWARD-LOOKING STATEMENTS

        This prospectus includes forward-looking statements, including statements that involve expectations, plans or intentions (such as those relating to future business or financial results, new features, products or services, or management strategies). You can identify these forward-looking statements by words such as "may," "will," "would," "should," "could," "expect," "anticipate," "believe," "estimate," "intend," "plan" and other similar expressions. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in these forward-looking statements. These risks and uncertainties include, among others, those described under "Risk Factors" and elsewhere in this prospectus, including in our financial statements and related notes appearing in this prospectus, and the following:

•

our ability to maintain or improve our growth rate, and fluctuations in our financial performance;

•

intense competition from legacy and emerging communications service providers, including traditional telecommunications carriers and other providers of specialized communications services;

•

availability and performance of third parties and third-party facilities, equipment and services;

•

our ability to protect our intellectual property, technology and brand;

•

regulation of our business and the risk that compliance with regulatory requirements may be costly and may require that we change the services we offer, the price for our services or the way we do business in particular states or other regions;

•

the growth and availability of broadband Internet access;

•

our ability to retain key personnel;

•

risks associated with acquisitions and other strategic transactions;

•

our ability to expand our service offerings; and

•

the costs associated with being an independent public company and our ability to comply with the internal control and reporting obligations of public companies.

We do not intend, and undertake no obligation, to update any of our forward-looking statements to reflect actual results, changes in circumstances, assumptions or beliefs, or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

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USE OF PROCEEDS

        We estimate that the net proceeds from the sale of shares of our common stock that we are selling in this offering will be $             million, or $             million if the underwriters' over-allotment option is exercised in full, based on an assumed initial public offering price of $            per share, the midpoint of the estimated price range shown on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders.

        A $1.00 increase or decrease in the assumed initial public offering price of $            per share would increase or decrease the net proceeds to us from the offering by approximately $             million, assuming the number of shares offered by us remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of one million shares in the number of shares of common stock offered by us would increase or decrease the net proceeds to us from this offering by approximately $             million, assuming the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        The principal purposes of this offering are to obtain additional capital, to create a public market for our common stock and to facilitate our future access to the public equity markets.

        We currently intend to use approximately $25.3 million of the net proceeds from this offering to repay our loans outstanding under our existing equipment purchase facilities and any accrued but unpaid interest thereon and other related fees, including approximately $1.1 million for repayment of our loans from Atel Ventures which are due in May and September of 2012 and bear interest at 15 percent; approximately $1.1 million for repayment of our loans from Compass Horizon Funding LLC which are due in April, June and October of 2012 and bear interest at 13 percent; approximately $2.5 million for repayment of our loans from Vogen Funding, L.P., which are due in installments until November 2013 and bear interest at rates between 10 percent and 13.75 percent; approximately $8.4 million for repayment of our equipment loans from Hercules Corporation II, L.P. and Comerica Bank which are due May 1, 2013 and bear interest at a rate of prime plus 7 percent and $5.5 million for repayment of our other obligations to Hercules Corporation II, L.P. and Comerica Bank which are due May 5, 2012 and bear interest at a rate of prime plus 2.05 percent; and approximately $6.7 million for repayment of our equipment loans from East West Bank which are due in installments through October 2014 and bear interest at a rate of prime plus 1 percent. We currently intend to use the remainder of the net proceeds received by us from this offering for working capital and general corporate purposes. We may also use a portion of our net proceeds to acquire and invest in complementary products, technologies or businesses; however, we currently have no agreements or commitments to complete any such transaction and are not involved in negotiations to do so.

        We cannot specify with certainty the particular uses for the net proceeds to be received by us from this offering. Accordingly, our management team will have broad discretion in using the net proceeds to be received by us from this offering.

        Pending the use of proceeds from this offering as described above, we plan to invest the net proceeds in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

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 determination to pay dividends in the future will be at the discretion of our board of directors and will be dependent on a number of factors, including our earnings, capital requirements, financial condition, future prospects and other factors that our board of directors deems relevant. Additionally, under the terms of our Loan and Security Agreement dated as of May 5, 2010 by and between us and Hercules Technology II, L.P., and Comerica Bank and our Loan and Security Agreement dated as of May 16, 2011 by and between us and East West Bank, we must obtain written consent from the lenders prior to paying any cash dividends.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2011, as follows:

•

on an actual basis;

•

on a pro forma basis after giving effect to the automatic conversion of all outstanding shares of our convertible preferred stock into 21,569,923 shares of common stock, assuming the conversion immediately upon the completion of this offering, and the resulting reclassification of the convertible preferred stock warrant liability to additional paid-in capital; and

•

on a pro forma as adjusted basis after giving effect to the automatic conversion of all outstanding shares of our convertible preferred stock into 21,569,923 shares of common stock assuming the conversion immediately upon the completion of this offering, the resulting reclassification of the convertible preferred stock warrant liability to additional paid-in capital, and our receipt of the net proceeds from the sale of            shares of common stock offered by us in this offering, at an assumed initial public offering price of $            per share, the midpoint of the estimated price range set forth on the cover page of the prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        You should read this table in conjunction with the sections titled "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes included elsewhere in this prospectus.

				As of September 30, 2011 (unaudited)
				Actual			Pro Forma			Pro Forma as Adjusted
				(in thousands, except share and per share data)
Cash and cash equivalents				$	5,093		$	5,093		$
Total indebtedness(1)				$	26,074		$	26,074
Warrant liabilities					7,996			1,617
	Convertible preferred stock, $0.0001 par value per share: 44,760,592 shares authorized, 21,569,923 shares issued and outstanding actual; no shares authorized, issued and outstanding pro forma and pro forma as adjusted (unaudited)				40,386			—			—
Stockholders' equity (deficit):
	Common stock, $0.0001 par value per share: 80,000,000 shares authorized, 5,272,321 shares issued and outstanding actual; 80,000,000 shares authorized, 26,842,244 shares issued and outstanding pro forma (unaudited);            shares issued and outstanding pro forma as adjusted (unaudited)				1			3
	Additional paid-in capital				9,813			56,576
	Accumulated deficit				(46,253	)		(46,253	)
		Total stockholders' equity (deficit)			(36,439	)		10,326
			Total capitalization	$	38,017		$	38,017		$

(1)

Total indebtedness includes $20.1 million in equipment financing obligations, $5.5 million of obligations under our revolving accounts receivable loan facility and $0.4 million payable under our capital lease obligation (see Notes 4 and 10 to our audited financial statements).

37

        Each $1.00 increase (decrease) in the assumed initial public offering price of $            per share, the midpoint of the estimated price range set forth on the cover page of the prospectus, would increase (decrease) the amount of pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders' equity, total capitalization and net proceeds we receive from this offering by approximately $             million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses. Similarly, each increase (decrease) of one million shares in the number of shares of common stock offered by us would increase (decrease) cash and cash equivalents, additional paid-in capital, total stockholders' equity, total capitalization and net proceeds we receive from this offering by approximately $             million, assuming the assumed initial public offering price remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        If the underwriters' over-allotment option is exercised in full, pro forma as adjusted cash and cash equivalents, common stock and additional paid-in capital, stockholders' equity (deficit) and shares issued and outstanding as of September 30, 2011 would be $             million, $             million, $             million and            , respectively.

        The number of shares of common stock issued and outstanding actual, pro forma, and pro forma as adjusted in the table above excludes the following shares:

•

7,659,282 shares of common stock issuable upon the exercise of options outstanding, at a weighted average exercise price of $1.65;

•

408,196 shares of common stock issuable upon the exercise of outstanding warrants to purchase common stock, at a weighted average exercise price of $1.57 per share; and

•

649,407 shares of common stock, on an as-converted basis, issuable upon the exercise of outstanding warrants to purchase convertible preferred stock assuming the conversion immediately upon the completion of this offering, at a weighted average exercise price of $1.73 per share.

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DILUTION

        If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the assumed initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering. Net tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma as adjusted net tangible book value per share of common stock immediately after completion of this offering.

        Net tangible book value per share is determined by dividing our total tangible assets less our total liabilities by the number of shares of common stock outstanding. Our historical net tangible book value as of September 30, 2011, was $1.0 million, or $0.20 per share. Our pro forma net tangible book value as of September 30, 2011 was $7.4 million or $0.28 per share, based on the total number of shares of our common stock outstanding as of September 30, 2011, after giving effect to the conversion of all outstanding shares of our convertible preferred stock into common stock assuming the conversion immediately upon the completion of this offering and the resulting reclassification of the convertible preferred stock warrant liability to additional paid-in capital.

        After giving effect to our sale of shares of common stock in this offering at the assumed initial public offering price of $            per share, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value as of September 30, 2011 would have been $             million, or $            per share. This represents an immediate increase in net tangible book value of $            per share to existing stockholders and an immediate dilution in net tangible book value of $            per share to purchasers of common stock in this offering, as illustrated in the following table:

Assumed initial public offering price per share			$
	Pro forma net tangible book value (deficit) per share as of September 30, 2011	$
	Increase in pro forma net tangible book value per share attributable to new investors
Pro forma as adjusted net tangible book value per share after this offering
Dilution per share to investors in this offering			$

        A $1.00 increase (decrease) in the assumed initial public offering price of $            per share, which is the midpoint of the estimated price range listed on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value per share by $            , assuming the number of shares offered by us remains the same as set forth on the cover page of this prospectus and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        If the underwriters' over-allotment option to purchase additional shares from us is exercised in full, the pro forma as adjusted net tangible book value per share after this offering would be $            per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $            per share and the dilution to new investors purchasing shares in this offering would be $            per share.

        The following table presents on a pro forma as adjusted basis as of September 30, 2011, after giving effect to the conversion of all outstanding shares of convertible preferred stock into common stock assuming the conversion immediately upon the closing of this offering, the differences between the existing stockholders and the purchasers of shares in this offering with respect to the number of shares purchased from us, the total consideration paid, which includes net proceeds received from the issuance of common and convertible preferred stock, cash received from the exercise of stock options

39

and the value of any stock issued for services and the average price paid per share (in thousands, except per share amounts and percentages):

		Shares Purchased					Total Consideration
											Average Price Per Share
		Number		Percent			Amount	Percent
Existing stockholders			26,842,244			%	$			%	$
New investors in this offering
	Totals				100.0	%	$		100.0	%

        A $1.00 increase (decrease) in the assumed initial public offering price of $            per share, which is the midpoint of the range listed on the cover page of this prospectus, would increase (decrease) total consideration paid by new investors by $            , total consideration paid by all stockholders by $            and the average price per share paid by all stockholders by $            , in each case assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same, and without deducting the estimated underwriting discounts and commissions and estimated offering payable by us. Similarly, each increase or decrease of one million shares in the number of shares of common stock offered by us would increase or decrease cash and cash equivalents, additional paid-in capital, total stockholders' equity, total capitalization and the net proceeds to us from this offering by approximately $             million, assuming the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        If the underwriters exercise their over-allotment option in full, our existing stockholders would own        percent and our new investors would own         percent of the total number of shares of our common stock outstanding after this offering.

        The foregoing calculations are based on our shares outstanding as of September 30, 2011 assuming our outstanding convertible preferred stock converts into 21,569,923 shares of common stock and excludes the following shares:

•

7,659,282 shares of common stock issuable upon the exercise of options outstanding, at a weighted average exercise price of $1.65 per share;

•

408,196 shares of common stock issuable upon the exercise of outstanding warrants to purchase common stock, at a weighted average exercise price of $1.57 per share; and

•

649,407 shares of common stock, on an as-converted basis, issuable upon the exercise of outstanding warrants to purchase convertible preferred stock assuming the conversion immediately upon the completion of this offering, at a weighted average exercise price of $1.73 per share.

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SELECTED FINANCIAL DATA

        The selected statement of operations data for the years ended December 31, 2008, 2009 and 2010 and the balance sheet data as of December 31, 2009 and 2010 are derived from our audited financial statements included elsewhere in this prospectus. The selected balance sheet data as of December 31, 2008 are derived from our audited financial statements that are not included in this prospectus. The selected statement of operations data for the years ended December 31, 2006 and 2007 and the balance sheet data as of December 31, 2006 and 2007 are derived from our unaudited financial statements, which are not included in this prospectus. The selected statement of operations data for the nine months ended September 30, 2010 and 2011 and the balance sheet data as of September 30, 2011 are derived from our unaudited financial statements included elsewhere in this prospectus. The unaudited financial statements have been prepared on the same basis as the audited financial statements, and, in the opinion of management reflect all adjustments necessary for the fair presentation of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results that may be expected in the future. You should read the following selected historical financial data below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements, related notes, and other financial information included elsewhere in this prospectus. The selected financial data in this section is not intended to replace the financial statements and is qualified in its entirety by the financial statements and related notes included in this prospectus.

			Year Ended December 31,															Nine Months Ended September 30,
			2006			2007			2008			2009			2010			2010			2011
			(in thousands, except share and per share data)
			(unaudited)			(unaudited)												(unaudited)			(unaudited)
Statement of Operations Data:
Revenue			$	18,970		$	27,586		$	43,352		$	76,194		$	111,549		$	80,445		$	106,234
Operating expenses:
	Peering partner compensation			14,051			19,506			29,824			50,232			79,108			56,890			74,927
	Infrastructure costs			895			2,426			2,987			5,265			6,348			4,546			5,691
	Operations(1)			2,118			2,830			3,353			4,673			5,578			4,181			5,610
	Research and development(1)			1,258			2,527			2,447			3,567			4,069			3,042			4,688
	Sales and marketing(1)			3,506			5,596			4,741			6,367			7,693			5,636			10,411
	General and administrative(1)			1,032			2,879			2,177			4,568			5,547			4,177			5,927
	Depreciation and amortization			264			1,635			1,852			2,373			3,719			2,627			3,960
		Total operating expenses		23,124			37,399			47,381			77,045			112,062			81,099			111,214
Loss from operations				(4,154	)		(9,813	)		(4,029	)		(851	)		(513	)		(654	)		(4,980	)
Interest expense, net				(101	)		(487	)		(1,274	)		(1,488	)		(2,614	)		(1,842	)		(2,072	)
Change in fair value of warrant liabilities				118			86			163			(1,004	)		(8,492	)		(5,260	)		(2,590	)
Net loss			$	(4,137	)	$	(10,214	)	$	(5,140	)	$	(3,343	)	$	(11,619	)	$	(7,756	)	$	(9,642	)

41

	Year Ended December 31,															Nine Months Ended September 30,
	2006			2007			2008			2009			2010			2010			2011
	(in thousands, except share and per share data)
	(unaudited)			(unaudited)												(unaudited)			(unaudited)
Net loss per share of common stock, basic and diluted(2)		$(0.87	)		$(2.30	)		$(1.17	)		$(0.76	)		$(2.65	)		$(1.77	)		$(1.98	)
Shares used in computing net loss per share of common stock, basic and diluted(2)		4,762,976			4,437,024			4,378,964			4,378,964			4,381,308			4,378,964			4,864,178
Pro forma net loss per share of common stock, basic and diluted (unaudited)(2)														$(0.15	)					$(0.27	)
Shares used in computing pro forma net loss per share of common stock, basic and diluted (unaudited)(2)														25,225,094						26,289,604

	December 31,
											September 30, 2011
	2006		2007		2008		2009		2010
	(in thousands)
	(unaudited)		(unaudited)								(unaudited)
Balance Sheet Data:
Cash and cash equivalents	$5,990		$1,943		$11,764		$10,134		$9,159			$5,093
Working capital (deficit)	6,721		(288	)	11,256		4,710		(3,536	)		(14,219	)
Total assets	12,714		9,661		28,099		36,462		47,187			61,794
Total indebtedness	1,528		5,117		6,608		12,035		18,675			26,074
Warrant liabilities	298		1,322		1,311		2,945		12,400			7,996
Redeemable convertible preferred stock	13,164		15,170		33,345		33,345		33,379			40,386
Total stockholders' deficit	(4,560	)	(14,558	)	(18,829	)	(21,875	)	(32,891	)		(36,439	)

(1)

The following table presents stock-based compensation expense included in each expense category:

	Year Ended December 31,					Nine Months Ended September 30,
	2006	2007	2008	2009	2010
						2010		2011
	(in thousands)
						(unaudited)		(unaudited)
Operations	$1	$8	$27	$31	$144	$	100		$192
Research and development	—	3	16	49	81		56		725
Sales and marketing	271	52	185	111	153		99		3,056
General and administrative	2	52	91	106	186		138		244
Total stock-based compensation	$274	$115	$319	$297	$564	$	393	$	4,217

(2)

Please see Notes 1 and 12 to our audited financial statements included elsewhere in this prospectus for an explanation of the calculations of our basic and diluted net loss per share of common stock and pro forma net loss per share of common stock.

42

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and elsewhere in this prospectus, particularly those discussed in the section entitled "Risk Factors."

Overview

        We are a provider of on-demand, cloud-based communications services to service providers and enterprises. Our customers can leverage our proprietary Communications-as-a-Service, or CaaS, platform, which we refer to as our CloudWorx CaaS Platform, to deliver multimodal communications services, including voice, unified communications, video and other rich-media applications, to communications devices with reduced cost and improved quality compared to existing alternatives. Our CloudWorx CaaS Platform allows customers to rapidly and easily transition from legacy network infrastructures to our flexible, software-based, multimodal, IP-based solutions.

        The global telecommunications industry is undergoing a shift to next-generation IP-based communications technologies from legacy telephone networks. This transition is being driven by the widespread availability of broadband Internet connectivity and the emergence of cloud-based infrastructures and on-demand service delivery models such as Software as a Service, or SaaS. We believe these trends, along with the inability of legacy infrastructures to support the convergence of business and next-generation communications services, such as VoIP and rich-media communications, will continue to drive demand for a flexible and high-quality cloud-based communications platform such as ours.

        Our revenue is derived principally from the delivery of communications services over our CloudWorx CaaS Platform. Substantially all of our revenue to date has been derived from the transmission of voice traffic and related value-added services. Service provider and enterprise customers direct communications traffic to us, which we route through our peering partners so that the traffic can be delivered to the ultimate recipient of the communication, which is the end-point device. We typically charge our customers based upon minutes of use for traffic delivered through our platform. Our revenue has grown from $43.4 million for the year ended December 31, 2008 to $111.5 million for the year ended December 31, 2010 and from $80.4 million for the nine months ended September 30, 2010 to $106.2 million for the same period in 2011. The minutes of use for traffic delivered through our platform increased from 3.8 billion in 2008 to almost 17 billion in 2010, and our number of customers increased from 78 to 147. Similarly, the number of our service provider peering partners increased from 34 in 2008 to more than 40 in 2010, and the number of telephone numbers and end point identifying addresses in our SuperRegistry directory increased to over 400 million in 2010. Our revenue growth has been driven by a combination of increases in revenue from existing customers and the addition of new customers.

        Historically, substantially all of our revenue was derived from service provider customers. In 2010, revenue from enterprise customers increased significantly but still represented a small percentage of our revenue. We have made investments in research and development to create services more targeted to enterprise customers and in sales and marketing to build and manage our enterprise focused sales channels. As a result, we expect that revenue from enterprise customers will represent an increasing percentage of our revenue in future periods.

        Our single largest cost is the amount we pay to our peering partners for delivering communications to the ultimate end-point device user. Peering partners are the parties with whom we have contractual arrangements pursuant to which we direct the communications traffic routed through our CloudWorx

43

CaaS Platform. When the end-point device user is also a customer of one of our peering partners, we refer to this as direct peering, and when the end-point device user is not a customer of one of our peering partners, we refer to this as indirect peering. Our peering partner compensation expense has historically increased largely in line with our increases in revenue. As we continue to grow the size of our SuperRegistry directory, we expect an increasing portion of our traffic will be delivered as a result of direct peering and that our costs, as a percentage of revenue, will decrease.

        Our cloud-based software architecture has been designed to be scalable and enable us to continue to increase revenue without incurring a proportionate increase in our employee, infrastructure, and other operating costs. Since our platform is software-based, our CloudWorx CaaS Platform can be scaled quickly and efficiently and we are able to increase our revenue without making substantial investments in capital expenditures, regardless of geography. Because we have relied primarily on technology and software to respond to the increased demand for our services, our revenue growth has not required a proportionate increase in headcount. In addition, since we are able to use third-party data centers and third-party fiber networks to deliver IP-based traffic, we have a limited need for investments in our internal physical infrastructure.

        We operate in a competitive and dynamic pricing environment. We monitor and, as appropriate, update the pricing that we offer our customers based upon multiple factors as we seek to offer our customers competitive pricing while satisfying their needs for carrier level quality and reliability. Likewise, the amounts we must pay to our peering partners are subject to change. Our proprietary software enables us to collect and quickly analyze information on communications traffic and provide our services at a competitive price without compromising the quality of our service. In addition, as the volume of traffic through our CloudWorx CaaS Platform increases, we expect we will be able to enter into better pricing arrangements with our peering partners.

        Our contracts with customers and peering partners do not include volume or pricing commitments and a significant portion of our revenue has historically been concentrated in a relatively limited number of customers. Although we have periodically experienced significant period-to-period variations in the revenue we derive from some of our largest customers, our aggregate revenue derived from existing customers increased over the revenue from the prior period for each quarter since January 1, 2008, except that our revenue in the quarters ended March 31, 2009, 2010 and 2011 declined as compared to the revenue from the prior quarter. We have established and maintain deep relationships with our customers, allowing us to have significant visibility into our customers' changing business plans and deployment decisions. Additionally, because we serve a substantial number of the larger service providers in the U.S. market, we are able to monitor and benefit from the evolving trends among these service providers with respect to communications traffic shifting between wireline and wireless providers, the continued migration of networks from the PSTN to SIP/IP-based networks and the changes in end-user customers among service providers.

        We intend to continue to grow our business by generating additional revenue from existing and new service provider and enterprise customers. We also intend to continue to expand our relationships with channel and technology partners to increase our number of enterprise customers. To date, we have generated our revenue principally from customers in the United States. We expect to expand our business internationally in future periods.

        We have incurred losses since inception as we have grown our business and invested in our CloudWorx CaaS Platform and selling and administrative functions. As of September 30, 2011, we had an accumulated deficit of $46.3 million.

Key Metrics of Our Business

        We monitor revenue as a measure of our overall business performance. We continually analyze and adjust the prices we charge our customers based on market conditions. Although our revenue is generally not impacted by seasonality, our revenue is principally driven by business communications

44

usage and is impacted by the weighted number of business days in each quarter. To derive the weighted number of business days in each quarter, we weight each day of the week and each holiday based upon historical traffic levels on those days.

        We also track operating margin to monitor operating costs, including peering partner compensation, infrastructure costs, capital expenditures and headcount, as a percentage of revenue. We expect our operating costs as a percentage of revenue will decrease as our business continues to grow.

Key Components of Our Results of Operations

Revenue

        We derive our revenue primarily from service provider and enterprise customer usage of our CloudWorx CaaS Platform services to connect our customers' traffic to the ultimate end-point device and charge on a minute of use basis. Our revenue growth has resulted from a combination of delivering additional minutes from existing customers and adding new customers. The rates charged per minute are determined by contractual terms between us and our customers and are subject to periodic changes. To date, our revenue has principally been derived from service provider customers and substantially all of such revenue has been for voice traffic and related value added services. In addition to revenue based upon minutes of use from service providers, we also derive revenue from communication services provided to enterprise customers either on a minutes of use or on a monthly recurring basis per subscriber as the services are provided. While this revenue has not been a significant percentage of our revenue to date, we expect that revenue from enterprise customers will comprise an increasing portion of our revenue in future periods as we increase and expand relationships with our customers, channel partners and technology partners, and those customers and channel partners develop additional applications that utilize our services.

        Revenue is impacted by a variety of factors regarding the composition of the minutes of use, including whether they are wireless or VoIP minutes, on the one hand, or wireline minutes, on the other hand. Revenue from particular customers may vary from period to period as our contracts do not include volume or pricing commitments. Revenue from particular customers has also varied as a result of industry consolidation and as our customers have added or lost end-users, and their associated communications traffic, over time.

Operating Expenses

        Operating expenses consist of peering partner compensation, infrastructure, operations, research and development, sales and marketing, general and administrative and depreciation and amortization costs.

Peering Partner Compensation

        Peering partner compensation represents the costs we incur to connect our customers' traffic to the ultimate end-point device. These costs consist primarily of charges for access to our peering partners' networks and are recorded at the time of usage. They are typically charged based upon minutes of use, and vary based upon negotiated rates with each peering partner. Peering partner compensation costs are impacted by a variety of factors relating to the composition of the minutes, including whether they are wireless or VoIP, on the one hand, or wireline, on the other hand. These costs are also impacted by whether the delivery is the result of direct or indirect peering. For indirect peering, our peering partner generally must pay another service provider who ultimately delivers the traffic to the end-user. As such, our peering partner compensation costs for this traffic increase accordingly. As we continue to grow the size of our SuperRegistry directory, we expect an increasing portion of our traffic will be delivered as a result of direct peering and that our costs as a percentage of revenue will decrease.

        We recognize peering partner compensation costs as they are incurred in accordance with contractual requirements. Invoices received from our peering partners often cover billing for millions of minutes. We perform monthly bill verification procedures to identify errors in peering partners' billing

45

processes. These verification procedures include the examination of the bills, review of call detail records, comparing billing rates used with contractual billing rates, evaluating the trends of invoiced amounts by peering partner and reviewing the types of charges being processed. If we discover a billing discrepancy as a result of our review, we then proactively seek to resolve the matter with our peering partner. If we determine that we will need to pay our peering partner more than we previously accrued or if we determine that there is a doubt regarding the amount that we will ultimately pay to our peering partner, we record a charge to peering partner compensation and a corresponding increase to our reserve for disputes based on our estimate of the amount that will eventually be payable. If we subsequently determine that the disputed amounts will be settled for an amount different than the amount which we originally accrued, we will recognize the difference as an adjustment to peering partner compensation. We believe that our procedures are designed to properly assess dispute accruals, however, changes to the estimates used in its calculation could result in a material impact on our statement of operations.

Infrastructure Costs

        Infrastructure costs include the costs of utilizing third party telecommunications networks, amounts we pay for use of co-location facilities and interconnection services, and costs of equipment and software maintenance and support. The majority of these costs are fixed in nature. We make commitments for infrastructure usage in anticipation of our future growth, balancing cost against the length of the commitment to cost effectively offer the quality and reliability that our customers require. We seek to expand our capacity in advance of expected future growth needs. As such, our infrastructure costs may vary as a percentage of revenue in any particular period based upon the timing of these investments in additional capacity. However, we expect that these costs will decline as a percentage of revenue over time.

Operations

        Operations expenses consist of the costs of our administrative facilities and the costs related to our personnel who are directly responsible for maintaining and expanding our CloudWorx CaaS Platform. Although there may be fluctuations from period to period as we hire additional personnel to expand our operations, we expect that these costs will decline as a percentage of revenue in future periods.

Research and Development

        Research and development expenses consist of costs incurred for internal development projects and are comprised of personnel costs, testing and compliance services, and facilities costs. We are currently devoting substantial resources to the development of additional functionality for our existing products and the development of new application components and APIs. We generally expense research and development costs as incurred. Some direct development costs related to the internally developed software used to provide our services are capitalized and depreciated over their useful life. The capitalized cost of this internally developed software for use in providing our services may increase as we continue to develop additional functionality to facilitate the delivery of our services.

Sales and Marketing

        Sales and marketing expenses consist of personnel-related costs, sales commissions, travel costs and facilities costs and, to a lesser extent, costs associated with marketing and publicizing our products and services. We primarily use a direct sales approach for our service provider customers and an indirect approach using sales channels for our enterprise customers. We plan to continue to invest in sales and marketing to expand and grow our business. However, we expect that these costs as a percentage of revenue will decline in future periods.

46

General and Administrative

        General and administrative expenses consist of personnel-related costs, professional services, and facilities costs related to our executive, finance, human resources and information technology functions. Professional services consist of outside legal and accounting services and information technology consulting costs. These costs have generally increased as we have invested in our administrative infrastructure to support our growth. Following the completion of this offering, we expect to incur additional expenses associated with being a public company, including increased legal and accounting costs, investor relations costs and compliance costs in connection with the internal control requirements of the Sarbanes-Oxley Act.

Depreciation and Amortization

        Depreciation and amortization expenses relate to our property and equipment and finite-lived intangible assets. Depreciation expense for property and equipment is primarily related to equipment that hosts our CloudWorx CaaS Platform housed at co-location facilities and is computed using the straight-line method over the estimated useful lives of the assets. This equipment is depreciated over seven years and all other equipment is depreciated over three years. Amortization for leasehold improvements is computed using the straight-line method over the shorter of the term of the lease or estimated useful lives of the assets. Amortization of finite-lived intangible assets is computed using the straight-line method over the estimated economic life of the asset. For the capitalized development costs related to our CloudCentral customer portal, the amortization period is seven years. For capitalized patent costs, the amortization period is the term of the patent, generally 14 years, or the estimated economic life if deemed to be shorter. We expect depreciation and amortization expenses to continue to increase on an absolute level as we increase our investments in equipment, but to decrease as a percentage of our revenue.

Other Income (Expense)

Interest Expense, Net

        Interest expense, net consists primarily of interest accrued or paid on our equipment financing obligations and our loan and security agreements, as well as the amortization of debt discount and deferred financing costs.

Change in Fair Value of Warrant Liabilities

        The change in fair value of warrant liabilities consists of the change in the fair value of our warrants to purchase convertible preferred stock and those warrants to purchase common stock with price protection features. These outstanding warrants are classified as liabilities and, as such, are remeasured to fair value at each balance sheet date with the corresponding gain or loss from the adjustment recorded in our statement of operations. The fair value of the warrants is estimated using the Black-Scholes option-pricing model and incorporating considerations of the potential value associated with price protection features. We will continue to record adjustments to the fair value of the warrants until the earlier of the exercise or expiration of the warrants. Following the completion of this offering, we will no longer be subject to these charges relating to the warrants for the purchase of our convertible preferred stock as they will be converted into warrants for common stock and will not have price protection features. However, we will continue to adjust our existing common stock warrants with price protection features for changes in fair value until the earlier of the exercise or expiration of the warrants.

Internal Control Over Financial Reporting

        In connection with the audit of our financial statements for the year ended December 31, 2010, our management and independent registered public accounting firm identified two material weaknesses in our internal control over financial reporting, as defined in rules established by the Public Company

47

Accounting Oversight Board, or PCAOB, and in connection with the review of our financial statements for the six months ended June 30, 2011, our management and independent registered public accounting firm identified an additional material weakness in our internal control over financial reporting. These material weaknesses related to (i) a lack of adequate control over the accounting for complex financial instruments, including accounting for certain stock warrants and convertible instruments, (ii) a lack of adequate controls to identify, evaluate, monitor and adjust our accrued liability for peering partner disputes, and (iii) a lack of adequate control to record non-plan stock option grants in the appropriate period. As a result, audit adjustments to our financial statements were identified during the course of the audit. In an effort to remediate these material weaknesses, with respect to complex financial instruments, we have retained consultants to assist us in properly accounting for complex financial instruments and have also developed in-house knowledge and expertise related to the accounting literature surrounding complex financial instruments. With respect to peering partner disputes, we have developed, documented and initiated enhanced procedures over our peering partner disputes to improve our ability to make reasonable estimates with respect to the amounts that such disputes will ultimately be settled. With respect to non-plan stock option grants, we have outsourced our stock administration function to a third party and we have implemented additional procedures to review non-plan grants to correctly assess the grant date. We cannot assure you that these measures will significantly improve or remediate the material weaknesses described above.

        Assessing our procedures to improve our internal control over financial reporting is an ongoing process. We are currently not required to comply with Section 404 of the Sarbanes-Oxley Act, and are therefore not required to make an assessment of the effectiveness of our internal control over financial reporting. As a result, our management did not perform an evaluation of our internal control over financial reporting as of December 31, 2010. Further, our independent registered public accounting firm has not been engaged to express, nor have they expressed, an opinion on the effectiveness of our internal control over financial reporting. We currently do not have an internal audit function.

        For the year ending December 31, 2012, pursuant to Section 404 of the Sarbanes-Oxley Act, management will be required to deliver a report that assesses the effectiveness of our internal control over financial reporting. Under current SEC rules, if we are an accelerated filer, our independent registered public accounting firm will be required to deliver an attestation report on the effectiveness of our internal control over financial reporting beginning with the year ending December 31, 2012.

48

Results of Operations

        The following table presents our statement of operations for the periods indicated (in thousands):

			Year Ended December 31,									Nine Months Ended September 30,
			2008			2009			2010			2010			2011
												(unaudited)			(unaudited)
Revenue			$	43,352		$	76,194		$	111,549		$	80,445		$	106,234
Operating expenses:
	Peering partner compensation			29,824			50,232			79,108			56,890			74,927
	Infrastructure costs			2,987			5,265			6,348			4,546			5,691
	Operations(1)			3,353			4,673			5,578			4,181			5,610
	Research and development(1)			2,447			3,567			4,069			3,042			4,688
	Sales and marketing(1)			4,741			6,367			7,693			5,636			10,411
	General and administrative(1)			2,177			4,568			5,547			4,177			5,927
	Depreciation and amortization			1,852			2,373			3,719			2,627			3,960
		Total operating expenses		47,381			77,045			112,062			81,099			111,214
Loss from operations				(4,029	)		(851	)		(513	)		(654	)		(4,980	)
Interest expense, net				(1,274	)		(1,488	)		(2,614	)		(1,842	)		(2,072	)
Change in fair value of warrant liabilities				163			(1,004	)		(8,492	)		(5,260	)		(2,590	)
Net loss			$	(5,140	)	$	(3,343	)	$	(11,619	)	$	(7,756	)		$(9,642	)

(1)

Includes stock-based compensation expense as follows (in thousands):

	Year Ended December 31,				Nine Months Ended September 30,
	2008	2009	2010		2010		2011
					(unaudited)		(unaudited)
Operations	$27	$31	$	144		$100		$192
Research and development	16	49		81		56		725
Sales and marketing	185	111		153		99		3,056
General and administrative	91	106		186		138		244
Total stock-based compensation	$319	$297	$	564		$393		$4,217

49

        The following table sets forth the results of operations for the specified periods as a percentage of our revenue for those periods:

			Year Ended December 31,									Nine Months Ended September 30,
			2008			2009			2010			2010			2011
												(unaudited)
Revenue				100	%		100	%		100	%		100	%		100	%
Operating expenses:
	Peering partner compensation			69			66			71			71			71
	Infrastructure costs			7			7			6			6			5
	Operations			8			6			5			5			5
	Research and development			6			5			4			4			4
	Sales and marketing			11			8			7			7			10
	General and administrative			5			6			5			5			6
	Depreciation and amortization			4			3			3			3			4
		Total operating expenses		109			101			100			101			105
Loss from operations				(9	)		(1	)		(0	)		(1	)		(5	)
Interest expense, net				(3	)		(2	)		(2	)		(2	)		(2	)
Change in fair value of warrant liabilities				0			(1	)		(8	)		(7	)		(2	)
Net loss				(12	)%		(4	)%		(10	)%		(10	)%		(9	)%

Nine months ended September 30, 2011 compared to the nine months ended September 30, 2010

Revenue

	Nine Months Ended September 30,
					Increase / (Decrease)		% Increase / (Decrease)
	2010		2011
	(in thousands, except for percentages)
Revenue	$	80,445	$	106,234	$	25,789		32	%

        Our revenue increased by $25.8 million, or 32 percent, to $106.2 million in the nine months ended September 30, 2011 from $80.4 million in the same period in 2010. This increase is due to $13.1 million in revenue from new customers in the nine months ended September 30, 2011, with the remaining increase due to increased minutes of use from existing customers. Revenue from Sprint and Qwest represented 21 percent and 12 percent of our revenue in the nine months ended September 30, 2011, respectively, and revenue from Sprint and Qwest represented 32 percent and 17 percent of our revenue in the same period in 2010, respectively. We expect that the percentage of our revenue represented by customers that represent 10 percent or more or our revenue will continue to vary in future periods due to factors such as industry consolidation, new or changed direct peering arrangements between service providers, and the addition or loss by our customers of their end user customers.

Operating Expenses

Peering Partner Compensation

	Nine Months Ended September 30,
					Increase / (Decrease)		% Increase / (Decrease)
	2010		2011
	(in thousands, except for percentages)
Peering partner compensation	$	56,890	$	74,927	$	18,037		32	%

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        Our peering partner compensation costs increased by $18.0 million, or 32 percent, to $74.9 million in the nine months ended September 30, 2011 from $56.9 million in the same period in 2010. This increase was primarily due to increased traffic through our CloudWorx CaaS Platform. Peering partner compensation as a percentage of revenue remained consistent at 71 percent in the nine months ended September 30, 2010 and 2011.

Infrastructure Costs

	Nine Months Ended September 30,
					Increase / (Decrease)		% Increase / (Decrease)
	2010		2011
	(in thousands, except for percentages)
Infrastructure costs	$	4,546	$	5,691	$	1,145		25	%

        Infrastructure costs increased by $1.1 million, or 25 percent, to $5.7 million in the nine months ended September 30, 2011 from $4.5 million in the same period in 2010. This increase was necessary to support the increase in revenue from our customers. In addition, our maintenance costs increased by $0.6 million due to a period-over-period increase in costs related to the equipment that hosts our CloudWorx CaaS Platform. Infrastructure costs as a percentage of revenue decreased from 6 percent for the nine months ended September 30, 2010 to 5 percent for the same period in 2011.

Operations

	Nine Months Ended September 30,
					Increase / (Decrease)		% Increase / (Decrease)
	2010		2011
	(in thousands, except for percentages)
Operations	$	4,181	$	5,610	$	1,429		34	%

        Operations expenses increased by $1.4 million, or 34 percent, to $5.6 million in the nine months ended September 30, 2011 from $4.2 million in the same period in 2010. This increase was primarily the result of a $1.3 million increase in headcount related costs. Operations expenses as a percentage of revenue was consistent at 5 percent for the nine months ended September 30, 2010 and 2011. Operations expenses included $0.1 million in stock compensation expense in the nine months ended September 30, 2010 and $0.2 million in the same period in 2011.

Research and Development

	Nine Months Ended September 30,
					Increase / (Decrease)		% Increase / (Decrease)
	2010		2011
	(in thousands, except for percentages)
Research and development	$	3,042	$	4,688	$	1,646		54	%

        Research and development expenses increased by $1.6 million, or 54 percent, to $4.7 million in the nine months ended September 30, 2011 from $3.0 million in the same period in 2010. This increase was primarily the result of a $0.8 million increase in headcount related costs as we expanded our product development efforts. Stock-based compensation expense increased by $0.7 million primarily due to the issuance of fully vested options to certain long-time employees whose nonstatutory options had expired. Research and development expenses as a percentage of revenue remained consistent at 4 percent in the nine months ended September 30, 2010 and 2011. We capitalized certain software development costs of $0.5 million in the nine months ended September 30, 2011 and $0.5 million for the same period in 2010. Research and development expenses included $56,000 in stock compensation expense in the nine months ended September 30, 2010 and $0.7 million for the same period in 2011.

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Sales and Marketing

	Nine Months Ended September 30,
					Increase / (Decrease)		% Increase / (Decrease)
	2010		2011
	(in thousands, except for percentages)
Sales and marketing	$	5,636	$	10,411	$	4,775		85	%

        Sales and marketing expenses increased by $4.8 million, or 85 percent, to $10.4 million in the nine months ended September 30, 2011 from $5.6 million in the same period in 2010. Stock-based compensation expense increased by $3.0 million, of which $2.7 million is due to the issuance of fully vested options to certain long-time employees whose nonstatutory options had expired. The remaining increase was primarily the result of a $1.1 million increase in headcount related costs, a $0.3 million increase in sales commissions and sales agent fees due to the increase in revenue in the nine months ended September 30, 2011, and a $0.4 million increase in marketing expenses due to an increase in marketing initiatives. Sales and marketing expenses increased as a percentage of revenue from 7 percent in the nine months ended September 30, 2010 to 10 percent in the same period in 2011 due primarily to the increase in stock compensation expense. Sales and marketing expenses included $0.1 million in stock compensation expense in the nine months ended September 30, 2010 and $3.1 million in the same period in 2011.

General and Administrative

	Nine Months Ended September 30,
					Increase / (Decrease)		% Increase / (Decrease)
	2010		2011
	(in thousands, except for percentages)
General and administrative	$	4,177	$	5,927	$	1,750		42	%

        General and administrative expenses increased by $1.8 million, or 42 percent in the nine months ended September 30, 2011 to $5.9 million from $4.2 million in the same period in 2010. This increase was primarily the result of an increase of $0.7 million in headcount related costs as we continued to invest in our administrative infrastructure in anticipation of our future growth and being a public company, a $0.1 million increase in travel related expenses, a $0.1 million increase in contractor fees, a $0.1 million increase in stock-based compensation, and a $0.6 million increase for regulatory filings. General and administrative expenses as a percentage of revenue increased from 5 percent for the nine months ended September 30, 2010 to 6 percent for the same period in 2011. General and administrative expenses included $0.1 million in stock compensation expense in the nine months ended September 30, 2010 and $0.2 million in the same period in 2011.

Depreciation and Amortization

	Nine Months Ended September 30,
					Increase / (Decrease)		% Increase / (Decrease)
	2010		2011
	(in thousands, except for percentages)
Depreciation and amortization	$	2,627	$	3,960	$	1,333		51	%

        Depreciation and amortization expenses increased by $1.3 million, or 51 percent in the nine months ended September 30, 2011 to $4.0 million from $2.6 million in the same period in 2010. The increase was primarily due to an increase in costs related to the equipment that hosts our CloudWorx CaaS Platform as we added more capacity to address the increase in minutes of use and expansion of our customer base.

52

Interest Expense, net

	Nine Months Ended September 30,
					Increase / (Decrease)		% Increase / (Decrease)
	2010		2011
	(in thousands, except for percentages)
Interest expense, net	$	1,842	$	2,072	$	230		12	%

        Interest expense, net increased by $0.2 million, or 12 percent, in the nine months ended September 30, 2011 to $2.1 million from $1.8 million in the same period in 2010. This increase was primarily a result of additional borrowings under our equipment financing agreements and revolving accounts receivable loan facility and the amortization of debt discount and deferred financing fees on all our debt obligations.

Change in Fair Value of Warrant Liabilities

	Nine Months Ended September 30,
					Increase / (Decrease)			% Increase / (Decrease)
	2010		2011
	(in thousands, except for percentages)
Change in fair value of warrant liabilities	$	5,260	$	2,590	$	(2,670	)		(51	)%

        The change in fair value of warrant liabilities decreased by $2.7 million to an expense of $2.6 million in the nine months ended September 30, 2011 from an expense of $5.3 million in the same period in 2010. The change was primarily due to the increase in the fair value of the stock underlying the warrants, offset by the decrease in the number of warrants subject to remeasurement. See Note 8 to our financial statements included elsewhere in this prospectus.

Year ended December 31, 2010 compared to the year ended December 31, 2009

Revenue

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2009		2010
	(in thousands, except for percentages)
Revenue	$	76,194	$	111,549	$	35,355		46	%

        Our revenue increased by $35.3 million, or 46 percent, to $111.5 million in 2010 from $76.2 million in 2009. This increase primarily reflected an increase of $28.8 million resulting from the addition in late 2009 of a large service provider customer and an aggregate $10.9 million in revenue due to increased usage from other existing service provider customers offset in part by a decrease of $17.1 million in revenue from one customer. The remaining increase was due to revenue from new customers in 2010. Revenue from Sprint and Qwest represented 29 percent and 16 percent of our revenue in 2010, respectively, and revenue from Qwest and Excel Telecommunications represented 46 percent and 10 percent of our revenue in 2009, respectively. Although the percentage of revenue from our two largest customers declined as compared to the prior year, the revenue in aggregate dollars from our two largest customers increased by approximately 18 percent from 2009 to 2010.

Operating Expenses

Peering Partner Compensation

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2009		2010
	(in thousands, except for percentages)
Peering partner compensation	$	50,232	$	79,108	$	28,876		57	%

53

        Our peering partner compensation costs increased by $28.9 million, or 57 percent, to $79.1 million in 2010 from $50.2 million in 2009. This increase was primarily due to increased traffic through our CloudWorx CaaS Platform. Peering partner compensation increased as a percentage of revenue from 66 percent in 2009 to 71 percent in 2010. In 2009, we benefited from a more favorable revenue mix than in 2010 due to the composition of minutes, causing peering partner compensation as a percentage of revenue to be lower in 2009.

Infrastructure Costs

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2009		2010
	(in thousands, except for percentages)
Infrastructure costs	$	5,265	$	6,348	$	1,083		21	%

        Infrastructure costs increased by $1.1 million, or 21 percent, to $6.3 million in 2010 from $5.3 million in 2009. This increase was necessary to support the increase in minutes of use by our customers. In addition, our maintenance costs increased by $0.7 million due to a year-over-year increase in costs related to the equipment that hosts our CloudWorx CaaS Platform. Infrastructure costs decreased as a percentage of revenue from 7 percent in 2009 to 6 percent in 2010, as we were able to process the increase in minutes of use without having to make a proportional investment in our infrastructure.

Operations

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2009		2010
	(in thousands, except for percentages)
Operations	$	4,673	$	5,578	$	905		19	%

        Operations expenses increased by $0.9 million, or 19 percent, to $5.6 million in 2010 from $4.7 million in 2009. This increase was primarily the result of a $0.8 million increase in costs related to personnel due to an increase in the headcount in our operations group. Operations expenses decreased as a percentage of revenue from 6 percent in 2009 to 5 percent in 2010, as we were able to increase our revenue without a proportional increase in our operations staff. Operations expenses included $31,000 in stock compensation expense in 2009 and $0.1 million in 2010.

Research and Development

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2009		2010
	(in thousands, except for percentages)
Research and development	$	3,567	$	4,069	$	502		14	%

        Research and development expenses increased by $0.5 million, or 14 percent, to $4.1 million in 2010 from $3.6 million in 2009. This increase was primarily the result of a $0.4 million increase in costs related to personnel due to an increase in headcount as we expanded our product development efforts, in particular for our CloudCentral portal and other new and enhanced services for our enterprise customers. Research and development expenses decreased as a percentage of revenue from 5 percent in 2009 to 4 percent in 2010, notwithstanding an increase in research and development headcount, as a portion of research and development costs were capitalized. Capitalized software development costs increased from $0 in 2009 to $0.7 million in 2010. Research and development expenses included $49,000 in stock compensation expense in 2009 and $81,000 in 2010.

54

Sales and Marketing

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2009		2010
	(in thousands, except for percentages)
Sales and marketing	$	6,367	$	7,693	$	1,326		21	%

        Sales and marketing expenses increased by $1.3 million, or 21 percent, to $7.7 million in 2010 from $6.4 million in 2009. This increase was primarily the result of a $1.3 million increase in costs related to personnel due to an increase in headcount and a $0.5 million increase in sales commissions and sales agent fees due to the increase in revenue in 2010. These increases were offset by a $0.4 million decrease in contractor and consulting fees, as we hired more employees. Sales and marketing expenses decreased as a percentage of revenue from 8 percent in 2009 to 7 percent in 2010. Sales and marketing expenses included $0.1 million in stock compensation expense in 2009 and $0.2 million in 2010.

General and Administrative

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2009		2010
	(in thousands, except for percentages)
General and administrative	$	4,568	$	5,547	$	979		21	%

        General and administrative expenses increased by $1.0 million, or 21 percent in 2010 to $5.5 million from $4.6 million in 2009. This increase was primarily the result of an increase of $1.0 million in costs related to personnel due to an increase in headcount as we continued to invest in our administrative infrastructure in anticipation of future growth, $0.5 million for regulatory filings and related professional services and $0.1 million in recruiting costs. These increases were offset by decreases in bad debt expense of $0.6 million and legal costs of $0.3 million. The decrease in bad debt expense was due to larger provisions taken in 2009 for customers whose receivables became uncollectible in that year. General and administrative expenses decreased as a percentage of revenue from 6 percent in 2009 to 5 percent in 2010 due to a decrease in bad debt expense and an increase in revenue without a need for a proportionate increase in administrative staff. General and administrative expenses included $0.1 million in stock compensation expense in 2009 and $0.2 million in 2010.

Depreciation and Amortization

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2009		2010
	(in thousands, except for percentages)
Depreciation and amortization	$	2,373	$	3,719	$	1,346		57	%

        Depreciation and amortization expenses increased by $1.3 million, or 57 percent in 2010 to $3.7 million from $2.4 million in 2009 primarily due to an increase in costs related to the equipment that hosts our CloudWorx CaaS Platform, as we added more capacity to address the increase in minutes of use and expansion of our customer base.

Interest Expense, Net

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2009		2010
	(in thousands, except for percentages)
Interest expense, net	$	1,488	$	2,614	$	1,126		76	%

        Interest expense, net increased by $1.1 million, or 76 percent, in 2010 to $2.6 million from $1.5 million in 2009. This increase was primarily a result of additional borrowings under our equipment financing agreements and the amortization of debt discount and deferred financing fees on all our debt obligations.

55

Change in Fair Value of Warrant Liabilities

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2009		2010
	(in thousands, except for percentages)
Change in fair value of warrant liabilities	$	1,004	$	8,492	$	7,488		746	%

        The change in fair value of warrant liabilities increased by $7.5 million to an expense of $8.5 million in 2010 from an expense of $1.0 million in 2009. The change was primarily due to the increase in the fair value of the stock underlying the warrants.

Year ended December 31, 2009 compared to the year ended December 31, 2008

Revenue

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2008		2009
	(in thousands, except for percentages)
Revenue	$	43,352	$	76,194	$	32,842		76	%

        Our revenue increased by $32.8 million, or 76 percent, to $76.2 million in 2009 from $43.4 million in 2008. This increase primarily reflected a $17.3 million increase in revenue from our largest customer and $8.9 million from new customers in 2009. Revenue from Qwest and Excel Telecommunications, represented 46 percent and 10 percent of our revenue in 2009, respectively, and revenue from Qwest represented 41 percent of our revenue in 2008.

Operating Expenses

Peering Partner Compensation

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2008		2009
	(in thousands, except for percentages)
Peering partner compensation	$	29,824	$	50,232	$	20,408		68	%

        Our peering partner compensation costs increased by $20.4 million, or 68 percent, to $50.2 million in 2009 from $29.8 million in 2008 due to increased traffic over our CloudWorx CaaS Platform. Peering partner compensation decreased as a percentage of revenue from 69 percent in 2008 to 66 percent in 2009 primarily as a result of a more favorable revenue mix due to the composition of minutes in 2009.

Infrastructure Costs

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2008		2009
	(in thousands, except for percentages)
Infrastructure costs	$	2,987	$	5,265	$	2,278		76	%

        Infrastructure costs increased by $2.3 million, or 76 percent, to $5.3 million in 2009 from $3.0 million in 2008. This increase was primarily the result of the increase in minutes of use by our customers. In addition, we maintained additional capacity during 2009 as we invested in additional infrastructure in anticipation of future growth. Infrastructure costs as a percentage of revenue was unchanged at 7 percent in 2008 and 2009, as the additional capacity was in line with the growth in minutes of use by our customers.

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Operations

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2008		2009
	(in thousands, except for percentages)
Operations	$	3,353	$	4,673	$	1,320		39	%

        Operations expenses increased by $1.3 million, or 39 percent, to $4.7 million in 2009 from $3.4 million in 2008. This increase was primarily the result of a $1.1 million increase in costs related to personnel due to an increase in the headcount of our operations group and $0.2 million in fees paid to contractors due to the growth of our business in 2009. Operations expenses decreased as a percentage of revenue from 8 percent in 2008 to 6 percent in 2009 as we were able to increase our revenue without needing a proportionate increase in our operations staff. Operations expenses included $27,000 in stock compensation expense in 2008 and $31,000 in 2009.

Research and Development

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2008		2009
	(in thousands, except for percentages)
Research and development	$	2,447	$	3,567	$	1,120		46	%

        Research and development expenses increased by $1.1 million, or 46 percent, to $3.6 million in 2009 from $2.4 million in 2008. This increase was primarily the result of a $1.3 million increase in costs related to personnel offset by a decrease of $0.3 million in contract employee costs, as we hired more personnel for our product development activities and reduced our reliance on outside services. We also expanded our research and development activities in 2009, as we began to develop new and enhanced services for our enterprise customers. Research and development expenses decreased as a percentage of revenue from 6 percent in 2008 to 5 percent in 2009, as we decreased our reliance on outside contractors. Research and development expenses included $16,000 in stock compensation expense in 2008 and $49,000 in 2009.

Sales and Marketing

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2008		2009
	(in thousands, except for percentages)
Sales and marketing	$	4,741	$	6,367	$	1,626		34	%

        Sales and marketing expenses increased by $1.6 million, or 34 percent, to $6.4 million in 2009 from $4.7 million in 2008. This increase was primarily the result of an increase of $0.5 million in costs related to personnel, $0.2 million in recruiting fees, $0.1 million in sales commissions and $0.1 million in travel costs due to an increase in the number of sales and marketing employees in 2009. We also increased our marketing expenses by $0.1 million, and our consulting and contractor costs increased by $0.5 million due to the expansion of our operations in 2009. Sales and marketing expenses decreased as a percentage of revenue from 11 percent in 2008 to 8 percent in 2009 as we increased our revenue without a proportionate increase in our sales and marketing staff. Sales and marketing expenses included $0.2 million in stock compensation expense in 2008 and $0.1 million in 2009.

General and Administrative

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2008		2009
	(in thousands, except for percentages)
General and administrative	$	2,177	$	4,568	$	2,391		110	%

57

        General and administrative expenses increased by $2.4 million, or 110 percent, to $4.6 million in 2009 from $2.2 million in 2008. This increase was primarily the result of an increase of $0.7 million in costs related to personnel due to higher headcount, $0.6 million in professional services primarily due to higher legal costs, $0.3 million in contractor and consulting expenses and $0.5 million in bad debt expense. Professional services and contractor and consulting costs increased, as we expanded our operations and entered into more contracts with customers and peering partners, as well as a higher level of business development activity. General and administrative expenses increased as a percentage of revenue from five percent in 2008 to six percent in 2009 due to an increase in bad debt expense and an increase in administrative staff. General and administrative expenses included $91,000 in stock compensation expense in 2008 and $0.1 million in 2009.

Depreciation and Amortization

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2008		2009
	(in thousands, except for percentages)
Depreciation and amortization	$	1,852	$	2,373	$	521		28	%

        Depreciation and amortization expenses increased by $0.5 million, or 28 percent, to $2.4 million in 2009 from $1.9 million in 2008. This increase was due to additional costs related to the equipment that hosts our CloudWorx CaaS Platform, as we added more capacity to address the increased traffic and expansion of our customer base.

Interest Expense, Net

	Year Ended December 31,
					Increase/ (Decrease)		% Increase/ (Decrease)
	2008		2009
	(in thousands, except for percentages)
Interest expense, net	$	1,274	$	1,488	$	214		17	%

        Interest expense, net increased by $0.2 million, or 17 percent, to $1.5 million in 2009 from $1.3 million in 2008. This change was primarily a result of an increase in interest expense from our equipment financings in 2009. This increase was offset by a non-recurring $0.5 million beneficial conversion charge from the conversion of $2.1 million in convertible promissory notes and related accrued interest into our Series C convertible preferred stock in October 2008 at a discount.

Change in Fair Value of Warrant Liabilities

	Year Ended December 31,
						Increase/ (Decrease)			% Increase/ (Decrease)
	2008		2009
	(in thousands, except for percentages)
Change in fair value of warrant liabilities	$	163	$	(1,004	)	$	(1,167	)		(716	)%

        The fair value of warrant liabilities changed by $1.2 million to an expense of $1.0 million in 2009 from a gain of $0.1 million in 2008. This change was primarily due to an increase in the fair value of the stock underlying the warrants.

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Quarterly Results of Operations

        The following table sets forth our unaudited quarterly statement of operations data for each of the eleven quarters in the period ended September 30, 2011. The data below has been prepared on the same basis as the audited financial statements included elsewhere in this prospectus, and, in management's opinion, reflects all necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of this data. The results of historical periods are not necessarily indicative of the results of operations for a full year or any future period.

		Three Months Ended
		Mar 31, 2009			June 30, 2009			Sept 30, 2009			Dec 31, 2009			Mar 31, 2010			June 30, 2010			Sept 30, 2010			Dec 31, 2010			Mar 31, 2011			June 30, 2011			Sept 30, 2011
		(in thousands) (unaudited)
Revenue			$14,783			$17,544			$21,138			$22,729			$22,697			$28,419			$29,329			$31,104			$30,944			$34,710		$	40,580
Operating expenses:
	Peering partner compensation		9,446			11,353			14,132			15,301			15,949			19,949			20,992			22,218			21,630			24,581			28,716
	Infrastructure costs		992			1,340			1,552			1,381			1,471			1,434			1,641			1,802			1,774			1,986			1,931
	Operations(1)		1,197			1,138			1,246			1,092			1,311			1,419			1,451			1,397			1,718			1,956			1,936
	Research and development(1)		834			932			968			833			1,005			1,011			1,026			1,027			1,205			1,987			1,496
	Sales and marketing(1)		1,766			1,455			1,641			1,505			1,547			1,976			2,113			2,057			2,381			3,285			4,745
	General and administrative(1)		1,141			1,277			1,049			1,101			1,361			1,365			1,451			1,370			1,917			1,812			2,198
	Depreciation and amortization		481			564			641			687			774			827			1,026			1,092			1,220			1,305			1,435
Total operating expenses			15,857			18,059			21,229			21,900			23,418			27,981			29,700			30,963			31,845			36,912			42,457
Income (loss) from operations			(1,074	)		(515	)		(91	)		829			(721	)		438			(371	)		141			(901	)		(2,202	)		(1,877	)
Interest expense, net			(225	)		(426	)		(381	)		(456	)		(491	)		(602	)		(749	)		(772	)		(806	)		(644	)		(622	)
Change in fair value of warrant liabilities			(459	)		1			7			(553	)		(2,740	)		(839	)		(1,681	)		(3,232	)		(3,641	)		(1,277	)		2,328
Net loss			$(1,758	)		$(940	)		$(465	)		$(180	)		$(3,952	)		$(1,003	)		$(2,801	)		$(3,863	)		$(5,348	)		$(4,123	)		$(171	)

(1)

Includes stock-based compensation expense as follows:

	Three Months Ended
	Mar 31, 2009		June 30, 2009		Sept 30, 2009		Dec 31, 2009		Mar 31, 2010		June 30, 2010		Sept 30, 2010		Dec 31, 2010		Mar 31, 2011		June 30, 2011		Sept 30, 2011
	(in thousands) (unaudited)
Operations		$9		$7		$7		$8		$32		$33		$35		$44		$21		$99		$72
Research and development		10		11		14		14		17		19		20		25		25		610		90
Sales and marketing		31		19		19		42		15		34		50		53		116		757		2,183
General and administrative		26		26		27		27		39		57		42		49		68		69		107
Total stock-based compensation		$76		$63		$67		$91		$103		$143		$147		$171		$230		$1,535	$	2,452

Quarterly Trends

        Revenue continued to increase over each of the eleven quarters ended September 30, 2011, except that revenue decreased slightly in the quarters ended March 31, 2009, 2010 and 2011 as compared to the revenue from the prior quarter. Revenue in each quarter is impacted by the weighted number of business days in the quarter.

59

        Peering partner compensation increased over each quarter in 2009 and 2010 and the quarters ended June 30, 2011 and September 30, 2011 due to increased traffic over our CloudWorx CaaS Platform.

        Infrastructure costs increased beginning in the second quarter of 2009 as we added capacity for the delivery of higher traffic levels, and then remained consistent until the latter part of 2010 when we again expanded our capacity for the anticipated increase in our revenues and maintenance costs increased due to our purchases of more equipment in 2010 and year to date in 2011.

        Operations, research and development, sales and marketing, and general and administrative expenses increased primarily due to the addition of personnel in connection with the expansion of our business.

        Depreciation and amortization expense increased quarter over quarter due to an increase in our purchases of equipment as we added more capacity to address the increased traffic over our CloudWorx CaaS Platform.

        Interest expense varied from quarter to quarter due to increased borrowings under our equipment financing arrangements and revolving accounts receivable loan facility; and a loan modification in the quarter ended March 31, 2010.

        Change in fair value of warrants was impacted by changes in the valuation of our stock which did not change significantly in the quarters ended June 30, 2009 and September 30, 2009, and then continued to increase in subsequent quarters through June 30, 2011 as the estimated fair value of our stock increased. In the quarter ended September 30, 2011, the estimated fair value of our stock decreased due to market conditions, which reduced the valuation of comparable guideline companies.

        Net loss decreased from the quarter ended March 31, 2009 through the quarter ended December 31, 2009 as we continued to benefit from higher income from operations. Our net loss in the quarters in 2010 varied significantly primarily due to higher charges for the change in fair value of warrant liabilities. Our net loss in the quarter ended September 30, 2011 decreased due to the credit for the change in fair value of warrant liabilities.

Liquidity and Capital Resources

        Since inception, we have funded our operations primarily with proceeds from issuances of common stock, convertible preferred stock, convertible promissory notes and debt facilities. From inception to September 30, 2011, we raised an aggregate of $36.1 million from the sale of our convertible preferred stock, including amounts received from the issuance of convertible promissory notes. We have also funded purchases of equipment with proceeds from our long-term debt.

        Currently, we have outstanding debt obligations, including accrued interest, to several commercial lenders. As of September 30, 2011, we owed approximately $2.5 million to Vogen Funding, L.P., $1.3 million to Atel Ventures, Inc., $1.3 million to Compass Horizon Funding LLC, $13.8 million to Hercules Corporation II, L.P. and Comerica Bank, and $7.1 million to East West Bank under credit arrangements providing funds for working capital and the purchase of equipment. We have no further ability to incur indebtedness under the agreements with Vogen Funding, L.P., Atel Ventures, Inc. and Compass Horizon Funding LLC. We have an ability to borrow up to an additional $4.5 million under our agreement with Hercules Corporation II, L.P. and Comerica Bank, and have an ability to borrow up to an additional $4.7 million under our debt agreement with East West Bank. These debt agreements generally require us to provide security for our obligations in the form of liens on equipment purchased with money borrowed, and in the case of the debt agreement with Hercules Corporation and Comerica Bank, liens on other of our personal property. Interest rates on the amounts borrowed range from fifteen percent to a variable prime plus one percent. We intend to use a portion of the proceeds of this offering to satisfy all remaining obligations under the debt agreements

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with Vogen Funding, L.P., Atel Ventures, Inc., Compass Horizon Funding LLC, Hercules Corporation II, L.P., Comerica Bank and East West Bank.

        Our debt agreements contain certain affirmative and negative covenants, including restrictions with respect to payment of cash dividends, merger or consolidation, changes in the nature of our business, disposal of assets and obtaining additional loans. Our debt agreements also contain certain financial covenants and cross-default provisions whereby a default, including a violation of covenants, under the terms of one agreement would result in a default under another agreement. As of September 30, 2011, we were in compliance with our debt covenants in all material respects. Our debt agreements are collateralized by all of our assets. In the event we fail to comply with our debt covenants, the amounts outstanding under our debt agreements would become due and payable absent a waiver by our lenders, which could materially and adversely affect our liquidity.

        We have incurred recurring operating losses since inception and have negative working capital of $14.2 million, an accumulated deficit of $46.3 million and a total stockholders' deficit of $36.4 million as of September 30, 2011. We do not expect any material change in our need for financing over the next twelve months. Our cash provided by or used in operating activities can vary from period to period, particularly as a result of timing differences between payment of peering partner compensation and billing and collection of large receivables. For example, cash used in operating activities during the nine months ended September 30, 2011 was affected by the timing of our collection of $7.0 million of accounts receivable, which we received in the first week of October 2011. In addition, cash used during the period reflected the use of $2.3 million for costs incurred in connection with our preparations for this offering. Our cash used in investing activities principally relates to the purchase of new equipment which is generally matched by borrowings under our equipment lines of credit. Our cash provided by or used in financing activities principally relates to new bank borrowings or repayment of outstanding debt. We have entered into agreements with various lenders to defer $2.0 million and $1.4 million of principal payments on our equipment financing obligations to January 1 and January 31, 2012, respectively. In the event that this offering is delayed, we will likely seek additional equity or debt financing. Among other proposals we are evaluating, we have received a non-binding term sheet from certain of our existing investors which provides for up to $11 million of new debt financing. We believe our existing cash and cash equivalents combined with the amounts available under our debt facilities and the additional debt or equity which we expect to raise, will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months.

        We currently expect to continue to finance our operations following this offering with a combination of the proceeds of this offering, cash provided by operations and debt arrangements. However, there can be no assurance that additional funding will be available to us on acceptable terms on a timely basis, if at all, or that we will generate sufficient cash from operations to adequately fund our operating needs or ultimately achieve profitability. If we are unable to raise additional capital to fund our operations, we will need to curtail planned activities to reduce costs. Doing so will likely have an unfavorable effect on our ability to execute on our business plans.

Cash Flows

        The following summary of our cash flows is for the periods indicated, and has been derived from our financial statements which are included elsewhere in this prospectus:

	Year Ended December 31,									Nine Months Ended September 30,
	2008			2009			2010			2010			2011
										(unaudited)
Cash provided by (used in) operating activities		$(5,577	)		$3,166			$4,676			$1,327			$(4,025	)
Cash used in investing activities		$(4,380	)		$(10,343	)		$(11,706	)		$(7,565	)		$(9,449	)
Cash provided by financing activities		$19,778			$5,547			$6,055			$3,237			$9,408

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Cash Flows from Operating Activities

        Our primary uses of cash from operating activities have been for personnel related expenditures, product development and costs related to our facilities. Our cash flows from operating activities will continue to be affected principally by our working capital requirements and the extent to which we increase spending on personnel as our business grows. Our largest source of operating cash flows is cash collections from our customers. We generally bill our customers on a monthly or weekly basis with payment due within 30 or 15 days. We have similar payment terms with our peering partners.

        Cash used in operating activities of $5.6 million in 2008 reflected a net loss of $5.1 million, partially offset by non-cash interest of $0.6 million primarily related to the discount on the conversion of promissory notes into Series C convertible preferred stock. The increase in our net operating assets and liabilities was primarily a result of an increase of $6.0 million in accounts receivable due to the increase in revenue in the latter part of 2008 partially offset by an increase of $2.4 million in accounts payable as we expanded our business.

        Cash provided by operating activities of $3.2 million in 2009 reflected a net loss of $3.3 million, partially offset by non-cash charges of $2.4 million for depreciation and amortization and $1.0 million related to our warrants as a result of the issuance of additional warrants and an increase in the fair value of the stock underlying these warrants. The increase in our net operating assets and liabilities was primarily a result of an increase of $4.3 million in accounts payable and accrued liabilities as our business grew, offset by an increase of $2.6 million on our accounts receivable balances, primarily due to the increase in revenue year over year and the timing of when we collect on the receivables.

        Cash provided by operating activities of $4.7 million in 2010 reflected a net loss of $11.6 million, offset by aggregate non-cash charges of $12.2 million due to depreciation expenses and the change in fair value of warrant liabilities and an increase of $2.6 million in our net operating assets and liabilities. This increase in our net operating assets and liabilities was primarily a result of an increase of $5.6 million in accounts payable and accrued liabilities offset by an increase in our accounts receivable balances of $2.4 million which was primarily due to the increase in revenue year over year and the timing of when we collected on the receivables. As we have grown our business, we have been able to obtain more favorable payment terms from our customers and peering partners.

        Cash provided by operating activities of $1.3 million in the nine months ended September 30, 2010 reflected a net loss of $7.8 million, offset by aggregate non-cash charges of $7.9 million for depreciation expense and the change in fair value of warrant liabilities. The change in net operating assets and liabilities of $0.2 million was primarily a result of a $4.0 million increase in accounts receivable due to the timing of our collection of the receivables, offset by an increase in accounts payable and accrued liabilities of $4.6 million as our operations had grown.

        Cash used in operating activities of $4.0 million in the nine months ended September 30, 2011 reflected a net loss of $9.6 million, offset by aggregate non-cash charges of $6.6 million for depreciation expense and the change in fair value of warrant liabilities, $4.2 million in stock-based compensation expense, and $0.8 million of non-cash interest expense. The decrease in net operating assets and liabilities of $6.0 million was primarily a result of the $9.5 million increase in accounts receivable due to the timing of our collection of the receivables, and the increase of $4.5 million in other assets for deferred costs we have incurred in connection with our initial public offering, offset by a net increase of $8.2 million in accounts payable and accrued liabilities as our operations have grown.

Cash Flows from Investing Activities

        Our investing activities have consisted primarily of capital expenditures to purchase equipment that hosts our CloudWorx CaaS Platform and to a lesser degree purchase of intangible assets. We have historically made investments each year for the acquisition of additional equipment to support our current and anticipated revenue growth and expect to continue to do so in the future.

        In 2008, cash used in investing activities was $4.4 million as a result of our capital expenditures.

        In 2009, cash used in investing activities was $10.3 million as a result of $9.9 million in capital expenditures and $0.5 million for the purchase of intangible assets.

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        In 2010, cash used in investing activities was $11.7 million as a result of $10.4 million in capital expenditures and $1.5 million for the purchase of intangible assets, including the capitalization of our CloudCentral portal costs.

        During the nine months ended September 30, 2010, cash used in investing activities was $6.5 million in net capital expenditures and $1.1 million for the purchase of intangible assets.

        During the nine months ended September 30, 2011, cash used in investing activities was $8.5 million in net capital expenditures and $1.0 million for the purchase of intangible assets.

Cash Flows from Financing Activities

        To date, we have financed our operations primarily with proceeds from the sale of convertible preferred stock and debt facilities. As of December 31, 2010, we had outstanding debt of $18.7 million.

        In 2008, cash provided by financing activities was $19.8 million, primarily as a result of $16.2 million of net proceeds from the issuance of our Series C convertible preferred stock and net borrowings of $3.6 million from an equipment loan facility that we entered into in 2007.

        In 2009, cash provided by financing activities was $5.5 million, primarily as a result of the receipt of $9.6 million from equipment loan facilities that we entered into in 2007 and 2009, offset by repayments on our debt of $4.1 million.

        In 2010, cash provided by financing activities was $6.1 million, primarily as a result of the receipt of $10.2 million from equipment loan facilities and a loan and security agreement that we entered into in 2010, offset by repayments on our debt of $4.1 million.

        During the nine months ended September 30, 2010, cash provided by financing activities was a result of the net borrowings of $3.2 million on our debt arrangements.

        During the nine months ended September 30, 2011, cash provided by financing activities was primarily from $13.3 million in borrowings on our equipment financing arrangements and revolving accounts receivable loan facility and $2.0 million in funds received from the repayment of shareholder notes receivable, offset by repayments of $5.9 million on our debt arrangements.

Contractual Obligations

        The following summarizes our contractual obligations as of December 31, 2010:

	Payments Due by Period
Contractual Obligations:	Less than 1 Year		1 to 3 Years		3 to 5 Years		More than 5 Years		Total
	(in thousands)
Long-term debt obligations, including current portion(1)	$	10,990	$	9,555	$	—	$	—	$	20,545
Capital lease obligation		131		393		77		—		601
Operating lease obligations(2)		1,704		517		—		—		2,221
Purchase commitments		4,500		—		—		—		4,500
Total	$	17,325	$	10,465	$	77	$	—	$	27,867

(1)

Long-term debt includes $18.2 million in principal and $2.3 million in accrued interest under the equipment financing agreements entered into in 2007 and 2009 and a loan and security agreement entered into in 2010.



(2)

Operating lease agreements represent our obligation to make payments under our non-cancelable lease agreements for office facilities and telecommunications equipment.

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Off-Balance Sheet Arrangements

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

Quantitative and Qualitative Disclosures about Market Risk

        We are exposed to market risks in the ordinary course of our business. These risks primarily include risk related to interest rate sensitivities.

        We had cash and cash equivalents of $10.1 million, $9.2 million and $5.1 million as of December 31, 2009 and 2010 and September 30, 2011, respectively. These amounts were held primarily in cash deposits and money market funds and have been held for working capital purposes. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of the interest rates in the United States. Due to the short-term nature of these instruments, a sudden change in market interest rates would not be expected to have a material impact on our financial condition or our results of operations.

        We had long-term debt of $12.0 million and $18.7 million at December 31, 2009 and 2010 and $26.1 million as of September 30, 2011, respectively, consisting of our outstanding obligations under our equipment financing arrangements, capital lease obligation, and the loan and security agreement that we entered into in May 2010. Our obligations under the equipment financing arrangements are fixed and are not subject to fluctuations. During the year ended December 31, 2010, a 10 percent increase or decrease in the prime rate would not have had a material impact on our interest expense.

        To the extent that in the future we enter into other long-term debt arrangements, we would be subject to fluctuations in interest rates which could have a material impact on our future financial condition and results of operations.

Critical Accounting Policies

        Our financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, operating expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. In many instances, we could have reasonably used different accounting estimates, and in other instances changes in the accounting estimates are reasonably likely to occur from period-to-period. Accordingly, actual results could differ significantly from the estimates made by our management. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.

Revenue Recognition

        We recognize revenue when all of the following have occurred: (1) we have entered into a legally binding arrangement; (2) services have been rendered; (3) payment is deemed fixed or determinable; and (4) collection is probable. The sales prices for our services are typically considered to be fixed or determinable at the inception of an arrangement.

        Our revenue is primarily derived from customer usage of our CloudWorx CaaS Platform on a minute of use basis. We recognize revenue based upon documented minutes of traffic over our

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CloudWorx CaaS Platform at the time of customer usage. The rates we charge per minute are determined by contracts between us and our customers and are subject to periodic changes.

Allowance for Doubtful Accounts

        We maintain an allowance for doubtful accounts for estimated losses resulting from the failure of customers to make required payments. When we are aware of circumstances that may impair a specific customer's ability to meet its financial obligations, we provide a specific allowance against the amounts due and thereby reduce the net receivable to the amount we believe will be collected. For all other customers, we base the amount of our allowance on our historical experience, current economic trends, and an analysis of our aged outstanding accounts receivable balances. If the financial condition of a customer deteriorates, resulting in additional risk in their ability to make payments to us, then additional allowances may be required which would result in an additional expense in the period that determination is made.

Stock-Based Compensation

        We recognize compensation costs related to stock options granted to employees based on the estimated fair value of the awards on the date of grant, net of estimated forfeitures. We estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. The grant date fair value of the stock-based awards is generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards.

        The fair value of the option awards was calculated using the Black-Scholes option valuation model with the following assumptions:

	Year Ended December 31,
							Nine Months Ended September 30, 2011
	2008		2009		2010
Expected term (in years)		6.25		6.25		6.25		1.16, 6.25
Risk-free interest rate		2.6%-4.1%		2.6%-3.8%		1.7%-2.6%		0.1%-2.7%
Expected volatility		42-52%		52%		52%		52%
Expected dividend rate		0%		0%		0%		0%

        The Black-Scholes model requires the use of highly subjective and complex assumptions which determine the fair value of share-based awards. These assumptions include:

Expected Term.    The expected term represents the period that our share-based awards are expected to be outstanding and was primarily determined using the simplified method in accordance with guidance provided by the SEC. For option grants considered to be on standard terms, the simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the awards. For awards not considered on standard terms, the expected term is based on the historical option exercise behavior of our employees and posting-vesting cancellations.

Risk-Free Interest Rate.    The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to each award's expected term.

Expected Volatility.    The expected volatility is derived from historical volatilities of several unrelated public companies within the telecommunications services and Software-as-a-Service, or SaaS, industries that are deemed to be comparable to our business because we have limited information on the volatility of our common stock since we have no trading history. When making

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the selections of our industry peer companies to be used in the volatility calculation, we considered the size, operational and economic similarities to our principal business operations.

Expected Dividend.    The expected dividend was assumed to be zero as we have never paid dividends and have no current plans to do so.

        In addition to assumptions used in the Black-Scholes option-pricing model, we must also estimate a forfeiture rate to calculate the stock-based compensation for our awards. Our forfeiture rate is based on an analysis of our actual historical forfeitures. We will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors. Quarterly changes in the estimated forfeiture rate can have a significant impact on our stock-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period the forfeiture estimate is changed. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the stock-based compensation expense recognized in the financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the stock-based compensation expense recognized in the financial statements.

        We will continue to use judgment in evaluating the expected term, expected volatility and forfeiture rate related to our own stock-based compensation on a prospective basis. As we continue to accumulate additional data related to our common stock, we may have refinements to the estimates of our expected volatility, expected terms and forfeiture rates, which could materially impact our future stock-based compensation expense.

        We are also required to estimate the fair value of the common stock underlying our stock-based awards when performing the fair value calculations with the Black-Scholes option-pricing model. The fair values of the common stock underlying our stock-based awards were estimated on each grant date by our board of directors, with input from management. Our board of directors has historically been comprised of a majority of non-employee directors with significant experience in various industries including the telecommunications, software, and technology sectors. We believe that our board of directors has the relevant experience and expertise to determine a fair value of our common stock on each respective grant date. Given the absence of a public trading market of our common stock, and in accordance with the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, our board of directors exercised reasonable judgment and considered numerous objective and subjective factors to determine the best estimate of the fair value of our common stock including:

•

contemporaneous and retrospective valuations performed by unrelated third party specialists;

•

prices for our convertible preferred stock and common stock sold to outside investors in arm's-length transactions;

•

rights, preferences and privileges of our convertible preferred stock relative to those of our common stock;

•

actual operating and financial performance;

•

hiring of key personnel and the experience of our management;

•

risks inherent in the development and deployment of our products and services;

•

likelihood of achieving a liquidity event, such as an initial public offering or a merger or acquisition of our company given prevailing market conditions and the nature and history of our business;

•

market value of a comparable group of public companies;

•

illiquidity of stock-based awards involving securities in a private company;

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•

industry information such as market size and growth; and

•

macroeconomic conditions.

        Since March 2010, we have used the Probability-Weighted Expected Return Method, or PWERM, to estimate the fair value of our common and preferred stock. This valuation method was considered to be most appropriate given the status of our business and the anticipated liquidity events. Under the PWERM method, management assigned probabilities and timing estimates to potential liquidity events for our business based on a variety of factors, including primarily our recent operating history, the amount of cash held by us, and our business outlook. Three principal scenarios were examined: a merger or acquisition, or M&A, scenario; an initial public offering, or IPO, scenario; and a scenario in which the company continues to operate as a private entity. For each valuation date, we prepared a financial forecast to be used in the computation of the enterprise value. The financial forecasts took into account our past experience and future expectations.

        To arrive at a value for common shares under the M&A scenario and the IPO scenario, the Guideline Public Company Method was used to estimate our enterprise value at the time of the respective anticipated liquidity event. The Guideline Public Company Method estimates the fair value of a company by applying to that company market revenue multiples of publicly traded companies in similar lines of business. When choosing the comparable companies to be used for the Guideline Public Company Method, we focused on companies in the telecommunication services and SaaS industries. Some of the specific criteria we used to select and analyze comparable companies within our industry included the business description, business size, projected growth, financial condition, and historical operating results. We analyzed the business and financial profiles of the selected companies for relative similarity to us, and once such differences and similarities were determined and proper adjustments were made, we selected an appropriate enterprise value revenue multiple. This revenue multiple was applied to the trailing twelve months' revenue at the time of the anticipated future liquidity event to arrive at our anticipated enterprise value and total stockholder value at the time of the respective liquidity event. The total stockholder value was then allocated among share classes based on the amount of liquidation preferences (or, in the case of the IPO scenario, the conversion ratios of each of the preferred shares), and the resulting equity values were discounted to the present using a discount rate which accounted for the market cost of capital and risk.

        We also used a Guideline Public Company Method to estimate our enterprise value under the continuing to operate as a private entity scenario. As our business continued to grow, and developing multi-year forecasts became possible, starting on December 31, 2010, we supplemented the Guideline Public Company Method of estimating our enterprise value under the continuing to operate as a private entity scenario with a Discounted Cash Flow approach. Under the Discounted Cash Flow approach, we analyzed the forecast of our expected future financial performance, and discounted those to a present value using an appropriate discount rate which reflected our then-current cost of capital. We weighted the enterprise values and total stockholder values determined by the Guideline Public Company Method and the Discounted Cash Flow approach to arrive at a single total stockholder value for the continuing to operate as a private entity scenario. Once we arrived at an enterprise value under the continuing to operate as a private entity scenario, we apportioned this total stockholder value to the various share classes, based on their respective liquidation preferences to arrive at a value for the common shares under the continuing to operate as a private entity scenario. Next, we applied a marketability discount to reflect the fact that our common stockholders were unable to liquidate their holdings at will, or possibly at all, which resulted in a value for the common shares under the continuing to operate as a private entity scenario. Lastly, we probability-weighted the common stockholder values under each of the scenarios to arrive at an indication of value for our common equity.

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        Information regarding stock option grants to our employees since January 1, 2010 is summarized as follows:

Grant Date	Number of Options Granted		Exercise Price		Fair Value Per Share of Common Stock		Aggregate Grant Date Fair Value
May 7, 2010		346,250	$	3.40	$	3.40	$	620,000
June 24, 2010		41,250		3.40		3.40		73,000
September 23, 2010		73,750		4.04		4.04		153,000
October 27, 2010		33,750		5.14		5.14		89,000
February 7, 2011		241,250		7.04		7.04		899,000
April 21, 2011		68,750		11.00		11.00		398,000
May 3, 2011		245,000		11.00		11.00		1,412,000
June 3, 2011		107,318		1.63		13.20		1,242,000
June 3, 2011		2,451		2.04		13.20		27,000
July 14, 2011		97,500		13.20		13.20		662,000
July 28, 2011		7,500		18.00		18.00		70,000
August 19, 2011		182,055		1.63		13.20		2,111,000
November 2, 2011		47,500	$	10.58	$	10.58	$	263,000

        The June 3, 2011 and August 19, 2011 option grants were issued to long time employees whose nonstatutory stock options had expired. These options were issued at the same exercise price as the expired options and are fully vested as they were issued in consideration for the services rendered by the long time employees.

        The intrinsic value of all outstanding options as of September 30, 2011 was $             million based on the estimated fair value for our common stock of $          per share, the mid-point of the estimated price range set forth on the cover of this prospectus.

        The factors described above were considered by our board of directors each time it determined the fair value of our common stock. No single event caused the valuation of our common stock to increase or decrease through November 2, 2011. Instead, a combination of the factors described below in each period led to the changes in the fair value of the underlying common stock. The following additional factors had particular relevance in connection with the board of directors' determination during each of the following periods:

March 31, 2010 to June 29, 2010: $3.40 per common share fair value

•

general, albeit slow, improvement in the economic environment, and a slight increase in the multiples of the peer guideline public companies;

•

continued growth in our revenue, and stable operating margins;

•

our updated liquidity scenarios, which reflected the possibility of a liquidity event in the year to year-and-a-half horizon; and

•

the most recent independent contemporaneous valuation report as of March 31, 2010.

June 30, 2010 to September 29, 2010: $4.04 per common share fair value

•

decline in the overall economic environment, and a corresponding decline in the valuation of our peer guideline public companies;

•

continued growth in our revenue, and stable operating margins;

•

our updated liquidity scenarios which reflected a slight increase in the possibility of a liquidity event in the year to year and a half horizon; and

•

the most recent independent contemporaneous valuation report as of June 30, 2010.

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September 30, 2010 to December 30, 2010: $5.14 per common share fair value

•

slight improvement in the overall economic environment, and a corresponding slight improvement in the valuation of our peer guideline public companies;

•

continued growth in our revenue, and continued operating margin stability;

•

our updated liquidity scenarios which reflected a one quarter delay in the timing of a liquidity event; and

•

the most recent independent contemporaneous valuation report as of September 30, 2010.

December 31, 2010 to March 30, 2011: $7.04 per common share fair value

•

improvement in the overall economic environment, and a corresponding improvement in the valuation of our peer guideline public companies;

•

continued growth in our revenue, and continued operating margin stability;

•

our updated liquidity scenarios which reflected a delay in the timing of a liquidity event to the end of 2011; and

•

the most recent independent contemporaneous valuation report as of December 31, 2010.

March 31, 2011 to May 31, 2011: $11.00 per common share fair value

•

improvement in the overall economic environment, and a corresponding improvement in the valuation of our peer guideline companies;

•

continued growth in our revenue, and continued operating margin stability;

•

sale of 537,136 of our common shares held by executives to an unrelated institutional investor for $11.00 per common share on May 4, 2011 and June 29, 2011;

•

our updated liquidity scenarios which reflected the possibility of a liquidity event at the end of 2011; and

•

the most recent independent contemporaneous valuation report as of March 31, 2011.

June 1, 2011 to July 14, 2011: $13.20 per common share fair value

•

continued improvement in the overall economic environment, and a corresponding improvement in the valuation of our peer guideline companies;

•

continued growth in our revenue, and continued operating margin stability;

•

we did not consider the June 29, 2011 sale of common shares held by executives for the purpose of the June 30, 2011 valuation measurement date as a new transaction as this transaction was a sale to the same investor on the same terms as the May 4, 2011 transaction and was not considered a new transaction for valuation purposes;

•

our updated liquidity scenarios which reflected the increased possibility of a liquidity event by the end of 2011; and

•

the most recent independent contemporaneous valuation report as of June 30, 2011.

July 15, 2011 to July 31, 2011: $18.00 per common share fair value

•

continued growth in our revenue, and continued operating margin stability;

•

the increased likelihood of a near-term completion of this offering; and

•

we did not have an independent contemporaneous valuation report prepared during this period due to our belief at the time that we were in close proximity to the initial public offering.

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August 1, 2011 to September 29, 2011: $13.20 per common share fair value

•

a decline in the overall economic environment, and a corresponding decline in the valuation of our peer guideline companies;

•

lack of companies in the IPO registration process going effective during this time period, which was offset by the continued growth in our revenue, and continued operating margin stability;

•

our updated liquidity scenarios which reflected the possibility of a liquidity event at the end of 2011; and

•

the most recent independent contemporaneous valuation report as of June 30, 2011.

September 30, 2011 to December 14, 2011: $10.58 per common share fair value

•

a continued decline in the overall economic environment, and a corresponding decline in the valuation of our peer guideline companies;

•

continued growth in our revenue, and continued operating margin stability;

•

our updated liquidity scenarios which reflected the possibility of a liquidity event by March 31, 2012; and

•

the most recent independent contemporaneous valuation report as of September 30, 2011.

        Our calculations are sensitive to highly subjective assumptions that we were required to make at each valuation date relating to an appropriate present value discount rate and marketability discount. The following table summarizes these assumptions at the end of each quarter since March 31, 2010:

Valuation Date	Present Value Discount Rate			Marketability Discount
March 31, 2010		29.0	%		12.0	%
June 30, 2010		28.5	%		10.0	%
September 30, 2010		29.0	%		10.0	%
December 31, 2010		29.0	%		12.0	%
March 31, 2011		29.0	%		11.0	%
June 30, 2011		25.0	%		9.0	%
September 30, 2011		24.0	%		11.0	%

        Our present value discount rate was determined using a Capital Asset Pricing Model, or CAPM. The discount rate was based on an analysis of comparable companies in the telecommunications services and SaaS industries. We also compared the results of the CAPM discount rate to discount rates published in various studies of venture capital required rates of return for investments in companies of an equivalent stage of development. The marketability discount was determined using a protective put analysis.

        Determining the fair market value of our common stock involves complex and subjective judgments including estimates of revenue, assumed market growth rates and estimated costs, as well as appropriate discount rates. At the time of each valuation, the significant estimates used in the discounted cash flow approach included estimates of our revenue and revenue growth rates for several years into the future. Although each time we prepared such forecasts for use in the preparation of a valuation report, we did so based on assumptions that we believed to be reasonable and appropriate, there can be no assurance that any such estimates for earlier periods or for future periods will prove to be accurate. There is also significant volatility in the telecommunications services and SaaS industries. Our valuations incorporate the volatility in the markets based on the Guideline Public Company Method described above. We also experience fluctuations in our own financial forecasts on a quarter-to-quarter basis which impacts the related valuations.

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        Our stock-based compensation expense for awards granted is as follows (in thousands):

	Year Ended December 31,						Nine Months Ended September 30,
	2008		2009		2010		2010		2011
							(unaudited)
Operations	$	27	$	31	$	144	$	100	$	192
Research and development		16		49		81		56		725
Sales and marketing		185		111		153		99		3,056
General and administrative		91		106		186		138		244
Total stock-based compensation	$	319	$	297	$	564	$	393	$	4,217

        As of December 31, 2010 and September 30, 2011 we had $1.3 million and $3.8 million of unrecognized stock-based compensation expense, net of estimated forfeitures, that is expected to be recognized over a weighted average period of 1.5 years and 1.7 years, respectively. In future periods, excluding the charge for the fully vested options granted to long-term employees whose nonstatutory options had expired, our stock-based compensation expense is expected to increase as a result of our existing unrecognized stock-based compensation to be recognized as these awards vest and as we issue additional stock-based awards to attract and retain employees.

Liability Associated with Warrants to Purchase Convertible Preferred Stock and Common Stock

        Freestanding warrants to purchase shares of our convertible preferred stock are classified as liabilities on our balance sheets at fair value because the warrants may conditionally obligate us to redeem the underlying convertible preferred stock at some point in the future. Certain freestanding warrants to purchase shares of our common stock are also classified as liabilities on our balance sheets at fair value because those warrants have price protection features.

        These convertible preferred stock and common stock warrants are subject to remeasurement at each balance sheet date, and any change in fair value is recognized as change in fair value of warrant liabilities in the statements of operations. We estimated the fair value of these warrants at the respective balance sheet dates using the Black-Scholes option-pricing model and incorporating considerations of the potential value associated with price protection features. We use assumptions to estimate the fair value of these warrants including the remaining contractual terms of the warrants, risk-free interest rates, expected dividend yields and the expected volatility of the underlying stock. These assumptions are subjective and the fair value of these warrants could have differed significantly had we used different assumptions.

        We will continue to record adjustments to the fair value of the convertible preferred stock warrants until they are exercised, expire or, upon the closing of an initial public offering, when they become warrants to purchase shares of our common stock, at which time the warrants will no longer be accounted for as a liability. At that time, the then-current aggregate fair value of these warrants will be reclassified from non-current liabilities to additional paid-in capital, a component of stockholders' equity, and we will cease to record any related periodic changes in fair value. The common stock warrants with price protection features will continue to be classified as a liability and will be remeasured until they are exercised or expire.

Recoverability of Intangible Assets

        Intangible assets on our balance sheets consist primarily of capitalized costs to acquire and develop trademarks, patents, our CloudCentral portal and regulatory licenses to operate as a telecommunications company. The trademarks and regulatory licenses have no expiration date and thus are classified as indefinite lived intangible assets on our balance sheets. As of December 31, 2010 and

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September 30, 2011, we had $0.9 million and $1.1 million, respectively, in indefinite-lived intangible assets.

        Our capitalized portal development costs and capitalized patent have an economic useful life and/or expire after a specified period of time and thus are classified as finite-lived intangible assets on our balance sheets. Amortization of finite-lived intangible assets is computed using the straight-line method over the estimated economic life of the assets. For the CloudCentral portal, the amortization period is seven years. For capitalized patent assets, the amortization period is the term of the patent, generally 14 years, or the estimated economic life if deemed to be shorter. As of December 31, 2010 and September 30, 2011, we had $1.1 million and $1.8 million, respectively, of finite-lived intangible assets on our balance sheets.

        For our indefinite-lived intangible assets, we conduct a long-lived asset impairment analysis on an annual basis and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. We perform our annual impairment test in the third quarter of each year. Factors we consider important which could cause us to assess potential impairment include significant changes in the manner of our use of the asset or the strategy for our overall business and significant negative industry or economic trends. An impairment loss is recorded when the carrying amount of the indefinite-lived asset is not recoverable and exceeds its fair value. The carrying amount of an asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and an expense to operating results. Our ability to utilize the assets in growing our business, as well as the market value of our company are variables considered in evaluating if impairment has occurred. These variables require management judgment and include inherent uncertainties such as customer acceptance of our value proposition, our ability to manage operating costs and growing our business, as well as the impact of technology changes in our business. A variation in the assumptions used could lead to a different conclusion regarding the realizability of an asset and, thus, could have a significant effect on our conclusions regarding whether an asset is impaired and the amount of impairment loss recorded in our financial statements. We have used a replacement cost approach to determine the fair value of regulatory licenses for the purpose of conducting an impairment test. This approach implies that the opportunity cost represents the foregone cash flows during the period it takes to obtain or create the asset, as compared to the cash flows that would be earned if the intangible asset was on hand today. We have not recognized a material impairment charge in our statements of operations on our indefinite-lived intangible assets in 2008, 2009 and 2010, and in the nine months ended September 30, 2011.

        We periodically review our finite-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset is impaired or the estimated useful lives are no longer appropriate. If indicators of impairment exist and the undiscounted projected cash flows associated with such assets are less than the carrying amount of the asset, an impairment loss is recorded to write the asset down to their estimated fair values. Fair value is estimated based on discounted future cash flows. We have not recognized an impairment charge in our statement of operations on our finite-lived intangible assets in 2008, 2009 and 2010, and in the nine months ended September 30, 2011.

Reserve for Peering Partner Disputes

        If we determine that we will need to pay our peering partner more than we previously accrued or if we determine that there is a doubt regarding the amount that we will ultimately pay to our peering partner, we record a charge to peering partner compensation and a corresponding increase to our reserve for disputes based on our estimate of the amount that will eventually be payable. If we subsequently determine that the disputed amounts will be settled for an amount different than the

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amount which we originally accrued, we will recognize the difference as an adjustment to peering partner compensation. We believe that our procedures are designed to properly assess dispute accruals, however, changes to the estimates used in its calculation could result in a material impact on our statement of operations.

Income Taxes

        Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We make these estimates and judgments about our future taxable income that are based on assumptions that are consistent with our future plans. As of December 31, 2009 and 2010, we have recorded a full valuation allowance on our net deferred tax assets due to uncertainties related to our ability to utilize our deferred tax assets in the foreseeable future. These deferred tax assets primarily consist of certain net operating loss carryforwards. Should the actual amounts differ from our estimates, the amount of our valuation allowance could be materially impacted.

        Since inception, we have incurred operating losses, and, thus, we have not recorded a provision for income taxes for any of the periods presented for income tax. Accordingly, there have not been significant changes to our provision for income taxes during 2008, 2009 or 2010, and we do not expect any significant changes until we are no longer incurring losses.

        As of December 31, 2010, we had federal net operating loss carryforwards of $26.8 million and state net operating loss carryforwards of $15.2 million. Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. If not utilized, the federal net operating loss and tax credit carryforwards will expire beginning in 2023 and the state net operating loss will begin expiring in 2024. Utilization of these net operating losses and credit carryforwards may be subject to an annual limitation due to applicable provisions of the Internal Revenue Code of 1986, as amended, and state and local tax laws if we have experienced an "ownership change" in the past, or if an ownership change occurs in the future, including, for example, as a result of the shares issued in this offering aggregated with certain other sales of our stock before or after this offering.

Recent Accounting Pronouncements

Fair Value Measurements

        Effective January 1, 2010, we adopted new authoritative guidance on fair value measurements and disclosures. The new guidance requires additional disclosures regarding fair value measurements, amends disclosures about postretirement benefit plan assets, and provides clarification regarding the level of disaggregation of fair value disclosures by investment class. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for certain Level 3 activity disclosure requirements that will be effective for reporting periods beginning after December 15, 2010. Accordingly, we adopted this new guidance beginning January 1, 2010, except for the additional Level 3 requirements, which will be adopted in 2011. Level 3 assets and liabilities are those whose fair value inputs are unobservable and reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. The adoption of this guidance did not have a material impact on our financial statements in 2010 and is not expected to have a material impact on our financial statements in 2011.

        In May 2011, the Financial Accounting Standards Board, or the FASB, issued new guidance for fair value measurements to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. The guidance changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level three fair value measurements. The guidance is effective for us prospectively beginning in the first quarter of 2012. We are currently evaluating the impact this guidance may have on our financial position, results of operations, and cash flows.

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BUSINESS

Overview

        We are a provider of on-demand, cloud-based communications services to service providers and enterprises. Our customers can leverage our proprietary Communications-as-a-Service, or CaaS, platform, which we refer to as our CloudWorx CaaS Platform, to deliver multimodal communications services, including voice, unified communications, video and other rich-media applications, to communications devices with reduced cost and improved quality compared to existing alternatives. Our CloudWorx CaaS Platform allows customers to rapidly and easily transition from legacy network infrastructures to our flexible, software-based, multimodal, IP-based solutions. Our service provider customers include wireless and wireline carriers, as well as cable and voice over IP, or VoIP, providers. Our enterprise customers include businesses seeking integrated multimodal communications solutions.

        The global telecommunications industry is undergoing a shift to next-generation IP-based communication technologies from legacy telephone networks. This transition is being driven by the widespread availability of broadband Internet connectivity and the emergence of cloud-based infrastructures and on-demand service delivery models such as Software as a Service, or SaaS. Cloud-based infrastructures or services refer to services that are delivered from remote servers at shared data centers over the Internet to clients or their customers, in contrast to services delivered using servers and computers controlled and operated by the client on its internal networks or at its owned or leased facilities. We believe these trends, along with the inability of legacy infrastructures to support user demand for next-generation multimodal communications services, have created an opportunity and a need for a flexible and high-quality cloud-based communications platform.

        Our on-demand CloudWorx CaaS Platform is fast to implement, easy to administer through our self-service web-based CloudCentral Portal and highly scalable. It is based on a sophisticated and integrated multi-layer approach, which includes:

•

our software-based Media Peering Grid service, providing any-to-any connection capabilities and allowing service providers and enterprises to cost-effectively interconnect, transport and transact communications traffic, at a rate of more than 22 billion minutes annually based on our traffic in the first nine months of 2011;

•

our SuperRegistry directory, currently containing more than 400 million telephone numbers and end-point identifying addresses for wireless, wireline and other communication devices, enabling intelligent routing of communications traffic over our Media Peering Grid service; and

•

our AppWorx open and secure communications application development environment, which includes a complete set of application programming interfaces, or APIs, developer tools, documentation and reference applications for building full-featured, rich-media applications that leverage our Media Peering Grid service and our SuperRegistry directory.

        These three layers are fully integrated to allow simplified delivery of enhanced voice and rich-media services connecting through the industry-standard Session Initiation Protocol, or SIP, to IP devices and enabling connectivity to traditional non-IP communication devices, such as legacy telephones. Our software-based platform scales easily without requiring significant additional capital expenditures to create and implement new services for new and existing customers and provides significant benefits versus traditional neutral and direct interconnection arrangements.

        Our CloudWorx CaaS Platform is used by service provider customers, such as Sprint and Qwest and enterprise customers, as well as our channel partners delivering communications services to enterprises using equipment and software supplied by technology partners such as Microsoft, Cisco, Avaya and Siemens. Service providers rely on our solutions to respond to the rapidly changing demands from their customers for high-quality multimodal communications through a variety of media and

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devices. Our platform allows service providers to eliminate or significantly reduce their dependency on the higher cost legacy networks by avoiding those networks and directly delivering their communications traffic to other service providers' end-points through our CloudWorx CaaS Platform services. Enterprise customers use our solutions to provide the connectivity necessary to support next-generation communication services, such as unified communications, or UC, platforms that can be used by businesses to embed a full suite of IP-based applications into their daily communications, including VoIP, email, instant messaging, collaboration and video conferencing, as well as advanced contact center communications.

        We believe that our cloud-based architecture, the scale of our proprietary, multi-layer fully-integrated CloudWorx CaaS Platform, and the network effects arising out of the breadth of our relationships with service provider customers, enterprise customers and channel partners, provide us with a significant competitive advantage.

        For the nine months ended September 30, 2010 and 2011 our total revenue was $80.4 million and $106.2 million, respectively, representing year over year growth of 32 percent, and our net loss was $7.8 million and $9.6 million, respectively. For 2008, 2009 and 2010 our total revenue was $43.4 million, $76.2 million and $111.5 million, representing year-over-year organic growth rates of 57 percent, 76 percent and 46 percent, respectively. For the same periods, our net loss was $5.1 million, $3.3 million and $11.6 million, respectively.

Industry

Overview

        Despite significant developments in communications technology, the basic public telephone system, which is known as the Public Switched Telephone Network, or PSTN, continues to rely on legacy networks using many of the same techniques that have been used for decades to connect one voice caller to another. The PSTN is comprised of numerous local and long distance service providers that interconnect through hops and switches within their networks and often across networks of other service providers to form a circuit and connect a call. This structure requires coordination across service providers and creates significant costs, including transit charges and other payments to intermediate service providers. In addition, the transit of communications across multiple service providers can degrade voice quality and reduce reliability. This structure also lacks flexibility to support multimodal communications and creates obstacles to the introduction of new forms of communications services and applications.

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        The graphic below illustrates how a call from one end-user must pass through multiple connections and service providers to be routed to another end-user over the traditional PSTN.

Legacy service provider PSTN architecture

        The increasing availability of broadband Internet connections continues to drive the growth of next-generation communications services, devices and content. This growth has led to the development of the SIP protocol to provide a uniform standard for controlling multimedia communications sessions among IP networks, unified communications systems and end-user communications devices. Infrastructure investments in, and widespread availability of, broadband Internet connections have led to increased adoption of unified communications systems, offering more advanced features such as VoIP, email, instant messaging, collaboration and video conferencing as well as the ability to combine different forms of multimodal communications such as voice and video. SIP-based communications enable substantial cost savings, operating flexibility and features relative to traditional telephony. However, due to the lack of an end-to-end SIP-based communications platform, the legacy PSTN has had to serve as a bridge for traffic between and among VoIP and other SIP networks as well as for connections to non-IP-based networks and end-point devices thus losing the advantages of SIP. This legacy PSTN infrastructure has become increasingly difficult to support as service providers balance the need to upgrade networks and introduce new communications services for their enterprise customers, wireless communication and application users and consumers demanding multimodal connectivity, with the goal of reducing operating costs and capital expenditures. Without the ability to keep communications traffic on an end-to-end connection over IP, it is challenging for service providers to achieve the operational and financial benefits associated with the adoption of all-IP protocols, such as SIP, and to support enterprises and consumers that are increasingly demanding higher quality, multimodal communications solutions to ensure consistent features and interoperability across such applications.

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Reliance on legacy PSTN network

Limitations of traditional approaches

•

Lack of support for software-based communications and rich media applications. The legacy PSTN infrastructure was not designed to support the high-bandwidth and feature-rich requirements of unified communications and software-based rich media applications, such as video conferencing, SMS, instant messaging and collaboration using SIP and IP-based devices. In addition, legacy approaches lack an open and secure application development environment with APIs, which further inhibits the development, distribution, access and integration of full-featured rich-media applications that can take full advantage of IP-based communications.

•

Higher capital costs.  The legacy PSTN infrastructure is characterized by limited functionality, fixed capacity cost and significant physical infrastructure requirements. Most service providers and enterprises maintain separate networks for IP-related communications and traditional voice transport through dedicated circuits, resulting in additional infrastructure costs. The legacy PSTN's hierarchical architecture requires switches to be housed in multiple regional and local physical facilities, resulting in high initial capital expenditures. In addition, service providers using the PSTN must install switches and other infrastructure sufficient to handle the full volume of potential usage and do not have the capability to scale up or down on demand, thereby resulting in underutilized capacity and inefficient capital investment.

•

Higher operating costs.  The legacy PSTN infrastructure architecture uses hardware-based, circuit-intensive networks that require ongoing maintenance and higher operating costs. In addition,

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due to the multiple regional and local physical facilities required by legacy service providers' hierarchical architecture, the operating costs of the circuits connecting these facilities significantly add to the network operating costs. These maintenance and operating costs, along with the lengthy activation periods associated with legacy PSTN infrastructures erode the potential operating cost benefits that could be obtained by using an all-IP network.

•

Inefficient routing and lack of dynamic network capacity allocation.  In the legacy PSTN, a call must follow a specific path, passing through multiple switches and hops, as it travels between end-points. Transit costs increase and the call quality deteriorates as the number of switches and hops in a route increases. SIP-based communications often rely upon the legacy PSTN as a bridge to connect disparate IP networks. This inefficient routing structure of the legacy PSTN imposes constraints on SIP-based communications, limiting the full-potential of multimodal communications. Additionally, the legacy PSTN lacks the capability to support dynamic allocation of network capacity in order to enable on-demand traffic volume changes and facilitate more efficient and cost-effective administration of networks.

•

Lack of a centralized directory for multimodal communications.  The legacy PSTN was designed to deliver voice communications between devices connected to a fixed switching site. As a result, directories included only limited identifying information such as user names and phone numbers. As devices have become increasingly feature-rich and offer multimodal communications, there is a growing need for a directory that not only maps the unique device addresses but also has the ability to determine the location and detect the capabilities of each device.

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Limitations of direct and existing neutral interconnect arrangements.  Some service providers that exchange significant volumes of traffic have used SIP to directly interconnect with other service providers. These direct connect approaches require unique solutions for each individual partner, which are complex to implement and costly to manage because of the large number of direct interconnects required and the inefficiency of managing multiple partner relationships. In addition, existing neutral interconnect solution providers offering peering services use a series of hardware switches that rely on legacy protocols and hierarchical architecture that must be deployed in every local market where communication services are to be provided. This approach requires switches to be housed in a large number of physical facilities in each local area, resulting in high initial capital expenditures, ongoing maintenance costs and limited scalability. Further, these neutral interconnect solution providers still rely upon the PSTN hierarchical architecture and are not capable of providing large scale multimodal communications solutions.

•

Lack of SIP-based interconnect solutions of scale.  With the increased demand for unified communications platforms and multimodal communications, service providers and enterprises are seeking SIP-based communication interconnect solutions of scale. Historically, these users were forced either to implement dedicated point-to-point IP connections, or to rely on the legacy PSTN to serve as a bridge between networks. The former approach is limited in scale, costly and hard to manage, while the latter eliminates the ability to keep communication traffic on IP connections end-to-end, limiting the ability to deliver the full benefits of multimodal communications. Having a large number of SIP-based end-users provides the necessary scale to deliver the advantages of multimodal communications.

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Lack of an integrated, on-demand solution.  Traditionally, there has been a lack of integrated, on-demand solutions enabling service providers and enterprises to deliver IP communications services. Service providers and enterprises seeking to deliver such services would have to combine various hardware, software and network solutions from different vendors, requiring internal and external development and integration costs. Such approaches are expensive, have limited flexibility and features, pose interoperability challenges and require significant time to implement.

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Demand drivers for a new CaaS platform

        By migrating to IP networks, service providers can leverage the flexibility of a software and cloud-based platform to increase the variety of communications services delivered to customers as hosted offerings. Further, customers recognize that, in addition to the many service improvements, adoption of SIP as a protocol for controlling multimedia communication sessions, such as voice and video over IP, provides the potential to drive down telecommunications costs as IP-based networks are more efficient and cost-effective than those that rely on legacy PSTN infrastructure. According to IDC, the total U.S. telecommunications services market is expected to reach $326.5 billion by 2014.⁽³⁾ Additionally, Infonetics Research has forecasted that the worldwide market for VoIP services could reach $74.5 billion by 2015.⁽⁴⁾ Connecting IP-based networks to each other or the PSTN, which is refered to as SIP trunking, represents one of the fastest growing segments within the VoIP services market, and is forecasted to increase at a compound annual growth rate of 52 percent from $599 million in 2010 to $4.8 billion in 2015.⁽⁴⁾ In addition to the migration of communications traffic from the PSTN to IP networks, a number of other trends in the industry are driving the growth in demand for a new cloud-based communications service platform:

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Proliferation of broadband connectivity.  Broadband connectivity continues to expand worldwide at a rapid pace due to the increasing number of Internet users and the implementation of government-supported programs to bolster broadband infrastructure deployment. This broadband proliferation increases the number of users that have access to and can benefit from all-IP communications services.

•

Emergence of cloud-based services architectures.  On-demand delivery models are changing the way services are being delivered, providing significant benefits such as minimizing up-front capital cost requirements, providing global reach, enabling customized pricing plans and centralized, highly redundant offerings with greater flexibility over traditional on-premise models. As a result, cloud-based architectures are being rapidly adopted across organizations of all sizes. According to IDC, the software-as-a-service market in the cloud, which also includes infrastructure-as-a-service and platform-as-a-service, is expected to grow at a compound annual growth rate of 24 percent from $17.1 billion in 2010 to $40.5 billion in 2014.⁽⁵⁾

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Proliferation of SIP/IP-based devices.  Continuing improvements in technology are driving the convergence of computer functionality and Internet connectivity in communications devices. At the same time, the industry continues to adopt SIP as the primary protocol for multimedia communications. The large-scale deployment of IP networks and broad adoption of SIP-based devices, including SIP phones, SIP video devices and SIP-enabled private branch exchanges, or PBXs, are driving increasing growth in SIP usage. According to Infonetics, worldwide business VoIP seats are expected to grow at a compound annual growth rate of 27 percent from 19.9 million in 2010 to 65.3 million in 2015.⁽⁶⁾

(3)

IDC, "U.S. Telecommunications Services 2010-2014 Forecast," IDC #223323, July 2010.

(4)

Infonetics Research, "VoIP and UC Services and Subscribers Biannual Worldwide and Regional Market Share, Size, and Forecasts," March 28, 2011.

(5)

IDC, "Worldwide Software as a Service 2010-2014 Forecast: Software Will Never Be the Same," IDC #223628, June 2010.

(6)

Infonetics Research, "VoIP and UC Services and Subscribers Biannual Worldwide and Regional Market Share, Size, and Forecasts," March 28, 2011.

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•

Demand for unified communications.  Organizations are continuing to invest heavily in unified communications and mobility to increase collaboration, improve the productivity of their workforces and enhance relationships with customers and partners. In addition, enterprises are looking for ways to augment their communications capabilities and leverage unified communications systems to enhance functionality and drive down costs. According to the results of a survey conducted by IDC, one-fourth of medium-sized and large U.S. businesses surveyed indicated that they plan to implement a unified communications solution in the next 12 months and nearly one-third of small businesses indicated that they plan to use unified communications in the same period.⁽⁷⁾

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Increased outsourcing by communications service providers.  Service providers are increasingly focused on providing on-demand multi-media services to their customers without incurring significant additional operational and capital expenditures. They are increasingly choosing to outsource certain network operations and services which allows them to focus on strategic investments to acquire customers and increase customer spending on new services. In a 2009 Booz & Co. survey of global carriers, 25 percent had already outsourced and 50 percent indicated that they could outsource their network operations and administration.⁽⁸⁾

Our CaaS Platform

IntelePeer CloudWorx CaaS platform

(7)

IDC, "Worldwide Unified Communications 2011 Top 10 Predictions," IDC #226900, February 2011.

(8)

Booz & Co., "Outsourcing Network Operations: Maximizing the Potential," 2009.

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        We have designed and developed a proprietary cloud-based communications service platform to address the challenges associated with the legacy PSTN. We believe that our CloudWorx CaaS Platform cost-effectively leverages both a cloud-based architecture and the widespread availability of broadband connectivity to provide a carrier-grade, highly flexible, software-based communications solution. Our on-demand CloudWorx CaaS Platform is fast to implement, easy to administer and highly scalable. It is based on a sophisticated, integrated multi-layer approach, which includes:

•

our Media Peering Grid service, providing any-to-any connection capabilities and supporting both SIP/IP-based networks and the legacy PSTN, allowing service providers and enterprises to cost-effectively interconnect, transport and transact communications traffic, currently at a rate of more than 22 billion minutes annually;

•

our SuperRegistry directory, currently containing more than 400 million telephone numbers and end-point identifying addresses for wireless, wireline and other communication devices, enabling intelligent routing of communications traffic over our Media Peering Grid service; and

•

our AppWorx open and secure communications application development environment, which includes a complete set of APIs, developer tools, documentation and reference applications. These applications allow our customers and partners to offer on-demand delivery of a growing set of multimodal communications applications, which our customers can use to generate additional revenue. Our AppWorx development environment enhances customer engagement and retention with our CloudWorx CaaS Platform and increases communications traffic over our platform.

        These three layers are fully integrated via interconnecting software components, which enable our platform to be easily delivered and administered through our self-service web portal.

Peering Layer: Media Peering Grid Service

        Our Media Peering Grid layer is a software-based set of components and services, delivered via a cloud architecture that allows us to directly connect IP sessions between service providers and enterprises as well as to connect to legacy non-IP communication devices. Our Media Peering Grid service automatically establishes individual peering relationships and direct connections that provide increased reliability, expanded multimodal functionality and fewer toll-generating hops as compared to legacy call transport architectures used by the PSTN. For example, in a VoIP peering arrangement, VoIP operators can benefit from direct all-IP sessions using our Media Peering Grid service rather than traveling through multiple intermediate handoff points or hops over the legacy PSTN. In addition to enabling direct connections between multiple service providers and enterprises, both across our IP-based platform and outside to the legacy PSTN, our cloud-based architecture enables us to deploy new and expanded services to our customers without requiring them to make costly incremental investments in hardware. Additionally, our redundant, geographically-dispersed, cloud-based architecture reduces the risk of regional disruptions.

        In addition to the efficiency and reliability of direct connections, our direct peering service can be used to link, or federate, self-contained, disparate networks to one another, including enterprise, wireline, wireless and VoIP service providers, thus allowing these isolated networks to exchange traffic more efficiently than through the legacy PSTN.

Registry and Routing Layer: SuperRegistry Directory

        Our SuperRegistry directory is a comprehensive database of telephone numbers and end-point identifying addresses for wireless, wireline and other devices. We believe that our directory, which currently contains more than 400 million numbers, is the largest independent multi-carrier, multimodal database of its kind, and continues to grow through contributions from our service provider peering

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partners and enterprise customers. Our SuperRegistry directory includes routing paths, pricing and route costs, route quality and other features and related information. This information enables us to cost-effectively route voice calls, messages and rich media over IP and legacy PSTN connections to the correct end-points, across various service providers, regardless of end-point location, device type or communications platform. By taking advantage of our proprietary routing software, directory and interconnections, enterprises and service providers are able to send traffic directly, without geographic constraints, to any of the numbers and addresses in our directory, eliminating intermediate hops and the costs associated with them.

        Using our SuperRegistry directory and routing technologies, our enterprise customers can move beyond the limitations of the PSTN to achieve rich media, all-IP unified communications with other enterprises across disparate communications technologies and to stand-alone SIP devices.

Application Services Layer: AppWorx Software Development Environment

        Our AppWorx software development environment allows our customers to offer software developers and web designers an open development platform to easily create innovative, communication-enabled applications. These applications include functions such as click-to-call, which enable an end-user to initiate a phone call directly from a website, widespread message dissemination via voice and SMS, voice and text marketing campaign management, on-demand audio conferencing and integration of communications into business processes and applications. The full integration of our AppWorx development environment with our other CloudWorx CaaS Platform layers enables on-demand delivery of these applications to meet our customers' changing needs. The applications that we or our customers create using these tools and open interfaces can be used to drive innovative business applications and models that take advantage of the convergence between telephony and the web.

        The open architecture of our AppWorx development environment encourages third party developers and channel partners to leverage our technology to build new applications that can be rapidly deployed. Developers can use these applications to generate incremental revenue streams or differentiate their products and services.

        The three layers of our CloudWorx CaaS Platform are integrated to provide a simple and cost-effective approach to delivering enhanced voice and rich-media services to any IP-connected device worldwide. Our proprietary platform enables service providers to offer incremental services expeditiously without needing to invest in new communications infrastructure.

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Legacy service provider network	IntelePeer peering platform solution
Legacy enterprise network	IntelePeer enterprise federation

Our Competitive Strengths

        Our solutions address the needs of service providers and enterprises while maintaining capital and operating efficiency. We believe the following strengths differentiate us and position us for continued growth:

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Cloud-based services architecture.  Our solutions are delivered on demand through a cloud-based architecture that can serve customers anytime and anywhere. This flexible and scalable architecture also enables us to customize our services to match each new customer's needs, thereby eliminating the challenges often associated with the adoption and implementation of fixed, one-size-fits-all solutions. Our ability to rapidly and easily deploy a customized solution on a service-by-service basis, helps us attract customers making a complete transition as well as those preferring to take a gradual migration path from PSTN-based to SIP-based communications services. Our architecture also allows us to easily introduce and deploy new service offerings to our existing customers and enables them to adjust their level of use based on demand, thereby allowing customers to address issues such as seasonal demand fluctuations. Using our architecture, our customers can add new services or increase use of services quickly and with minimal incremental expense. Whereas other architectures require expensive, site-specific, time-consuming hardware installations to extend their network systems into new territories, our cloud-based approach allows us to help our customers reach new geographic regions and implement new services quickly and cost-effectively by leveraging the availability of the cloud.

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Fully-managed, IP-based Media Peering Grid service.  Our proprietary software-based, fully-managed, distributed Media Peering Grid service provides carrier-grade, high-quality voice and connectivity that can be relied on as a primary communications network. Our flexible Media Peering Grid software supports both legacy and VoIP network interoperability and enables our customers to efficiently and cost-effectively transition their communications infrastructures from the legacy PSTN to an IP network incrementally and on demand, thus reducing expenses associated with legacy architecture as well as call delivery services, tolls and circuit expenses.

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Extensive, secure, multimodal SuperRegistry directory.  Our SuperRegistry directory currently includes a database of more than 400 million telephone numbers and end-point identifying addresses corresponding to wireline, wireless and IP-enabled devices. The scale and multimodal nature of this directory give us the ability to complete a call to any connected end-point device, regardless of whether it is a PSTN-based handset or a SIP-connected device. This feature provides us with a significant competitive advantage in that it allows us to discover and direct sessions to both traditional phones and IP-connected devices. Using our proprietary intelligent routing software and the numbers in our SuperRegistry directory, we are able to determine the interface type necessary to complete the connection. We have been building this extensive SuperRegistry directory since 2006 through partnering efforts with service providers and enterprises. This expanding database of telephone numbers and end-point addresses enables us to route traffic more efficiently from end-to-end, through our Media Peering Grid service, providing real-time optimal routing for both service provider and enterprise originated calls, improving call reliability and decreasing call transport tolls. Furthermore, our SuperRegistry directory enables our enterprise customers to achieve rich media, all-IP unified communications across disparate communications technologies, such as Microsoft, Cisco, Avaya and Siemens unified communications platforms, with other enterprises and IP connected devices.

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AppWorx open application development environment.  Our AppWorx open application development environment provides software developers and channel partners with access to powerful tools for rapid development and integration of new communications services. The tools in our AppWorx development environment include a set of APIs as well as fully customizable and scriptable command and control of calls that enable developers with little or no telecom experience to easily build robust, rich media applications. These applications and new services can be accessed from anywhere, deployed quickly over our platform and easily integrated into existing web services or software applications. Our AppWorx development environment enables our customers to develop and use these applications to provide additional functionality and new and differentiated services to their end-users, which our customers can use to develop a stronger relationship with their end-customers.

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Powerful network effects.  We benefit from strong network effects driven by the large volume of numbers in our SuperRegistry directory. As our service provider peering partnerships and enterprise customer base grow, the benefits each existing customer realizes by using our platform increase, resulting in reduced costs for our customers and increased traffic through our platform. New features and partnerships broaden our value proposition, attracting more customers, peering partners and channel partners. For example, each new service provider or enterprise customer that allows us to add their end-point identifying numbers to our SuperRegistry directory results in more calls that we can connect directly, providing increased quality and efficiency benefits and lower costs. In addition, every time we add an IP-connected device, it increases our ability to provide multimodal communications capabilities to our customers. This helps us grow our revenue while at the same time increasing the volume of traffic for which we compensate the service providers that make their numbers available through our SuperRegistry. The scale of our business and breadth of our relationships not only attract new customers but also serve as barriers to entry for potential competitors.

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Fully integrated communications platform.  Our multi-layer platform, which integrates transport, peering, registering services and APIs, offers our customers a one-stop, flexible and full-featured solution for developing and extending their communications services as compared to alternatives that focus on local market, hardware-based solutions. Our fully integrated platform also enables us to be flexible and to easily add and deploy new IP-enabled communications and collaboration services as our customers' needs evolve. Customers choosing our integrated platform solution benefit from a significant time, cost and quality advantage as compared to the alternative of

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building a similarly functional solution that would require arrangements with multiple vendors and partners.

Our Strategy

        Our objective is to continue to leverage our CloudWorx CaaS Platform to establish a position as a leading provider of communications solutions for service providers and enterprises. We intend to accomplish this by pursuing the following strategies:

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Establish the technology leadership of our CloudWorx CaaS Platform.  We have developed an innovative multi-layer platform and modular technology architecture that effectively transforms the delivery of SIP-enabled communications, provides significant cost savings and enables faster and more flexible deployment. We intend to continue to invest in our platform through internal development, or by acquiring complementary technology. These activities are expected to broaden our support for new collaboration and communications features, enhance the capabilities of our SuperRegistry directory, and expand our AppWorx application development environment to drive broader adoption among new customers and developer communities.

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Extend the reach and breadth of our peering partnerships.  We plan to add additional telephone numbers and end-point identifying addresses to our SuperRegistry directory from new and expanded relationships with service providers and enterprise customers to increase our capacity for the benefit of our service provider and enterprise customers. As we add additional direct peering partners, we expect to increase our communications traffic and revenue without needing to utilize the legacy PSTN, which we expect will reduce our traffic delivery costs.

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Grow our relationships with existing customers.  We have built a diverse customer base of service providers and enterprises by cost-effectively connecting disparate networks over IP and providing highly flexible and high quality cloud-based services. Our sales team works closely with our customers to understand their challenges and industry trends, determine the services that we can provide to better serve their needs as well as to identify areas of focus for our ongoing research and development activities. These relationships allow our support team to respond more quickly and effectively to customer needs and our development team to provide customized solutions for our customers. We intend to continue to leverage the work of our sales team to identify and deliver additional services to expand our relationships.

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Expand our customer base and technology partnerships.  We intend to expand our base of enterprise customers by deepening our existing technology partnerships with industry leaders such as Microsoft, Cisco, Avaya and Siemens, developing new technology partnerships with additional industry leaders and expanding our network of channel partners. We also intend to focus on expanding our service provider customer base by leveraging our CloudWorx CaaS Platform, investing in our direct sales force and educating service providers on the potential opportunity to reduce or eliminate capital expenditures and reduce operating costs by leveraging our platform.

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Broaden our international presence.  We currently have an extensive peering partner network that serves U.S. customers through five U.S. regional data centers to connect with U.S. customers and connects with international service providers through data centers in London, Los Angeles and New York. We plan to extend our geographic reach and coverage by expanding our peering partner network and SuperRegistry directory globally through the addition of international service provider peering partners, and global enterprise customers.

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Sales and Marketing

        We market and sell our solutions through our direct sales force, agents and channel partners. As of September 30, 2011, we employed 28 sales professionals and sales engineers and had relationships with 53 channel partners. We sell to service providers primarily through our direct sales force and we sell to enterprises primarily through our indirect sales force that works with our channel partners.

        Our service provider direct sales force is composed of experienced sales professionals as well as sales engineers who promote the advantages of our CloudWorx CaaS Platform. This focus provides a higher level of service and understanding of our customers' unique needs. Our enterprise sales team uses a channel sales strategy and seeks to partner with leading technology companies that provide technology products and services to enterprises. Through this strategy, we benefit from the reach of dedicated sales agents, knowledgeable, certified resellers and technology providers who resell or white label our services. Currently, our channel partners include resellers who sell and implement unified communications solutions, such as Microsoft, Cisco, Avaya and Siemens based solutions, and who offer call center solutions. Our sales personnel work closely with these partners to assist them in selling customized solutions to their end-customers. We actively support our channel partners on an ongoing basis. This support includes sales training, white papers, solution guides, hosted partner events and our on-demand self-service CloudCentral portal.

        Our marketing team is principally engaged in the development of marketing collateral and support for our sales activities. We seek to play an active role in industry-related thought leadership matters through speaking engagements, white papers and webinars. Our marketing also includes attendance at industry trade shows and conferences, as well as targeted corporate advertising.

Our Customers

        Today, we sell our solutions to service provider and enterprise customers primarily located in the United States. As of September 30, 2011, we had 115 service provider customers and 176 enterprise customers. For the nine months ended September 30, 2011, Sprint and Qwest, represented 21 percent and 12 percent of our revenue, respectively, and for the year ended December 31, 2010, Sprint and Qwest represented 29 percent and 16 percent of our revenue, respectively.

        Our service provider customers currently include major wireline and wireless carriers, competitive local exchange carriers, or CLECs, cable companies and VoIP providers, among others, as well as other smaller service providers that provide services to limited regions or market segments. These service provider customers use our CloudWorx CaaS Platform to deliver traffic destined for geographic areas where the service providers do not own and operate their networks or where they are migrating from the PSTN to an IP-based solution.

        With respect to enterprise customers, we have initially targeted mid-sized enterprises, including companies of 200 to 5,000 employees, which are seeking to migrate from a legacy network architecture to a SIP/IP unified communications platform. We also target enterprises of all sizes that operate customer contact centers. Many of these enterprises are updating their communications infrastructures to take advantage of their existing broadband Internet services to connect a growing number of geographically dispersed workers with highly productive and cost-effective communications solutions. Furthermore, the increased use of video, SMS and other rich media applications in the enterprise business environment is driving a need for sophisticated unified communications platforms, which can all be delivered by our CloudWorx CaaS Platform.

        We believe the following case studies illustrate the value we offer to our customers:

Wireless service provider case study:    A major wireless provider in the midst of a technical and operational transition associated with its migration to a SIP network was seeking a partner that could provide the SIP connectivity, carrier-grade quality, speed and flexibility that it was unable to

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achieve through alternative solutions. We successfully partnered with this service provider and enabled it to introduce new SIP voice capabilities while simultaneously adopting a new outsourced network operation model. We believe our ability to deliver consistent, high quality service, coupled with material cost savings and our strong industry reputation, positioned us as a preferred partner for the initial engagement. This initial sale also created an opportunity for us to expand our relationship with this service provider customer by offering new services and features on an ongoing basis. This customer soon expanded the services purchased from us by adding VoIP termination services. Since that time, we have further grown the business relationship by executing a direct peering agreement. More recently, this customer has further increased the scope of services by contracting with us to provide them with direct inward dialing, or DID, services. We are also currently in discussions regarding providing additional services to this customer.

Enterprise customer through a channel partner case study:    A fast growing sports club company with over 350 locations in 22 U.S. states as well as Canada, recently upgraded its entire corporate communications infrastructure with a new unified communications channel partner who recommended our services to them. During the engagement, we expeditiously implemented our service in less than a month and further validated our reputation within the vendor partner community by replacing larger service providers who faced challenges in delivering SIP trunking services. Through our SIP trunking services, the enterprise customer was able to integrate its communications experience with its business applications, standardize capabilities across every location and simplify its network environment, resulting in productivity gains and immediate annual cost savings of over $600,000, representing a significant reduction from the operating costs of its prior communications solutions.

Enterprise customer contact center case study:    A global leader in on-demand, multi-channel contact center services was looking for a solution that could help it manage its increasing call volume more efficiently and cost-effectively. Our on-demand capabilities, along with outbound local and long distance services to support large volumes of event-based notification calls, enabled the customer to significantly increase its capacity and grow its revenue. The scalability of our CloudWorx CaaS Platform enabled this customer to increase its usage by more than 60 percent over a one-month period, allowing them to capitalize on a time-sensitive campaign opportunity to deliver millions of calls. We further expanded the relationship by developing and reviewing key call metrics, critical to the contact center's business, to increase call success and optimize network utilization.

Technology

        We have developed a proprietary, multi-layer stack, cloud communications platform, our CloudWorx Caas Platform, which hosts our core technologies and services. Our proprietary, software-based platform currently includes three layers: a peering layer, called the Media Peering Grid, a directory layer, named the SuperRegistry, and an applications layer, known as AppWorx. The three layers are integrated with our proprietary interconnection components.

        Our communications services are provided according to the functionality required by the selected application by following routing rules and preferences associated with individual devices and users. These rules and preferences are maintained in and processed by the SuperRegistry directory layer. The AppWorx applications layer receives and processes communication session requests. The Media Peering Grid peering layer receives device, user and routing rules and preferences from the directory layer, and establishes connections between devices accordingly.

        Together, the elements of our multi-layer platform run on a cloud-based architecture to deliver communication services between a wide variety of communication end-points.

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The Media Peering Grid or Peering Layer

        The Media Peering Grid peering layer is a software-based solution that manages connections and capabilities between our CloudWorx CaaS Platform and service provider and enterprise networks, providing the actual connections between devices or end-points. This peering layer processes incoming and outgoing communications, enabling devices to connect by following specific routing policies based on user, device and routing information that is stored in our SuperRegistry directory. This peering layer connects calls and interoperates the networks of various types of customers such as wireless and wireline service providers, CLECs, local exchange carriers, or LECs, enterprise customers, federation partners, application service providers, VoIP service providers and peering partners. Our peering layer software supports various technologies and call types, including voice, video and SMS. If a call or communication session is delivered between two devices running on different network architectures, it may be necessary to transcode, or convert, the call to a format that is compatible with the specific destination device. Our peering layer determines the signaling protocol of each end-point and if necessary, automatically converts the call to a format compatible with the destination device. Our peering layer supports SIP for VoIP calls as well as SS7 signaling for legacy PSTN calls.

        Key features of our peering layer include:

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Security architecture: We have designed and implemented a security system of multi-layered defense, which we believe to be industry best practice. This protects our Media Peering Grid service and our communications with our customers. These layers include: access control lists on routers and stateful firewalls to block unwanted traffic. Our security devices also block rogue media such as distributed denial of service attacks, or DDoS, and have embedded digital signal processors for media transcoding that deliver optimal performance under load/attack. Our solution also includes a rich set of security features including encryption, transport layer security rogue real-time transport protocol protection, dynamic blacklisting and toll fraud prevention.

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Resiliency: We have designed a fully redundant, geographically diverse transport infrastructure dedicated to delivering low latency and low jitter media services across the peering grid. We have taken a comprehensive approach to design from the wide area network, or WAN, level down to the individual cards and ports providing high availability to our Media Peering Grid service. This design includes data center facilities, diverse fiber routes, and other redundancy measures. Additional elements of our service designed to maintain our high availability of our platform include redundant power feeds with full UPS and generator backup, redundant cooling systems, humidification control, minimum 72 hours fuel storage on site, minimum two contracts for additional fuel per site, SAS 70 Type 2 compliance and physical security including on-site security guards, cameras and biometrics.

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Transcoding capabilities: We offer full support for wireless devices whether they use 3G, 4G or the emerging long term evolution, or LTE, standard. We also support wireline codecs, such as G711, including fax and modem transmission capabilities. Our applications also include high-definition voice from VoIP service providers. While the majority of our traffic comes from our IP active trunk groups including public SIP/IP and private GigE SIP, we also process time division multiplexing, or TDM, DS-3 SS7 ISUP and dedicated clear channel DS-3. Furthermore, to enable our multimodal application development and distribution, we support a full range of both audio and video coder and decoder technology or codecs. The peering layer receives the device, user, and routing rules and preferences and establishes connections between devices based on those elements.

The SuperRegistry Directory or Directory Layer

        Our directory layer is a policy-based engine that stores and maintains directory (or registry) entries, including user and routing information, and then uses that information to determine a routing

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policy for each communications session. We use a combination of intelligent software and business rules to route communications traffic based on quality level, cost constraints and registration for each device to be used for direct call connection.

        Our SuperRegistry directory is a secure database environment that combines cost information, quality of service metrics and optimal routing policy software with telephone numbers, IP addresses, SIP trunk groups, telephone number portability data, SS7 point codes, used for PSTN end-point routing and connections to external federations, enabling heterogeneous peering.

        We are developing enhancements to our policy-based routing, such as user contact preferences by device, based on criteria such as time of day, day of the week, user location and nature of incoming calls. Our software will enable use of this directory data to deliver intelligent policy-based communications.

        Key features of our SuperRegistry directory and related services include:

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Any-digit peering: Our software enables peering between service provider and enterprise networks using 10-digit (based upon the E.164 or industry standard international public telecommunication numbering plan) or 6-digit (area code and exchange for North America) phone numbers.

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Regulatory: Our software includes support for U.S. regulatory designations such as interstate, intrastate and local jurisdictions and the cost structure, tolls and tariffs associated with each of these jurisdictions.

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Voice or video federation: We expect to release a new version of our service, that we believe will allow us to deliver multimodal communications and federation capabilities whether inside a single enterprise or at different external enterprises. We expect to release this service in the second half of 2011.

The AppWorx Application Services Layer

        Our application layer software enables creation and distribution of fully featured applications and offers a set of standards-based APIs for managing use of these applications and activation services. This layer is also responsible for recognizing and initiating various application requests. When an application is accessed via a user device, the application layer receives and identifies a communication session request which includes specific configuration information related to the request. The application layer software includes numerous application scripts corresponding to specific features. An application script is a set of instructions which, when executed, causes specific actions to occur such as establishing a communication session between two or more devices.

        Examples of application script uses include:

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click-to-call, providing a voice connection between end-points initiated from a website;

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SMS messaging, providing messaging capabilities between end-points;

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blast SMS, providing mass delivery of outbound messages;

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blast voice, delivering media to one or more end-points;

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auto conference, scheduling automatic dialing for conference call bridging;

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reporting, for generating records of usage and performance of calls;

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real time call events, allowing applications to take action based on call progress;

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recording, enabling recording, storage and delivery of media sessions;

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text to speech engine processing that converts text into speech in a given language;

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scripted interactive voice response, or IVR, which allows users to define IVRs to be applied to voice calls; and

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media management, which allows media to be converted and included in call sessions.

        Within our application layer is our CloudCentral Portal software, which enables our customers to activate and manage their services and is also used as our internal management portal to manage aspects of our relationship with these customers. Our CloudCentral Portal is used for enterprise management, user management, SIP trunking, DID, toll-free number ordering, management and reporting.

        Our software supports capabilities such as capacity planning, performance reporting, event monitoring and notification, call media and signaling analysis, as well as our billing and invoicing report generation. These end applications connect to our business intelligence layer which tracks peering grid and vendor performance, service levels, traffic analysis, usage reporting and billing service assurance. The business functions enabled by our software correspond to our peering grid tracking intelligence that handles automatic number identification, or ANI, including fax/modem detection and routing, route loop detection and prevention, as well as tracking capacity data, processing network topology for fault analysis and traffic rerouting, and providing call detail record, or CDR, correlation, summarization and warehousing.

The Interconnection Components

        The various layers of our CloudWorx CaaS Platform are integrated by our proprietary software interconnection components that coordinate activities between our peering, application and directory layers. The application layer delivers messages to the interconnection component for subsequent transmission to the peering layer, which leverages the SuperRegistry directory layer for optimal routing policy.

Research and Development

        As of September 30, 2011, we had 27 employees dedicated to research and development. Our total research and development expenses were $2.4 million, $3.6 million and $4.1 million for the years ended December 31, 2008, 2009 and 2010, respectively, and $4.7 million for the nine months ended September 30, 2011.

Intellectual Property

        Our success depends upon our ability to protect our core technology and intellectual property. To accomplish this, we rely on a combination of intellectual property rights, including patents, trade secrets, copyrights and trademarks, as well as customary confidentiality and other contractual protections. We have been issued three patents in the United States. Additionally, we have six patent applications pending in the United States, two provisional patent applications pending in the United States and four patent applications pending in each of Europe, Japan and South Korea. Our registered trademarks in the United States include IntelePeer, IntelePeer AppWorx, AppWorx and SuperRegistry. We have four pending trademark applications in the United States.

        In addition to the protections described above, we generally control access to and use of our proprietary software and other confidential information through the use of internal and external controls, including contractual protections with employees, consultants, customers and vendors. U.S. and international copyright laws protect our software. We also license software from third parties for integration into our service offerings.

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        We license our software to customers pursuant to agreements that impose restrictions on the customers' ability to use the software, including prohibitions on reverse engineering and limitations on the use. We also seek to avoid disclosure of our intellectual property by requiring employees and consultants with access to our proprietary information to execute nondisclosure and assignment of intellectual property agreements and by restricting access to our source code.

        Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our services or obtain and use information that we regard as proprietary. We cannot assure you that the steps taken by us will prevent misappropriation of our technology. We cannot assure you that other patents will issue from our pending or future applications or that, with respect to our issued or any future patents, they will not be challenged, invalidated or circumvented, or that the rights granted under the patents will provide us with meaningful protection or any commercial advantage. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as the laws of the United States, and many foreign countries do not enforce these laws as diligently as government agencies and private parties in the United States.

        Our industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patent and other intellectual property rights. In particular, leading telecommunications companies have extensive patent portfolios. From time-to-time, third parties, including certain of these leading companies, may assert patent, copyright, trademark or other intellectual property rights against us, our channel partners or our end-customers. Successful claims of infringement by a third party could prevent us from performing certain services or require us to pay substantial damages, royalties or other fees. Even if third parties may offer a license to their technology, the terms of any offered license may not be acceptable and the failure to obtain a license or the costs associated with any license could cause our business, operating results or financial condition to be materially and adversely affected. We typically indemnify our end-customers and distributors against claims that our products infringe the intellectual property of third parties.

        Even if our efforts to obtain patent protection are successful, third parties may not respect our rights and we may be required to initiate litigation to enforce any patents issued to us, or to determine the scope or validity of a third party's patent or other proprietary rights. Patent litigation is expensive and time consuming, and may adversely affect our business.

Competition

        The markets for our products are extremely competitive and are characterized by rapid technological change. Our competitors include traditional telecommunications carriers and other providers of specialized communications services.

        The principal competitive factors in our markets include the following:

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brand recognition and financial strength;

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scope and scale of communication services offered;

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quality, reliability and availability of services;

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cost of services;

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speed of activation and implementation;

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wireless, wireline and other end-point coverage; and

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customer service and support.

        We believe that we compete favorably with our competitors on the basis of these factors. In particular, we believe that we benefit competitively from our cloud-based all-IP solution, our extensive

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SuperRegistry directory, the speed and flexibility of implementation of our service and our lower prices, while being at a competitive disadvantage regarding our more limited operating history, brand recognition and financial resources. In the competitive markets we seek to serve, we have tried to differentiate our service offerings in several ways:

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Innovative multimodal services—we provide cloud-based, rich media communication services that exceed the capabilities of PSTN voice services;

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Rapid activation—we can quickly activate new customers;

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High reliability—our fully managed, geographically distributed platform provides carrier-grade quality and reliability for our communication services;

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On-demand availability—our customers can quickly increase or decrease amount and types of services they purchase using our online portals; and

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Platform neutrality—allowing service providers to use our peering and registry services despite competitive pressures between each other in their service areas.

        We operate in an industry with limited barriers to entry and expect to have new competitors in the future. Additionally, some of our larger, more well-known competitors have greater brand recognition, longer operating histories, larger installed customer bases, larger sales and marketing budgets, as well as greater financial and other resources. Our biggest customers may enter into direct peering relationships, which could substantially diminish our business opportunities.

        Our ability to compete effectively could be adversely affected by changes in regulation affecting our industry, consolidation among our competitors and our customers, entrance of new competitors, rapid change in technology and market demands for new services, all of which are factors largely outside of our control.

Employees

        As of September 30, 2011, we had 125 full-time employees, including 28 in sales and marketing, 45 in operations, 27 in research and development and 25 in general and administrative and other functions. None of our employees are covered by collective bargaining agreements. We consider our relationships with our employees to be good.

Facilities

        Our headquarters are located in a 11,572 square-foot facility in San Mateo, California that we lease. The lease expires in September 2013. We also operate our Engineering, Development and Operations center in Denver, Colorado in a 15,744 square-foot facility that we lease. The lease expires in August 2012. We also have small offices in Seattle, Washington and Austin, Texas that we lease. We also have several co-location production facilities in New York, New York, Chicago, Illinois, Atlanta, Georgia, Dallas, Texas, Los Angeles, California, and London, United Kingdom as well as a testing co-location facility in Englewood, Colorado, all of which are leased facilities. We believe that our current facilities are suitable and adequate to meet our current needs. We intend to add new facilities or expand existing facilities as we add employees, and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations.

Legal Proceedings

        In June, 2011, a lawsuit was filed against us and one of our officers in the Superior Court of the State of Washington alleging various claims associated with certain warrants which terminated in accordance with their terms in December 2010. The warrants represented in aggregate the right to purchase 703,722 shares at an exercise price of $0.92 per share. The complaint alleges that we owed

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contractual, statutory and other duties, including a duty to apprise the holder of the warrants of significant corporate developments and that as a result of breaching such duties, the warrant holder is entitled to damages. We believe the complaint to be without merit and intend to vigorously defend the matter. However, the results of litigation are inherently uncertain, and there can be no assurance that we will prevail. Any such lawsuit or proceeding could have a material adverse effect on our business, financial condition and results of operations.

        In July 2011 we received correspondence from one of our former employees who worked for us during our initial period of operations through his resignation in 2005 alleging certain improprieties by certain members of our current management team. He was subsequently prosecuted and convicted of multiple frauds in connection with a yacht financing business that was unrelated to the Company and is currently serving his sentence in federal prison. We fully cooperated with the federal government's investigation of him at that time. In his correspondence, he proposed to settle any claims against us for $40 million, including $20 million for restitution to victims of the frauds for which he has been convicted. His correspondence alleges misrepresentations to early investors, disclosure violations and other matters. Our board and audit committee engaged outside counsel to conduct an investigation of this matter, and we believe the claims to be without merit. Should this individual initiate any legal action against us relating to these matters, we intend to defend such action vigorously.

        From time to time, we may be subject to additional litigation and claims arising in the ordinary course of business. We are not currently aware of any other pending or threatened legal proceeding against us that could have a material adverse effect on our business, operating results or financial condition.

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REGULATION

Overview

        The United States has a dual regulatory structure applicable to the offering of telecommunications services. The Federal Communications Commission, or FCC, in general regulates interstate and international telecommunications services; while state public utilities commissions, or PUCs, regulate telecommunications services that are within a state's boundaries. Certain of our offerings are subject to regulation by both the FCC and state PUCs. Under the Communications Act of 1934, as amended by the Telecommunications Act of 1996, or the Communications Act, we are subject to a variety of rules at the federal level that govern the rates we charge for certain services, customer privacy, public safety, contribution requirements to a variety of federal telecommunications-related funds including the USF as well as reporting obligations. States impose similar obligations and may, in certain instances, regulate the rates we can charge for certain offerings. A number of states impose USF contribution obligations that are in addition to federal USF contribution requirements. The FCC and state PUCs will monitor our compliance with their rules and regulations, and may impose fines, fees and additional assessments if they determine our efforts do not fully satisfy those requirements.

        Our communications services are also subject to international regulation. Such regulations may affect our plans to expand our business internationally.

        We have obtained licenses to offer telecommunications services from the FCC and authorization to offer facilities-based and resold telecommunications services from PUCs in 45 states and the District of Columbia. We are still pursuing licenses in the remaining states and expect to receive the necessary authorizations in the near future. Most states require us to file tariffs or price lists setting forth the terms, conditions and prices for telecommunications services that are classified as intrastate. Rates, terms and conditions for certain services and access to network elements provided by certain Incumbent Local Exchange Carriers, or ILECs, and Regional Bell Operating Companies, or RBOCs, are, in many cases, determined by arbitration before the applicable state PUC. The precise jurisdictional reach of the various federal, state and local authorities depends on the offering and can be uncertain because it is subject to ongoing controversy and judicial review.

        As a regulated provider of telecommunications services, we are also entitled to certain rights. For example, other telecommunications service providers are required to interconnect their networks with ours. We have the right to access certain elements of ILEC networks at rates that are just, reasonable and non-discriminatory. We also have the right to obtain telephone numbering resources for our network use and for assignment to our customers. At the state level, we are generally entitled to tariff our service offerings, which allows us to set the terms, conditions and prices of our offerings in accordance with state law for large numbers of customers without entering into individually negotiated agreements. These rights provide us benefits and protections that are not available to unregulated entities. We leverage our status as a regulated provider to develop commercially beneficial relationships with our peering partners.

        As technologies and the communications industry continue to change, the international, federal, state and local statutes and rules governing the communications industry may be modified significantly. Such a change could substantially affect the demand and pricing for our services. Such changes could include, but are not limited to, an increase in regulatory oversight; regulation of the prices that we can charge for some or all of our services; modification of statutes, rules or policies that could affect our current or future plans or that would require modification of the terms and conditions of our tariffs, contracts, or other agreements that we rely on for our business; modifications to the operations or costs of the operations, including the pricing of our services to our customers; a decrease in the amount of traffic our customers exchange with us; a change in the types of traffic our customers exchange with us (including our customers exchanging, on average, lower priced minutes or services); changes in the rates, terms and conditions under which voice service providers exchange traffic; changes in state or

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federal universal service programs; and changes or modifications in taxes or surcharges that could cause a decrease in the amount of traffic our customers deliver to us or affect our sources of revenue. We cannot predict when, or upon what terms and conditions, further federal, state or local regulation or deregulation might occur or the effect future regulation or deregulation may have on our business or the rights we enjoy as a regulated telecommunications service provider.

Federal and State Regulation of Voice Peering Services

        As a competitive service provider, we have offered communications services at prices that generally have not been heavily regulated by the FCC or state utility agencies. However, these agencies have exercised greater regulatory authority over the pricing of ILECs' tandem transit and access services. Regulation of these services and rates generally has set the benchmark for the prices of competitive service providers including the communications services that we offer. On November 18, 2011, the Federal Communications Commission, or FCC, released a Report and Order and Further Notice of Proposed Rulemaking, or the FCC Order, that comprehensively reforms the system under which regulated service providers compensate each other for interstate, intrastate, and local traffic origination and termination services. See "Other Proceedings That May Impact Our Business or Service Offerings—Intercarrier Compensation Reform."

        A number of PUCs assert regulatory authority over the provision of local and intrastate transit services. Some PUCs have initiated proceedings to examine the regulatory status of services such as ours. Some states have taken the position that voice peering service is an element of the "transport and termination of traffic" services that incumbent ILECs are required to provide at rates based on a reasonable approximation of the additional costs of completing the calls under the Communications Act, while other PUCs have determined that the Communications Act does not apply to these services. The PUC regulatory framework associated with local and intrastate transit services is constantly under review. If the FCC or a federal court determines that a particular state's interpretation of the Communications Act was incorrect, the incumbent LECs' tandem transit rates may either increase or decrease substantially, which could affect our ability to offer competing services profitably. See "Other Proceedings That May Impact Our Business or Service Offerings—Intercarrier Compensation Reform."

Regulation of Access Rates

        While we do not directly access local exchanges pursuant to federal or state tariffs, the cost of such access can affect the amounts we pay our indirect peering partners and ultimately impact our operations, margins and profitability. Like many other market participants, we are involved in billing disputes concerning the appropriate data that should be used when determining intercarrier payments. In addition to the FCC Order, state public utilities commissions are also considering substantial modifications with respect to the way carriers compensate one another for the exchange of traffic. See "Other Proceedings That May Impact Our Business or Service Offerings—Intercarrier Compensation Reform."

Interstate Access Charges

        Access charges that local exchange carriers, or LECs, impose upon us consist of both usage-sensitive switched access charges and flat-rated transport and special access charges. The FCC regulates ILEC interstate access services. We also enter into commercial carrier-to-carrier contracts with peering partners to transport and terminate our traffic, and such agreements are typically not subject to tariff regulation. The industry is subject to a significant amount of litigation related to how much access will cost and what services should pay for access. The regulatory structure governing the cost of access is complex and tends to lag behind technological and service advancements, which creates a high level of uncertainty in the industry, as well as rate arbitrage. The cost of billing disputes between carriers and service providers can be significant, and such disputes could result in litigation. We cannot predict at

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this time to what extent the foregoing issues and our business may be affected by the FCC Order. See "Other Proceedings That May Impact Our Business or Service Offerings—Intercarrier Compensation Reform."

        In addition, in 2005, the FCC commenced a rulemaking proceeding, seeking comment on the regulatory framework that should apply to the provision of interstate special access services by price cap incumbent local exchange carriers. Among other issues under consideration are those relating to the special access rates that price cap incumbent local exchange carriers are permitted to charge. In July 2011, several parties filed a petition with the United States Court of Appeals for the District of Columbia, asking the court to grant a writ of mandamus ordering the FCC to conclude its special access proceeding and to issue new rules within six months. The Court has not ruled on this petition. We cannot predict the timing or outcome of the FCC's special access proceeding, nor can we predict what, if any, effect it will have on our business.

        The FCC has adopted a mandatory detariffing regime for access services that wireless carriers wish to provide. Wireless carriers may not file tariffs for access services and must, instead, enter into voluntary contracts. As the volume of wireless traffic increases, the potential for wireless access charges poses a risk to our cost structure. Our current business practice is to pay commercially agreed upon rates to wireless carriers when handling traffic destined to wireless customers. Wireless service providers are also impacted by the FCC Order. With respect to inter- and intrastate toll traffic, wireless service providers are subject to the same transition plan as the larger regulated services providers, i.e., a six year transition to no intercarrier payments for the most common termination functions, end office switching, and tandem switching where the terminating regulated service provider owns the tandem switch. The FCC Order maintains current rules under which a wireless service provider is only entitled to impose access charges for toll traffic that originates from or terminates to its customers under contract (not tariff).

Intrastate Access Charges

        Intrastate access charges that incumbent and competitive LECs assess us, or that our competitive local exchange carriers, or CLECs, are permitted to charge other carriers, are regulated by the PUCs. Intrastate access rates have historically been higher than interstate access rates, and continue to be so in many but not all states. The disparity between interstate and intrastate access rates results in a significant number of billing disputes and litigation throughout the industry. It is particularly difficult to determine the appropriate jurisdiction when a call originates or terminates on a mobile network, or on the Internet, since the user's location can change at any time and may be different from that indicated by their telephone number. For these reasons, among others, a number of states have concluded that intrastate access rates should be lowered to parity with interstate access, which is consistent with the FCC Order. Pursuant to the FCC Order, all regulated service providers will be required to bring interstate and intrastate terminating switched end office rates and transport rates, as well as any reciprocal compensation rates that exceed interstate access rates, to parity with the regulated service provider's interstate access rate within two steps, by July 2013.

        Many, but not all, states have rules limiting the rates CLECs can tariff for intrastate access services, similar to the FCC rules discussed in the preceding sections. In these states, CLEC rates generally cannot be higher than those of the competing ILEC.

Local Reciprocal Compensation

        Local telephone companies that deliver calls to the networks of other local carriers in the same geographic area for termination typically compensate one another for terminating such traffic. The FCC has established a general framework and ratemaking methodology governing such compensation. The specific rates traditionally have been regulated by the PUCs. Historically, rates for local reciprocal

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compensation are often significantly lower than rates for switched access, which may result in billing disputes and litigation. The FCC, however, has comprehensively reformed the intercarrier compensation system, including local reciprocal compensation. See "Other Proceedings That May Impact Our Business or Service Offerings—Intercarrier Compensation Reform."

Regulation of Interconnected VoIP Services

        In addition to telecommunications services, we offer a variety of VoIP services. VoIP services are a form of communications services that use the IP standard instead of the legacy time division multiplexing, or TDM technology. Depending on the needs of the customer, we may offer services via the public Internet or over a private or managed connection to the Internet. The FCC has asserted its regulatory authority over certain configurations of our VoIP services, known as interconnected VoIP. The FCC, however, to date has not classified interconnected VoIP services as telecommunications services.

        Interconnected VoIP services are those services that enable real-time two-way voice communications, require a broadband Internet connection from the user's location, require the use of IP-compatible customer premises equipment and permit users generally both to receive calls from and to terminate calls to the PSTN. The FCC requires interconnected VoIP providers to comply with certain regulations including, but not limited to, the Communications Assistance for Law Enforcement Act, or CALEA, customer privacy regulations, discontinuance rules, E911 obligations, and reporting obligations. These offerings must also contribute to a number of federal funds including the USF. Each of these regulations covers matters that, because we are a licensed telecommunications carrier, our communications services would have been obligated to comply with even if we were not treated as an interconnected VoIP provider. Increased regulation of VoIP services by the FCC therefore benefits us by ensuring parity in regulatory obligations between us and our competitors.

        The authority of the states to regulate certain types of interconnected VoIP services is uncertain at this time. In 2004, the FCC ruled that states could not impose certification, tariffing or other similar common carrier requirements on a provider of nomadic interconnected VoIP service that relied on the public Internet for connections to its customers. However, the FCC did not rule then, and generally has not subsequently addressed, to what extent the states could exercise jurisdiction over other interconnected VoIP services that use fixed connections to customers rather than connecting over the public Internet. While the FCC has recently clarified that states may require nomadic interconnected VoIP service providers to contribute to state USF programs, it is unclear what other regulatory authority states may have over interconnected VoIP services. Several states have recently sought to impose registration or other similar requirements on interconnected VoIP providers that they believe are not covered by the FCC's ruling concerning VoIP services that rely on the public Internet for connections to their customers. Even if states are ultimately able to require providers of certain types of interconnected VoIP services to seek approval to offer services, we believe the impact on us would be minimal as we are licensed in most states and the District of Columbia, and intend to be licensed in all fifty states in the near future.

        As discussed below, there are a number of open proceedings at the FCC that could impose additional obligations on interconnected VoIP providers. For example, the FCC continues to examine whether to expand E911 obligations that apply to interconnected VoIP services including the possible imposition of automatic location requirements. Additionally, there is a pending petition with the FCC concerning the appropriate regulatory classification of fixed, facilities-based interconnected VoIP services. Specifically, the FCC may find that certain or all forms of VoIP services are properly classified as "telecommunication services" under federal law. We cannot predict the impact of such a finding on us at this time.

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Enhanced 911 Services

        In June 2005, the FCC concluded that interconnected VoIP service providers must support enhanced 911 emergency services. The FCC rules, among other things, also require interconnected VoIP providers to distribute stickers and labels informing customers of the limitations on their emergency services as compared with traditional wireline E911 services; to notify and obtain affirmative acknowledgement from customers that they are aware of those limitations; to obtain from each customer, prior to the initiation of service, the physical location at which the service will first be utilized; and to provide their customers one or more methods to update their "Registered Locations." Our VoIP E911 services, like those offered by other interconnected VoIP service providers, are more limited than the 911 services offered by traditional wireline telephone companies. These limitations may cause significant delays, or even failures, in callers' receipt of emergency assistance. Despite the fact that we have notified our customers and received affirmative acknowledgement from all of our customers that they understand these differences, affected parties may attempt to hold us responsible for any loss, damage, injury or death suffered as a result of certain technical failures of the mandated E911 service for interconnected VoIP providers.

        In September 2010, the FCC released a "Notice of Inquiry" seeking additional comments on a number of issues including, but not limited to, whether nomadic interconnected VoIP providers should be required to offer automatic location information of their users without customers providing location information. The FCC also sought comment on how far it can extend E911 obligations to other types of companies including device manufacturers, software developers and others. In July 2011, the FCC released a Second Further Notice of Proposed Rulemaking, seeking comment on various issues including (i) whether to apply the FCC's 911 rules to "outbound-only" interconnected VoIP services (i.e., services that support outbound calls to the PSTN but not inbound voice calling from the PSTN); (ii) whether to develop a framework for ensuring that all covered VoIP providers can provide automatic location information for VoIP 911 calls; and (iii) whether to revise the FCC's definition of interconnected VoIP service to require an "Internet connection" rather than a broadband connection, and to "define connectivity in terms of the ability to terminate calls to all or substantially all United States E.164 telephone numbers." As part of the same release, the FCC included a Notice of Proposed Rulemaking that sought comment on whether any amendment of the definition of interconnected VoIP service should be limited to 911 purposes, or should apply more broadly to other contexts. In September 2011, the FCC released a Notice of Proposed Rulemaking seeking comment on what role the FCC should play to facilitate the implementation of "next generation" 911 capabilities, including, for example, the short-term implementation of text-to-911 solutions; the prioritization of 911 traffic, especially during times of natural and manmade disasters; long-term implementation of IP-based alternatives for delivering text, photos, videos, and other data to 911; and the path towards integration and standardization of IP-based text-to-911. At this time we cannot predict the outcome of these proceedings nor can we predict their potential impact on our business.

Classification of Certain Facilities-Based VoIP Services

        In July 2011, the FCC released a Public Notice concerning a petition filed by tw telecom inc. where tw telecom filed a petition for a declaratory ruling that it has the right to direct IP-to-IP interconnection with the incumbent LECs for certain IP-based services. Specifically, tw telecom seeks direct IP-to-IP interconnection from incumbent LECs for the transmission and routing of its facilities-based VoIP services and for voice services that originate and terminate in Time Division Multiplexing, or TDM, format but are converted to IP format for transport, referred to by the industry as "IP-in-the-middle" voice services. tw telecom is asking for the FCC to clarify that its facilities-based VoIP services are telecommunications services as well as telephone exchange services and/or exchange access. At this time we cannot predict the outcome of this proceeding nor can we predict its potential impact on our business.

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Communications Assistance for Law Enforcement Act

        In September 2005, the FCC concluded that interconnected VoIP service providers must comply with the CALEA and configure their network and services to support law enforcement activity in the area of wiretaps and call records.

Universal Service Fund

        The FCC and a number of states administer "universal service" funds to provide for affordable local telephone service in rural and high-cost areas and to fund other social programs, such as Internet access to schools and libraries. There are numerous regulatory and legislative efforts to reform universal service funding requirements and we cannot predict the outcome of these efforts. In June 2006, the FCC issued an order holding that interconnected VoIP providers must contribute to the federal USF. In November 2010, the FCC clarified that states may impose USF contribution requirements on the intrastate revenues of nomadic interconnected VoIP providers to the extent that such contribution systems do not conflict with federal law and the intrastate universal service assessments do not apply to revenues generated by services provided in other states.

        On April 21, 2010, the FCC issued a notice that could lead to new proposals regarding contributions to the USF that, if adopted, could materially affect the magnitude of our contributions to the fund. The Commission continues to analyze contribution requirements for USF. It is impossible to predict the impact of the FCC's proposals on our operations and financial results. In addition, a major RBOC filed a "Petition for Immediate Commission Action" on July 10, 2009, requesting that the FCC adopt a new mechanism for calculating federal USF contribution that would be applicable to all contributors. The specific proposal, which has been pending at the FCC for some time, is to determine contributions to the USF based on "assessable telephone numbers" rather than interstate and international revenue. This proposal remains pending. We cannot predict whether the FCC will adopt this or some other contribution methodology, nor can we predict the potential impact on our business at this time. Additionally, the FCC Order reforms the federal Universal Service Fund. One main goal of the Order is to shift support from narrowband to broadband services. The FCC Order, among many other things, establishes the "Connect America Fund," creates a budget for high-cost programs within the Universal Service Fund, and reforms processes relating to the distribution of funds to regulated service providers that are eligible to receive Universal Service Fund support. We do not receive any funds from federal or state Universal Service Fund programs. We cannot predict what impact the reforms adopted in the FCC Order will have on our business at this time.

Customer Proprietary Network Information

        The FCC has determined that its Customer Proprietary Network Information, or CPNI, rules apply to interconnected VoIP providers. Interconnected VoIP providers must adhere to particular customer approval processes when using CPNI outside of pre-defined limits and when using CPNI, for marketing purposes. The rules also require such providers to take certain steps to verify a customer's identity before releasing any CPNI over the telephone or the Internet, and to report unauthorized disclosures of CPNI. Interconnected VoIP providers must also file certain CPNI certification information annually with the FCC. Our failure to comply with these rules may result in forfeitures or other enforcement actions by the FCC, state regulatory agencies, or state attorneys general.

Local Number Portability

        The FCC has extended to interconnected VoIP providers the obligation to provide local number portability. Interconnected VoIP providers are required to permit customers to retain their assigned telephone numbers when changing carriers, and are required to undertake porting requests on an

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expedited basis. Providers are also subject to local number portability fees historically imposed on local exchange carriers.

Disability Access

        The FCC has required interconnected VoIP providers to offer "711" dialing (for telecommunications relay), and to make their services and equipment (including software used for interconnected VoIP) accessible to persons with disabilities, if doing so is readily achievable. Interconnected VoIP providers are also required to contribute to the Telecommunications Relay Services Fund. In August 2010, the FCC sought comment on proposed changes to the wireless hearing aid compatibility rules, and in December 2010 the FCC's Wireless Telecommunications Bureau sought comment on the FCC's rules relating the hearing aid compatibility of wireless handsets. In November 2011, the FCC's Wireless Telecommunications Bureau and Office of Engineering and Technology released a Second Further Notice of Proposed Rulemaking proposing to adopt the most current hearing aid compatibility technical standard into the FCC's rules. We cannot predict at this time what new requirements the FCC will establish, if any, or how any such new requirements may affect us.

        In October 2010, the Twenty-First Century Communications and Video Accessibility Act was signed into law. The statute imposes a number of accessibility and other obligations on providers of Advanced Communications Services, which include interconnected VoIP services, and on manufacturers of equipment, including software, used for services covered by the law. In October 2011, the FCC released an order adopting rules to implement the new accessibility requirements. The FCC also adopted a further notice of proposed rulemaking on certain issues. We cannot predict what effect the new rules, which are not yet effective, will have on our business, nor can we predict how the FCC will address issues raised in the further notice.

Truth-in-Billing and Unauthorized Charges

        In July 2011, the FCC released a Notice of Proposed Rulemaking, seeking comment on proposed rules designed to assist consumers in detecting and preventing the placement of unauthorized charges on their telephone bills, an unlawful and fraudulent practice commonly referred to as "cramming." Among other things, the FCC seeks comment on whether these proposed rules or similar requirements should apply to providers of interconnected VoIP service. Further, the FCC is seeking comment on whether any of its 'Truth-in-Billing' rules or similar requirements should apply to interconnected VoIP providers in order to protect consumers from cramming. At this time we cannot predict the outcome of this proceeding, nor can we predict its potential impact on our business.

Other Proceedings That May Impact Our Business or Service Offerings

        The FCC and state PUCs are considering a number of issues that could impact the structure of the market in which we operate. The FCC and certain states continue to consider the pricing of services offered by incumbent providers that compete with our regulated offerings. New price regulation of incumbent offerings would likely result in decreasing prevailing incumbent rates for services that compete with ours, making our services less attractive and potentially decreasing the prices we can charge for such services.

Intercarrier Compensation Reform

        As described above, the current regime governing intercarrier compensation consists of a patchwork of federal and state regulation depending upon such factors as the provider, jurisdiction and nature of traffic. This has led to a significant amount of disputes and litigation throughout the industry.

        Although we provide our communications services pursuant to contracts with those service providers who connect directly to us, much of the traffic routed using our service is ultimately

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originated or terminated by other parties with whom we are connected indirectly, and the rights and obligations of these indirectly connected parties, including the rates they pay for the origination and termination of the traffic they carry, are often governed by regulated tariffs rather than by contracts. Those rates, in turn, have a material effect on the rates that we pay our peering partners to transmit and terminate our traffic.

        Historically, regulated service providers charge other service providers for various functions performed in handling voice traffic. The express goal of reforming the system of payments made between regulated service providers is to move the industry away from relying on such payments to recoup costs associated with the provision of service and instead permit regulated service providers to seek to recoup their cost from their end-user customers. Regulated service providers are free to negotiate alternative arrangements, but the FCC Order establishes default rates in the absence of agreements between regulated service providers.

        The rules adopted by the FCC provide for a multiyear transition to a national uniform bill-and-keep framework as the ultimate default end state for all telecommunications traffic that is delivered to local exchange carriers for termination, while originating interstate (and some intrastate) switched access default rates are capped at current levels. Under bill-and-keep, providers do not charge an originating or other carrier for terminating traffic and instead generally seek to recover these costs from their own end-user customers.

        Pursuant to the FCC Order, the default rates for certain services provided under tariffs are lowered for the most common termination functions performed by regulated service providers when handling voice traffic. The transition period depends on the type of regulated service provider. For the largest regulated service providers, known as "price cap" carriers (as well as competitive LECs that benchmark access rates to these carriers), the transition plan lowers certain termination rates to bill and keep between July 1, 2012 and July 1, 2017. For smaller regulated service providers that offer service in rural and high cost areas, known as rate-of-return carriers (as well as competitive LECs that benchmark access rates to these carriers), the transition to lower termination rates begins on July 1, 2012, but extends for eight years until July 1, 2020. After the transition is complete, service providers will be permitted to seek to recoup certain termination costs directly from their end-user customers and not from tariffed charges imposed on other service providers.

        The transition to bill and keep begins by capping default rates that regulated service providers can charge service providers for a variety of functions performed to terminate voice traffic (as noted, some originating switched access rates also are capped at this time). Depending on the particular function performed and the type of regulated service provider, the tariffed rate to terminate traffic steps down until a unified rate for inter- and intrastate voice traffic of $0.0007 is established by July 1, 2016 for the most common termination functions performed by price cap regulated service providers and their competitors when processing voice traffic. Beginning July 1, 2017, these regulated service providers will be permitted to seek to recover the costs associated with the provision of service only from their customers and not other regulated service providers. The rules will also cap the tariffed rate for terminating traffic to $0.0007 by July 1, 2017, for additional tandem switching and transport functions performed by these regulated service providers, when the terminating carrier owns the serving tandem switch. Beginning July 1, 2018, the tandem switching tariffed rate for these regulated service providers changes to zero such that both tandem and end office costs will be recoverable only from customers rather than service providers, when the terminating carrier owns the serving tandem switch. For smaller carriers located in rural and high cost areas and their competitors, the steps and tariffed rate caps differ and the transition extends until July 1, 2020.

        The FCC Order also addresses wireless service provider traffic. The FCC Order adopts bill and keep as the default compensation for all CMRS-LEC non-access traffic effective December 29, 2011. CMRS providers will be subject to the transition applicable to price cap carriers in the event that

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CMRS providers' reciprocal compensation default rates are inconsistent with the reforms adopted in the FCC Order.

        The FCC Order establishes new rules concerning traffic exchanged over PSTN facilities that originates or terminates in Internet Protocol format, referred to as "VoIP-PSTN" traffic. As with traditional and wireless telecommunications traffic, regulated service providers will ultimately be subject to bill and keep when terminating such traffic. But as part of the transition to that end point, the FCC Order adopts a VoIP-PSTN initial transitional framework for compensation between regulated service providers. The Order establishes two default rates for such traffic: toll and local. The rate for terminating intrastate and interstate toll traffic will match the relevant tariffed interstate access rate for traditional non-VoIP toll traffic, and the local rate will match the local ("reciprocal compensation") rate associated with traditional non-VoIP local traffic. Further, the FCC Order allows regulated service providers to tariff charges associated with handling VoIP-PSTN traffic in a manner consistent with the rates established by the FCC Order. The VoIP-PSTN reforms become effective December 29, 2011.

        The FCC Order broadly reforms the system of default rates that apply to payments between regulated service providers. While the rates for termination of VoIP-PSTN traffic may initially increase, the FCC Order ultimately may reduce default rates for all types of telecommunications traffic and that may impact the rates we are able to negotiate with our partners, may lower our profit margins, may make certain traffic that we handle less profitable than other traffic, may reduce traffic volumes either globally or for certain traffic that we currently handle, may require us to find new business partners, or may require us to materially change our business practices. But a stated goal of the FCC in adopting these reforms is to increase the deployment of broadband networks and to create an environment that will encourage the increased use of IP-enabled services. It is also possible that calling volumes will increase even though revenue per minute of use will decrease. For example, as default rates for certain services fall pursuant to the FCC Order, incentives to roll out new IP-enabled services may increase resulting in more minutes of use in the overall marketplace. We cannot predict the full impact of the FCC Order at this time.

        The FCC Order is not yet effective and has been appealed by multiple plaintiffs. It could also take some time for regulated service providers to modify their rates when providing service pursuant to commercial agreements as such providers must invoke change in law clauses in the relevant agreements to implement the new rates. We cannot predict whether and when the FCC Order will be effective or whether it will become effective in whole or in part. We cannot predict the impact on our business if the FCC Order does not become effective either in whole or in part.

Network Neutrality Rules

        In December 2010, the FCC adopted rules governing the provision of consumer wireline broadband Internet access services. Among other things, the rules: (1) require providers of consumer broadband Internet access to publicly disclose their network management practices and the performance and commercial terms of their broadband Internet access services; (2) prevent broadband Internet access providers from blocking lawful content, applications, services, or non-harmful devices, subject to reasonable network management; and (3) prevent broadband Internet access providers from unreasonably discriminating in the transmission of lawful network traffic over a consumer's broadband Internet access service. While these rules are focused on broadband Internet access services for consumers and small business, it is possible that they may likewise affect enterprise or carrier Internet access services. The FCC's rules became effective on November 20, 2011. Appeals were filed in several different federal courts of appeal. The federal courts issued an order that all appeals would be heard in the United States Court of Appeals for the District of Columbia. Subsequently, appeals filed in other circuits were transferred to the United States Court of Appeals for the District of Columbia and are pending consolidation. Additionally, one party filed a Petition for Reconsideration with the FCC. We cannot predict whether and to what extent these or any other appeals may succeed, whether the

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appeals will be allowed to move forward in advance of the FCC's consideration of the Petition for Reconsideration, what the FCC may order with respect to the Petition, nor can we predict what impact the rules or lack thereof will have on our business at this time.

Outage Reporting

        In July 2010, the FCC's Public Safety and Homeland Security Bureau sought comment on whether to extend the FCC's outage reporting rules to broadband Internet service providers and interconnected VoIP service providers. In a May 2011 rulemaking, the FCC proposed to extend the outage reporting requirements in Part 4 of the rules to interconnected VoIP and broadband service providers.

Federal Trade Commission "Red Flag" Identity Theft Rules

        We are subject to Section 114 of the Fair and Accurate Credit Transactions Act of 2003, or FACTA, and rules of the Federal Trade Commission that require "creditors" to develop and effectuate written internal programs to detect, prevent, and mitigate identity theft in connection with their accounts. We likely would be deemed to be a "creditor" as defined in the FACTA.

Rural Call Completion Task Force

        Rural telephone companies have reported a substantial increase in complaints between April 2010 and March 2011 regarding incoming calls that are delayed, never completed, of poor quality, or lacking accurate caller ID information. Many believe this problem is being caused by specialized call routing providers that are refusing to deliver calls to rural LECs that charge high terminating rates. On October 18, 2011, the Rural Call Completion Task Force (which includes FCC staff) held a workshop to identify specific causes of the problem and discuss potential solutions with key stakeholders. It is possible that the Task Force may ultimately recommend that the FCC adopt certain reforms, including tightening the rules that require carriers to provide accurate information about call origin and imposing monetary penalties on offending routing providers. We cannot predict how any such recommendations may affect our business.

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MANAGEMENT

Executive Officers and Directors

        The following table sets forth information regarding our executive officers and directors:

Name	Age	Title
Frank Fawzi	48	President, Chief Executive Officer and Chairman of the Board
Shaun Andrews	39	General Manager, Service Providers
John Belanger	48	Senior Vice President of Service Provider Sales
Phillip Bronsdon	48	Senior Vice President of Engineering, Development and Operations
Haydar Haba	47	Founder, Chief Visionary Officer and Director
Margaret Norton	57	General Manager, Enterprises
Andre Simone	53	Chief Financial Officer, Secretary
William Harding(2)(3)	64	Director
Lawrence Irving(1)	55	Director
Keith Olsen(1)	55	Director
Javier Rojas(1)(2)(3)	49	Director
Raymond Smets(1)(2)	48	Director

(1)

Member of our audit committee.

(2)

Member of our compensation committee.

(3)

Member of our nominating and corporate governance committee.

Executive Officers

Frank Fawzi has served as a director and Chairman of our board of directors since June 2006. In 2007, Mr. Fawzi assumed the role of chief executive officer and president. Before joining us, between 1991 and 2001, Mr. Fawzi founded and was the chief executive officer for CommTech Corporation, a leader in the communications software industry until it was acquired by ADC, where he subsequently served as chief technology officer for ADC's Software & Integration Group, from 2001 to 2002. Mr. Fawzi also served as a partner with First Oakmount Corporation, a business advisory firm, from 2004 to 2006. Mr. Fawzi received a Bachelor of Science in Engineering and Computer Science and a Masters of Science in Management Information Systems from Stevens Institute of Technology, and has participated in the Wharton Executive Education Program at the University of Pennsylvania. Mr. Fawzi brings to our board the perspective and experience he has as our president and chief executive officer as well as his extensive experience in the communications and software industries.

Shaun Andrews has served as our general manager, service providers since May 2010. Before joining us, Mr. Andrews served in various executive roles, ultimately as the vice president of commercial services for the wholesale marketing group with Level 3 Communications, an international provider of fiber-based communications services. Mr. Andrews worked at Level 3 Communications from January 2006 to April 2010. Mr. Andrews holds a Bachelor of Science degree in marketing from Miami University of Ohio and a Masters of Business Administration from the Kellogg Graduate School of Management at Northwestern University.

John Belanger has served as our senior vice president of service provider sales since January 2004. Before joining us, Mr. Belanger served as senior director of the carrier services division, covering the western United States for France Telecom, Inc. Mr. Belanger worked at France Telecom, Inc. from May 2002 to January 2004. Mr. Belanger attended Capital University in Ohio.

        Phillip Bronsdon has served as our senior vice president of engineering, development and operations since September 2007. Before joining us, Mr. Bronsdon served as a client principal in the

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Americas consulting and integration vertical for communications, media and entertainment at Hewlett Packard Corporation from August 2006 to August 2007. Prior to joining Hewlett Packard, Mr. Bronsdon served as vice president of operations for Ooma, a VoIP service provider, from November 2005 to August 2006. Mr. Bronsdon has served as a Brigade Commander, with the 37th Armored Brigade, Ohio Army National Guard. Mr. Bronsdon holds a Bachelors of Science degree in computer science engineering from The Ohio State University and a Masters of Business Administration from Ohio University.

Haydar Haba has served as our chief visionary officer since October 2007 and as a member of our board of directors since co-founding the company in 2003. Mr. Haba served as our president and chief executive officer from July 2003 to October 2007. Before founding the company, Mr. Haba was founder and chief technology officer of Telco 214, an international voice communications provider from 1997 to 2000. Mr. Haba began his career at Symetrics Industries, a public company specializing in the design and manufacture of communications systems and computer telephony platforms for the United States Department of Defense, NASA, and other large enterprises. Mr. Haba completed PhD course work in electrical engineering and holds Bachelors of Science and Masters of Science degrees in electrical engineering and computer science from the Florida Institute of Technology. Mr. Haba brings to our board the perspective, experience and deep understanding of our business he developed as a co-founder and our former chief executive officer as well as his extensive experience in the communications and software industries.

Margaret Norton has served as our general manager, enterprises, since September 2009. Before joining us, Ms. Norton served in various senior executive roles, ultimately as president and chief executive officer, with Mobilitec, Inc., a provider of integrated software products that enable mobile content delivery which was acquired by Alcatel Lucent, from September 2003 to January 2008, after which she decided to take time off for personal development purposes. Prior to Mobilitec, Ms. Norton was a self employed consultant and served on the board of directors of Roguewave Software, a developer of software tools for developers which was acquired by Quovadx, Inc., from January 2000 to September 2003. Ms. Norton holds a Bachelor of Arts degree in economics from the University of Arizona and a Masters of Business Administration from the University of Connecticut.

Andre Simone has served as our chief financial officer since February 2007. Before joining us, Mr. Simone served as chief financial officer of Dimatix, Inc., a provider of piezoelectric inkjet print heads, from February 2005 to October 2006. Prior to Dimatix, Mr. Simone served as chief financial officer of SAP Markets, Inc., a provider of technology platforms and business solutions, from November 2002 to December 2004. Mr. Simone holds a Bachelor of Arts degree in economics from Stanford University and a Masters of Business Administration from The Wharton School of Business at the University of Pennsylvania.

Directors

William J. Harding, Ph.D., has served as a member of our board of directors since October 2008. Dr. Harding has served as a managing director of VantagePoint Capital Partners, a venture capital firm, since October 2007. Before joining VantagePoint, Dr. Harding held several positions including as a managing director of Morgan Stanley & Co., president of Morgan Stanley Venture Partners and a managing member of several venture capital funds affiliated with Morgan Stanley, where he was employed from 1994 through 2007. Dr. Harding also served as an officer in the Military Intelligence Branch of the U.S. Army Reserve. In the last five years, Dr. Harding has served as a director for InterNap Network Services Corporation and Aviza Technology, Inc. Dr. Harding holds a Bachelors of Science degree in engineering mathematics and a Masters of Science degree in Systems Engineering from the University of Arizona and a Ph.D. in engineering from Arizona State University. Dr. Harding brings to our board his extensive prior experience as an investor in technology companies, as well as his

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prior experience serving on the boards of directors of technology companies. Dr. Harding is a designee of VantagePoint Venture Partners 2006 (Q), L.P.

Lawrence R. Irving has served as a member of our board of directors since January 2011. Mr. Irving has served as the chief financial officer and treasurer of Synchronoss Technologies, Inc., a provider of on-demand transaction, content and connectivity management solutions, since July 2001. Before joining Synchronoss, Mr. Irving served as chief financial officer and treasurer at CommTech Corporation from 1998 to 2001. Mr. Irving holds a Bachelors of Business Administration degree in accounting from Pace University and is a certified public accountant. Mr. Irving brings to our board his extensive experience as a senior finance executive in leading public and private high-growth technology companies in the telecommunications and IT industries. Mr. Irving is currently a designee of VantagePoint Capital Partners 2006 (Q), L.P.

Keith Olsen has served as a member of our board of directors since July 2011. Since December 2010, Mr. Olsen has served as a member of the board of directors of RigNet, Inc., a provider of network infrastructure services to the oil and gas industry. Prior to RigNet, Mr. Olsen served as president and chief executive officer and as a director of Switch and Data Facilities Company, Inc., a provider of network-neutral data centers, from February 2004 to May 2010. Before joining Switch and Data, Mr. Olsen served as a vice president of AT&T, where he was responsible for indirect sales and global sales channel management, from May 1993 to February 2004. Mr. Olsen holds a Bachelors of Arts degree from the State University of New York, Geneseo. Mr. Olsen brings to our board his extensive experience as a senior public company executive in leading technology companies in the telecommunications and information technology industries.

Javier Rojas has served as a member of our board of directors since June 2006. Mr. Rojas has served as a managing director of Kennet Partners LLC, a venture capital firm, since December 2000, where he leads their United States investment activities. Before joining Kennet, Mr. Rojas was a managing director of Broadview International and led their west coast software and services practice. Mr. Rojas holds a Bachelors of Science degree in finance from Georgetown University and a Masters of Business Administration from Harvard University. Mr. Rojas brings to our board his extensive prior experience as an investor in technology companies, as well as his prior experience serving on the boards of directors of technology companies. Mr. Rojas is a designee of Kennet II, L.P.

        Raymond Smets has served as a member of our board of directors since January 2011. Mr. Smets has served as the vice president of field operations for Metaswitch Networks since December, 2011. Before joining Metaswitch, Mr. Smets served as the vice president and general manager of the wireless networking business unit of Cisco Systems, Inc. from December 2008 to November 2011, where he was responsible for technology and product development for Cisco's 802.11n wireless LAN access point products, controllers and software for management and mobile services solutions. Before joining Cisco Systems, Mr. Smets served from September 2007 to August 2008, as the executive vice president of sales and marketing for Packeteer, Inc., an application classification and traffic prioritization systems provider. Mr. Smets also served as the senior vice president of Netopia, Inc., a provider of carrier-class broadband customer premise equipment, from February 2006 to September 2008. Mr. Smets holds a Bachelors of Science degree in engineering from the University of Florida and a Masters of Business Administration from Nova Southeastern University. Mr. Smets brings to our board his extensive experience as a senior executive leading public and private high-growth technology business teams in the IT telecom, networking and security industries.

Board Composition and Independence

        All of our current directors were elected or appointed to our board of directors in accordance with an agreement that we entered into with certain holders of our common stock and holders of our preferred stock, including entities with which certain of our directors are affiliated. The holders of a

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majority of our common stock, voting as a separate class, have designated Frank Fawzi and Haydar Haba for election to our board of directors. The holders of a majority of our shares of Series C Preferred Stock, voting as a separate class, have designated William Harding for election to our board of directors. The holders of a majority of our shares of Series B Preferred Stock, voting as a separate class, have designated Javier Rojas for election to our board of directors. Lawrence Irving, Keith Olsen and Raymond Smets were appointed by members of our board of directors to fill vacancies in directorships for independent directors. Upon the completion of this offering, the voting agreement and these board designation rights will terminate.

        Upon the completion of this offering, our certificate of incorporation and bylaws will authorize a board of directors of six members. Our board of directors will be divided into three classes with staggered three-year terms as follows:

•

Class I directors will be Mr. Rojas and Mr. Fawzi, and their terms will expire at the annual general meeting of stockholders to be held in 2012;

•

Class II directors will be Mr. Haba and Mr. Smets, and their terms will expire at the annual general meeting of stockholders to be held in 2013; and

•

Class III directors will be Mr. Harding, Mr. Olsen and Mr. Irving, and their terms will expire at the annual general meeting of stockholders to be held in 2014.

        The authorized number of directors may be changed only by resolution of our board of directors. This classification of our board of directors into three classes with staggered three-year terms may have the effect of delaying or preventing changes in our control or management.

        There are no family relationships among any of our current directors or executive officers. Our board of directors has determined that other than Mr. Fawzi, our president and chief executive officer, and Mr. Haba, our founder and chief visionary officer, each of the members of our board of directors is an "independent" director for purposes of the listing requirements and rules and regulations of the Nasdaq Global Market.

Board Leadership Structure

        We do not have a policy on whether the role of the chairperson and chief executive officer should be separated and our board of directors believes that it is currently in the best interest of the company and its stockholders for Mr. Fawzi to serve in both roles, which he has done since October 2007, in light of his knowledge of our company and our industry. Our board of directors believes combining these roles promotes effective leadership and provides the clear focus needed to execute our business strategies and objectives. However, our board of directors does not believe these roles must be combined, and may in the future separate these roles. We do not have a lead independent director. Our board of directors believes it will be able to effectively provide independent oversight of our business and affairs, including the risks facing our company, without an independent chairman or a lead independent director through the composition of our board of directors and committees, the strong leadership of our independent directors and the other corporate governance policies and processes that will be in place upon completion of this offering.

Board Committees

        Our board of directors directs the management of our business and affairs, as provided by Delaware law, and conducts its business through meetings of our board of directors. Our board of directors has established three standing committees: an audit committee; a compensation committee; and a nominating and corporate governance committee. In addition, from time to time, special committees may be established under the direction of our board of directors when necessary to address specific issues. Our board of directors has adopted a written charter for each of the standing

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committees. These charters will be available on our corporate website at www.intelepeer.com following the completion of the offering. We intend to rely on the transition periods provided by applicable Nasdaq Global Market rules and Rule 10A-3 of the Exchange Act, which provide for phase-in compliance for companies that are listing on the Nasdaq Global Market in connection with their initial public offering. As a result, we plan to have our audit, compensation and nominating and governance committees comprised of a majority of independent directors within ninety days of our listing and comprised solely of independent directors within one year of our listing.

        Audit Committee.    Our audit committee is comprised of Lawrence Irving, the committee chairman, Keith Olsen, Javier Rojas and Raymond Smets. Each of Mr. Irving, Mr. Olsen and Mr. Smets satisfies the independence requirements of the Nasdaq Global Market and Rule 10A-3 of the Exchange Act. After the completion of this offering, our audit committee will be directly responsible for, among other things, the appointment, compensation, retention, and management of our independent registered public accounting firm. The committee will be responsible for reviewing the plans and results of the audit engagement with the firm, approving any additional professional services provided by the firm and reviewing the firm's independence. Beginning with our first report on internal control over financial reporting, the committee will also be responsible for discussing the effectiveness of our internal control over financial reporting with the public accounting firm and our relevant financial management. Our board of directors has determined that all of the members of the audit committee possess the level of financial literacy required by the applicable rules of the SEC, and that Lawrence Irving is an audit committee financial expert as currently defined by SEC rules.

        Compensation Committee.    Our compensation committee is comprised of William Harding, the committee chairman, Javier Rojas and Raymond Smets, each of whom satisfies the independence requirements of the Nasdaq Global Market. In addition, Mr. Smets qualifies as a "non-employee director" under Section 16 of the Exchange Act and an "outside director" for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code. After the completion of this offering, the compensation committee will be responsible for, among other things, supervising and reviewing our affairs as they relate to the compensation and benefits of our executive officers. In carrying out these responsibilities, the compensation committee will review all components of executive compensation for consistency with our compensation philosophy and with the interests of our stockholders.

        Nominating and Corporate Governance Committee.    Our nominating and corporate governance committee is comprised of William Harding and Javier Rojas, each of whom satisfies the independence requirements of the Nasdaq Global Market. After the completion of this offering, the nominating and corporate governance committee will be responsible for, among other things, identifying individuals qualified to become board members; selecting, or recommending to our board of directors, director nominees for each election of directors; developing and recommending to our board of directors criteria for selecting qualified director candidates; considering committee member qualifications, appointment and removal; recommending corporate governance principles, codes of conduct and compliance mechanisms; and providing oversight in the evaluation of our board of directors and each committee.

Compensation Committee Interlocks and Insider Participation

        During 2010, our compensation committee was comprised of Javier Rojas and William Harding. There are no interlocking relationships between our board of directors or compensation committee and the board of directors or compensation committee of any other entity, nor has any interlocking relationship existed in the past. None of our directors who served on our compensation committee during 2010 has served our company or any of our subsidiaries as an officer or employee. In addition, none of our executive officers serves as a member of the board of directors or compensation committee

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of any entity which has one or more executive officers serving as a member of our board of directors or our compensation committee.

Code of Business Conduct and Ethics

        We have adopted a written code of business conduct and ethics, which outlines the principles of legal and ethical business conduct under which we do business. The code is applicable to all of our directors, officers and employees. This code will be available on our corporate website at www.intelepeer.com following the completion of the offering. Any substantive amendment or waiver of the code relating to executive officers or directors will be made only after approval by a committee comprised of a majority of our independent directors and will be disclosed on our website identified above within four business days.

Limitation of Liability and Indemnification

        For information concerning limitation of liability and indemnification applicable to our directors, executive officers and, in certain cases, employees, see "Description of Capital Stock—Limitations of Director Liability and Indemnification of Directors, Officers, and Employees" located elsewhere in this prospectus.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The following discussion and analysis of compensation arrangements of our named executive officers for 2010 should be read together with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current considerations, expectations, and determinations regarding our compensation programs. The actual amount and form of compensation and the compensation programs that we adopt in future periods may differ materially from current or planned programs as summarized in this discussion.

Objectives

        The compensation committee of our board of directors has overall responsibility for our compensation program for our executive officers. For 2010, our named executive officers were:

•

Frank Fawzi, president, chief executive officer, and chairman of the board of directors;

•

Andre Simone, chief financial officer;

•

Haydar Haba, chief visionary officer;

•

Phillip Bronsdon, senior vice president of engineering, development and operations; and

•

John Belanger, senior vice president of service provider sales.

        The compensation committee's objective is to provide a total compensation package for executives that is reasonable, competitive and reflective of corporate and individual performance. The compensation committee's decisions are driven by our desire to recruit and retain highly talented executives and to incentivize and reward aggressive corporate growth, achievement of long-term corporate objectives and individual performance that meets or exceeds our expectations.

        Because we operate in a highly competitive market, hiring and retaining officers and other key employees is critically important to our success. As a private company, our ability to provide cash compensation has historically been limited by the needs of the business. Accordingly, the primary component of our incentive compensation program has been the grant and vesting of equity awards. This allowed us conserve cash while still offering key employees the opportunity to share in future gains as we worked towards a liquidity event for our investors, such as an initial public offering of our stock.

        As we transition from being a privately-held company to a publicly-traded company, we will evaluate our philosophy and compensation programs as circumstances require. As part of this review process, we will apply our corporate values and objectives to determine the types and levels of compensation required to meet our retention objectives.

Role of Executives in Executive Compensation Decisions

        Our compensation committee seeks input and specific recommendations from our chief executive officer when discussing the performance of, and compensation levels for, executives other than himself. The chief executive officer provides recommendations to the compensation committee regarding each executive officer's level of individual achievement other than himself. However, he is not a member of the compensation committee and does not vote.

        The compensation committee also works with our chief executive officer, our chief financial officer and the head of our human resources department to evaluate the financial, accounting, tax and retention implications of our various compensation programs. Neither our chief executive officer nor any of our other executives participates in deliberations relating to his or her own compensation.

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Role of Compensation Consultants in Executive Compensation Decisions

        The compensation committee has the authority to retain the services of third-party executive compensation specialists in connection with the establishment of cash and equity compensation and related policies. While the compensation committee did not use a compensation consultant in connection with setting 2010 executive compensation, the compensation committee reviewed and considered various market data, including the professional and market experience of our committee members, and the Radford Executive Survey and the Survey Totals Report, which reflected data regarding approximately 130 technology companies with revenue in a range similar to ours, including:

3PAR
8X8
A123 SYSTEMS
ACCELA
ACTIVIDENTITY
ACTUATE
ADAPTEC
ADVANCED ANALOGIC
    TECHNOLOGIES
AEROFLEX COLORADO
    SPRINGS
AIRVANA
ALIBRIS
ALLIED TELESIS
AMICAS
APPLIED SIGNAL
    TECHNOLOGY
ARBOR NETWORKS
ARCSIGHT
ARUBA NETWORKS
AUDATEX A SOLERA
    COMPANY
AVAILITY LLC
BIGBAND NETWORKS
BLUEARC
BORLAND SOFTWARE
BRIGHTSOURCE ENERGY
CAFEPRESS.COM
CALIFORNIA CASUALTY
    MANAGEMENT
CALIPER LIFE SCIENCES
CALLIDUS SOFTWARE
CALYPSO TECHNOLOGY
CASCADE MICROTECH
CIRRUS LOGIC
CORTINA SYSTEMS
DATRON WORLD
    COMMUNICATIONS
DELTA PRODUCTS
DEMANDTEC
DIGI INTERNATIONAL DIVX
DPIX
DTS
EADS NORTH AMERICA
    TEST AND SERVICES
EARLY WARNING
    SERVICES LLC
EBARA TECHNOLOGIES
ECHELON
EHEALTH
ELECTRO SCIENTIFIC
    INDUSTRIES
EMPIRIX
ENDWAVE
ENTROPIC
    COMMUNICATIONS
ENTRUST
EPOCRATES
EXAR
FINANCIAL ENGINES
FORCE 10 NETWORKS
FOUNDATION 9
    ENTERTAINMENT
FRONTRANGE
    SOLUTIONS
FSI INTERNATIONAL
FUJIFILM DIMATIX
GLU MOBILE
HOMEAWAY.COM
IDEO
IFS NORTH AMERICA
INFOSPACE
INTEVAC
IXIA
JSR MICRO
KANA SOFTWARE
KASPERSKY LAB
KEY TECHNOLOGY
KOKUSAI
    SEMICONDUCTOR
    EQUIPMENT L-3 COMMUNICATIONS
LINKABIT
LANDESK SOFTWARE
LIFELOCK
LIMELIGHT NETWORKS
LIVEOPS
LIVETV
MAGMA DESIGN
    AUTOMATION
MAGNUM
    SEMICONDUCTOR
MARKETTOOLS
MATTSON TECHNOLOGY
MBLOX
MICROTUNE
MINDSPEED
    TECHNOLOGIES
MOBITV
MODEL N
MOTRICITY
MOVIUS
NAMCO BANDAI GAMES
    AMERICA
NAPSTER
NATIONAL RURAL
    TELECOMMUNICATIONS
    CO-OP
NAVINET
NEKTAR THERAPEUTICS
NETLOGIC
    MICROSYSTEMS
NETSUITE
NEUTRAL TANDEM
NEXTAG
NOBLIS
OMNEON
OMNITURE
OPEN TV
PERICOM
    SEMICONDUCTOR PGP
PHOENIX
    TECHNOLOGIES
PHOTON DYNAMICS AN
    ORBOTECH CO
PLX TECHNOLOGY
PRINTRONIX
RAMBUS
RGB NETWORKS
RIGHTNOW
    TECHNOLOGIES
RINCON RESEARCH
SABA
SAVI TECHNOLOGY
SCHILLING ROBOTICS
SDI
SEMATECH
SENSIS
SERVICESOURCE
SHORETEL
SOLTA MEDICAL
SOURCEFIRE
SPACE SYSTEMS/LORAL
SPACENET
SUMTOTAL SYSTEMS
SYMYX TECHNOLOGIES
TALEO
THERMASOURCE
TRIPWIRE
TRUEPOSITION
TURIN NETWORKS
ULTRATECH
UPEK
VICOR
VIGNETTE
VOLCANO
VOLTERRA
WAGEWORKS
WEBTRENDS

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        In February 2011, the compensation committee engaged Compensia, Inc., a national compensation consulting firm providing executive compensation advisory services, to assist it in developing a set of executive compensation guiding principles, to evaluate the competitiveness of our executive officers' compensation and to assist the compensation committee in developing a public company-oriented executive compensation program, including the establishment of reference points and guidelines with respect to base salary, incentive compensation and equity compensation. Compensia is engaged by, and serves at the discretion of, the compensation committee. Compensia did not provide any services to us in 2010.

Timing of Compensation Decisions

        At the end of each fiscal year, our chief executive officer reviews the performance of the executive officers other than himself and presents his conclusions and recommendations to the compensation committee. At that time and throughout the year, the compensation committee will also evaluate the performance of our chief executive officer, which is measured in substantial part against our financial performance. In the first quarter of the following fiscal year, the compensation committee then assesses the overall effectiveness of our compensation plans against our goals, and determines whether any changes to the allocation of compensation elements, or the structure or level of any particular compensation element, are warranted.

        In connection with this process, our compensation committee generally establishes the elements of our performance-based cash bonus plan and determines whether to grant equity awards to our executive officers. With respect to newly hired employees, our practice is typically to approve equity grants at the first meeting of the board of directors following such employee's hire date provided that the board has received a third party valuation of the Company's common stock which incorporates all material information. We do not have any program, plan or practice to time equity award grants in coordination with the release of material non-public information. From time to time, additional equity awards may be granted to executive officers during the fiscal year. In May, June and October 2011, we granted the following options to named executive officers:

Name	Grant Date		Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable			Option Exercise Price ($)		Option Expiration Date
Frank Fawzi		May 3, 2011		—		95,000	(1)	$	11.00		May 3, 2021
Andre Simone		May 3, 2011		—		52,500	(1)	$	11.00		May 3, 2021
Haydar Haba		May 3, 2011		—		42,500	(1)	$	11.00		May 3, 2021
Phil Bronsdon		May 3, 2011		—		27,500	(1)	$	11.00		May 3, 2021
John Belanger		May 3, 2011		—		27,500	(1)	$	11.00		May 3, 2021
Haydar Haba		June 3, 2011		—		42,945	(2)	$	1.63		September 28, 2013
John Belanger		June 3, 2011		—		13,556	(2)	$	1.63		September 28, 2013
John Belanger		October 18, 2011		—		157,669	(2)	$	1.63		September 28, 2013

(1)

1/4^th of the total number of shares subject to the option will vest on May 3, 2012, and the remainder will vest in equal monthly installments over a 36-month period thereafter, subject to the grantee's continued service to us on each such vesting date.

(2)

Exercisable following the first to occur of the one of several events listed in the applicable option agreement (including separation of service by the officer, death or disability, or a change of control) and June 30, 2013 and shall be exercisable until the first to occur of (i) ninety (90) days following the first event giving rise to the right to exercise; and (ii) December 31 of the calendar year in which such event occurs.

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Role of the Compensation Committee in Setting Executive Compensation

        The compensation committee is responsible for overseeing our executive compensation philosophy and administering our executive compensation program, as well as determining and approving the compensation for our executive officers, including the named executive officers. The compensation committee regularly reports to our full board of directors on its deliberations. Historically, the compensation committee has advised the full board of directors on executive compensation matters, and the board of directors has set compensation levels.

        In anticipation of the initial public offering of our stock, the board of directors has delegated authority to make compensation decisions to our compensation committee, as described in the compensation committee charter.

        Members of the compensation committee are appointed by the board of directors. Currently, the compensation committee consists of William Harding, Javier Rojas and Raymond Smets, none of whom are executive officers of the Company, and each of whom qualifies as an "independent director" under the applicable Nasdaq Global Market standards. In addition, Mr. Smets qualifies as an "outside director" under Section 162(m) of the Code. See "Management—Board Committees—Compensation Committee" above.

        The compensation committee will perform, at least annually, a strategic review of the compensation program for our executive officers to determine whether it provides adequate incentives and motivation to our executive officers and whether it adequately compensates them relative to comparable officers in other companies with which we compete for executives.

Elements of Compensation Program

        The compensation package for our named executive officers is composed of the following elements:

•

annual base salary;

•

short-term performance-based cash compensation, in the form of an annual bonus;

•

long-term equity compensation, in the form of stock option grants; and

•

a benefits package that is generally available to all of our employees.

        We combine these elements to formulate compensation packages that provide competitive pay, reward achievement of financial, operational and strategic objectives and align the interests of our named executive officers and other senior management personnel with those of our stockholders.

Determining the Amount of Each Element of Compensation

        On an annual basis, the compensation committee establishes our executive compensation program, considering such factors as:

•

our short-term and long-term financial and strategic objectives;

•

individual responsibilities and performance;

•

the amount earned by our executive officers in prior years;

•

comparison to other executives within our company having similar levels of expertise and experience;

•

the external competitive market for senior management personnel; and

•

general economic factors and market outlook for the coming year.

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        The compensation committee believes that the most effective executive compensation program is one that delivers base salary and target incentive compensation at levels generally consistent with market practice, but also provides for opportunities in the form of incremental bonus and long-term equity awards that may result in above market levels if company objectives are exceeded and if executive officers remain for an extended period of time as our employees.

Base Salary

        Base salaries represent compensation for performing the basic obligations expected of each executive officer. The compensation committee generally sets annual base salaries at a level which it believes is sufficient to attract and retain the level of executive talent that we believe is necessary to manage and foster our growth and development. Historically, base salaries have approximated the 50th percentile of the competitive market, based primarily on the information set forth in the Radford Technology Survey. However, dependent upon an individual employee's background and experience or performance review, base salaries have also been targeted at the 25th, 75th or 90th percentile of the competitive market. Base salaries for our named executive officers in 2010 were set based upon each officer's position and title as compared to the Radford Technology Survey, and any increase in an individual's salary was based on their respective individual performance and determined in accordance with the guidelines in the table set forth below. Any changes in base salary are discretionary, and are made by the compensation committee based upon our performance and the responsibilities and continued success of each of our executive officers in contributing to that performance. The following table sets forth the guidelines we have historically used, and expect to continue to use, in targeting base salaries and setting merit increases:

		Current Salary as Compared to Competitive Market and Suggested Annual Merit Increase for Each Level
Performance Rating	Market Rate Compensation	Less than 85%			85-95%			95-105%			105-110%			110-115%			115-120%
Exceptional	90th Percentile		10.0	%		7.0	%		3.5	%		3.0	%		2.5	%		1.5	%
Exceeds Expectations	75th Percentile		8.0	%		6.0	%		3.0	%		2.5	%		2.0	%		1.0	%
Successfully Meets Expectations	50th Percentile		6.0	%		3.5	%		2.0	%		1.5	%		1.0	%		0.0	%
Occasionally Meets Expectations	25th Percentile		0	%		0	%		0	%		0	%		0	%		0	%
Fails to Meet Requirements	25th Percentile		0	%		0	%		0	%		0	%		0	%		0	%

        As an example based on the table above, if a named executive officer with a base salary of $200,000 in 2009 earned a performance rating of "Exceptional," such officer would have a salary target set at the 90th percentile of market for their job title for 2010. If the 90th percentile for such officer's job title was $230,000, the officer's current salary is 87 percent of the target, and the officer would be entitled to a seven percent merit increase for 2010. If the same officer earned a performance ranking of "Successfully Meets Expectations" for 2009, such officer would have a salary target set at the 50th percentile. If the 50th percentile for such officer was $190,000, the officer's current salary is 105.3 percent of the target, and such officer would be entitled to a one and one-half percent merit increase for 2010.

        In January 2011, the annual base salaries for each of our named executive officers for 2011 were set, effective as of January 1, 2011. Each of our executive officers, other than Mr. Belanger, due to the nature of his commission plan as described in greater detail below, received an increase in their base salary based on their individual performance reviews for 2010. Following the engagement of Compensia in March 2011, the compensation committee reviewed the base salaries that had been set in January 2011 and determined to make a change to the base salary arrangement for 2011 for Mr. Fawzi and Mr. Haba. Under Mr. Fawzi's employment agreement with us, upon the completion of this offering, Mr. Fawzi's salary will increase to $442,000 on an annualized basis. In connection with the execution of Mr. Haba's employment agreement with us, Mr. Haba's salary for 2011 increased from $242,459 to $250,459.

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        The 2010 and 2011 base salaries for our named executive officers are set forth below:

Named Executive Officer	2010 Base Salary		2010 Salary Percentage as Compared to the Percentile of the Radford Executive Survey Applicable to an Executive with the Named Executive Officer's Performance Rating			2011 Base Salary		2011 Salary Percentage as Compared to the Percentile of the Radford Executive Survey Applicable to an Executive with the Named Executive Officer's Peformance Rating
Frank Fawzi	$	375,000		76	%	$	412,500		86	%
Andre Simone	$	275,000		82	%	$	302,500		91	%
Haydar Haba	$	237,705		100	%	$	250,459		105	%
Phil Bronsdon	$	225,000		91	%	$	238,500		96	%
John Belanger	$	125,000		n/a		$	125,000		n/a

Short-Term Performance-Based Cash Compensation

        We use short-term performance-based cash compensation to incentivize performance consistent with our shorter-term corporate financial and strategic objectives while making progress towards our longer-term growth and other goals. The compensation committee determines cash bonus amounts for our executive officers, including the named executive officers, based on achievement of corporate financial targets established in our annual operating plan and individual performance requirements, as described further below.

        Each of our executive officers, including our named executive officers, other than Mr. Belanger, who participates in a separate sales commission plan, is eligible to participate in a performance-based cash bonus plan under which he may earn an annual target amount based on achievement of our corporate financial objectives and his individual performance. The corporate performance element accounts for 75 percent of the eligible bonus, and the individual's performance element accounts for the remaining 25 percent. As explained in more detail below, the bonus pool is accrued and funded quarterly based on performance against plan for each of the corporate financial objectives. Payment of any portion of the target bonus attributable to individual performance is dependent upon the executive officer receiving a performance review of no less than "Successfully Meets Expectations." The aggregate annual target amounts are computed as a percentage target rate of annual base salary. The target amounts in 2010 for our named executive officers were as follows:

Named Executive Officer	Annual Cash Bonus Target
Frank Fawzi		50	%
Andre Simone		50
Haydar Haba		50
Phil Bronsdon		50

        For 2010, the compensation committee established the following corporate financial objectives. The annual cash bonus pool was created and funded to support our annual operating plan, to enhance long-term value creation, and to fund annual cash bonus awards. These corporate objectives comprised 75 percent of the target bonus opportunity for 2010, and their relative weightings were as follows:

Corporate Objective	Weighting
Quarterly Revenue Targets		33.33	%
Quarterly Gross Margin Targets		33.33
Quarterly Adjusted EBITDA Targets		33.33

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        The quarterly targets for each of the above objectives for 2010 were as follows:

Corporate Objective	Q1		Q2		Q3		Q4
Quarterly Revenue Targets	$	22,309,668	$	25,424,142	$	27,694,706	$	29,866,317
Quarterly Gross Margin Targets		30.5%		29.65%		30.49%		31.05%
Quarterly Adjusted EBITDA Targets	$	704,048	$	583,560	$	1,406,703	$	2,241,280

        The compensation committee selected the above measures because it considered them to be appropriate indicators of our success in achieving the objectives expressed and outlined in our annual plan as a private company. We historically calculated Gross Margin as total revenue less peering partner compensation divided by total revenue. We historically calculated Adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, change in fair value of warrant liability and stock-based compensation. In 2010, we used Adjusted EBITDA as a key performance measure because we believed it facilitated operating performance comparisons from period to period by excluding potential differences caused by variations in capital structures (affecting net interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or fluctuations in permanent differences or discrete quarterly items) and the impact of depreciation and amortization expense on finite-lived intangible assets.

        These target levels were based upon expected growth from the prior year, but were set at an amount the compensation committee believed to be reasonably attainable in light of our performance in prior years and our strategic and market outlook for 2010. In the event the minimum performance threshold was not met for any individual corporate quarterly objective, no bonus would be accrued for that specific corporate target for the quarter.

        Individual achievement by our named executive officers comprised the remaining 25 percent of the target bonus opportunity for 2010 and was based on each executive officer's 2010 annual performance review. Individual performance for each our named executive officers was assessed by our chief executive officer, other than for himself. The performance of our chief executive officer was assessed by the compensation committee. Performance was evaluated following the end of the year and was based on three major areas of measurement: quality of work performed, quantity of work performed and teamwork/initiative and management effectiveness. Individual performance for our named executive officers, and eligibility for a cash bonus, is ranked on the following scale: "Fails to Meet Expectations," "Occasionally Meets Expectations," "Successfully Meets Expectations," "Exceeds Expectations" and "Exceptional."

        An executive officer must achieve a ranking of at least "Successfully Meets Expectations" to be eligible for a payment of that portion of the bonus attributable to achievement of individual objectives. Executive officers who rank at "Exceeds Expectations" or "Exceptional" are eligible for a discretionary bonus if reasonable, considering the achievement of our corporate financial objectives.

        For 2010, the annualized target bonus pool available to fund the plan was set at $2,269,424, or approximately $567,356 per quarter, divided equally among the three corporate financial objectives. Bonuses accrued quarterly based on actual achievement against plan for each of the financial measures,

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ranging from 25 percent of the target bonus amount to 150 percent of the target bonus amount, as follows:

Revenue

Performance	Payout Percent			Payout Amount
Target minus 10%		25	%	$	47,280
Target minus 5%		62.5			118,199
Target		100			189,119
Target plus 5%		112.5			212,759
Target plus 10%		125			236,399
Target plus 15%		150			283,679

Gross Margin

Performance	Payout Percent			Payout Amount
Target minus 5.6%		25	%	$	47,280
Target minus 3.5%		62.5			118,199
Target		100			189,119
Target plus 5%		112.5			212,759
Target plus 7.5%		125			236,399
Target plus 10%		150			283,679

Adjusted EBITDA

Performance	Payout Percent			Payout Amount
Target minus 30%		25	%	$	47,280
Target minus 15%		62.5			118,199
Target		100			189,119
Target plus 5%		112.5			212,759
Target plus 10%		125			236,399
Target plus 25%		137.5			260,039
Target plus 50%		150			283,679

        Based on the above tables, the maximum annual bonus pool available for 2010 was $3,404,136, or 150 percent of the target amount.

        The corporate performance element was directly tied to our annual performance against the designated financial measures. As set forth in the table below, for 2010, our corporate financial performance was 118 percent of plan, and the total available pool to be distributed among plan participants was $2,674,542 (118 percent of the target bonus pool of $2,269,424):

	Actual Results as Compared to Targets
	Q1 2010			Results %		Q2 2010			Results %		Q3 2010			Results %		Q4 2010			Results %		Total %
Revenue	$	22,783,901			105	$	28,504,040			136	$	29,373,917			115	$	31,103,731			110		117
Gross Margin		30.00	%		88		30.65	%		108		30.61	%		102		30.56	%		88		97
Adjusted EBITDA	$	233,966			140	$	1,573,983			159	$	1,279,432			146	$	1,947,611			126		143
Aggregate					111					131					121					108		118

        The individual performance element was not directly tied to our annual corporate performance, but was instead based on an individual's annual performance review. The individual bonus performance element for top performers is subject to adjustment at the discretion of our chief executive officer, and

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to board approval. For 2010, participants who achieved an annual performance rating of "Successfully Meets Expectations" were eligible to receive 100 percent of their individual performance element. At the discretion of our chief executive officer, participants who achieved an annual performance rating of "Exceeds Expectations" were eligible to receive 121.5 percent of their individual performance element and participants who achieved an annual performance rating of "Exceptional" were eligible to receive 143 percent of their individual performance element. The plan is budgeted based upon the assumption that all eligible executive officers will achieve requisite performance ratings. Individuals receiving more than 100 percent of their performance element were paid out of bonus amounts not earned by employee participants who performed at a level below "Successfully Meets Expectations." Based on the above, if a named executive officer's target bonus amount was $100,000 for 2010, he would have earned $25,000 for a performance level of "Successfully Meets Expectations," $30,375 for "Exceeds Expectations" or $35,750 for being rated "Exceptional."

        Each of our named executive officers achieved an individual performance ranking of at least "Successfully Meets Expectations" and was eligible to receive the corresponding target bonus for their respective performance ranking for 2010. Frank Fawzi and Andre Simone earned a performance ranking of "Exceptional," Haydar Haba earned a performance ranking of "Successfully Meets Expectations" and Phil Bronsdon earned a performance ranking of "Exceeds Expectations." Mr. Belanger does not participate in our standard review process and did not receive an applicable performance ranking for 2010. In addition to the target bonus he earned for his individual performance in 2010, Mr. Fawzi, upon the decision of the compensation committee, was eligible to receive a discretionary bonus as set forth in greater detail below. The actual bonuses paid to our named executive officers for 2010 are set forth in the Summary Compensation Table below.

        For 2011, the compensation committee, in consultation with Compensia, decided to keep the same overall structure for our short-term performance-based cash compensation plan, but decided to replace Gross Margin and Adjusted EBITDA with quarterly Operating Margin, calculated as revenue less total expenses plus stock-based compensation, and annual Unlevered Free Cash Flow, calculated as Adjusted EBITDA less capital expenditures, as target objectives. Quarterly Total Revenue will remain as a target objective for 2011. The 2011 objectives and relative weighting are as follows:

Corporate Objective	Weighting
Quarterly Revenue Targets		33.33	%
Quarterly Operating Margin Targets		33.33
Annual Unlevered Free Cash Flow Target		33.33

        The compensation committee decided to change the objectives for our short-term performance-based cash compensation plan because it believes Operating Margin and Unlevered Free Cash Flow are more representative of our business success and our overall performance, particularly as a public company, and our strategic plans to scale our business while remaining focused on capital efficiency.

        In addition, while the target bonus pool dollar amounts have yet to be determined, the compensation committee, upon the recommendation of Compensia, decided (i) to increase the target bonus amount for Mr. Fawzi to 100 percent of his annual base salary and that of Mr. Simone to 65 percent of his annual base salary and (ii) to modify the range such that the maximum target bonus amount that may be achieved for each objective will be 200 percent of the target bonus amounts. These changes were made to better align our compensation with other publicly-traded companies identified by Compensia as comparable companies.

Discretionary Bonus

        In addition to payments made under our 2010 short-term performance-based cash compensation plan, our board of directors also awarded a discretionary bonus in the amount of approximately $17,000 to Mr. Fawzi for exceptional performance for 2010. As a result of Mr. Fawzi's leadership, we

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significantly improved financial and operating performance, positioning us to pursue an initial public offering. The amount of the discretionary bonus was determined by the board of directors based on the total amount remaining available for distribution under the 2010 bonus pool after distribution to the plan participants.

Sales Commission Plan

        Mr. Belanger did not participate in our short-term performance-based cash compensation plan in 2010, but instead participated in a separate sales commission plan. For 2010, Mr. Belanger was paid a fixed percentage on all net profits (revenue multiplied by net margin percentage) generated by his assigned accounts under the standard sales commission plan applicable to all of our sales professionals. As a result of his position as the leader of our sales team he was also entitled to a separate "override commission," which was a fixed percentage on all net profits generated by accounts not assigned to Mr. Belanger, but instead assigned to sales professionals who report to Mr. Belanger. For both the assigned accounts and the override accounts, the fixed percentage earned by Mr. Belanger increased once total net profits exceeded the net profits achieved during the month of December 2009, which were $242,566 for his assigned accounts and $6,630,186 for his override accounts. The commission percentages for Mr. Belanger for 2010 were as follows:

	Assigned Accounts	Override Accounts
Up to December 2009 Total Monthly Net Profit Achievement	3% of total monthly net profit	0.775% of total monthly net profit
In excess of December 2009 Total Monthly Net Profit Achievement	7% of net profit in excess of December 2009 total monthly net profit	1% of net profit in excess of December 2009 monthly net profit

        A fixed percentage was used to make the plan easy to understand and to directly tie Mr. Belanger's compensation to our success. Because our management wanted to incentivize Mr. Belanger to maximize sales of our services and thereby maximize his own compensation, there were no target or maximum amounts established for Mr. Belanger's sales commission plan. Mr. Belanger's actual commission payout for 2010 is set forth in the Summary Compensation Table presented later in this prospectus.

Long-Term Equity Compensation

        We use equity awards to motivate and reward our executive officers, including our named executive officers, to encourage long-term corporate performance based on the value of our common stock and to align the interests of our executive officers with those of our stockholders. We believe that stock options, when granted with exercise prices equal to the fair market value of our common stock on the date of grant, provide an appropriate long-term incentive for our executive officers. Stock options reward our executive officers only to the extent that, following their grant date, our stock price increases.

        Historically, we have not applied a rigid formula to determine the size of the stock option awards that are granted to our executive officers. Instead, these awards are determined in the judgment of the compensation committee, taking into consideration, among other things, our performance and that of the executive officer during the past year, the prospective role and responsibility of the executive officer, competitive factors, the amount of equity-based compensation held by the executive officer and the cash compensation received by the executive officer. Based on these factors, the compensation committee sets the size of each stock option award at levels it considers appropriate to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value. There were no equity awards granted to our named executive officers during 2009 or 2010 due to the fact that the equity ownership of our named executive officers had not changed appreciably since our last round

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of equity financing in 2008. However, our compensation committee did recently review supplemental market studies regarding executive compensation as well as the number of vested options held by key employees. As a result, in May 2011, the compensation committee granted equity awards to certain of our named executive officers, as set forth above in "Timing of Compensation Decisions."

        We have not granted any equity awards to our named executive officers other than stock options. Typically, our named executive officers have received an initial stock option grant at the time of hire, with only discretionary additional awards thereafter. We have adopted a long-term equity incentive plan to become effective following the completion of this offering. While this plan provides for a variety of different types of equity awards, we expect that, reflecting our focus on long-term growth, the compensation committee will continue to use stock options as our primary form of long-term incentive compensation.

Exercise Price of Equity Awards

        The exercise price of stock options granted to our executives under our equity incentive plans is equal to or greater than the fair market value of our common stock on the grant date. As a privately held company, our board of directors has historically determined the fair market value of our common stock based on various factors, including (1) our recent and historical company performance; (2) our liquidity and cash resources; (3) our projections regarding our future financial results; (4) company developments since the last time option grants were approved by our board of directors; (5) independent third party valuations; (6) the value of comparable companies; and (7) the rights, preferences and privileges of our preferred stock relative to those of our common stock. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Stock Based Compensation" for further information. Upon the completion of this offering, we will use the market price of our common stock on the date of grant for purposes of establishing the exercise price of stock options.

Other Compensation Policies

Retirement and Other Benefits; Perquisites

        Our executive officers, including the named executive officers, are eligible to participate in our tax-qualified Section 401(k) retirement savings plan on the same basis as our other employees who satisfy the plan's eligibility requirements, including requirements relating to age and length of service. Under this plan, participants may elect to make pre-tax contributions of up to 90 percent of their current compensation, not to exceed the applicable statutory income tax limitation, which was $16,500 in 2010.

        Additional benefits received by our executive officers, including the named executive officers, include medical, dental and vision benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance, and basic life insurance. These benefits are provided on the same basis as to all of our full-time employees. We also maintain a corporate apartment for use by employees visiting our Denver operations, including our named executive officers.

        We do not have a formal perquisite policy, and we do not emphasize special perquisites for our executive officers. The compensation committee may periodically review perquisites for our executive officers, particularly in the context of new employment agreements.

Executive Equity Ownership

        We encourage our executive officers to hold a significant equity interest in our company. However, we do not have specific share retention and ownership guidelines for our executive officers.

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Executive Hedging and Trading

        We have adopted a policy that, once we become a publicly traded company following this offering, we will not permit our executive officers to sell short our stock, will prohibit our executive officers from holding our stock in a margin account, and will discourage the purchase and sale of exchange-traded options on our stock by our executive officers.

Compensation Committee Philosophy on Acceleration of Vesting of Equity, Change of Control and Severance Benefits

        Pursuant to our agreements with them, certain of our named executive officers may receive certain cash payments, continuation of medical and welfare insurance benefits, and acceleration of vesting under outstanding equity awards in connection with a termination of employment or a change of control or the initial public offering of the company. See "Executive Employment Agreements" and "Potential Payments Upon Termination, Change of Control or Initial Public Offering" below for more information. When establishing these arrangements, the compensation committee believed that they were necessary to attract or retain qualified executives who may have pursued attractive alternatives absent these benefits. With respect to benefits related to a change of control, the board of directors elected to provide for these benefits to partially mitigate the risks that exist for executives working in an environment where there is a potential for a change of control. With respect to benefits related to an initial public offering, the board of directors elected to provide for these benefits to incentivize our executives for the achievement of an initial public offering of the company. The compensation committee sought to provide change of control-related arrangements which would allow executives to focus on the value of strategic alternatives to stockholders without concern for the impact of a change of control on their continued employment.

Effect of Tax and Accounting Treatment on Compensation Decisions

        We consider the anticipated accounting and tax implications to us and our executives in determining our compensation programs. However, these factors alone are not dispositive, and we also consider the cash and non-cash impact of the programs and whether a program is consistent with our overall compensation philosophy and objectives. Section 162(m) of the Code imposes a limit on the amount of compensation that we may deduct in any one year with respect to our chief executive officer and each of our next three most highly compensated executive officers (other than our chief financial officer), unless specific and detailed criteria are satisfied. "Performance-based compensation," as defined in the Code, is fully deductible if the programs are approved by stockholders and meet other requirements. We believe that grants of equity awards under our existing stock plan qualify as performance-based for purposes of satisfying the conditions of Section 162(m), thereby permitting us to receive a federal income tax deduction in connection with such awards. In general, we have determined that we will not seek to limit executive compensation so that it is deductible under Section 162(m). However, from time to time, we monitor whether it might be in our interests to structure our compensation programs to satisfy the requirements of Section 162(m). We seek to maintain flexibility in compensating our executives in a manner designed to promote our corporate goals and therefore our compensation committee has not adopted a policy requiring all compensation to be deductible. Our compensation committee will continue to assess the impact of Section 162(m) on our compensation practices and determine what further action, if any, is appropriate.

        We follow the Financial Accounting Standards Board's Accounting Standards Codification Topic 718 for our stock-based compensation awards. ASC 718 requires companies to calculate the grant date "fair value" of their stock-based awards using a variety of assumptions. This calculation is performed for accounting purposes and reported in the compensation tables that accompany this Compensation Discussion and Analysis, even though recipients may never realize any value from their awards. ASC 718 also requires companies to recognize the compensation cost of their stock-based

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awards in their income statements over the period that an employee is required to render service in exchange for the award.

Analysis of Risk Relating to Our Compensation Programs

        After reviewing the various design elements of our compensation programs to determine whether any of their aspects encourage excessive or inappropriate risk-taking, the compensation committee has determined that our compensation programs do not encourage excessive risk or inappropriate risk taking, as our compensation programs have been balanced to focus on our short-and long-term financial and operational performance. The determination was based on the following factors:

•

the base salaries we pay to our employees are set at levels sufficient to match compensation paid by similarly situated companies and are designed to provide a steady income regardless of our stock price performance, which we believe discourages risk taking;

•

our various non-equity incentive compensation programs contain company-wide and individual elements that we believe are attainable without the need to take inappropriate risks or make material changes to our business or strategy;

•

other than payments that may be made under our sales commission plans, which are not capped, the cash payments that may be made to our employees under our non-equity incentive compensation programs are subject to maximum limits, which we believe mitigates the risks our employees may take; and

•

equity grants to participants under our equity incentive plans generally vest over a period of four years, which we believe discourages excessive or inappropriate short-term risk taking.

Summary Compensation Table

        The following table sets forth the total compensation earned for services rendered by our principal executive officer, our principal financial officer, and our three other most highly compensated executive officers whose total compensation for the year ended December 31, 2010 was in excess of $100,000 and who were serving as executive officers at the end of that fiscal year. The listed individuals are referred to herein as our "named executive officers."

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SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2010

Name and Principal Position		Year		Salary		Bonus			Non-Equity Incentive Plan Compensation			Total
Frank Fawzi			2010	$	375,000	$	17,031	(1)	$	232,969	(2)	$	625,000
	President, Chief Executive Officer and Chairman
Andre Simone			2010		275,000		—			170,586	(2)		445,586
	Chief Financial Officer, Secretary
Haydar Haba			2010		237,705		—			136,675	(2)		374,380
	Chief Visionary Officer
Phil Bronsdon			2010		225,000		—			133,523	(2)		358,523
	Senior Vice President, Engineering, Development and Operations
John Belanger			2010		125,000		—			324,555	(3)		449,555
	Senior Vice President, Service Provider Sales

(1)

Represents an amount awarded to Mr. Fawzi as a discretionary bonus by our board of directors for exceptional performance in 2010.

(2)

Represents cash compensation paid to our named executive officers under our short-term performance-based cash compensation plan for the year ended December 31, 2010.

(3)

Represents the total performance-based commissions earned by Mr. Belanger pursuant to his sales commission plan for the year ended December 31, 2010.

        See discussion of the material terms of the employment agreements for each of the named executive officers under the heading "Executive Employment Agreements," below.

Grants of Plan-Based Awards

        The following table sets forth certain information with grants of non-equity incentive plan-based awards granted during the year ended December 31, 2010 to our named executive officers:

GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2010

			Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1)
Name	Plan Adoption Date		Threshold		Target		Maximum
Frank Fawzi		May 7, 2010	$	46,875	$	187,500	$	281,250
Andre Simone		May 7, 2010		34,375		137,500		206,250
Haydar Haba		May 7, 2010		29,713		118,852		178,279
Phil Bronsdon		May 7, 2010		28,125		112,500		168,750
John Belanger(2)		January 1, 2010		1		285,816		—

(1)

We award non-equity incentive plan compensation under our short-term performance-based cash compensation plan, as described above under the section entitled "Compensation Discussion and Analysis." The figures listed represent amounts that could have been earned for the year ended December 31, 2010. The actual amount earned by each named executive officer for 2010 is set forth above in the Summary Compensation Table.

(2)

Mr. Belanger does not participate in our short-term performance-based cash compensation plan and has a separate commission plan as described above under the section entitled "Compensation Discussion and Analysis." The target

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amount for Mr. Belanger's commission plan was calculated based on 100 percent achievement of plan and no change in net margin percentage for 2010, as compared to the December 2009 target. Mr. Belanger's commission plan was uncapped, so no maximum payout can be estimated.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2010

        The following table sets forth certain information with respect to the unexercised options held by our named executive officers as of December 31, 2010:

Name	Grant Date			Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price ($)		Option Expiration Date
Frank Fawzi		5/10/2007	(1)		109,404		—	$	0.78		5/10/2017
		2/14/2008	(2)		989,401		260,369		0.28		2/14/2018
		2/14/2008	(3)		214,285		—		0.28		2/14/2018
		12/11/2008	(4)		52,079		52,080		0.88		12/11/2018
Andre Simone		5/10/2007	(5)		399,232		17,358		0.78		5/10/2017
		2/14/2008	(6)		420,069		124,886		0.28		2/14/2018
		12/11/2008	(7)		52,079		52,080		0.88		12/11/2018
Haydar Haba		5/28/2004	(8)		42,945		—		1.63		5/28/2011
		8/18/2004	(9)		21,472		—		1.63		8/18/2011
		5/10/2007	(10)		—		226,649		0.78		5/10/2017
		2/14/2008	(11)		183,738		54,625		0.28		2/14/2018
		12/11/2008	(12)		52,079		52,080		0.88		12/11/2018
John Belanger		5/28/2004	(13)		13,556		—		1.63		5/28/2011
		8/4/2004	(14)		150,000		—		1.63		8/4/2011
		8/18/2004	(15)		7,669		—		1.63		8/18/2011
		1/15/2005	(16)		121,842		—		1.90		1/15/2012
		5/10/2007	(17)		50,000		—		0.78		5/10/2017
		2/14/2008	(18)		39,440		11,726		0.28		2/14/2018
Phillip Bronsdon		10/15/2007	(19)		40,625		9,375		0.78		10/15/2017
		2/14/2008	(20)		239,405		71,174		0.28		2/14/2018
		12/11/2008	(21)		17,359		17,360		0.88		12/11/2018

(1)

1/2 of the total number of shares issued pursuant to the option vested on May 10, 2007, and the remainder vested in equal monthly installments over an 18-month period thereafter.

(2)

1/48^th of the total number of shares subject to the option vest monthly commencing November 1, 2007, subject to Mr. Fawzi's continued service to us on each such vesting date, with all shares subject to the option being vested by September 30, 2011.

(3)

1/12^th of the total number of shares subject to the option vested monthly commencing November 1, 2007 with all shares subject to the option having vested by September 30, 2008.

(4)

1/4^th of the total number of shares subject to the option vested on December 11, 2009, and the remainder vest in equal monthly installments over a 36-month period thereafter, subject to Mr. Fawzi's continued service to us on each such vesting date.

(5)

1/4^th of the total number of shares subject to the option vested on February 5, 2008, and the remainder vested in equal monthly installments over a 36-month period thereafter, subject to Mr. Simone's continued service to us on each such vesting date.

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(6)

1/48^th of the total number of shares subject to the option vest monthly commencing November 14, 2007, subject to Mr. Simone's continued service to us on each such vesting date.

(7)

1/4^th of the total number of shares subject to the option vested on December 11, 2009, and the remainder vest in equal monthly installments over a 36-month period thereafter, subject to Mr. Simone's continued service to us on each such vesting date.

(8)

100 percent of the total number of shares subject to the option vested on May 28, 2004.

(9)

100 percent of the total number of shares subject to the option vested on August 18, 2004.

(10)

100 percent of the total number of shares subject to the option vest upon the earlier to occur of (i) a change of control of us in which the holders of our Series B preferred stock receive consideration with a fair market value of at least $14.748 per share of Series B preferred stock (as adjusted for stock splits, combinations and the like) or (ii) the initial public offering of our common stock, pursuant to which a share of our Series B preferred stock (or our common stock upon conversion thereof) has a fair market value of at least $14.748 per share (as adjusted for stock splits, combinations and the like), in each case subject to Mr. Haba's continued service to us on either such occurrence.

(11)

1/4^th of the total number of shares subject to the option vested on November 14, 2008, and the remainder vest in equal monthly installments over a 36-month period thereafter, subject to Mr. Haba's continued service to us on each such vesting date.

(12)

1/4^th of the total number of shares subject to the option vested on December 11, 2009, and the remainder vest in equal monthly installments over a 36-month period thereafter, subject to Mr. Haba's continued service to us on each such vesting date.

(13)

100 percent of the total number of shares subject to the option vested on May 28, 2004.

(14)

1/3^rd of the total number of shares subject to the option vested on August 4, 2004, 1/3^rd of the total number of shares subject to the option vested upon our attaining of $833,333 in collected monthly GAAP revenue for two consecutive fiscal months following the date of grant and the remaining 1/3^rd of the total number of shares subject to the option vested upon our attaining of $2,083,333 in collected monthly GAAP revenue for two consecutive fiscal months following the date of grant.

(15)

100 percent of the total number of shares subject to the option vested on August 18, 2004.

(16)

1/24^th of the total number of shares subject to the option vested monthly commencing in the month of our attaining of $833,333 in collected monthly GAAP revenue for two consecutive fiscal months following the date of grant.

(17)

100 percent of the total number of shares subject to the option vested on May 16, 2007.

(18)

1/4^th of the total number of shares subject to the option vested on November 14, 2008, and the remainder vest in equal monthly installments over a 36-month period thereafter, subject to Mr. Belanger's continued service to us on each such vesting date.

(19)

1/4^th of the total number of shares subject to the option vested on September 6, 2008, and the remainder vest in equal monthly installments over a 36-month period thereafter, subject to Mr. Bronsdon's continued service to us on each such vesting date.

(20)

1/4^th of the total number of shares subject to the option vested on November 14, 2008, and the remainder vest in equal monthly installments over a 36-month period thereafter, subject to Mr. Bronsdon's continued service to us on each such vesting date.

(21)

1/4^th of the total number of shares subject to the option vested on December 11, 2009, and the remainder vest in equal monthly installments over a 36-month period thereafter, subject to Mr. Bronsdon's continued service to us on each such vesting date.

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Option Exercises and Stock Vested

        None of our named executive officers exercised options, or became vested in shares of stock subject to stock awards, during the year ended December 31, 2010.

Pension Benefits

        We do not maintain any defined benefit pension plans.

Nonqualified Deferred Compensation

        We do not maintain any nonqualified deferred compensation plans.

Potential Payments upon Termination, Change of Control or Initial Public Offering

        Our named executive officers are eligible to receive certain payments and benefits in connection with the following events pursuant to the terms of their employment agreements, offer letter agreements and/or option agreements. The terms "cause," "termination without cause," "resignation for good reason" and "change of control" as used below have the meanings given to them in the applicable agreements with us which we have filed as exhibits to the registration statement on Form S-1 of which this prospectus is a part. The term "cause" generally includes the executive's refusal to perform assigned duties, acts of willful misconduct, personal dishonesty intended to result in substantial personal enrichment and felony convictions or other willful acts which have a material adverse effect on us. The terms "involuntary termination without cause" and "resignation for good reason" generally mean the executive's resignation in connection with the occurrence of certain events, which generally include a disproportionate salary reduction, materially adverse changes in responsibilities, an involuntary relocation of greater than a certain number of miles or our material breach of the executive's employment agreement. The term "change of control" generally means the acquisition of our company pursuant to which our stockholders prior to the event do not retain at least a majority of our outstanding voting securities after such event, or the sale of all or substantially all of our assets.

Termination without Cause, Resignation for Good Reason and Death or Permanent Disability

        Upon his involuntary termination without cause, his resignation for good reason or his death or permanent disability (as defined in his agreement), Mr. Fawzi will be entitled to receive continuation of his then annual base salary over a 12-month period paid in accordance with our then existing payroll schedule, plus a lump sum cash payment equal to the pro rata amount of his corresponding annual target bonus amount. In addition, Mr. Fawzi will be entitled to continuation of health and other benefits, including coverage under our directors and officers liability insurance policy, for a six-month period. If such involuntary termination without cause or resignation for good reason occurs within 24 months following a change of control, Mr. Fawzi will be entitled to receive a lump sum cash payment equal to 100 percent of his then annual base salary plus a pro rata amount of his corresponding annual target bonus amount. In addition, 100 percent of any then unvested equity awards will vest at the time of such termination without cause or resignation for good reason, and Mr. Fawzi will be entitled to continuation of health and other benefits, including coverage under our director's and officer's liability insurance policy, for a period of 12 months. Mr. Fawzi's right to receive the foregoing benefits is subject to his execution of a release of claims against us.

        Upon his involuntary termination without cause, his resignation for good reason or his death or permanent disability (as defined in his agreement), Mr. Simone will be entitled to receive continuation of his then annual base salary over a six-month period paid in accordance with our then existing payroll schedule, plus a lump sum cash payment equal to the pro rata amount of his corresponding annual target bonus amount. In addition, Mr. Simone will be entitled to continuation of health and other benefits, including coverage under our directors and officers liability insurance policy, for a six-month

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period. If such involuntary termination without cause or resignation for good reason occurs within 24 months following a change of control, Mr. Simone will be entitled to receive a lump sum cash payment equal to 100 percent of his then annual base salary plus a pro rata amount of his corresponding annual target bonus amount. In addition, 100 percent of any then unvested equity awards will vest at the time of such termination without cause or resignation for good reason, and Mr. Simone will be entitled to continuation of health and other benefits, including coverage under our directors and officers liability insurance policy, for a period of 12 months. Mr. Simone's right to receive the foregoing benefits is subject to his execution of a release of claims against us.

        Upon his involuntary termination without cause or his resignation for good reason (as defined in his agreement), Mr. Haba will be entitled to receive continuation of his then annual base salary over a 12-month period paid in accordance with our then existing payroll schedule, plus a lump sum cash payment equal to the pro rata amount of his corresponding annual target bonus amount. In addition, Mr. Haba will be entitled to continuation of health and other benefits, including coverage under our directors and officers liability insurance policy, for a six-month period. If such involuntary termination without cause or resignation for good reason occurs within 24 months following a change of control, Mr. Haba will be entitled to receive a lump sum cash payment equal to 100 percent of his then annual base salary plus a pro rata amount of his corresponding annual target bonus amount. In addition, 100 percent of any then unvested equity awards will vest at the time of such termination without cause or resignation for good reason, and Mr. Haba will be entitled to continuation of health and other benefits, including coverage under our directors and officers liability insurance policy, for a period of 12 months. Mr. Haba's right to receive the foregoing benefits is subject to his execution of a release of claims against us.

        Neither Mr. Belanger nor Mr. Bronsdon will be entitled to any payments upon termination without cause or for resignation for good reason.

        The following table presents our estimate of the dollar value of the payments and benefits payable to our named executive officers upon the occurrence of a termination without cause or resignation for good reason in the circumstances noted below, assuming that such event occurred on December 31, 2010:

Name	Event	Cash Severance Payment		Continuation of Benefits (1)		Value of Option Acceleration (2)
Frank Fawzi(3)	Termination without Cause in Absence of Change of Control(4)	$	375,000	$	8,100	$	—
	Termination without Cause within 24 months after Change of Control(5)		562,500		16,200		2,080,907
	Resignation for Good Reason in Absence of Change of Control(4)		375,000		8,100		—
	Resignation for Good Reason within 24 months after Change of Control(5)		562,500		16,200		2,080,907
Andre Simone(3)	Termination without Cause in Absence of Change of Control(6)	$	137,500	$	—	$	—
	Termination without Cause within 12 months after Change of Control(6)		137,500		—		1,273,703
	Resignation for Good Reason in Absence of Change of Control		—		—		—
	Resignation for Good Reason within 12 months after Change of Control(6)		137,500		—		1,273,703

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Name	Event	Cash Severance Payment		Continuation of Benefits (1)		Value of Option Acceleration (2)
Haydar Haba(3)	Termination without Cause in Absence of Change of Control(7)	$	356,558	$	16,200	$	—
	Termination without Cause within 24 months after Change of Control(8)		713,315		16,200		2,127,681
	Resignation for Good Reason in Absence of Change of Control(7)		356,558		16,200		—
	Resignation for Good Reason within 24 months after Change of Control(8)		713,315		16,200		2,127,681
John Belanger	Termination without Cause in Absence of Change of Control		—		—		—
	Termination without Cause in connection with Change of Control		—		—		—
	Resignation for Good Reason in Absence of Change of Control		—		—		—
	Resignation for Good Reason following Change of Control		—		—		—
Phillip Bronsdon	Termination without Cause in Absence of Change of Control		—		—		—
	Termination without Cause in connection with Change of Control		—		—		—
	Resignation for Good Reason in Absence of Change of Control		—		—		—
	Resignation for Good Reason following Change of Control		—		—		—

(1)

Represents the aggregate value of continuation of health insurance benefits after the date of termination. For the purposes of this calculation, expected costs have not been adjusted for any likelihood that the executives will find other employment.

(2)

Represents the aggregate value of the accelerated vesting of the named executive officer's unvested stock options. With respect to each option award, amounts were calculated by multiplying (i) the difference between the fair market value of our common stock on December 31, 2010, $7.04, and the applicable exercise price of such option award by (ii) the assumed number of option shares subject to such award vesting on an accelerated basis on December 31, 2010.

(3)

The respective rights of Messrs. Fawzi, Simone and Haba to receive the listed benefits are subject to such person's execution of a release of claims against us.

(4)

Cash severance for Mr. Fawzi, as of December 31, 2010, was equal to 50 percent of his annual base salary at December 31, 2010, plus his annual bonus target amount of $187,500 for fiscal year 2010. Cash severance payable to Mr. Fawzi related to salary was payable over six months pursuant to regular payroll procedures. Cash severance payable to Mr. Fawzi related to bonus amounts was payable in a lump sum.

(5)

Cash severance for Mr. Fawzi, as of December 31, 2010, was equal to his annual base salary at December 31, 2010, plus his annual bonus target amount of $187,500 for fiscal year 2010, and was payable in a lump sum.

(6)

Cash severance for Mr. Simone, as of December 31, 2010, was equal to 50 percent of his annual base salary at December 31, 2010 and was payable over six months pursuant to regular payroll procedures.

(7)

Cash severance for Mr. Haba, as of December 31, 2010, was equal to his annual base salary at December 31, 2010, plus his annual bonus target amount of $118,853 for fiscal year 2010, and was payable in a lump sum.

(8)

Cash severance for Mr. Haba, as of December 31, 2010, was equal to 300 percent of his annual base salary at December 31, 2010 and was payable in a lump sum. Mr. Haba's salary and the terms of Mr. Haba's severance were changed in May 2011. For additional information, see "Executive Employment Agreements—Haydar Haba" located elsewhere in this prospectus.

Change of Control or Initial Public Offering

        Certain of our stock option award agreements with our named executive officers provide that 100 percent of the shares of common stock subject to such option agreements will vest immediately prior to a change of control or the initial public offering of our securities. In addition, in the event of a change of control, Mr. Simone's offer letter agreement, as amended, calls for the acceleration of

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100 percent of the unvested options subject to the option grant Mr. Simone received in connection with the entering into of his offer letter agreement.

        The following table presents our estimate of the dollar value of the payments and benefits payable to our named executive officers in connection with a change of control or initial public offering of securities, assuming that such event occurred on December 31, 2010:

Name	Event	No. of Shares Subject to Acceleration			Value of Option Acceleration (1)
Frank Fawzi	Change of Control		312,449			$2,080,907
	Initial Public Offering		260,369			1,760,094
Andre Simone	Change of Control		194,324			1,273,703
	Initial Public Offering		—			—
Haydar Haba	Change of Control		281,729	(2)		1,758,415
	Initial Public Offering		229,649	(2)		1,437,603
John Belanger	Change of Control		—			—
	Initial Public Offering		—			—
Phillip Bronsdon	Change of Control		17,360			106,938
	Initial Public Offering		—			—

(1)

Represents the aggregate value of the accelerated vesting of the named executive officer's unvested stock options. With respect to each option award, amounts were calculated by multiplying (i) the difference between the fair market value of our common stock on December 31, 2010, $7.04, and the applicable exercise price of such option award by (ii) the assumed number of option shares subject to such award vesting on an accelerated basis on December 31, 2010. For any award with a purchase price greater than $7.04, no additional value is represented by the acceleration of outstanding unvested options subject to such award.

(2)

Includes options to purchase 226,649 shares, which shall accelerate and become exercisable in the event that the price of our common stock exceeds $14.748 per share following the completion of our initial public offering or in the event of a change of control in which the holders of Series B preferred stock receive consideration with a fair market value of at least $14.748 per share. The fair market value of $7.04 per share was used to calculate the value of such acceleration at December 31, 2010.

        Neither of the above tables includes:

•

any accrued benefits that were earned and payable as of December 31, 2010, including bonuses deemed earned by the executive pursuant to the terms of our 2010 short-term performance-based cash compensation plan;

•

payments and benefits to the extent they are provided generally to all salaried employees and do not discriminate in scope, terms or operation in favor of our named executive officers; or

•

the value to the executive of the continuing right to indemnification and continuing coverage under our directors' and officers' liability insurance, if applicable.

Executive Employment Agreements

        We have entered into employment agreements or offer letter agreements with each of our named executive officers, which are summarized below. For additional information regarding executive bonuses and severance and/or other benefits to be payable in connection with a named executive officer's termination, resignation for good reason or in connection with a change of control and/or the initial public offering of our securities, see the sections under the heading "Executive Compensation" entitled "Compensation Discussion and Analysis," and "Potential Payments upon Termination, Change of Control or Initial Public Offering," respectively. For additional information regarding equity awards, see

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the tables under the heading "Executive Compensation" entitled "Summary Compensation Table," "Grants of Plan-Based Awards" and "Outstanding Awards at Fiscal Year-End."

Frank Fawzi

        We entered into an amended and restated employment agreement with Mr. Fawzi in May 2011 to serve as our president, chief executive officer and chairman of the board. The agreement provides Mr. Fawzi's annual base salary is $412,500, subject to increase to $442,000 in the event of the initial public offering of our securities on a national securities exchange. Mr. Fawzi's annual base salary is to be reviewed on at least an annual basis and may be increased, but not decreased, as determined by the board. In addition, Mr. Fawzi is eligible to participate in our annual short-term performance based cash compensation plan with an annual target of 100 percent of his then annual base salary. The agreement has no specific term and constitutes at-will employment. Pursuant to the agreement, each of Mr. Fawzi's previously granted equity awards shall continue to vest subject to their original terms; provided, however, that the post-termination exercise period for each of his grants, notwithstanding the terms of each such grant, shall be extended to a term that is the shorter of three years following Mr. Fawzi's termination for any reason other than for cause (as defined in the agreement) or the expiration date of the respective option grant. Pursuant to the agreement, Mr. Fawzi has agreed that for one year following the termination of his employment with us for any reason, he will not, without our prior written consent, directly or indirectly, induce or attempt to induce any person who is an employee or contractor of us or any of our affiliates to terminate his or her relationship with us or any of our affiliates. In addition to participating in the Company's standard benefit plans, Mr. Fawzi's agreement also provides for certain severance and/or other benefits to be payable in connection with his termination, resignation for good reason, or in connection with a change of control and/or the initial public offering of our securities. See "Potential Payments upon Termination, Change of Control or Initial Public Offering" above.

Andre Simone

        We entered into an amended and restated employment agreement with Mr. Simone in May 2011 to serve as our chief financial officer. The agreement provides Mr. Simone's annual base salary is $302,500, subject to review on at least an annual basis, and may be increased, but not decreased, as determined by the board. In addition, Mr. Simone is eligible to participate in our annual short-term performance based cash compensation plan with an annual target of 65 percent of his then annual base salary. The agreement has no specific term and constitutes at-will employment. Pursuant to the agreement, each of Mr. Simone's previously granted equity awards shall continue to vest subject to their original terms; provided, however, that the post-termination exercise period for each of his grants, notwithstanding the terms of each such grant, shall be extended to a term that is the shorter of twelve months following Mr. Simone's termination for any reason other than for cause (as defined in the agreement) or the expiration date of the respective option grant. Pursuant to the agreement, Mr. Simone has agreed that for one year following the termination of his employment with us for any reason, he will not, without our prior written consent, directly or indirectly, induce or attempt to induce any person who is an employee or contractor of us or any of our affiliates to terminate his or her relationship with us or any of our affiliates. In addition to participating in the Company's standard benefit plans, Mr. Simone's agreement also provides for certain severance and/or other benefits to be payable in connection with his termination, resignation for good reason, or in connection with a change of control and/or the initial public offering of our securities. See "Potential Payments upon Termination, Change of Control or Initial Public Offering" above.

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Haydar Haba

        We entered into an amended and restated employment agreement with Mr. Haba in May 2011 to serve as our chief visionary officer. The agreement provides Mr. Haba's annual base salary is $250,459, subject to review on at least an annual basis, and may be increased, but not decreased, as determined by the board. In addition, Mr. Haba is eligible to participate in our annual short-term performance based cash compensation plan with an annual target of 50 percent of his then annual base salary. The agreement has no specific term and constitutes at-will employment. Pursuant to the agreement, each of Mr. Haba's previously granted equity awards shall continue to vest subject to their original terms; provided, however, that the post-termination exercise period for each of his grants, notwithstanding the terms of each such grant, shall be extended to a term that is the shorter of twelve months following Mr. Haba's termination for any reason other than for cause (as defined in the agreement) or the expiration date of the respective option grant. Pursuant to the agreement, Mr. Haba has agreed that for one year following the termination of his employment with us for any reason, he will not, without our prior written consent, directly or indirectly, induce or attempt to induce any person who is an employee or contractor of us or any of our affiliates to terminate his or her relationship with us or any of our affiliates. In addition to participating in the Company's standard benefit plans, Mr. Haba's agreement also provides for certain severance and/or other benefits to be payable in connection with his termination, resignation for good reason, or in connection with a change of control and/or the initial public offering of our securities. See "Potential Payments upon Termination, Change of Control or Initial Public Offering" above.

John Belanger

        We entered into an offer letter agreement with Mr. Belanger to serve as our vice president of sales and marketing, dated December 10, 2003. Mr. Belanger was subsequently appointed as our senior vice president of service provider sales. Mr. Belanger's annual base salary was initially $120,000 which has subsequently been raised to $125,000. Under the terms of the agreement, Mr. Belanger is eligible to participate in a commission plan on such terms as our board of directors may determine. See "Compensation Discussion and Analysis—Elements of Executive Compensation—Sales Commission Plan" above. The agreement also contemplates that Mr. Belanger will receive an initial option grant as provided therein. The agreement does not provide for any severance and/or other benefits to be payable in connection with his termination, resignation for good reason or in connection with a change of control and/or the initial public offering of our securities.

Phillip Bronsdon

        We entered into an offer letter agreement with Mr. Bronsdon to serve as our vice president of operations, dated August 21, 2007. Mr. Bronsdon was subsequently appointed as our senior vice president of engineering, development and operations. Mr. Bronsdon's annual base salary was initially $175,000 which has subsequently been raised to $238,500. Under the terms of the agreement, Mr. Bronsdon is eligible to receive an annual performance bonus of up to 50 percent of his annual base salary based upon achievement of individual performance goals to be agreed upon by us and Mr. Bronsdon as well as company performance goals to be determined by our board of directors. The agreement contemplates that Mr. Bronsdon will receive an initial option grant as provided therein. The agreement does not provide for any severance and/or other benefits to be payable in connection with his termination, resignation for good reason or in connection with a change of control and/or the initial public offering of our securities.

Director Compensation

        To date, and other than as set forth in the following disclosure, we have not compensated our non-employee directors for their services as directors. We do reimburse both employee and

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non-employee directors for reasonable travel and lodging expenses incurred by them to attend our board and committee meetings.

        On February 7, 2011, Raymond Smets received an option grant to purchase 50,000 shares of our common stock at an exercise price equal to $7.04 per share, the fair market value of our common stock on the grant date, as determined by our board of directors. Pursuant to our letter agreement with Mr. Smets dated January 11, 2011, Mr. Smets receives a $25,000 annual retainer for his services as a director.

        On February 7, 2011, Lawrence Irving received an option grant to purchase 50,000 shares of our common stock at an exercise price equal to $7.04 per share, the fair market value of our common stock on the grant date, as determined by our board of directors. Pursuant to our letter agreement with Mr. Irving dated January 26, 2011, Mr. Irving receives a $35,000 annual retainer for his services as a director.

        On July 14, 2011, Keith Olsen received an option grant to purchase 50,000 shares of our common stock at an exercise price equal to $13.20 per share, the fair market value of our common stock on the grant date, as determined by our board of directors. Mr. Olsen will also receive a $25,000 annual retainer for his services as a director.

        On the day after completion of this offering, Javier Rojas and William Harding will each receive an option grant under our 2011 Equity Incentive Plan, or 2011 Equity Plan, to purchase 50,000 shares of our common stock with an exercise price per share equal to the fair market value of our common stock on the date of grant.

        Beginning upon the completion of this offering, all of our non-employee directors will be eligible to receive cash compensation of $25,000 per year for service as a director. The chair of our audit committee will be entitled to receive an additional $15,000 per year, the chair of our compensation committee entitled to receive an additional $10,000 per year and the chair of our nominating and corporate governance committee entitled to an additional $7,500 per year. Other members of the audit committee will be entitled to receive an additional $10,000 per year, other members of the compensation committee entitled to an additional $5,000 per year and other members of the nominating and corporate governance committee entitled to an additional $3,000 per year. Additionally, all non-employee directors will also be eligible to receive an option grant under our 2011 Equity Plan to purchase 50,000 shares of our common stock upon their initial election to the board and an additional option each year to purchase 12,500 shares which will be granted on the first day after the Company holds its annual meeting. Each option will have an exercise price per share equal to the fair market value of our common stock on the date of grant. We will continue to reimburse all directors for reasonable travel and lodging expenses incurred by them to attend our board and board committee meetings.

Employee Benefit Plans

Amended and Restated 2003 Stock Option and Restricted Stock Plan

        On June 10, 2003, our board of directors adopted, and the Company's stockholders later approved, our 2003 Stock Option and Restricted Stock Plan and on May 10, 2007, such plan was amended and restated. The Amended and Restated 2003 Stock Option and Restricted Stock Plan, or 2003 Stock Plan, provides for the grant of incentive and nonstatutory stock options and stock purchase right awards to employees, consultants and members of our board of directors or of any of parent or subsidiary corporation of ours. However, only options have been granted under the 2003 Stock Plan.

        Subject to adjustment in the event of certain changes in capital structure, the maximum aggregate number of shares of common stock authorized for issuance under the 2003 Stock Plan is 9,264,788. As of September 30, 2011, options were outstanding under the 2003 Stock Plan and outside the plan to

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purchase 7,659,282 shares of common stock, at a weighted average exercise price of $1.65 per share, and 1,723,302 shares remained available for future grant. Shares subject to awards that expire, are forfeited or otherwise terminate will again be available for grant under the 2003 Stock Plan.

        Our board of directors will terminate the 2003 Stock Plan effective upon the closing of this offering, and no additional options or other equity awards may be granted under the 2003 Stock Plan following its termination. However, options granted under the 2003 Stock Plan prior to its termination will remain outstanding until they are either exercised or expire.

2011 Equity Incentive Plan

        Our 2011 Equity Plan was approved by our board of directors and our stockholders in May 2011.

        The number of shares of our common stock that has been initially authorized and reserved for issuance under the 2011 Equity Plan is equal to the total number of shares still available for issuance under the 2003 Stock Plan as of the closing of this offering. This reserve will automatically increase on January 1, 2012 and each subsequent anniversary through 2020, by an amount equal to the smaller of (a) 4.0 percent of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or (b) an amount determined by the board. The reserve will also increase automatically by the number of any shares subject to awards outstanding under the 2003 Stock Plan which expire or are cancelled or forfeited after the closing of this offering. Appropriate adjustments will be made in the number of authorized shares and other numerical limits in the 2011 Equity Plan and in outstanding awards to prevent dilution or enlargement of participants' rights in the event of a stock split or other change in our capital structure. Shares subject to awards which expire or are cancelled or forfeited will again become available for issuance under the 2011 Equity Plan. The shares available will not be reduced by awards settled in cash or by shares withheld to satisfy tax withholding obligations. Only the net number of shares issued upon the exercise of stock appreciation rights or options exercised by means of a net exercise or by tender of previously owned shares will be deducted from the shares available under the 2011 Equity Plan.

        The 2011 Equity Plan will be administered by the compensation committee of our board of directors. Awards may be granted under the 2011 Equity Plan to our employees, including officers, directors, or consultants or those of any present or future parent or subsidiary or other affiliated entity. While we may grant incentive stock options only to employees, we may grant nonstatutory stock options, stock appreciation rights, restricted stock purchase rights or bonuses, restricted stock units, performance shares, performance units and cash-based awards or other stock-based awards to any eligible participant.

        In the event of a change of control as described in the 2011 Equity Plan, the acquiring or successor entity may assume or continue all or any awards outstanding under the 2011 Equity Plan or substitute substantially equivalent awards. Any awards which are not assumed or continued in connection with a change of control or are not exercised or settled prior to the change of control will terminate effective as of the time of the change of control. The compensation committee may provide for the acceleration of vesting of any or all outstanding awards upon such terms and to such extent as it determines, except that the vesting of all awards held by members of the board of directors who are not employees will automatically be accelerated in full. The 2011 Equity Plan also authorizes the compensation committee, in its discretion and without the consent of any participant, to cancel each or any outstanding award denominated in shares upon a change of control in exchange for a payment to the participant with respect to each share subject to the cancelled award of an amount equal to the excess of the consideration to be paid per share of common stock in the change of control transaction over the exercise price per share, if any, under the award.

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401(k) Plan

        Through our relationship with Trinet, we offer our employees a defined contribution employee retirement plan, or 401(k) plan. Our executive officers are also eligible to participate in the 401(k) plan on the same basis as our other employees. The 401(k) plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Code. The plan provides that each participant may contribute up to the statutory limit, which is $16,500 for calendar year 2011. Participants who are 50 years or older can also make "catch-up" contributions, which in calendar year 2011 may be up to an additional $5,500 above the statutory limit. The plan permits us to make discretionary contributions and matching contributions, subject to established limits and a vesting schedule. In fiscal year 2010, we did not make any discretionary or matching contributions on behalf of our named executive officers.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Policies and Procedures for Related Person Transactions

        All future transactions, if any, between us and our officers, directors and principal stockholders and their affiliates, as well as any transactions between us and any entity with which our officers, directors or principal stockholders are affiliated will be reviewed and approved or ratified in accordance with policies and procedures that our board of directors intends to adopt effective upon the completion of this offering. Such policies and procedures will require that related person transactions be approved by the audit committee or our board of directors or otherwise in accordance with the then applicable SEC, NYSE or Nasdaq rules and regulations governing the approval of such transactions. These policies and procedures have not been and will not be applied to the transactions described below.

Related Person Transactions

        Since January 1, 2008, we have not been a party to, and we have no plans to be a party to, any transaction or series of similar transactions in which the amount involved exceeded or will exceed $120,000 and in which any current or former director, executive officer, holder of more than five percent of our capital stock, any member of the immediate family of or any entities affiliated with any of the foregoing persons or entities affiliated with them, had or will have a direct or indirect material interest, other than as described above under the heading "Executive Compensation" and in the transactions described below.

Securities Issued to Insiders

        On June 5, 2008, June 17, 2008, and August 1, 2008 we collectively issued and sold an aggregate principal amount of $2,050,000 of subordinated convertible promissory notes that accrued interest at a rate of eight percent per annum. As described below, on October 31, 2008, all outstanding principal and interest, equal to an aggregate amount of $2,117,003, converted into shares of our Series C preferred stock. The table below summarizes purchases of these convertible promissory notes by our directors, executive officers, holders of more than five percent of any class of our voting securities, and any member of the immediate family of or any entities affiliated with any of the foregoing persons.

Purchasers	Principal Amount of Notes
Entities affiliated with Kennet II L.P.(1)	$1,193,798
Entities affiliated with IVS Fund II K/S(2)	457,364
Entities affiliated with EDF Ventures III, Limited Partnership(3)	348,837

(1)

Consists of $1,188,472 principal amount purchased by Kennet II L.P. and $5,326 principal amount purchased by King Street Partners L.P.   Javier Rojas is a managing director of Kennet Partners LLC, and is a member of our board of directors. Kennet Capital Management (Jersey) LTD. is the manager of each of Kennet II L.P. and King Street Partners L.P.

(2)

Consists of $304,909 principal amount purchased by IVS Fund II K/S and $152,455 principal amount purchased by IVS A/S.

(3)

Consists of $313,954 principal amount purchased by EDF Ventures III, Limited Partnership and $34,883 principal amount purchased by EDF Ventures III Sidecar, Limited Partnership.

        On October 31, 2008, we issued and sold an aggregate of 8,770,525 shares of our Series C preferred stock at a per share price of approximately $2.1194 with respect to shares purchased for cash and a per share price of approximately $1.6955 with respect to shares issued upon conversion of outstanding debt, for aggregate consideration of approximately $18.1 million (approximately $2.1 million via conversion of debt and $16.0 million in cash). The table below summarizes purchases of shares of our Series C preferred stock by our directors, executive officers, holders of more than five percent of any class of our voting securities, and any member of the immediate family of or any entities

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affiliated with any of the foregoing persons. In connection with these sales, we granted the purchasers certain registration rights with respect to their securities. See "Description of Capital Stock—Registration Rights." Each outstanding share of our Series C preferred stock will be converted automatically into one share of our common stock immediately prior to the completion of this offering.

Purchasers	Shares of Series C Preferred Stock		Aggregate Purchase Price(1)
VantagePoint Venture Partners 2006(Q), L.P.(2)		7,524,888	$15,948,248
Entities affiliated with IVS Fund II K/S(3)		277,908	471,198
Entities affiliated with Kennet II L.P.(4)		725,385	1,229,906
Entities affiliated with EDF Ventures III, Limited Partnership(5)		211,963	359,388

(1)

Payment via cash and conversion of outstanding debt at a 20 percent discount to the cash purchase price.

(2)

William J. Harding is a member of VantagePoint Venture Associates 2006, LLC, the general partner of VantagePoint Venture Partners 2006(Q), L.P., and is a member of our board of directors.

(3)

Consists of 92,636 shares purchased by IVS A/S and 185,272 shares purchased by IVS Fund II K/S.

(4)

Consists of 722,149 shares purchased by Kennet II L.P. and 3,236 shares purchased King Street Partners L.P. Javier Rojas is a managing director of Kennet Partners LLC, and is a member of our board of directors. Kennet Capital Management (Jersey) LTD. is the manager of each of Kennet II L.P. and King Street Partners L.P.

(5)

Consists of 190,767 shares purchased by EDF Ventures III, Limited Partnership and 21,196 shares purchased EDF Ventures III Sidecar, Limited Partnership.

Stockholder Agreement

        We have entered into a Stockholder Agreement with VantagePoint Venture Partners 2006(Q), L.P., or VantagePoint, and Kennet II L.P., or KII, pursuant to which, subject to maintaining specified stock ownership levels, they each have a right to designate a director and to approve certain specified transactions unless such transactions are approved by our stockholders. For a description of the terms of the Stockholder Agreement, see "Description of Capital Stock—Stockholder Agreement."

Amended and Restated Registration Rights Agreement

        We have entered into a registration rights agreement with the purchasers of our outstanding convertible preferred stock, including entities with which certain of our directors are affiliated, and certain holders of our outstanding common stock, including certain of our executive officers. As of September 30, 2011, the holders of up to 30,258,126 shares of our common stock, including the common stock issuable upon the conversion of our preferred stock and upon the exercise of warrants, are entitled to rights with respect to the registration of their shares following this offering under the Securities Act. For a description of these registration rights and other registration rights held by certain holders of our common stock, see "Description of Capital Stock—Registration Rights."

Indemnification Agreements

        We have entered into, or will enter into, an indemnification agreement with each of our directors and executive officers. The indemnification agreements and our certificate of incorporation and bylaws require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law. See "Description of Capital Stock—Limitations of Director Liability and Indemnification of Directors, Officers, and Employees."

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Offer Letters

        We have entered into employment agreements and proprietary information and inventions agreements with our executive officers. For more information regarding these agreements, see "Executive Compensation—Executive Employment Agreements."

Indebtedness of Management

        In June 2006, we issued an aggregate of 384,660 shares of our common stock to Fawzi Common Stock, Inc., an entity affiliated with Frank Fawzi, our chief executive officer and chairman, in exchange for a promissory note in the original principal amount of $932,493. Interest on the note originally accrued at a rate of 5.06 percent per annum, and the note had an initial maturity date of the earlier of (i) June 30, 2011 or (ii) the day immediately prior to a public offering. The note was a non-recourse note and was secured by a pledge of the 384,660 shares of common stock. In May 2007, in accordance with its terms, the note was amended to reduce the principal to $788,058 to reflect a reduction in the value of the shares of common stock following a reduction in the conversion price of our Series B preferred stock. In December 2010, the note was amended in order to change the interest rate to 0.32 percent per annum and to change the maturity date to the earlier of (i) June 30, 2012 or (ii) the day immediately prior to a public offering. The largest aggregate amount of indebtedness outstanding pursuant to the note was $983,771, which represented the full amount of principal and accrued interest outstanding at May 4, 2011, the date the note was repaid in full.

Recent Stock Sales

        On May 4, 2011 and June 29, 2011, certain of our executive officers or their affiliates sold an aggregate of 363,637 shares and 173,499 shares, respectively, of our common stock to an institutional investor. The institutional investor was not previously a company stockholder or an affiliate of a company stockholder. All transactions were completed at a price per share of $11.00. Discussions with the institutional investor originally arose due to the need for certain indebtedness of management to the Company to be re-paid prior to the initial filing of the Registration Statement of which this prospectus is part. The initial transaction for Fawzi Common Stock, Inc., an entity affiliated with Frank Fawzi, our chief executive officer and chairman, allowed Fawzi Common Stock, Inc. to satisfy the indebtedness owed by Fawzi Common Stock, Inc. to us in an amount equal to $983,737, and tax liability associated with gains on the sale of such shares. Mr. Simone, our chief financial officer, and Mr. Haba, our chief visionary officer and director, decided to join Fawzi Common Stock, Inc. in selling shares to the institutional investor in the initial transaction. Subsequently, these and other members of management participated in a second transaction. In light of ongoing market volatility, at the time of such sales the sellers did not know when or if this offering would be completed, what the price range would be or whether they would be allowed to sell any shares as part of the offering. They also understood that even if the offering were successfully completed, as a result of lock-up agreements, federal securities law restrictions and other factors, their ability to sell shares after the offering might be restricted for an indefinite period. As a result, they entered into the transactions with the same institutional investor.

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        The number of shares sold on each date and the percent of the number of shares beneficially owned by each seller as of such date are set forth in the table below:

	Date of Sale	Shares Sold		Percent of Shares Beneficially Owned		Aggregate Original Purchase Price		Aggregate Sale Price
Fawzi Common Stock, Inc.	May 4, 2011		140,118		6.2	$	339,643	$	1,541,309
	June 29, 2011		45,414		2.0	$	110,084	$	499,565
Andre Simone	May 4, 2011		23,572		2.4	$	6,600	$	259,303
	June 29, 2011		24,470		2.5	$	6,851	$	269,165
Haydar Haba	May 4, 2011		40,842		2.0	$	6,535	$	449,268
	June 29, 2011		62,420		3.1	$	43,355	$	686,615
John Belanger	June 29, 2011		4,688		1.2	$	1,313	$	51,563
Margaret Norton	June 29, 2011		2,738		1.3	$	3,614	$	30,118
Shaun Andrews	June 29, 2011		1,565		2.5	$	5,323	$	17,221

The institutional investor that purchased such shares of common stock has entered into a lock-up agreement with the underwriters, and the shares of common stock that were purchased are subject to the restrictions contained in such lock-up agreement, which are described elsewhere in this prospectus. See "Underwriting."

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PRINCIPAL AND SELLING STOCKHOLDERS

        The following table sets forth information known to us regarding the beneficial ownership of our common stock as of September 30, 2011 for:

•

each person, or group of affiliated persons, known to us to beneficially own more than five percent of our common stock;

•

each of our directors;

•

each of our named executive officers;

•

all of our directors and executive officers as a group; and

•

each of the selling stockholders.

        The information in the following table has been presented in accordance with the rules of the SEC. Under the SEC's rules, beneficial ownership of a class of capital stock includes any shares of such class as to which a person, directly or indirectly, has or shares voting power or investment power and also any shares as to which a person has the right to acquire such voting or investment power within 60 days following September 30, 2011 through the exercise of any stock option, warrant or other right. Except as otherwise noted, unvested options granted under our 2003 Stock Plan are not immediately exercisable and therefore are not considered beneficially owned by their holder. If two or more persons share voting power or investment power with respect to specific securities, each such person is deemed to be the beneficial owner of such securities. Except as we otherwise indicate below and subject to applicable community property laws, we believe that the beneficial owners of the common stock listed below, based on information they have furnished to us, have sole voting and investment power with respect to the shares shown. Unless otherwise noted below, the address for each holder listed below is c/o IntelePeer, Inc., 2855 Campus Drive, Suite 200, San Mateo, CA 94403.

        For purposes of calculating beneficial ownership, we have assumed that:

•

as of September 30, 2011, 26,842,244 shares of common stock were outstanding, assuming the conversion of all of our outstanding convertible preferred stock, which will occur immediately prior to the completion of this offering; and

•

we will issue                        shares of common stock in the offering (assuming the underwriters do not exercise their over-allotment option).

        Because the selling stockholders may offer all or a portion of the shares at any time and from time to time after the date hereof, no estimate can be made of the number of shares that each selling stockholder may retain upon completing the offering. Assuming all of the shares offered hereunder are sold by the selling stockholders, after completing the offering, none of the selling stockholders will own

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more than one percent of the shares of common stock outstanding except as noted below. Beneficial ownership after the offering will depend on the number of shares sold by each selling stockholder.

		Number of Shares Beneficially Owned				Percent Beneficially Owned
										Total Shares Offered if Over- Allotment is Exercised
Name and Address of Beneficial Owner		Before Offering		After Offering	Number of Shares Offered	Before Offering			After Offering
5% Stockholders:
	VantagePoint Venture Partners 2006(Q), L.P.(1)		7,524,888				28.0	%
	Entities affiliated with Kennet II L.P.(2)		7,524,886				28.0	%
	Entities affiliated with IVS Fund II K/S(3)		2,882,909				10.7	%
	Entities affiliated with EDF Ventures III, Limited Partnership(4)		2,198,828				8.2	%
	Frank M. Fawzi(5)		2,204,979				7.7	%
	Haydar Haba(6)		1,865,484				6.8	%
Directors and Executive Officers:
	Frank M. Fawzi(5)		2,204,979				7.7	%
	Shaun Andrews(7)		92,185				*
	John Belanger(8)		218,320				*
	Phillip Bronsdon(9)		385,895				1.4	%
	Haydar Haba(6)		1,865,484				6.8	%
	Margaret Norton(10)		281,474				1.0	%
	Andre Simone(11)		1,033,525				3.7	%
	William J. Harding		—				*
	Lawrence Irving		—				—
	Keith Olsen		—				—
	Javier Rojas		—				—
	Raymond Smets		—				—
All Directors and Executive Officers as a Group (12 persons)(12)			6,081,863				19.5	%
Additional Selling Stockholders:

*

Represents beneficial ownership of less than one percent.

(1)

The General Partner of VantagePoint Venture Partners 2006(Q), L.P. is VantagePoint Venture Associates 2006, LLC. Due to his authority as a Managing Member of VantagePoint Venture Associates 2006, LLC, Alan E. Salzman may be deemed to have beneficial ownership over shares held by VantagePoint Venture Partners 2006(Q), L.P. Mr. Salzman disclaims beneficial ownership except to the extent of his pecuniary interest in those shares. The address for each VantagePoint entity and for Mr. Salzman is 1001 Bayhill Drive, Suite 300, San Bruno, CA 94066.

(2)

Includes 7,491,316 shares held by Kennet II L.P., or KII; and 33,570 shares held by King Street Partners L.P., or KSP. Pursuant to a management agreement, Kennet Capital Management (Jersey) Limited, or KCMJL, has sole voting and investment power over the shares held by KII and KSP. KCMJL is a wholly owned subsidiary of Kennet Partners LLP. The board of directors of KCMJL consists of Michael Harrop, David King and Jane Stammers, who share such voting and investment power. KCMJL has appointed Javier Rojas, an affiliate of Kennet Partners LLP and a limited partner of KSP, as its representative to the Company's board of directors. Each of Michael Harrop, Jane Stammers, David King and Javier Rojas disclaim beneficial ownership except to the extent of his or her pecuniary interest in these shares. The address of KCMJL is 47 Esplanade, St. Helier, Jersey JE1 0BD Channel Islands.

(3)

Includes (i) 1,921,939 shares held by IVS Fund II K/S and (ii) 960,970 shares held by IVS A/S. The Board of Directors of IVS A/S has sole voting power over the shares held by IVS Fund II K/S and IVS A/S. The board of directors of IVS A/S consists of Lars Bruhn, Peter Aagaard, Soren Fogtdal, Preben Mejer, and Frank Ewald, who share such voting and investment power. Each of Lars Bruhn, Peter Aagaard, Soren Fogtdal, Preben Mejer, and Frank Ewald disclaim beneficial ownership except to the extent of his or her pecuniary interest in these shares.

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(4)

Includes (i) 1,978,948 shares held by EDF Ventures III, Limited Partnership and (ii) 219,880 shares held by EDF Ventures III Sidecar, Limited Partnership. The general partner of EDF Ventures III, Limited Partnership is Enterprise Ventures III, Limited Partnership of which the general partner is EDM III, Inc. The general partner of EDF Ventures III Sidecar, Limited Partnership is Enterprise Ventures III Sidecar, Limited Partnership of which the general partner is EDM III Sidecar, Inc. Mary Campbell and Mike Devries collectively own all of the outstanding equity interests of each of EDM III, Inc. and EDM III Sidecar, Inc. and collectively have ultimate voting power over the Company's shares held by EDF Ventures III, Limited Partnership and EDF Ventures III Sidecar, Limited Partnership. Each of Mary Campbell and Mike Devries disclaim beneficial ownership except to the extent of his or her pecuniary interest in these shares.

(5)

Includes (i) 199,125 shares held by Fawzi Common Stock, Inc., (ii) 1,644,908 shares issuable upon exercise of options exercisable within 60 days following September 30, 2011, and (iii) 123,210 shares issuable upon exercise of options which shall become exercisable upon the closing of our initial public offering. Frank Fawzi has sole control over the shares held by Fawzi Common Stock, Inc.

(6)

Includes (i) 314,312 shares issuable upon exercise of options which are exercisable within 60 days following September 30, 2011 and (ii) 1,078,104 shares held by UIS LLC of which Mr. Haba is the managing member. Includes 229,649 of Mr. Haba's options which shall become exercisable in the event the fair market value of our common stock exceeds $14.748 per share following the completion of our initial public offering, subject to his continuous service to the Company.

(7)

Represents 92,185 shares issuable upon options exercisable within 60 days following September 30, 2011.

(8)

Represents 218,320 shares issuable upon options exercisable within 60 days following September 30, 2011.

(9)

Represents 385,895 shares issuable upon options exercisable within 60 days following September 30, 2011.

(10)

Represents 281,474 shares issuable upon options exercisable within 60 days following September 30, 2011.

(11)

Includes 989,452 shares issuable upon options exercisable within 60 days following September 30, 2011.

(12)

See note (5) through (11). Includes (i) 3,768,427 shares issuable pursuant to options exercisable within 60 days following September 30, 2011, (ii) 123,210 shares issuable pursuant to options exercisable upon the consummation of our initial public offering and (iii) 229,649 shares which shall become exercisable in the event the fair market value of our common stock exceeds $14.478 per share following the completion of our initial public offering, subject to Mr. Haba's continuous service to the Company.

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DESCRIPTION OF CAPITAL STOCK

General

        Upon completion of this offering, our authorized capital stock will consist of 200,000,000 shares of common stock, $0.0001 par value per share, and 5,000,000 shares of undesignated preferred stock, $0.0001 par value per share.

        The following description of the material provisions of our capital stock and our charter and bylaws is only a summary, does not purport to be complete and is qualified by applicable law and the full provisions of our charter and bylaws. You should refer to our charter and bylaws as in effect upon the closing of this offering, which are included as exhibits to the registration statement of which this prospectus is a part.

Common Stock

        As of September 30, 2011, there were 26,842,244 shares of our common stock outstanding and held of record by 58 stockholders. The foregoing assumes the automatic conversion of all of our outstanding convertible preferred stock into shares of our common stock, which will occur immediately prior to the completion of this offering. All of the outstanding shares of our common stock are fully paid and nonassessable. The rights, preferences and privileges of the holders of our common stock are subject to the rights of the holders of shares of any series of preferred stock which we may issue in the future.

        Voting Rights.    Holders of common stock are entitled to one vote per share on any matter to be voted upon by stockholders. All shares of common stock rank equally as to voting and all other matters. The shares of common stock have no preemptive or conversion rights, no redemption or sinking fund provisions, are not liable for further call or assessment and are not entitled to cumulative voting rights.

        Dividend Rights.    For as long as such stock is outstanding, the holders of common stock are entitled to receive ratably any dividends when and as declared from time to time by our board of directors out of funds legally available for dividends. We currently intend to retain all future earnings for the operation and expansion of our business and do not anticipate paying cash dividends on the common stock in the foreseeable future.

        Liquidation Rights.    Upon a liquidation or dissolution of our company, whether voluntary or involuntary, creditors will be paid before any distribution to holders of our common stock. After such distribution, and subject to the liquidation preferences of any outstanding preferred stock, holders of common stock are entitled to receive a pro rata distribution per share of any excess amount.

Preferred Stock

        Immediately prior to the completion of this offering, and assuming there are no exercises of outstanding warrants after September 30, 2011, all outstanding shares of our preferred stock will be automatically converted into an aggregate of 21,569,923 shares of common stock provided that the aggregate offering price of the shares offered in this offering equals or exceeds $50,000,000 and the per share offering price is at least $6.3582.

        Undesignated Preferred Stock.    Under our charter, as it will be amended and restated effective upon the completion of this offering, our board of directors has authority to issue undesignated preferred stock without stockholder approval. Our board of directors may also determine or alter for each class of preferred stock the voting powers, designations, preferences, and special rights, qualifications, limitations, or restrictions as permitted by law. 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 the common stock. Issuing preferred stock provides flexibility in connection with possible acquisitions and other corporate purposes, but could also, among other things,

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have the effect of delaying, deferring or preventing a change of control of our company and may adversely affect the market price of our common stock and the voting and other rights of the holders of common stock.

Warrants

        Immediately following the completion of this offering, there will be outstanding and held of record by ten holders warrants to purchase 1,057,603 shares of our common stock, assuming no voluntary exercise of any of these warrants prior to the completion of this offering. This total includes warrants to purchase 649,407 shares of our preferred stock that will convert into warrants to purchase the same number of shares of our common stock upon the conversion of our preferred stock into common stock as a result of the offering. The warrants that will remain outstanding following the completion of this offering have a weighted average exercise price of $1.67 per share and have termination dates that range from October 4, 2011 to July 1, 2021.

Stockholder Agreement

        In August 2011, we entered into a Stockholder Agreement with VantagePoint Venture Partners 2006(Q), L.P., or VantagePoint, and Kennet II L.P., or KII, pursuant to which we agreed to the following:

(i)    so long as each of VantagePoint and KII continue to own not less than 50% of the number of our shares that they owned prior to this offering, they will each have the right to designate one person for election to our Board of Directors and for such person to be a member of all committees of our Board of Directors other than our Audit Committee;

(ii)    so long as each of VantagePoint and KII have a right to designate a director and both collectively beneficially own shares representing 35% or more of the voting power of our shares, we will not, without the approval of all directors designated by VantagePoint and KII then in office or our stockholders,

•

issue any new class or series of equity security (in one or more steps) having economic rights senior to our common stock or having voting rights other than those granted to our common stock generally (other than issuances that would not dilute the percentage interest in our common stock of any stockholder or otherwise adversely affect the rights of VantagePoint or KII, including the issuance of a new class of shares for a stockholder rights plan);

•

issue new securities (including any security or other right convertible into or exercisable for any equity security) in one or a series of related transactions which dilute our outstanding common stock by more than 20%; provided that the foregoing shall not apply to the issuance of new securities to the owners of a business in connection with our acquisition of that business or its assets; or

•

change the advance notice provision in our bylaws for stockholder proposals or director nominations, or delay our annual meeting by more than 90 days from the date originally set by our Board of Directors; and

(iii)    so long as VantagePoint or KII continue to have a right to designate a person to our Board of Directors, we will not change the authorized directors to a size above eight or below six, change the class of directors of a designated director and we will not amend our charter documents if such amendment would impair their rights.

Each of these rights terminates on the later of three years following the date of this offering or our third annual meeting of stockholders following this offering. In consideration of this agreement, VantagePoint and KII agreed to approve our proposed form of charter documents which will be in effect upon completion of this offering and to waive certain registration rights relating to this offering.

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Registration Rights

        Immediately prior to this offering all outstanding shares of our preferred stock will be converted into shares of our common stock and all outstanding warrants to purchase shares of our preferred stock will become exercisable for shares of our common stock. After the completion of this offering, certain holders of our common stock and warrants exercisable for our common stock, assuming exercise of such warrants, will be entitled to rights with respect to the registration of their shares under the Securities Act. These registration rights are contained in our Registration Rights Agreement, dated as of October 31, 2008, as amended by Amendment No. 1 thereto, dated April 15, 2009, and Amendment No. 2 thereto, dated May 5, 2010, or the Registration Rights Agreement, and are described in additional detail below.

        In connection with this offering, each securityholder that has registration rights has entered into lock-up agreements or is otherwise subject to contractual restrictions pursuant to which they have agreed not to transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock, for a period of at least 180 days after the date of this prospectus, which is subject to extension in some circumstances, as described under the heading "Underwriting."

Registration Rights Agreement

        The registration rights provided for in the Registration Rights Agreement, will expire seven years following the completion of this offering, or, with respect to any particular securityholder, when such securityholder is able to sell all of its shares pursuant to Rule 144 of the Securities Act or a similar exemption during any 90-day period. Subject to certain conditions, we will pay the registration expenses of the holders of the shares registered pursuant to the registrations described below. In an underwritten offering, the managing underwriter, if any, has the right, subject to specified conditions, to limit the number of shares such holders may include in the offering.

        Demand Registration Rights.    After the completion of this offering, the holders of an aggregate of 23,623,951 shares of our common stock will be entitled to certain demand registration rights. Any time after October 1, 2011, the holders of at least a majority of these shares can, on not more than two occasions, request that we register all or a portion of their shares. The request for registration must cover at least that number of shares with an anticipated aggregate offering price, of at least $50,000,000. If in the good faith judgment of our board of directors, we determine that it would be seriously detrimental to us and to our stockholders to effect such a demand registration, we have the right to defer such registration, not more than once in any one-year period, for a period of up to 120 days.

        Piggyback Registration Rights.    In connection with this offering, the holders of an aggregate of 30,258,126 shares of our common stock were entitled to, and the necessary percentage of holders waived, their rights to notice of this offering and to include their shares of registrable securities in this offering. Following the date of this offering, in the event that we propose to register any of our securities under the Securities Act, either for our own account or for the account of other securityholders, the holders of these shares 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 a registration related to a company stock plan, the exchange of securities in certain corporate reorganizations or certain other transactions, the holders of these shares are entitled to notice of the registration and have the right, subject to limitations that the underwriters may impose on the number of shares included in the registration, to include their shares in the registration.

        S-3 Registration Rights.    After the completion of this offering, the holders of an aggregate of 23,623,951 shares of our common stock may make a written request that we register their shares on Form S-3. We are obligated to effect such registration on Form S-3 if we are eligible to file a

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registration statement on Form S-3, the request is made by the holders of not less than 30 percent of the registrable securities then outstanding, and the request covers at least that number of shares with an anticipated aggregate offering price of at least $1,000,000. These holders 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 in the good faith judgment of our board of directors, we determine that it would be seriously detrimental to us and to our stockholders to effect such a Form S-3 registration, in which case we have the right to defer such registration for not more than 120 days from the date of request, provided that we have not utilized this right more than twice in any 12-month period.

Anti-Takeover Matters

Certificate of Incorporation and Bylaw Provisions

        Our amended and restated certificate of incorporation and bylaws to be in effect upon the closing of this offering will include a number of provisions that may have the effect of encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to negotiate with our board of directors rather than pursue non-negotiated takeover attempts. They are intended to enhance our long-term value to our stockholders by increasing the likelihood of continued stability in the composition of our board of directors and its policies and discouraging certain types of transactions that may involve an actual or threatened acquisition of us. These provisions are also designed to reduce our vulnerability to an unsolicited acquisition proposal and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, they also may inhibit fluctuations in the market price of our stock that could result from actual or rumored takeover attempts. These provisions include the items described below.

        Board Composition and Filling Vacancies.    Our board of directors shall 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. In addition, because our stockholders will not have cumulative voting rights, our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors. Our amended and restated bylaws will provide that directors may be removed only for cause by the affirmative vote of the holders of a majority of the voting power of all the outstanding shares of capital stock entitled to vote generally in the election of directors voting together as a single class. Furthermore, any vacancy on our board of directors, however occurring, including a vacancy resulting from an increase in the size of our board of directors, may only be filled by the affirmative vote of a majority of our directors then in office even if less than a quorum.

        No Written Consent of Stockholders.    Our amended and restated certificate of incorporation will provide that all stockholder actions are required to be taken by a vote of the stockholders at an annual or special meeting, and that stockholders may not take any action by written consent in lieu of a meeting.

        Meetings of Stockholders.    Our amended and restated bylaws will provide that only our board of directors, the chairman of the board, the chief executive officer or the president may call special meetings of stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders. Our amended and restated bylaws will limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before the meeting.

        Advance Notice Requirements.    Our amended and restated bylaws will establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. These procedures provide that notice of stockholder proposals must be timely given in writing to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received

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at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding year. The notice must contain certain information specified in the amended and restated bylaws.

        Amendment to Bylaws and Certificate of Incorporation.    As required by the Delaware General Corporation Law, or DGCL, any amendment of our certificate of incorporation must first be approved by a majority of our board of directors and, if required by law or our certificate of incorporation, thereafter be approved by a majority of the outstanding shares entitled to vote on the amendment, and a majority of the outstanding shares of each class entitled to vote thereon as a class, except that the amendment of the provisions relating to management of our business, stockholder action, directors, limitation of liability and the amendment of our bylaws and certificate of incorporation must be approved by no less than 66²/3 percent of the voting power of all of the shares of capital stock issued and outstanding and entitled to vote generally in any election of directors, voting together as a single class. Our bylaws may be amended by the affirmative vote of a majority vote of the directors then in office, subject to any limitations set forth in the bylaws; and may also be amended by the affirmative vote of at least 66²/3 percent of the voting power of all of the shares of capital stock issued and outstanding and entitled to vote generally in any election of directors, voting together as a single class.

        Blank Check Preferred Stock.    Our amended and restated certificate of incorporation will provide for 5,000,000 authorized shares of preferred stock. The existence of authorized but unissued shares of preferred stock may 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 otherwise. For example, if in the due exercise of its fiduciary obligations, our board of directors were to determine that a takeover proposal is not in the best interests of our company or our stockholders, our board of directors could cause shares of preferred stock to be issued without stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In this regard, our amended and restated certificate of incorporation grants our board of directors broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares of common stock. The issuance may also adversely affect the rights and powers, including voting rights, of these holders and may have the effect of delaying, deterring, or preventing a change of control of us.

Limitations of Director Liability and Indemnification of Directors, Officers and Employees

        As permitted by the DGCL, provisions in our amended and restated certificate of incorporation and amended and restated bylaws that will be in effect upon the closing of this offering will limit or substantially eliminate the personal liability of our directors. Consequently, directors will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for:

•

any breach of the director's duty of loyalty to us or our stockholders;

•

any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

•

any unlawful payments related to dividends or unlawful stock repurchases, redemptions or other distributions; or

•

any transaction from which the director derived an improper personal benefit.

        These limitations of liability do not alter director liability under the federal securities laws and do not affect the availability of equitable remedies, such as an injunction or rescission.

        In addition, our amended and restated bylaws will provide that:

•

we will indemnify our directors, officers and, in the discretion of our board of directors, certain employees, to the fullest extent permitted by the DGCL, subject to limited exceptions, including

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an exception for indemnification in connection with a proceeding (or counterclaim) initiated by such persons; and

•

we will advance expenses, including attorneys' fees, to our directors and, in the discretion of our board of directors, certain officers and employees, in connection with legal proceedings, subject to limited exceptions.

        We have entered into indemnification agreements with each of our executive officers and directors. These agreements provide that, subject to limited exceptions and among other things, we will indemnify each of our executive officers and directors to the fullest extent permitted by law and advance expenses to each indemnitee in connection with any proceeding in which a right to indemnification is available.

        We also intend to maintain a general liability insurance policy that covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers, including liabilities under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted for directors, officers, or persons who control us, 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.

        These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder's investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. We believe that these provisions, the indemnification agreements and the insurance policy are necessary to attract and retain talented and experienced directors and officers.

        At present, there is no pending litigation or proceeding involving any of our directors or officers where indemnification will be required or permitted. We are not aware of any threatened litigation or proceeding that might result in a claim for such indemnification.

Exchange Listing

        Before the date of this prospectus, there has been no public market for our common stock. We have applied to have our common stock approved for listing on the Nasdaq Global Market, subject to notice of issuance, under the symbol "PEER."

Transfer Agent and Registrar

        The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC.

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SHARES ELIGIBLE FOR FUTURE SALE

        Prior to our initial public offering, there has not been a public market for shares of our common stock. Future sales of substantial amounts of shares of our common stock, including shares issued upon the exercise of outstanding options and warrants, in the public market after this offering, or the possibility of these sales occurring, could cause the prevailing market price for our common stock to fall or impair our ability to raise equity capital in the future.

        Upon the closing of this offering, and assuming that there are no exercises of outstanding options or warrants after September 30, 2011 and assuming the underwriters do not exercise their over-allotment option, we will have outstanding an aggregate of approximately                        shares of common stock. Of these shares,                        shares of common stock to be sold in this offering, plus an additional                        shares if the underwriters exercise their over-allotment option in full, will be freely tradable in the public market without restriction or further registration under the Securities Act, unless the shares are held by any of our affiliates, as that term is defined in Rule 144 of the Securities Act.

        The remaining                        shares of our common stock outstanding after this offering are restricted securities, as such term is defined in Rule 144 under the Securities Act. These shares were issued and sold by us in private transactions and are eligible for public sale only if registered under the Securities Act or sold in accordance with Rule 144 or Rule 701 under the Securities Act, each of which is discussed below. In addition, the holders of substantially all of our currently outstanding shares of our common stock are subject to lock-up agreements or other contractual restrictions under which they have agreed not to transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock, for a period of at least 180 days after the date of this prospectus, which is subject to extension in some circumstances, as discussed under the heading "Underwriting."

        As a result of the lock-up agreements described below and the provisions of Rule 144 and Rule 701, the shares of our common stock (excluding the shares to be sold in this offering) will be available for sale in the public market as follows:

•

substantially all of such shares will be subject to lock-up agreements and will not be eligible for immediate sale upon the completion of this offering; and

•

all of such shares will be eligible for sale under Rule 144 or Rule 701 upon expiration of lock-up agreements 180 days after the date of this offering, subject to any extension of the lock-up period under circumstances described under the heading "Underwriting," and provided that certain shares held by affiliates will be subject to volume limitations and other requirements of Rule 144 described below.

Rule 144

        In general, under Rule 144, beginning 90 days after the date of this prospectus, a person who is not our affiliate, has not been our affiliate for the previous three months, and who has beneficially owned shares of our common stock for at least six months, may sell all such shares. An affiliate or a person who has been our affiliate within the previous 90 days, and who has beneficially owned shares of our common stock for at least six months, may sell within any three-month period a number of shares that does not exceed the greater of:

•

one percent of the number of shares of our common stock then outstanding, which will equal approximately                                     shares immediately after this offering, assuming no exercise of the underwriters' over-allotment option and based upon the number of shares of our common stock outstanding as of September 30, 2011; or

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•

the average weekly trading volume of our common stock on the Nasdaq Global Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;

provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale, and subject to the lock-up agreements described below. Sales under Rule 144 by affiliates or persons who have been affiliates within the previous 90 days are also subject to manner of sale provisions and notice requirements.

Rule 701

        In general, under Rule 701 as currently in effect, any of our employees, directors, consultants or advisors who purchased shares from us in connection with a compensatory stock or option plan or other written agreement in a transaction before the effective date of this offering that was completed in reliance on Rule 701 and complied with the requirements of Rule 701 will, subject to the lock-up agreements described below, be eligible to resell such shares 90 days after the effective date of this offering in reliance on Rule 144, but without compliance with certain restrictions, including the holding period, contained in Rule 144.

Registration Rights

        Upon completion of this offering, the holders of                                    shares of our common stock outstanding and/or issued upon the automatic conversion of our preferred stock upon the closing of our initial public offering, and the holders of                                    shares of our common stock issuable upon exercise of outstanding warrants will be entitled to various rights with respect to the registration of these shares under the Securities Act. Subject to the lock-up agreements described below, registration of these shares under the Securities Act would result in these shares becoming fully tradable without restriction under the Securities Act immediately upon the effectiveness of the registration statement for such shares, subject to restrictions imposed on shares held by affiliates. See "Description of Capital Stock—Registration Rights" for additional information.

Registration Statement on Form S-8

        We intend to file one or more registration statements on Form S-8 under the Securities Act covering up to                                     shares of common stock reserved for issuance under our Amended and Restated 2003 Stock Option and Restricted Stock Plan, our 2011 Equity Plan and for options granted outside of our stock plans. These registration statements are expected to be filed soon after the date of this prospectus and will automatically become effective upon filing. Accordingly, after expiration of lock-up agreements 180 days after the date of this offering, subject to any extension of the lock-up period under circumstances described under the heading "Underwriting," shares registered under such registration statements will be available for sale in the public market, unless such shares are subject to vesting restrictions with us and requirements that apply to affiliates under Rule 144 described above.

Lock-up Agreements

        For a description of the lock-up agreements with the underwriters that restrict sales of shares by us, our officers and directors, all of the selling stockholders and substantially all of our other securityholders, see the information under the heading "Underwriting."

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MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX
CONSEQUENCES FOR NON-U.S. HOLDERS OF COMMON STOCK

        The following is a discussion of the material U.S. federal income and estate tax consequences to non-U.S. holders with respect to their ownership and disposition of our common stock issued pursuant to this offering. In general, a "non-U.S. holder" is any beneficial owner of our common stock who is not, for U.S. federal income tax purposes:

•

an individual who is a citizen or resident of the United States;

•

a corporation or any other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in the United States or under the laws of the United States, any state thereof, or the District of Columbia;

•

an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

•

a trust, if (i) a U.S. court can exercise primary supervision over the administration of the trust and one or more U.S. persons can control all substantial decisions of the trust or (ii) the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person in effect.

        Generally, an individual may be treated as a resident of the United States in any calendar year for U.S. federal income tax purposes by, among other ways, being present in the United States for at least 31 days in that calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. For purposes of this calculation, such individual would count all of the days in which the individual was present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year. Residents are taxed for U.S. federal income tax purposes as if they were citizens of the United States.

        This discussion is based on current provisions of the Internal Revenue Code, U.S. Treasury Regulations promulgated under the Internal Revenue Code, judicial opinions, published positions of the Internal Revenue Service, or IRS, and all other applicable authorities, all of which are subject to change, possibly with retroactive effect. No ruling has been or will be sought from the IRS with respect to the matters discussed below, and there can be no assurance that the IRS will not take a contrary position or that any such contrary position would not be sustained by a court. This discussion assumes that the non-U.S. holder will hold our common stock as a capital asset (generally property held for investment).

        This discussion does not address all aspects of U.S. federal income and estate taxation or any aspects of state, local, or non-U.S. taxation, nor does it consider any specific facts or circumstances that may apply to particular non-U.S. holders that may be subject to special treatment under the U.S. federal income tax laws, such as:

•

insurance companies;

•

tax-exempt organizations;

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financial institutions;

•

regulated investment companies;

•

tax-qualified retirement plans;

•

brokers or dealers in securities;

•

investors that hold our common stock as part of a straddle, hedge, conversion transaction, synthetic security or other integrated investment;

•

controlled foreign corporations;

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•

passive foreign investment companies; and

•

U.S. expatriates.

        If a partnership or any other entity taxed as a partnership for U.S. federal income tax purposes is a beneficial owner of our common stock, the treatment of a partner in the partnership or other entity taxed as a partnership will generally depend upon the status of the equity owner of such partnership or entity taxed as a partnership and the activities of the partnership or other entity taxed as a partnership. Accordingly, partnerships and entities taxed as a partnership that hold our common stock and owners in such partnerships or other entities taxed as a partnership are urged to consult their tax advisors regarding the specific U.S. federal income tax consequences to them of acquiring, owning or disposing of our common stock.

PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF SHARES OF OUR COMMON STOCK, AS WELL AS THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSIDERATIONS OF ACQUIRING, OWNING AND DISPOSING OF SHARES OF COMMON STOCK.

Dividends

        As described above under the heading "Dividend Policy," we do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future. However, if we do make distributions on our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed our current and accumulated earnings and profits, they will constitute a return of capital and will first reduce the recipient's adjusted tax basis in our common stock, but not below zero, and then will be treated as gain from the sale of stock as described below under the heading "Gain on Sale or Other Disposition of Common Stock."

        Dividends paid to a non-U.S. holder will be subject to U.S. federal withholding tax at a rate equal to 30 percent of the gross amount of the dividend, or a lower rate prescribed by an applicable income tax treaty, unless the dividends are effectively connected with a trade or business carried on by the non-U.S. holder within the United States (and, if required by an applicable income tax treaty, are attributable to a U.S. permanent establishment maintained by the non-U.S. holder). Under applicable Treasury Regulations, a non-U.S. holder will be required to satisfy certain certification requirements, generally on IRS Form W-8BEN (or applicable successor form), directly or through an intermediary, in order to claim a reduced rate of withholding under an applicable income tax treaty. If tax is withheld in an amount in excess of the amount prescribed by an applicable income tax treaty, a refund of the excess amount may be obtained by timely filing an appropriate claim for refund with the IRS.

        Dividends that are effectively connected with such a U.S. trade or business (and, if required by an applicable income tax treaty, are attributable to a U.S. permanent establishment maintained by the recipient) will not be subject to U.S. withholding tax if the non-U.S. holder files the required forms, usually an IRS Form W-8ECI (or applicable successor form), with the payor of the dividend, but instead will be subject to U.S. federal income tax on a net income basis in the same manner as if the non-U.S. holder were a resident of the United States. A corporate non-U.S. holder that receives effectively connected dividends may be subject to an additional branch profits tax at a rate of 30 percent, or a lower rate prescribed by an applicable income tax treaty, with respect to effectively connected dividends.

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Gain on Sale or Other Disposition of Common Stock

        A non-U.S. holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of the non-U.S. holder's shares of common stock unless:

•

the gain is effectively connected with a trade or business carried on by the non-U.S. holder within the United States (and, if required by an applicable tax treaty, is attributable to a U.S. permanent establishment or a fixed base maintained by the non-U.S. holder), in which case the non-U.S. holder generally will be required to pay tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates and, if the non-U.S. holder is a corporation, the branch profits tax may apply, at a 30 percent rate or such lower rate as may be specified by an applicable income tax treaty;

•

the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met, in which case the non-U.S. holder will be required to pay a flat 30 percent tax (or such lower rate as may be specified by an applicable income tax treaty between the United States and such non-U.S. holder's country of residence) on the net gain derived from the disposition, which tax may be offset by U.S. source capital losses, if any, provided that the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses; or

•

our common stock constitutes a U.S. real property interest by reason of our status as a "United States real property holding corporation," or USRPHC, for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the disposition or the non-U.S. holder's holding period for our common stock.

        We believe that we are not currently and will not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, however, as long as our common stock is regularly traded on an established securities market, such common stock will be treated as U.S. real property interests only if the non-U.S. holder actually or constructively held more than five percent of our common stock at any time during the shorter of the five-year period preceding the disposition or the non-U.S. holder's holding period for our common stock. We expect our common stock to be regularly traded on an established securities market, although we cannot guarantee that it will be so traded.

Information Reporting and Backup Withholding

        We must report annually to the IRS and to each non-U.S. holder the amount of dividends on our common stock, the name and address of the recipient and the amount, if any, of tax withheld. These information reporting requirements apply even if withholding was not required because the dividends were effectively connected dividends or withholding was reduced by an applicable income tax treaty. Under tax treaties or other agreements, the IRS may make its reports available to tax authorities in the recipient's country of residence.

        Dividend payments made to a non-U.S. holder that is not an exempt recipient generally will be subject to backup withholding, currently at a rate of 28 percent, unless a non-U.S. holder certifies as to its foreign status, which certification may be made on IRS Form W-8BEN. Notwithstanding the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the holder is a U.S. person that is not an exempt recipient.

        Proceeds from the disposition of common stock by a non-U.S. holder effected by or through a U.S. office of a broker will be subject to information reporting and backup withholding, currently at a rate of 28 percent of the gross proceeds, unless the non-U.S. holder certifies to the payor under penalties of

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perjury as to, among other things, its address and status as a non-U.S. holder or otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding will not apply to a payment of disposition proceeds if the transaction is effected outside the United States by or through a non-U.S. office of a broker. However, if the broker is, for U.S. federal income tax purposes, a U.S. person, a controlled foreign corporation, a foreign person who derives 50 percent or more of its gross income for specified periods from the conduct of a U.S. trade or business, a specified U.S. branch of a foreign bank or insurance company or a foreign partnership with certain connections to the United States, information reporting but not backup withholding will apply unless the broker has documentary evidence in its files that the holder is a non-U.S. holder and other conditions are met; or the holder otherwise establishes an exemption.

        Backup withholding is not an additional tax. Rather, the amount of tax withheld is applied to the U.S. federal income tax liability of persons subject to backup withholding. If backup withholding results in an overpayment of U.S. federal income taxes, a refund may be obtained, provided the required documents are timely filed with the IRS.

Recent Legislation Relating to Foreign Accounts

        Recently enacted legislation generally will impose a U.S. federal withholding tax of 30 percent on dividends and the gross proceeds of a disposition of our common stock paid after December 31, 2012 to a "foreign financial institution" (as specifically defined for this purpose) unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners). The legislation also will generally impose a U.S. federal withholding tax of 30 percent on dividends and the gross proceeds of a disposition of our common stock paid after December 31, 2012 to a non-financial foreign entity unless such entity provides the withholding agent with either a certification that it does not have any substantial direct or indirect U.S. owners or provides information regarding direct and indirect U.S. owners of the entity. Under certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such taxes. Holders are encouraged to consult with their own tax advisors regarding the possible implications of the legislation on their investment in our common stock.

Estate Tax

        Our common stock owned or treated as owned by an individual who is not a citizen or resident of the United States (as specifically defined for U.S. federal estate tax purposes) at the time of death will be includible in the individual's gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.

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UNDERWRITING

        We and the selling stockholders are offering the shares of common stock described in this prospectus through a number of underwriters. J.P. Morgan Securities LLC, Deutsche Bank Securities Inc. and Barclays Capital Inc. are acting as joint book-running managers of the offering and as representatives of the underwriters. We and the selling stockholders have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we and the selling stockholders have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table:

Name	Number of Shares
J.P. Morgan Securities LLC
Deutsche Bank Securities Inc.
Barclays Capital Inc.
RBC Capital Markets, LLC
William Blair & Company, L.L.C.
Total

        The underwriters are committed to purchase all the shares of common stock offered by us and the selling stockholders if they purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.

        The underwriters propose to offer the shares of common stock directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $            per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $            per share from the initial public offering price. After the initial public offering of the shares, the offering price and other selling terms may be changed by the underwriters. Sales of shares made outside of the United States may be made by affiliates of the underwriters. The representatives have advised us that the underwriters do not intend to confirm discretionary sales in excess of five percent of the shares of common stock offered in this offering.

        The underwriters have an option to buy up to                        additional shares of common stock from us and the selling stockholders to cover sales of shares by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this over-allotment option. If any shares are purchased with this over-allotment option, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

        The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us and the selling stockholders per share of common stock. The underwriting fee is $            per share.

        The following table shows the per share and total public offering price, underwriting discounts and commissions, and proceeds before expenses to us and the selling stockholders. These amounts are

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shown assuming both no exercise and full exercise of the underwriters' option to purchase additional shares.

			Total
		Per share	Without over-allotment exercise	With full over-allotment exercise
Public offering price		$	$	$
Underwriting discounts and commissions to be paid by:
	Us	$	$	$
	The selling stockholders	$	$	$
Proceeds, before expenses, to us		$	$	$
Proceeds, before expenses, to selling stockholders		$	$	$

        We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be approximately $            .

        A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.

        We have agreed that we will not (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing or (ii) enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any shares of common stock or any such other securities (regardless of whether any of these transactions are to be settled by the delivery of shares of common stock or such other securities, in cash or otherwise), in each case without the prior written consent of J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. for a period of 180 days after the date of this prospectus, other than the shares of our common stock to be sold hereunder and any shares of our common stock issued upon the exercise of options granted under our existing equity incentive plans. Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to our company occurs; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

        Our directors and executive officers, and certain of our significant stockholders have entered into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which each of these persons or entities, with limited exceptions, for a period of 180 days after the date of this prospectus, may not, without the prior written consent of J.P. Morgan Securities LLC and Deutsche Bank Securities Inc., (1) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock

155

(including, without limitation, common stock or such other securities which may be deemed to be beneficially owned by such directors, executive officers, managers and members in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant), (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock or such other securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or such other securities, in cash or otherwise or (3) make any demand for or exercise any right with respect to the registration of any shares of our common stock or any security convertible into or exercisable or exchangeable for our common stock. Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to our company occurs; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

        We and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.

        We have applied to have our common stock approved for listing on the Nasdaq Global Market under the symbol "PEER."

        In connection with this offering, the underwriters may engage in stabilizing transactions, which involve making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of the common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be "covered" shorts, which are short positions in an amount not greater than the underwriters' over-allotment option referred to above, or may be "naked" shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the over-allotment option. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.

        The underwriters have advised us that, pursuant to Regulation M of the Securities Act, they may also engage in other activities that stabilize, maintain or otherwise affect the price of our common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.

        These activities may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock, and, as a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the Nasdaq Global Market, in the over-the-counter market or otherwise.

156

        Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. In determining the initial public offering price, we and the representatives of the underwriters expect to consider a number of factors including:

•

the information set forth in this prospectus and otherwise available to the representatives;

•

our prospects and the history and prospects for the industry in which we compete;

•

an assessment of our management;

•

our prospects for future earnings;

•

the general condition of the securities markets at the time of this offering;

•

the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and

•

other factors deemed relevant by the underwriters and us.

        Neither we nor the underwriters can assure investors that an active trading market will develop for our shares of common stock, or that the shares will trade in the public market at or above the initial public offering price.

        Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

        This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, or the Order, or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling with Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). The securities are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

        In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, or a Relevant Member State, from and including the date on which the European Union Prospectus Directive, or the EU Prospectus Directive is implemented in that Relevant Member State, or Relevant Implementation Date, an offer of securities described in this prospectus may not be made to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the EU Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time:

•

to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

157

•

to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000; and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;

•

to fewer than 100 natural or legal persons (other than qualified investors as defined in the EU Prospectus Directive) subject to obtaining the prior consent of the book-running managers for any such offer; or

•

in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

        For the purposes of this provision, the expression an "offer of securities to the public" in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the same may be varied in that Member State by any measure implementing the EU Prospectus Directive in that Member State and the expression EU Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

        Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.

158

LEGAL MATTERS

        The validity of the shares of common stock offered by this prospectus and other legal matters will be passed upon for us by DLA Piper LLP (US), East Palo Alto, California. Goodwin Procter LLP, Menlo Park, California, has acted as counsel for the underwriters in connection with certain legal matters related to this offering.

EXPERTS

        The financial statements as of December 31, 2009 and 2010 and for each of the three years in the period ended December 31, 2010 included in this prospectus and in the registration statement have been so included in reliance on the report of BDO USA, LLP, an independent registered public accounting firm, appearing elsewhere herein and in the registration statement, given on the authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the SEC a registration statement on Form S-1, which includes amendments and exhibits, under the Securities Act and the rules and regulations under the Securities Act for the registration of common stock being offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information that is in the registration statement and its exhibits and schedules. Certain portions of the registration statement have been omitted as allowed by the rules and regulations of the SEC. Statements in this prospectus that summarize documents are not necessarily complete, and in each case you should refer to the copy of the document filed as an exhibit to the registration statement. You may read and copy the registration statement, including exhibits and schedules filed with it, and reports or other information we may file with the SEC at the public reference facilities of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. In addition, the registration statement and other public filings can be obtained from the SEC's Internet site at www.sec.gov.

        Upon completion of this offering, we will become subject to information and periodic reporting requirements of the Exchange Act and we will file annual, quarterly and current reports, proxy statements, and other information with the SEC. We also maintain a website at www.intelepeer.com, at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The inclusion of our website address in this prospectus does not include or incorporate by reference the information contained in, or that can be accessed through, our website into this prospectus.

159

INTELEPEER, INC.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-2
Balance Sheets	F-3
Statements of Operations	F-4
Statements of Redeemable Convertible Preferred Stock and Stockholders' Deficit	F-5
Statements of Cash Flows	F-6
Notes to Financial Statements	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
IntelePeer, Inc.
San Mateo, California

        We have audited the accompanying balance sheets of IntelePeer, Inc. as of December 31, 2009 and 2010 and the related statements of operations, redeemable convertible preferred stock and stockholders' deficit, and cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IntelePeer, Inc. at December 31, 2009 and 2010, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO USA, LLP

San Francisco, California
May 9, 2011, except as to the fourth and fifth paragraphs of Note 14,
which are as of December 14, 2011

F-2

INTELEPEER, INC.

BALANCE SHEETS

(in thousands, except for share and per share amounts)

			December 31, 2009			December 31, 2010			September 30, 2011			Pro Forma Stockholders' Equity as of September 30, 2011
									(unaudited)			(unaudited)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	10,134		$	9,159		$	5,093
	Accounts receivable, net of allowance for doubtful accounts of $89, $67 and $92 as of December 31, 2009 and 2010 and September 30, 2011 (unaudited)			9,859			12,164			21,633
	Prepaid expenses and other current assets			96			287			463
		Total current assets		20,089			21,610			27,189
Property and equipment, net				15,134			22,224			26,837
Intangible assets, net				558			2,049			2,912
Other assets				681			1,304			4,856
TOTAL ASSETS			$	36,462		$	47,187		$	61,794
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
	Accounts payable		$	6,987		$	10,630		$	17,305
	Accrued liabilities			3,025			4,994			6,472
	Equipment loans			5,367			9,422			12,026
	Revolving accounts receivable loan facility			—			—			5,500
	Capital lease obligation			—			100			105
		Total current liabilities		15,379			25,146			41,408
Equipment loans, non-current				6,668			8,735			8,105
Capital lease obligation, non-current				—			418			338
Warrant liabilities				2,945			12,400			7,996		$	1,617
		Total liabilities		24,992			46,699			57,847
Commitments and contingencies (Note 10)
Redeemable convertible preferred stock, $0.0001 par value—44,760,592 shares authorized; 20,842,696, 20,847,796, 21,569,923 and no shares issued and outstanding as of December 31, 2009 and 2010 and September 30, 2011 (unaudited) and pro forma (unaudited); liquidation preference of $36,088 and $37,153 as of December 31, 2010 and September 30, 2011 (unaudited)				33,345			33,379			40,386		$	—
STOCKHOLDERS' DEFICIT:
	Common stock, $0.0001 par value—80,000,000 shares authorized; 4,378,964, 4,401,189, 5,272,321 and 26,842,244 shares issued and outstanding as of December 31, 2009 and 2010, September 30, 2011 (unaudited) and pro forma (unaudited)			—			—			1			3
	Additional paid-in capital			3,117			3,720			9,813			56,576
	Accumulated deficit			(24,992	)		(36,611	)		(46,253	)		(46,253	)
		Total stockholders' deficit		(21,875	)		(32,891	)		(36,439	)	$	10,326
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT			$	36,462		$	47,187		$	61,794

See notes to financial statements.

F-3

INTELEPEER, INC.

STATEMENTS OF OPERATIONS

(in thousands, except for share and per share amounts)

			Year Ended December 31,									Nine Months Ended September 30,
			2008			2009			2010			2010			2011
												(unaudited)
Revenue			$	43,352		$	76,194		$	111,549		$	80,445		$	106,234
Operating expenses:
	Peering partner compensation			29,824			50,232			79,108			56,890			74,927
	Infrastructure costs			2,987			5,265			6,348			4,546			5,691
	Operations			3,353			4,673			5,578			4,181			5,610
	Research and development			2,447			3,567			4,069			3,042			4,688
	Sales and marketing			4,741			6,367			7,693			5,636			10,411
	General and administrative			2,177			4,568			5,547			4,177			5,927
	Depreciation and amortization			1,852			2,373			3,719			2,627			3,960
		Total operating expenses		47,381			77,045			112,062			81,099			111,214
Loss from operations				(4,029	)		(851	)		(513	)		(654	)		(4,980	)
Interest expense, net				(1,274	)		(1,488	)		(2,614	)		(1,842	)		(2,072	)
Change in fair value of warrant liabilities				163			(1,004	)		(8,492	)		(5,260	)		(2,590	)
Net loss			$	(5,140	)	$	(3,343	)	$	(11,619	)	$	(7,756	)	$	(9,642	)
Net loss per share of common stock, basic and diluted			$	(1.17	)	$	(0.76	)	$	(2.65	)	$	(1.77	)	$	(1.98	)
Shares used in computing net loss per share of common stock, basic and diluted				4,378,964			4,378,964			4,381,308			4,378,964			4,864,178
Pro forma net loss per share of common stock, basic and diluted (unaudited)									$	(0.15	)				$	(0.27	)
Shares used in computing pro forma net loss per share of common stock, basic and diluted (unaudited)										25,225,094						26,289,604

See notes to financial statements.

F-4

INTELEPEER, INC.

STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' DEFICIT

(in thousands, except for share amounts)

	Redeemable Convertible Preferred Stock
					Common Stock
									Additional Paid-in Capital		Accumulated Deficit			Total Stockholders' Deficit
	Shares		Amount		Shares		Amount
BALANCE—January 1, 2008		11,614,437	$	15,170		4,378,964	$	—	$	1,951	$	(16,509	)	$	(14,558	)
Issuance of Series B convertible preferred stock and warrants (net of issuance costs of $151 and value of warrants of $152)		457,734		372		—		—		—		—			—
Issuance of Series C convertible preferred stock (net of issuance costs of $210)		7,524,888		15,691		—		—		—		—			—
Issuance of Series C convertible preferred stock due to conversion of promissory notes		1,245,637		2,112		—		—		—		—			—
Beneficial conversion feature for convertible promissory notes		—		—		—		—		528		—			528
Stock-based compensation		—		—		—		—		319		—			319
Warrants issued for debt financing		—		—		—		—		22		—			22
Net loss		—		—		—		—		—		(5,140	)		(5,140	)
BALANCE—December 31, 2008		20,842,696		33,345		4,378,964		—		2,820		(21,649	)		(18,829	)
Stock-based compensation		—		—		—		—		297		—			297
Net loss		—		—		—		—		—		(3,343	)		(3,343	)
BALANCE—December 31, 2009		20,842,696		33,345		4,378,964		—		3,117		(24,992	)		(21,875	)
Issuance of Series B convertible preferred stock upon exercise of warrant		5,100		34		—		—		—		—			—
Stock-based compensation		—		—		—		—		564		—			564
Warrants issued for debt financing		—		—		—		—		28		—			28
Issuance of common stock upon exercise of options		—		—		20,998		—		9		—			9
Issuance of common stock upon exercise of warrants		—		—		1,227		—		2		—			2
Net loss		—		—		—		—		—		(11,619	)		(11,619	)
BALANCE—December 31, 2010		20,847,796		33,379		4,401,189		—		3,720		(36,611	)		(32,891	)
Issuance of Series B convertible preferred stock upon exercise of warrants (unaudited)		722,127		7,007		—		—		—		—			—
Stock-based compensation (unaudited)		—		—		—		—		4,246		—			4,246
Issuance of common stock upon exercise of options (unaudited)		—		—		99,804		—		91		—			91
Issuance of common stock upon exercise of warrants (unaudited)		—		—		1,227		—		2		—			2
Issuance of shares on repayment of notes receivable from shareholders (unaudited)		—		—		769,320		1		1,694		—			1,695
Issuance of common stock for services (unaudited)		—		—		781		—		11		—			11
Warrants issued for debt financing (unaudited)		—		—		—		—		49		—			49
Net loss (unaudited)		—		—		—		—		—		(9,642	)		(9,642	)
BALANCE—September 30, 2011 (unaudited)		21,569,923	$	40,386		5,272,321	$	1	$	9,813	$	(46,253	)	$	(36,439	)

See notes to financial statements.

F-5

INTELEPEER, INC.

STATEMENTS OF CASH FLOWS

(in thousands)

					Year Ended December 31,									Nine Months Ended September 30,
					2008			2009			2010			2010			2011
														(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss				$	(5,140	)	$	(3,343	)	$	(11,619	)	$	(7,756	)	$	(9,642	)
	Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
		Depreciation and amortization				1,852			2,373			3,719			2,627			3,960
		Change in fair value of warrant liabilities				(163	)		1,004			8,492			5,260			2,590
		Provision for doubtful accounts				129			667			74			39			58
		Stock-based compensation expense				319			297			564			393			4,217
		Non-cash interest expense				631			228			899			603			792
		Gain on disposal of fixed assets				(62	)		(19	)		(34	)		—			14
		Common stock issued for services				—			—			—			—			11
		Changes in operating assets and liabilities:
			Accounts receivable			(5,995	)		(2,584	)		(2,379	)		(4,000	)		(9,527	)
			Prepaid expenses and other current assets			(161	)		257			(191	)		(147	)		(176	)
			Other assets			(41	)		(62	)		(461	)		(302	)		(4,475	)
			Accounts payable			2,433			3,040			3,643			3,478			6,675
			Accrued liabilities			621			1,308			1,969			1,132			1,478
				Net cash provided by (used in) operating activities		(5,577	)		3,166			4,676			1,327			(4,025	)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of property and equipment					(4,443	)		(9,920	)		(10,362	)		(6,549	)		(8,556	)
	Purchase of intangible assets					(37	)		(521	)		(1,491	)		(1,109	)		(958	)
	Proceeds from disposal of property and equipment					100			98			147			93			65
				Net cash used in investing activities		(4,380	)		(10,343	)		(11,706	)		(7,565	)		(9,449	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from borrowings					5,726			9,623			10,171			6,481			13,258
	Payments on borrowings					(2,163	)		(4,076	)		(4,128	)		(3,244	)		(5,922	)
	Proceeds from exercise of common stock options					—			—			9			—			91
	Proceeds from exercise of common stock and preferred stock warrants					—			—			3			—			14
	Proceeds from the repayment of shareholder notes receivables					—			—			—			—			1,967
	Issuance of Series B and C convertible preferred stock and warrants, net of issuance costs					16,215			—			—			—			—
				Net cash provided by (used in) financing activities		19,778			5,547			6,055			3,237			9,408
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS						9,821			(1,630	)		(975	)		(3,001	)		(4,066	)
CASH AND CASH EQUIVALENTS—Beginning of period						1,943			11,764			10,134			10,134			9,159
CASH AND CASH EQUIVALENTS—End of period					$	11,764		$	10,134		$	9,159		$	7,133		$	5,093
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
	Cash paid for interest				$	734		$	1,122		$	1,732		$	1,161		$	1,431
NONCASH INVESTING AND FINANCING ACTIVITIES:
	Issuance of common stock warrants for credit facilities				$	22		$	—		$	28		$	28		$	49
	Issuance of Series C convertible preferred stock warrants in connection with loans				$	—		$	630		$	637		$	637		$	—
	Conversion of bridge loans to Series C convertible preferred stock				$	2,112		$	—		$	—		$	—		$	—
	Purchase of equipment with capital lease obligation				$	—		$	—		$	560		$	560		$	—

See notes to financial statements.

F-6

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS

1. Business and Summary of Significant Accounting Policies

Business

        IntelePeer, Inc. (the "Company" or "we" or "our" or "us") is a provider of on-demand, cloud-based communications services to service providers and enterprises. Our customers can leverage our proprietary Communications-as-a-Service, or CaaS, platform, which we refer to as our CloudWorx CaaS Platform, to deliver multimodal communication services, including voice, unified communications, video and other rich-media applications to communications devices with reduced cost and improved quality as compared to existing alternatives. Our CloudWorx CaaS Platform allows customers to rapidly and easily transition from legacy network infrastructures to our flexible, software-based, multimodal, IP-based solutions.

        We were incorporated in June 2003 under the laws of the State of Washington. We are the successor entity to a July 1, 2003 acquisition transaction with a limited liability company and asset purchase of the VoIP business line of another limited liability company, both of which were previously affiliated with us through common ownership. We were reincorporated under the laws of the State of Delaware in October 2006.

Basis of Presentation

        These financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.

        The accompanying financial statements have been prepared assuming we will continue as a going concern. We have incurred recurring operating losses since inception and have an accumulated deficit of $46.3 million, negative working capital of $14.2 million, and a total stockholders' deficit of $36.4 million as of September 30, 2011. Notwithstanding the foregoing, we have $40.4 million as of September 30, 2011 in redeemable convertible preferred stock not included in the calculation of stockholders' deficit. Additionally, our operating results in the years ended December 31, 2009 and 2010 showed improvement as compared to prior years, as reflected in higher revenue, lower operating losses and in the generation of positive cash flows from operations. Since inception, we have relied primarily on the proceeds from equity offerings and debt proceeds to finance our operations. We plan to continue to finance operations with a combination of equity issuances, debt arrangements, lines of credit and cash provided by operations. However, there can be no assurance that additional funding will be available to us on acceptable terms on a timely basis, if at all, or that we will generate sufficient cash from operations to adequately fund operating needs or ultimately achieve profitability. If we are unable to raise additional capital or generate sufficient cash from operating activities to adequately fund our operations, we will need to curtail planned activities to reduce costs. Doing so will likely have an unfavorable effect on our ability to execute on our business plan. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Reclassification

        We have reclassified certain costs in 2010 from infrastructure costs to peering partner compensation in our statement of operations to be consistent with the current period presentation. The reclassification did not impact any other periods presented and did not impact our financial position or cash flows.

F-7

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

1. Business and Summary of Significant Accounting Policies (Continued)

Segment Reporting

        Operating segments are defined as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our chief executive officer and our board of directors. We have one business activity and there are no segment managers who are held accountable for operations. Accordingly, we have a single reporting segment. All of our principal operations, revenue and decision-making functions are located in the United States.

Unaudited Interim Financial Information

        The accompanying unaudited interim balance sheet as of September 30, 2011, the statements of operations and cash flows for the nine months ended September 30, 2010 and 2011, and the statement of redeemable convertible preferred stock and stockholders' deficit for the nine months ended September 30, 2011 are unaudited. The unaudited interim financial statements have been prepared on a basis consistent with the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position as of September 30, 2011 and our results of operations and cash flows for the nine months ended September 30, 2010 and 2011. The financial data and the other financial information disclosed in these notes to the financial statements related to the nine month periods are also unaudited. The results of operations for the nine months ended September 30, 2011 are not necessarily indicative of the results to be expected for the year ending December 31, 2011 or for any other future annual or interim period.

Unaudited Pro Forma Stockholders' Equity

        The pro forma stockholders' equity as of September 30, 2011 presents our stockholders' equity as though all of our convertible preferred stock outstanding had automatically converted into 21,569,923 shares of common stock upon the completion of a qualifying initial public offering (IPO) of our common stock. In addition, the pro forma stockholders' equity assumes the reclassification of the preferred stock warrant liability to additional paid-in capital upon completion of a qualifying IPO of our common stock, as the warrants either expire upon an IPO or become common stock warrants that are not subject to remeasurement. The pro forma stockholders' equity does not give effect to any proceeds from the IPO itself.

Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such management estimates include allowance for doubtful accounts, reserves for disputes, fair value of common stock, stock-based compensation expense, fair value of warrants, useful lives of intangible assets and valuation of deferred tax assets. We base our estimates on historical experience and also on assumptions that we believe are reasonable, however, actual results could differ materially from those estimates.

F-8

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

1. Business and Summary of Significant Accounting Policies (Continued)

Concentrations of Credit Risk

        We maintain the majority of our cash and cash equivalents at a highly qualified financial institution. All amounts of cash exceed federally insured limits. To date we have not experienced a material loss or lack of access to our invested cash and cash equivalents. However, no assurance can be provided that access to our invested cash and cash equivalents will not be impacted by adverse economic conditions in the financial markets.

        We perform periodic credit evaluations of our customers and generally do not require collateral, and evaluate the need for maintaining an allowance for doubtful accounts.

        As of December 31, 2009, one customer individually accounted for 52% of total accounts receivable. As of December 31, 2010, three customers individually accounted for 19%, 17% and 11% of total accounts receivable. As of September 30, 2011, one customer individually accounted for 38% of total accounts receivable.

        Customers representing 10% or greater of revenues for the periods presented were as follows (in percentages):

	Year Ended December 31,									Nine Months Ended September 30,
Customers	2008			2009			2010			2010			2011
										(unaudited)
Customer A		41	%		46	%		16	%		17	%		12	%
Customer B		—			*			29	%		32	%		21	%
Customer C		*			10	%		*			*			*

*

Less than 10%

Cash and Cash Equivalents

        We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of demand and money market fund deposits with a federally insured financial institution.

Accounts Receivable

        Accounts receivable are carried at original invoice amount less an allowance made for doubtful accounts. We record an allowance for doubtful accounts based on the probability of future collection. When we are aware of circumstances that may decrease the likelihood of collection, we record a specific allowance against amounts due and thereby reduce the net receivable to the amount we reasonably believe will be collected. For all other customers, management determines the adequacy of the allowance based upon reviews of individual creditworthiness, payment history, age of the accounts receivable balances, current economic conditions and other pertinent factors. Accounts are written off when deemed uncollectible. Increases in the allowance are charged to expense in the period incurred.

F-9

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

1. Business and Summary of Significant Accounting Policies (Continued)

        The following table presents the changes in the allowance for doubtful accounts (in thousands):

		Year Ended December 31,									Nine Months Ended September 30,
		2008			2009			2010			2010			2011
											(unaudited)
Allowance for doubtful accounts:
	Balance, beginning of period	$	49		$	117		$	89		$	89		$	67
	Add: provision for doubtful accounts		129			667			74			39			58
	Less: write-offs, net of recoveries and other adjustments		(61	)		(695	)		(96	)		(89	)		(33	)
	Balance, end of period	$	117		$	89		$	67		$	39		$	92

Property and Equipment

        Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally seven years for CloudWorx CaaS Platform equipment and three years for furniture, fixtures and other equipment. Amortization for leasehold improvements is computed using the straight-line method over the shorter of the term of the lease or estimated useful lives of the assets. Expenditures for repairs and maintenance are expensed as incurred.

        Amortization expense of assets acquired through capital leases is included in depreciation and amortization expense in the statements of operations.

Accounting for Internal-Use Computer Software

        We capitalize certain external and internal costs, including internal payroll costs incurred in connection with the development or acquisition of software for internal use. These costs are capitalized when we have entered the application development stage. Capitalization ceases when the software is substantially complete and is ready for its intended use. We purchased and capitalized costs related to our CloudCentral portal of $749,000 and $451,000 during the year ended December 31, 2010 and the nine months ended September 30, 2011. We did not incur similar costs during the years ended December 31, 2008 and 2009. The capitalized development costs related to our CloudCentral portal are included in intangible assets and are amortized using the straight-line method over the estimated useful life of seven years.

Deferred Offering Costs

        Deferred offering costs, consisting of legal, accounting and filing fees relating to the IPO, are capitalized. The deferred offering costs will be offset against IPO proceeds upon the effectiveness of the offering. In the event the offering is terminated, deferred offering costs will be expensed. As of December 31, 2010 and September 30, 2011, we had capitalized $241,000 and $4.2 million of deferred offering costs in other assets on the balance sheet. No amounts were deferred as of December 31, 2009.

F-10

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

1. Business and Summary of Significant Accounting Policies (Continued)

Intangible Assets

        We capitalized certain costs to acquire trademarks, patents and regulatory licenses deemed essential to operate as a telecommunications company. The trademarks and regulatory licenses have no expiration date and thus are classified as indefinite-lived assets.

        We amortize our capitalized patent costs using the straight-line method over the shorter of the contractual term of the patent up to 14 years or the estimated economic life of the patent.

        Our trademarks and regulatory licenses are considered to be indefinite-lived assets and accordingly are not amortized. We conduct a long-lived asset impairment analysis for these assets on an annual basis and whenever events or changes in circumstances indicate the carrying value of an asset may be impaired. We believe that no material events or changes in circumstances have occurred that would require an impairment test for these assets.

Impairment of Long-Lived Assets

        We evaluate our long-lived assets for impairment and continue to evaluate them as events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable. We evaluate the recoverability of the long-lived assets by measuring the carrying amount of the assets against the estimated undiscounted future cash flows associated with them. At the times such evaluations indicate that the future undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values. We have used a replacement cost approach to determine the fair value of regulatory licenses for the purpose of conducting an impairment test. This approach implies that opportunity cost represents the foregone cash flows during the period it takes to obtain or create the asset, as compared to the cash flows that would be earned if the intangible asset was on hand today. As of December 31, 2010 and September 30, 2011, we have not materially written down any of our long-lived assets as a result of impairment.

Warrant Liabilities

        We account for freestanding warrants for shares of our convertible preferred stock that are contingently redeemable as liabilities at fair value on the balance sheets because these warrants may obligate us to redeem the underlying preferred stock at some point in the future. The warrants are subject to remeasurement at each balance sheet date, and any change in fair value is recognized in the change in fair value of warrant liabilities line on the statements of operations. We will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the convertible preferred stock warrants, the completion of a deemed liquidation event, conversion of convertible preferred stock into common stock, or until holders of the convertible preferred stock can no longer trigger a deemed liquidation event. At that time, the portion of the warrant liabilities related to the convertible preferred stock warrants will be reclassified to additional paid-in capital.

        Warrants to purchase shares of our common stock are also outstanding as of December 31, 2010 and September 30, 2011. Some of the common stock warrants include down round protection features which are outside our control and, accordingly, these warrants are recorded as liabilities at fair value. The common stock warrants with down round protection features are subject to remeasurement at each balance sheet date with any changes in fair value being recognized in the change in fair value of

F-11

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

1. Business and Summary of Significant Accounting Policies (Continued)

warrant liabilities line on the statements of operations. We will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants. At that time, the liability related to the common stock warrants with down round protection features will be reclassified to additional paid-in capital.

Revenue Recognition

        We recognize revenue when there is persuasive evidence of an arrangement, services have been rendered, the fees are fixed or determinable and collection is reasonably assured.

        Our revenues are derived from customer usage of our CloudWorx Caas Platform on a minute of use basis. We recognize revenue based upon documented minutes of traffic delivered over our CloudWorx CaaS Platform at the time of customer usage. The rates charged per minute are determined by contracts between us and our customers. We also recognize revenue from communication services provided to certain enterprise customers on a monthly recurring basis as the services are provided based on contractual amounts expected to be collected. These revenues have not been significant to date.

Peering Partner Compensation and Infrastructure Costs

        Peering partner compensation represents the costs we incur to connect our customers' traffic to the ultimate end-point device. These costs consist primarily of charges for access to our peering partners' networks, and are recorded at the time of usage.

        We recognize peering partner compensation costs as they are incurred in accordance with contractual requirements. We perform monthly bill verification procedures to identify errors in the peering partners' billing processes. These verification procedures include the examination of the bills, comparing billing rates used with contractual billing rates, evaluating the trends of invoiced amounts by peering partner and reviewing the types of charges being processed. If we discover a billing discrepancy as a result of our review, we then proactively seek to resolve the matter with our peering partner. When applicable, we record a charge to peering partner compensation and a corresponding increase to our reserve for disputes based on our estimate of the amount that will eventually be payable. As we receive additional information that indicates the disputed amounts will be settled for an amount which is different than the amount which we originally accrued, we will recognize the difference as an adjustment to peering partner compensation costs. We believe that our procedures are designed to properly assess dispute accruals; however, changes to the estimates used in the calculation could result in a material impact on our statements of operations.

        Infrastructure costs include the costs of utilizing third party telecommunications networks, amounts we pay for use of co-location facilities and interconnection services, and costs of equipment and software maintenance and support.

Research and Development

        Research and development expenses consist of personnel costs, testing and compliance services, and facility costs, and are expensed as incurred. However, some direct development costs related to the internally developed software used to provide our services may be capitalized and depreciated over the estimated useful life.

F-12

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

1. Business and Summary of Significant Accounting Policies (Continued)

Income Taxes

        We recognize deferred tax assets and liabilities for the expected future income tax consequences of events that have been recognized in our financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the temporary differences between the financial statement carrying amounts and their tax basis using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. Valuation allowances are provided when we are unable to conclude that the realization of deferred tax assets is more likely than not.

        We follow the accounting guidance for accounting for uncertainty in income taxes. The accounting guidance requires a more likely than not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. We record a liability for the difference between the benefit recognized and measured and the tax position taken or expected to be taken on our tax return. To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that the tax return positions are fully supportable. The reserves are adjusted in light of changing facts and circumstances, such as the outcome of a tax audit. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate. As of December 31, 2009 and 2010, we had no unrecognized tax benefits. Our policy is to recognize interest and penalties related to income tax matters as an income tax expense. Through December 31, 2010, we did not have any interest or penalties associated with unrecognized tax benefits.

Fair Value of Financial Instruments

        The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximate their fair value based on the liquidity of these financial instruments and based on their short-term nature. Based on borrowing rates currently available to us for loans with similar terms, the carrying value of the long-term debt approximates fair value.

        Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2—Inputs other than quoted prices included within Level 1 that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3—Unobservable inputs that are supported by little or no market activity for the related assets or liabilities.

F-13

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

1. Business and Summary of Significant Accounting Policies (Continued)

        In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as considering counter-party credit risk in our assessment of fair value.

        The valuation of certain items, including the valuation of outstanding warrants, involves significant estimates with underlying assumptions judgmentally determined. The valuation of warrants for convertible preferred stock and common stock is based upon the Black-Scholes option-pricing model, which requires estimates of stock volatility and other assumptions. Certain of the warrants are exercisable for preferred stock that is contingently redeemable. Certain of the common stock warrants and the conversion feature of the Series B and C convertible preferred stock contain down round protection features.

        Our financial instruments consist of Level 3 liabilities only, which include the convertible preferred stock warrant liabilities and the common stock warrant liabilities. The determination of the fair value of the warrant liabilities is discussed in Note 8.

Stock-Based Compensation

        We recognize compensation expense for all share-based payment awards made to employees and directors based on estimated fair values. We determine the grant date fair value of the awards using the Black-Scholes option-pricing model and generally recognize the fair value as stock-based compensation expense on a straight-line basis over the vesting period of the respective awards. Stock-based compensation expense is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As such, our stock-based compensation is reduced for the estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In the event of a modification, the fair value of the grant immediately before and after the modification is determined and the difference in values, if any, is also recognized over the remaining vesting period or immediately if the option is fully vested.

        We account for stock options granted to non-employees also based on the fair value of the awards determined using the Black-Scholes option-pricing model. The fair value of the awards granted to non-employees is remeasured as the awards vest, and the resulting change in value, if any, is recognized in the statement of operations during the period the related services are rendered, which is generally the vesting period.

Net Loss per Share of Common Stock

        Our basic net loss per share of common stock is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. The weighted-average number of shares of common stock used to calculate our basic net loss per share of common stock excludes those shares purchased with the notes receivable from stockholders (see Note 11) as these shares are not deemed to be issued for accounting purposes until the notes are paid off. The diluted net loss per share of common stock is computed by giving effect to all potential common stock equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, convertible preferred stock, stock options to purchase common stock, warrants to purchase convertible preferred stock and warrants to purchase common stock are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share of common stock as their effect is antidilutive for all periods presented.

F-14

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

1. Business and Summary of Significant Accounting Policies (Continued)

Unaudited Pro Forma Net Loss per Share of Common Stock

        Pro forma basic and diluted net loss per share of common stock has been computed to give effect to the conversion of the convertible preferred stock into common stock. Also, the numerator in the pro forma basic and diluted net loss per share calculation has been adjusted to remove gains and losses resulting from remeasurements of the portion of the warrant liability related to warrants to purchase shares of convertible preferred stock as these amounts will be reclassified to additional paid-in capital upon a qualifying initial public offering of our common stock. The gains and losses resulting from remeasurements of the portion of the warrant liability related to warrants to purchase shares of common stock with down round protection features have not been removed from the pro forma basic and diluted net loss per share of common stock calculation because the liability classification of these warrants will not be impacted by a qualifying initial public offering of our common stock.

Recently Issued Accounting Pronouncements

        Effective January 1, 2010, we adopted new authoritative guidance on fair value measurements and disclosures. The new guidance requires additional disclosures regarding fair value measurements, amends disclosures about postretirement benefit plan assets, and provides clarification regarding the level of disaggregation of fair value disclosures by investment class. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for certain Level 3 activity disclosure requirements that will be effective for reporting periods beginning after December 15, 2010. Accordingly, we adopted this new guidance beginning January 1, 2010, except for the additional Level 3 requirements, which will be adopted in 2011. Level 3 assets and liabilities are those whose fair value inputs are unobservable and reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. The adoption of this guidance did not have a material impact on our financial statements in 2010 and is not expected to have a material impact on our financial statements in 2011.

2. Balance Sheet Items

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

	December 31,
							September 30, 2011
	2009			2010
							(unaudited)
CloudWorx CaaS Platform equipment	$	19,393		$	29,345		$	37,175
Office furniture, fixtures and other equipment		1,137			1,686			1,860
Leasehold improvements		451			709			777
Total property and equipment		20,981			31,740			39,812
Less accumulated depreciation and amortization		(5,847	)		(9,516	)		(12,975	)
Property and equipment, net	$	15,134		$	22,224		$	26,837

        Depreciation and amortization expense was $1.9 million, $2.4 million and $3.7 million during the years ended December 31, 2008, 2009 and 2010, respectively, and $2.6 million and $4.0 million during the nine months ended September 30, 2010 and 2011, respectively.

F-15

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

2. Balance Sheet Items (Continued)

        Accrued liabilities consist of the following (in thousands):

	December 31,
					September 30, 2011
	2009		2010
					(unaudited)
Accrued compensation and benefits	$	2,093	$	2,796	$	3,210
Reserve for peering partner disputes		95		1,249		972
Accrued commissions		187		226		279
Accrued interest		110		146		169
Other liabilities		540		577		1,842
Accrued liabilities	$	3,025	$	4,994	$	6,472

3. Intangible Assets

        The following table presents the components of our intangible assets (in thousands):

			Carrying Amount as of December 31, 2009		Carrying Amount as of December 31, 2010		Carrying Amount as of September 30, 2011
							(unaudited)
Indefinite-lived assets:
	Trade name and trademarks		$	21	$	127	$	240
	Regulatory licenses			499		817		827
		Sub-total indefinite-lived assets		520		944		1,067
Finite-lived assets:
	Patents			38		356		734
	CloudCentral portal			—		749		1,111
		Sub-total finite-lived assets		38		1,105		1,845
	Total intangible assets		$	558	$	2,049	$	2,912

        The patents have zero amortization expense reflected in the statements of operations during the years ended December 31, 2008, 2009 and 2010 as the assets are not yet in service. The CloudCentral portal was placed into service on December 15, 2010 and therefore had no accumulated amortization as of December 31, 2010. Amortization of finite-lived intangible assets was $95,000 for the nine months ended September 30, 2011.

F-16

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

3. Intangible Assets (Continued)

        As of December 31, 2010, amortization expense for the estimated useful life of the patents and the CloudCentral portal, the finite-lived assets, is as follows (in thousands):

Year Ending December 31:		Amortization of Intangible Assets
2011		$	114
2012			158
2013			158
2014			158
2015			158
Thereafter			359
	Total	$	1,105

4. Long-Term Debt

Equipment Financing Obligations

        In June 2007, we entered into an equipment loan of up to $6.0 million (borrowing limit) pursuant to a Master Lease Agreement (amended on December 3, 2008 to increase borrowings to $6.5 million), under which advances are repayable over a 36-month period from each borrowing commencement date. Each advance bears interest that ranges from 10.0% to 10.75%. The commitment to make advances terminated on October 30, 2010. In March 2010, $1.3 million of the principal repayments due in 2010 were deferred until January 1, 2011 and later periods (See Note 14 Subsequent Events for additional deferral of principal repayments in 2011). There were outstanding borrowings of $5.2 million, $4.1 million and $2.4 million under this agreement as of December 31, 2009, 2010, and September 30, 2011, respectively.

        In connection with this agreement, in June 2007 we issued immediately exercisable and fully vested warrants to purchase 123,967 shares of our common stock at an exercise price of $0.78 per share. The fair value of the common stock warrant on the date of issuance was $58,000, as determined using the Black-Scholes option-pricing model, and was recorded as additional paid-in capital and as a deferred financing cost. Also, in connection with the increase in credit line pursuant to the October 2009 amendment, we issued immediately exercisable and fully vested warrants to purchase 47,183 shares of our Series C convertible preferred stock at an exercise price of $2.1194 per share. The fair value of the Series C warrant was $112,000, as determined using the Black-Scholes option-pricing model, and was recorded as a warrant liability and as a discount to the debt. The deferred financing cost and the discount are being amortized to interest expense over the term of the debt.

        In April 2009, we entered into an equipment loan of up to $4.0 million. Under this agreement, advances are repayable over a 36-month period from each loan commencement date. Each advance bears a monthly interest rate factor. The monthly interest rate factor is indexed to the yield for U.S. Treasury Notes maturing closest to the date 36 months from each loan's commencement date (the "Index Instrument"). The monthly interest rate factor is adjusted to provide for any increase or decrease in the yield of the Index Instrument. The monthly interest rate factor is fixed as of the date of the final acceptance of each item of equipment. The current loans under this facility bear interest at approximately 15%. The equipment purchased under the agreement serves as the collateral for the

F-17

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

4. Long-Term Debt (Continued)

loan. There were outstanding borrowings of $3.5 million, $2.3 million and $1.3 million under this agreement as of December 31, 2009 and 2010 and September 30, 2011, respectively.

        In connection with this agreement, in May 2009 we issued immediately exercisable and fully vested warrants to purchase 113,239 shares of our Series C convertible preferred stock at an exercise price of $2.1194 per share. The fair value of the Series C warrant on the date of issuance was $225,000, as determined using the Black-Scholes option-pricing model, and was recorded as a warrant liability and as a deferred financing cost that is being amortized to interest expense over the term of the debt.

        In May 2009, we entered into an equipment and security agreement with a total commitment of $4.0 million. The commitment to make advances terminated on December 31, 2009. Advances are repayable over a 36-month period from each loan commencement date. Each advance bears interest equal to the greater of (a) 12.33% or (b) 12.33% plus the positive or negative difference between (i) the one month LIBOR Rate as reported in the Wall Street Journal, on the date which is three business days before the funding date for such loan, and (ii) 0.33%. The interest rate is 13.0875% on balances outstanding as of December 31, 2010. The equipment purchased under the agreement serves as collateral for the loan. There were outstanding borrowings of $3.5 million, $2.3 million and $1.3 million under this agreement as of December 31, 2009 and 2010 and September 30, 2011, respectively.

        In connection with this agreement, in May 2009 we issued immediately exercisable and fully vested warrants to purchase shares of our Series C convertible preferred stock at an exercise price of $2.1194 per share. A warrant to purchase 75,000 shares of Series C convertible preferred stock was issued upon signing of the agreement and another warrant to purchase 18,161 shares of Series C convertible preferred stock was issued upon first draw under this agreement. The fair value of the warrant to purchase 75,000 shares of Series C convertible preferred stock issued upon signing of the agreement was $149,000, as determined using the Black-Scholes option-pricing model, and was recorded as a warrant liability and as a deferred financing cost. The fair value of the warrant to purchase 18,161 shares of Series C convertible preferred stock issued upon the first draw of funds was $36,000, as determined using the Black-Scholes option-pricing model, and was recorded as a warrant liability and as a discount to the debt. We issued additional warrants for the purchase of 48,388 shares of our Series C convertible preferred stock with an exercise price of $2.1194 per share upon draws under the agreement in 2009. The fair value of these additional warrants was $108,000, as determined using the Black-Scholes option-pricing model, and was recorded as a warrant liability and as a discount to the debt. The deferred financing cost and the discounts are being amortized to interest expense over the term of the debt.

Loan and Security Agreement

        In May 2010, we entered into a loan and security agreement that provided us with up to $10.0 million in equipment financing and a revolving accounts receivable loan facility of $10.0 million.

        Under the agreement, the advances for equipment were available until December 31, 2010, and bear interest at the prime rate plus 7% per year. The advances are payable over a 36-month period, and the payments due through December 31, 2010 were interest only. As of December 31, 2010, and September 30, 2011, the total amount outstanding under the $10.0 million equipment loan was $9.5 million and $8.2 million, respectively.

F-18

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

4. Long-Term Debt (Continued)

        In connection with this agreement, in May 2010 we issued immediately exercisable and fully vested warrants to purchase 141,549 shares of our Series C convertible preferred stock at an exercise price of $2.1194 per share. The fair value of the Series C warrant on the date of issuance was $637,000, as determined using the Black-Scholes option-pricing model, and was recorded as a warrant liability and as a deferred financing cost that is being amortized to interest expense over the term of the debt.

        At our option, we may prepay all, but not less than all, of the outstanding equipment loan advances by paying the entire principal balance, all accrued and unpaid interest, together with a payment charge equal to the following percentage of the equipment loan balance being prepaid: 3% if prepaid in the first 12 months following the closing date (May 5, 2010); 2% if prepaid after 12 months but prior to 24 months following the closing date, and thereafter 1%.

        The $10.0 million revolving accounts receivable loan facility bears interest at the prime rate plus 2.05% per year. The advances are based on 80% of our eligible accounts receivable. The loan is repayable in interest only payments until the maturity date, at which time the entire principal and accrued interest is to be paid in full. The original maturity date for the $10.0 million revolving loan was May 5, 2011, but was automatically extended to May 5, 2012. There are no borrowings outstanding under the $10.0 million revolving loan as of December 31, 2010. As of September 30, 2011, the total borrowings outstanding was $5.5 million.

        The loan and security agreement borrowings are secured by all assets of the Company, including intellectual property.

Other Matters

        All of the equipment financings and debt agreements contain certain covenants and information reporting requirements. The loan and security agreement allows the lender to call the debt in the event there is a material adverse change in our business or financial condition. Additionally, under the terms of the loan agreement, we cannot pay any cash dividends without the approval of the lenders.

        As of December 31, 2010 and September 30, 2011, we were in compliance with the covenants set forth in our various debt agreements.

Schedule of Payments Due

        The following is a schedule of payments due on our long-term debt as of December 31, 2010 (in thousands):

Year Ending December 31:
	2011	$	9,422
	2012		6,830
	2013		2,008
			18,260
Less:
	Discount		(103	)
	Current portion		(9,422	)
Non-current portion of equipment loans		$	8,735

F-19

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

5. Convertible Promissory Notes Payable to Related Parties

        In June 2008, we entered into a set of convertible promissory note payable agreements totaling $2.0 million with several of our major investors. The notes accrued simple interest at a fixed rate of 8% per annum. The notes and accrued interest were repayable on January 31, 2009. The notes were convertible into the Company's next equity financing upon written request from the major investors.

        In October 2008, the note holders authorized the conversion of the outstanding principal balance plus accrued unpaid interest totaling $2.1 million into 1,245,637 shares of Series C convertible preferred stock. The conversion was in connection with the issuance of Series C convertible preferred stock in October 2008. As the notes were converted into the Series C convertible preferred stock at a 20% discount from the purchase price of the stock, we recognized a beneficial conversion charge in the amount of $528,000 as interest expense during the year ended December 31, 2008.

6. Common Stock Reserved for Issuance

        As of December 31, 2010 and September 30, 2011 we had reserved shares of common stock, on an as-if converted basis, for issuance as follows:

	December 31, 2010		September 30, 2011
			(unaudited)
Issuance under stock option plan and outside plan		7,361,152		7,659,282
Available for issuance under stock option plan		379,415		1,723,302
Conversion of convertible preferred stock		20,847,796		21,569,923
Issuance upon exercise of convertible preferred stock warrants		1,371,534		649,407
Issuance upon exercise of common stock warrants		403,923		408,196
		30,363,820		32,010,110

7. Convertible Preferred Stock

        In January 2008, we sold 457,734 shares of Series B convertible preferred stock ("Series B") at a price of $1.4748 per share for gross proceeds of $675,000.

        In connection with the January 2008 Series B stock purchase, we issued warrants to the investors for the purchase of 137,319 shares of Series B with an exercise price of $0.02 per share and an expiration date of December 18, 2017. The fair value of the Series B warrants on the date of issuance of $152,000, as determined using the Black-Scholes option-pricing model, was recorded as a warrant liability.

        In October 2008, we sold 7,524,888 shares of Series C convertible preferred stock ("Series C") at a price of $2.1194 per share for gross proceeds of $15.9 million. In connection with the equity financing, convertible promissory notes from related parties were converted into 1,245,637 shares of Series C at $1.6955 per share, a 20% discount from the purchase price of the preferred stock. The discount has been accounted for as a beneficial conversion feature charge of $528,000 (see Note 5).

F-20

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

7. Convertible Preferred Stock (Continued)

        Authorized and outstanding convertible preferred stock as of December 31, 2009 and 2010 and September 30, 2011 was as follows (in thousands, except share data):

	As of December 31, 2009
	Shares Authorized		Shares Issued and Outstanding		Aggregate Liquidation Preference
Series A		1,280,210		562,098	$	517
Series B		24,730,382		11,510,073		16,975
Series C		18,750,000		8,770,525		18,588
Total		44,760,592		20,842,696	$	36,080

	As of December 31, 2010
	Shares Authorized		Shares Issued and Outstanding		Aggregate Liquidation Preference
Series A		1,280,210		562,098	$	517
Series B		24,730,382		11,515,173		16,983
Series C		18,750,000		8,770,525		18,588
Total		44,760,592		20,847,796	$	36,088

	As of September 30, 2011 (unaudited)
	Shares Authorized		Shares Issued and Outstanding		Aggregate Liquidation Preference
Series A		1,280,210		562,098	$	517
Series B		24,730,382		12,237,300		18,048
Series C		18,750,000		8,770,525		18,588
Total		44,760,592		21,569,923	$	37,153

        The rights, preferences and privileges of the convertible preferred stock are as follows:

Liquidation Preferences

        Series A preferred stock has a liquidation preference of $0.92 per share plus unpaid dividends if declared by the board of directors. Series B preferred stock has a liquidation preference of $1.4748 per share plus unpaid dividends if declared by the board of directors. Series C preferred stock has a liquidation preference of $2.1194 per share plus unpaid dividends if declared by the board of directors. The liquidation preference amounts are to be paid in the following order of priority: first to the holders of Series C preferred stock, then to the holders of the Series B preferred stock, then to the holders of the Series A preferred stock and then to the holders of common stock.

Voting Rights

        Each share of convertible preferred stock has a number of votes equal to the number of shares of common stock into which it is convertible. The outstanding shares of preferred and common stock vote

F-21

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

7. Convertible Preferred Stock (Continued)

together as a single class on all matters, except with respect to the election of directors. The holders of Series B and C preferred stock, voting as two separate classes, are currently each entitled to elect one director of the Company.

        The holders of common stock, voting as a separate class, are currently entitled to elect two directors of the Company. The holders of preferred and common stock, voting together as a single class and not a separate series, are currently entitled to elect three directors of the Company.

Conversion Rights

        Each share of preferred stock is convertible, at the option of the holder, at any time into such number of shares of 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"). The initial conversion price per share for each series of preferred stock is the original issue price applicable to such series. As of December 31, 2010 and September 30, 2011, the conversion rate for all series of the outstanding shares of preferred stock is 1 to 1.

        Each share of preferred stock will be automatically converted into shares of common stock at the Conversion Rate at the time in effect for such series of preferred stock immediately upon the sale of our 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 that results in gross proceeds to us, net of underwriting expenses, in excess of $50 million at an offer price per share equal to three times (3x) the original issue price for the Series C preferred (calculated to be $6.3582 as of December 31, 2010). In addition, each share of preferred stock shall automatically be converted into shares of common stock at the respective Conversion Rates at the time in effect for each such series of preferred stock upon consent or agreement of the holders of at least 66% of the then outstanding shares of Series B preferred stock and Series C preferred stock (voting together as a single class and not as a separate series, and on an as-converted basis).

Redemption Rights

        Upon receiving a written request at any time after September 30, 2013, from the holders of 66% of the outstanding shares of Series B and C preferred stock, we shall redeem, on the date three (3) months following our receipt of such written redemption request and on the last day of each calendar quarter thereafter, the amount equal to all of the shares of Series B and C preferred stock that are outstanding on the date we receive such written redemption request.

        We recorded the convertible preferred stock at fair value on the dates of issuance, net of issuance costs. We classify the convertible preferred stock outside of stockholders' equity (deficit) because the shares contain redemption features that are not solely within our control. We did not adjust the carrying values of the redeemable convertible preferred stock to the deemed redemption values of such shares since a liquidation event was not probable during any of the periods presented. Subsequent adjustments to increase the carrying values to the ultimate redemption values will be made only when it becomes probable that such a liquidation event will occur.

F-22

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

8. Warrants

        In connection with issuing preferred stock and obtaining lease credit facilities, lines of credit, equipment financing and loans, we issued common stock warrants, and Series A, B and C convertible preferred stock warrants.

        We have issued warrants to purchase shares of our common stock at various times since 2004. Some of the common stock warrants include a down round protection feature and used to provide the holder an option to put these warrants to us for cash. In February 2010, these common stock warrants were extended for another five years, or to February 2015, and the put feature was removed. These common stock warrants are recorded as liabilities at fair value and are subject to remeasurement at each balance sheet date due to the down round protection feature.

        We have issued warrants to purchase shares of our convertible preferred stock at various times since 2004. Our convertible preferred stock warrants are generally exercisable immediately and can only be exercised for cash or net share settled. Freestanding warrants to purchase our convertible preferred stock are valued at fair value and classified as liabilities in the balance sheets because the warrants may conditionally obligate us to transfer assets at some point in the future.

        As of December 31, 2010, the following common stock warrants, which are not subject to remeasurement, were outstanding:

Issue Date	Reason for Grant	Number of Shares Into Which the Warrant Is Exercisable		Exercise Price per Share		Expiration
November 2004	Debt financing		9,816	$	1.63	November 12, 2011
October 2004	Debt financing		11,413	$	0.02	October 4, 2011
June 2007	Debt financing		123,967	$	0.78	June 14, 2017
September 2006	Debt financing		30,961	$	2.42	September 20, 2016
December 2008	Debt financing		35,387	$	0.88	December 3, 2018
May 2010	Debt financing		11,560	$	3.40	May 4, 2020
			223,104

        As of September 30, 2011, the following common stock warrants, which are not subject to remeasurement, were outstanding:

Issue Date	Reason for Grant	Number of Shares Into Which the Warrant Is Exercisable		Exercise Price per Share		Expiration
November 2004	Debt financing		8,589	$	1.63	November 12, 2011
October 2004	Debt financing		11,413	$	0.02	October 4, 2011
June 2007	Debt financing		123,967	$	0.78	June 14, 2017
September 2006	Debt financing		30,961	$	2.42	September 20, 2016
December 2008	Debt financing		35,387	$	0.88	December 3, 2018
May 2010	Debt financing		11,560	$	3.40	May 4, 2020
July 2011	Debt financing		5,500	$	13.20	July 1, 2021
			227,377

F-23

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

8. Warrants (Continued)

        As of December 31, 2010, the following common stock and preferred stock warrants, which are subject to remeasurement, were outstanding:

Issue Date	Reason for Grant	Type of Stock Into Which the Warrant Is Exercisable	Number of Shares Into Which the Warrant Is Exercisable		Exercise Price per Share		Expiration
October 2004	Debt financing	Series A		25,000	$	0.92	October 20, 2014
January 2005	Debt financing	Series A		53,006	$	1.63	January 28, 2012
February 2005	Debt financing	Common		115,030	$	1.63	February 24, 2015
August 2005	Debt financing	Common		65,789	$	1.90	February 24, 2015
June 2006	Debt financing	Series B		52,648	$	0.992	December 3, 2014
December 2007	Debt financing	Series B		14,209	$	1.4739	June 12, 2016
December 2007	Equity financing	Series B		650,932	$	0.02	Earlier of (i) the closing of an IPO or (ii) December 18, 2017
January 2008	Equity financing	Series B		132,219	$	0.02	Earlier of (i) the closing of an IPO or (ii) December 18, 2017
May 2009	Debt financing	Series C		93,161	$	2.1194	May 1, 2019
May 2009	Debt financing	Series C		113,239	$	2.1194	May 14, 2019
June 2009	Debt financing	Series C		18,326	$	2.1194	June 25, 2019
October 2009	Debt financing	Series C		47,183	$	2.1194	October 28, 2019
October 2009	Debt financing	Series C		30,062	$	2.1194	October 30, 2019
May 2010	Debt financing	Series C		141,549	$	2.1194	May 5, 2020
				1,552,353

        As of September 30, 2011, the following common stock and preferred stock warrants, which are subject to remeasurement, were outstanding (unaudited):

Issue Date	Reason for Grant	Type of Stock Into Which the Warrant Is Exercisable	Number of Shares Into Which the Warrant Is Exercisable		Exercise Price per Share		Expiration
October 2004	Debt financing	Series A		25,000	$	0.92	October 20, 2014
January 2005	Debt financing	Series A		53,006	$	1.63	January 28, 2012
February 2005	Debt financing	Common		115,030	$	1.63	February 24, 2015
August 2005	Debt financing	Common		65,789	$	1.90	February 24, 2015
June 2006	Debt financing	Series B		52,648	$	0.992	December 3, 2014
December 2007	Debt financing	Series B		14,209	$	1.4739	June 12, 2016
January 2008	Equity financing	Series B		61,024	$	0.02	Earlier of (i) the closing of an IPO or (ii) December 18, 2017
May 2009	Debt financing	Series C		93,161	$	2.1194	May 1, 2019
May 2009	Debt financing	Series C		113,239	$	2.1194	May 14, 2019
June 2009	Debt financing	Series C		18,326	$	2.1194	June 25, 2019
October 2009	Debt financing	Series C		47,183	$	2.1194	October 28, 2019
October 2009	Debt financing	Series C		30,062	$	2.1194	October 30, 2019
May 2010	Debt financing	Series C		141,549	$	2.1194	May 5, 2020
				830,226

F-24

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

8. Warrants (Continued)

Fair Value of Warrant Liabilities

        The following is a summary of the warrants to purchase common stock that are subject to remeasurement and the warrants to purchase convertible preferred stock outstanding and their fair values as of December 31, 2009 and 2010 and September 30, 2011, (dollar amounts in thousands):

	Shares as of						Fair Value as of
	December 31, 2009		December 31, 2010		September 30, 2011		December 31, 2009		December 31, 2010		September 30, 2011
					(unaudited)						(unaudited)
Common stock		180,819		180,819		180,819	$	48	$	1,007	$	1,617
Preferred stock		1,235,085		1,371,534		649,407		2,897		11,393		6,379
		1,415,904		1,552,353		830,226	$	2,945	$	12,400	$	7,996

        The changes in Level 3 liabilities measured at fair value on a recurring basis are summarized as follows during the years ended December 31, 2008, 2009 and 2010 and the nine months ended September 30, 2010 and 2011 (in thousands):

	Year Ended December 31,								Nine Months Ended September 30,
	2008			2009		2010			2010		2011
									(unaudited)
Fair value of warrant liabilities—beginning of period	$	1,322		$	1,311	$	2,945		$	2,945	$	12,400
Fair value of preferred stock warrants issued during the period		152			630		637			637		—
Fair value of common stock warrants extended during the period		—			—		359			359		—
Less: fair value of warrants exercised		—			—		(33	)		—		(6,994	)
Change in fair value of the warrant liabilities		(163	)		1,004		8,492			5,260		2,590
Fair value of warrant liabilities—end of period	$	1,311		$	2,945	$	12,400		$	9,201	$	7,996

        The fair values of outstanding common stock warrants that are subject to remeasurement were estimated using the Black-Scholes option-pricing model, including consideration of any potential additional value associated with pricing protection features, with the following assumptions:

	Year Ended December 31,									Nine Months Ended September 30,
	2008			2009			2010			2010			2011
										(unaudited)
Expected term (in years)		5.9			4.9			3.9			4.4			3.4
Risk-free interest rate		1.7	%		2.3	%		1.5	%		1.4	%		0.6	%
Expected volatility		68	%		66	%		55	%		54	%		54	%
Expected dividend rate		0	%		0	%		0	%		0	%		0	%

F-25

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

8. Warrants (Continued)

        The fair values of outstanding convertible preferred stock warrants were estimated using the Black-Scholes option-pricing model, including consideration of any potential additional value associated with pricing protection features, with the following assumptions:

	Year Ended December 31,			Nine Months Ended September 30,
	2008	2009	2010	2010	2011
				(unaudited)
Expected term (in years)	3.1-9.0	2.1-9.3	1.1-9.4	1.3-9.1	0.3-8.6
Risk-free interest rate	1.3%-2.2%	1.4%-3.6%	0.6%-3.3%	0.5%-2.7%	0.1%-2.0%
Expected volatility	50%-61%	58%-66%	43%-61%	43%-55%	41%-54%
Expected dividend rate	0%	0%	0%	0%	0%

9. Stock-Based Compensation

        Our 2003 Stock Option and Restricted Stock Plan (the "Plan"), as amended, provides for the grant of options to purchase up to 9,264,788 shares of our common stock. Stock options are exercisable at prices generally equal to the fair value of our common stock at the date of grant, as determined by the board of directors. Options generally vest over a four year period and may be exercised for a period of up to ten years. Vested options generally expire 90 days after termination of employment with certain exceptions described in the Plan.

F-26

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

9. Stock-Based Compensation (Continued)

        The following table summarizes stock option activity related to shares of common stock:

		Shares Available for Grant			Number of Stock Options Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
												(in thousands)
Outstanding—January 1, 2008			3,001,173			2,346,273		$	1.151		6.9
	Additional options authorized		1,414,121			—
	Granted		(4,187,177	)		4,187,177			0.354
	Forfeited		143,966			(143,966	)		0.576
	Expired		58,016			(58,016	)		0.780
Outstanding—December 31, 2008			430,099			6,331,468			0.639		8.0
	Additional options authorized		500,000			—
	Granted		(1,152,015	)		1,152,015			1.274
	Forfeited		462,352			(462,352	)		1.172
	Expired		105,231			(105,231	)		0.256
Outstanding—December 31, 2009			345,667			6,915,900			0.716		7.4
	Additional options authorized		499,998			—
	Granted		(495,000	)		495,000			3.614
	Forfeited		26,666			(26,666	)		0.922
	Expired		2,084			(2,084	)		0.082
	Exercised		—			(20,998	)		0.400
Outstanding—December 31, 2010			379,415			7,361,152			0.910		6.6	$	45,122
	Additional options authorized (unaudited)		1,741,821			—
	Granted (unaudited)		(660,000	)		660,000			9.957
	Granted outside of plan (unaudited)		(291,824	)		291,824			1.633
	Exercised (unaudited)		—			(99,804	)		0.902
	Forfeited (unaudited)		35,418			(35,418	)		4.370
	Expired (unaudited)		518,472			(518,472	)		1.627
Outstanding—September 30, 2011 (unaudited)			1,723,302			7,659,282			1.651		6.4	$	68,386
Vested and expected to vest—December 31, 2010						7,021,167			0.919		6.6	$	42,977
Vested—December 31, 2010						5,225,414			0.713		6.0	$	33,062
Vested and expected to vest—September 30, 2011 (unaudited)						7,321,711			1.687		6.4	$	65,109
Vested—September 30, 2011 (unaudited)						6,036,607			0.789		5.9	$	59,104

F-27

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

9. Stock-Based Compensation (Continued)

        The fair value of the option awards was calculated using the Black-Scholes option valuation model with the following assumptions:

	Year Ended December 31,			Nine Months Ended September 30,
	2008	2009	2010	2010	2011
				(unaudited)
Expected term (in years)	6.25	6.25	6.25	6.25	1.16, 6.25
Risk-free interest rate	2.6%-4.1%	2.6%-3.8%	1.7%-2.6%	1.7%-2.6%	0.1%-2.7%
Expected volatility	42%-52%	52%	52%	52%	52%
Expected dividend rate	0%	0%	0%	0%	0%

        The expected term of the options represents the estimated time from the date of the grant until the date of exercise and is primarily based on the simplified method which calculates the expected term as the average of the time-to-vesting and the contractual life of the awards. Expected volatility is determined based on the historical volatility of a peer group of publicly-traded companies over the expected term of the options. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with a similar term. The expected dividend yield was assumed to be zero as we have never paid dividends and have no current plans to do so.

        The aggregate intrinsic value of options exercised during the year ended December 31, 2010 and the nine months ended September 30, 2011 was $100,000 and $1.2 million, respectively.

        The weighted-average grant date fair value of our stock options during the years ended December 31, 2008, 2009 and 2010 and the nine months ended September 30, 2011 was $0.12, $0.33, $1.41 and $7.17 per share, respectively. The aggregate grant date fair value of our stock options granted to employees during the years ended December 31, 2008, 2009 and 2010 and the nine months ended September 30, 2011 was $676,000, $518,000, $935,000 and $6.8 million, respectively.

Stock-Based Compensation Expense

        The total stock-based compensation expense is recognized in the statements of operations as follows (in thousands):

	Year Ended December 31,						Nine Months Ended September 30,
	2008		2009		2010		2010		2011
							(unaudited)
Operations	$	27	$	31	$	144	$	100	$	192
Research and development		16		49		81		56		725
Sales and marketing		185		111		153		99		3,056
General and administrative		91		106		186		138		244
	$	319	$	297	$	564	$	393	$	4,217

        We issued fully vested options in June and August 2011 with a fair value of $3.4 million to long-term employees whose nonstatutory stock options had expired. See Note 14 for further discussion.

F-28

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

9. Stock-Based Compensation (Continued)

        As of December 31, 2010, total compensation expense related to unvested stock-based awards granted under the Plan, but not yet recognized, was $1.3 million, net of estimated forfeitures. This cost will be amortized on a straight-line basis over a weighted-average remaining period of 1.5 years. There was no capitalized stock-based compensation expense during the years ended December 31, 2008, 2009 and 2010. We capitalized $29,000 of stock-based compensation as deferred offering costs during the nine months ended September 30, 2011.

        Additional information regarding our stock options outstanding and vested and exercisable as of December 31, 2010 is summarized below:

	Options Outstanding						Options Vested and Exercisable
Exercise Prices	Number of Stock Options Outstanding		Weighted- Average Remaining Contractual Life (Years)		Weighted- Average Exercise Price per Share		Shares Subject to Stock Options		Weighted- Average Exercise Price per Share
$0.06		75,000		2.5	$	0.06		75,000	$	0.06
$0.28		3,553,982		7.1	$	0.28		2,884,156	$	0.28
$0.78-$0.88		1,612,684		5.9	$	0.81		1,091,040	$	0.80
$1.32-$1.90		1,463,087		4.4	$	1.52		1,001,319	$	1.61
$2.04-$2.46		161,399		3.7	$	2.38		161,399	$	2.38
$3.40-$4.04		461,250		9.4	$	3.50		12,500	$	3.40
$5.14		33,750		9.8	$	5.14		—		—
$0.06-$5.14		7,361,152						5,225,414

Non-Employee Stock-Based Compensation Expense

        During the years ended December 31, 2008, 2009 and 2010 and the nine months ended September 30, 2011, we granted 12,500, 10,000, 12,500 and 5,000 stock options to non-employees of the Company. As of December 31, 2010 and September 30, 2011, we had non-employee options to purchase 189,743 and 194,743 shares of common stock outstanding with exercise prices ranging from $0.28 to $11.00 and contractual terms up to 10 years. We have recorded stock-based compensation expense for these non-employee options of $9,000, $7,000 and $81,000 for the years ended December 31, 2008, 2009 and 2010, respectively and $32,000 (of which $29,000 has been capitalized) for the nine months ended September 30, 2011, which is included in total stock-based compensation expense.

10. Commitments and Contingencies

Capital Lease Obligation

        We entered into a capital lease obligation of $560,000 during the year ended December 31, 2010 for CloudWorx CaaS Platform equipment. Related accumulated amortization totaled $33,000 and $93,000 at December 31, 2010 and September 30, 2011, respectively.

F-29

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

10. Commitments and Contingencies (Continued)

        The following is a schedule of future minimum lease payments due under the capital lease obligation as of December 31, 2010 (in thousands):

Year Ending December 31:
	2011	$	131
	2012		131
	2013		131
	2014		131
	2015		77
Total minimum lease payments			601
Less: amount representing interest			(83	)
Present value of minimum lease payments			518
Less: current portion			(100	)
Capital lease obligation, non-current		$	418

Operating Leases

        We have non-cancelable operating leases for office space and infrastructure facilities expiring at various dates through August 2013. Rent expense for non-cancellable operating leases with scheduled rent increases is recognized on a straight line basis over the lease term. Certain leases allow us, at our option, to renew the leases for various periods. Rent expense for the years ended December 31, 2008, 2009 and 2010 and for the nine months ended September 30, 2010 and 2011 was $437,000, $547,000, $592,000, $437,000 and $472,000, respectively.

        The following is a schedule of future minimum lease payments under non-cancelable operating leases as of December 31, 2010 (in thousands):

Year Ending December 31:
	2011	$	1,704
	2012		313
	2013		204
	Total	$	2,221

Purchase Commitment

        We have a purchase commitment for CloudWorx CaaS Platform equipment to be ordered and delivered in 2011. As of December 31, 2010, the outstanding purchase commitment under the agreement amounted to $4.5 million.

11. Notes Receivable from Stockholders

        In June 2006, we issued 769,320 common shares to two of our executives in exchange for two promissory notes amounting to $1.6 million. The notes receivable carried an annual interest rate of 5.06% and were scheduled to mature on the earlier of June 30, 2011 or the day immediately prior to a public offering. These notes were non-recourse notes and were secured by a pledge of the common

F-30

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

11. Notes Receivable from Stockholders (Continued)

stock, however, the notes were considered to be nonsubstantive and, as a result, the notes and related legally outstanding shares were not recorded on the balance sheet.

        In December 2010, the notes receivable were amended to change the maturity date to the earlier of June 30, 2012 or the day immediately prior to a public offering. In addition, the annual interest rate was reduced to 0.32%. See Note 14 for discussion of the subsequent repayment of the notes.

12. Net Loss per Share of Common Stock

        The following table sets for the computation of our basic and diluted net loss per share of common stock during the years ended December 31, 2008, 2009 and 2010 and for the nine months ended September 30, 2010 and 2011 (in thousands, except for share and per share amounts). The shares purchased with the notes receivable from stockholders have been excluded as these shares are not deemed to be issued for accounting purposes until the notes are paid off.

	Year Ended December 31,									Nine Months Ended September 30,
	2008			2009			2010			2010			2011
										(unaudited)
Net loss	$	(5,140	)	$	(3,343	)	$	(11,619	)	$	(7,756	)	$	(9,642	)
Shares used in computing net loss per share of common stock, basic and diluted		4,378,964			4,378,964			4,381,308			4,378,964			4,864,178
Net loss per share of common stock, basic and diluted	$	(1.17	)	$	(0.76	)	$	(2.65	)	$	(1.77	)	$	(1.98	)

        The following outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have been antidilutive:

	December 31,						September 30,
	2008		2009		2010		2010		2011
							(unaudited)
Convertible preferred stock		20,842,696		20,842,696		20,847,796		20,842,696		21,569,923
Stock options to purchase common stock		6,331,468		6,915,900		7,361,152		7,336,400		7,659,282
Convertible preferred stock warrants		933,114		1,235,085		1,371,534		1,381,734		649,407
Common stock warrants		1,144,557		1,144,557		403,923		1,118,074		408,196
Shares purchased with stockholder notes		769,320		769,320		769,320		769,320		—

F-31

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

12. Net Loss per Share of Common Stock (Continued)

        The following table sets forth the computation of our pro forma basic and diluted net loss per share of common stock during the year ended December 31, 2010 and the nine months ended September 30, 2011 (in thousands, except for share and per share amounts):

	Year Ended December 31, 2010			Nine Months Ended September 30, 2011
	(unaudited)			(unaudited)
Net loss	$	(11,619	)	$	(9,642	)
Change in fair value of convertible preferred stock warrant liabilities		7,892			2,590
Net loss used in computing pro forma net loss per share of common stock, basic and diluted	$	(3,727	)	$	(7,052	)
Shares used in computing net loss per share of common stock, basic and diluted		4,381,308			4,864,178
Pro forma adjustments to reflect assumed conversion of convertible preferred stock		20,843,786			21,425,426
Shares used in computing pro forma net loss per share of common stock, basic and diluted		25,225,094			26,289,604
Pro forma net loss per share of common stock, basic and diluted	$	(0.15	)	$	(0.27	)

13. Income Taxes

        We did not record a provision or benefit for income taxes during the years ended December 31, 2008, 2009 and 2010.

        Net deferred tax assets as of December 31, 2009 and 2010 consist of the following (in thousands):

			December 31, 2009			December 31, 2010
Deferred tax assets:
	Net operating loss carryforward		$	8,512		$	10,077
	Allowance for doubtful accounts			153			1
	Accrued compensation			805			1,088
	Accruals, reserves and other			397			1,052
		Gross deferred tax assets		9,867			12,218
	Valuation allowance			(8,349	)		(9,559	)
		Net deferred tax assets		1,518			2,659
Deferred tax liabilities:
	Depreciation and amortization			1,518			2,659
Net deferred tax assets			$	—		$	—

F-32

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

13. Income Taxes (Continued)

        Reconciliations of the statutory federal income tax to our effective tax during the years ended December 31, 2008, 2009 and 2010 are as follows (in thousands):

	Year Ended December 31,
	2008			2009			2010
Tax at statutory federal rate	$	(1,799	)	$	(1,170	)	$	(4,067	)
State tax—net of federal benefit		(120	)		(78	)		(106	)
Change in valuation allowance		1,873			830			1,210
Fair market value adjustment to warrants		(57	)		352			2,972
Other		103			66			(9	)
Provision (benefit) for income taxes	$	—		$	—		$	—

        The valuation allowance for deferred tax assets as of December 31, 2009 and 2010 was $8.4 million and $9.6 million, respectively. The net change in the total valuation allowance for each of the years ended December 31, 2008, 2009 and 2010 was an increase of $1.9 million, $0.6 million and $1.2 million, respectively. The valuation allowance was substantially related to net operating loss carryforwards that, in the judgment of management, are not more likely than not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected taxable income, and tax-planning strategies in making this assessment.

        As of December 31, 2010, we had federal net operating loss carryforwards of $26.8 million expiring beginning in 2023. As of December 31, 2010, we had state net operating loss carryforwards of $15.2 million, expiring beginning in 2024.

        Internal Revenue Code section 382 places a limitation (the Section 382 Limitation) on the amount of taxable income that can be offset by federal net operating carryforwards after a change in control (generally greater than 50% change in ownership) of a loss corporation. California has similar rules. Generally, after a control change, a loss corporation cannot deduct operating loss carryforwards in excess of the Section 382 Limitation. Management has considered the impact such limitation may have on the utilization of our operating loss carryforwards against taxable income in future periods.

        As of December 31, 2009 and 2010, we had no unrecognized tax benefits.

        We file income tax returns in the United States and various states. The tax years 2006 through 2010 remain open in most jurisdictions. We are not currently under examination by income tax authorities in federal or any state jurisdiction.

14. Subsequent Events

        In February 2011, warrant holders exercised warrants for the purchase of 722,127 shares of Series B convertible preferred stock with an exercise price of $0.02 per share, resulting in gross proceeds to us of approximately $14,000. The portion of the warrant liability related to the exercised preferred stock warrants was reclassified from warrant liabilities to convertible preferred stock.

F-33

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

14. Subsequent Events (Continued)

        On May 3, 2011, we increased the number of shares available for grant under our 2003 Stock Option and Restricted Stock Plan by 1.45 million shares.

        On May 4, 2011, the two executives with outstanding notes receivable related to the purchase of common stock (see Note 11) repaid all of the outstanding principal and accrued interest due under the notes receivable.

Reverse Stock Split

        On August 9, 2011, we effected a 1.5-for-1 reverse stock split of our outstanding common stock and convertible preferred stock. Accordingly, all share and per share amounts for all periods presented in these financial statements and notes thereto, have been adjusted retroactively, where applicable, to reflect this reverse stock split.

        On September 29, 2011, we effected a 1.33333333-for-1 reverse stock split of our outstanding common stock and convertible preferred stock. Accordingly, all share and per share amounts for all periods presented in these financial statements and notes thereto, have been adjusted retroactively, where applicable, to reflect this reverse stock split.

Unaudited

        On May 16, 2011, we entered into a Loan and Security Agreement with East West Bank under which we can borrow $12.0 million for the purchase of equipment. The borrowings will be secured by any equipment purchased under the financing agreement, and are available through January 31, 2012. The interest rate will be variable and is equal to the prime rate plus 1.00%. As of September 30, 2011, $7.0 million was borrowed and outstanding under the financing agreement.

        In June 2011, a lawsuit was filed against us and one of our officers in the Superior Court of the State of Washington alleging various claims associated with certain warrants which terminated in accordance with their terms in December 2010. The warrants represented in aggregate the right to purchase 703,722 shares at an exercise price of $0.92 per share. The complaint alleges that we owed contractual, statutory and other duties, including a duty to apprise the holder of the warrants of significant corporate developments and that as a result of breaching such duties, the warrant holder is entitled to damages. Although we believe the complaint to be without merit, if we do not prevail, this matter could have a material adverse effect on our business, financial condition and results of operations.

        On June 3, 2011, we issued fully vested stock options to purchase common stock to certain long-term employees whose nonstatutory options had expired. The options, for an aggregate of 109,769 shares of common stock, have exercise prices ranging from $1.63 to $2.04 per share. The fair value of the options of $1.3 million has been recorded in the statement of operations during the nine months ended September 30, 2011, using the Black-Scholes option pricing model.

        On June 30, 2011, we entered into an agreement with two of our equipment financing providers to defer $1.0 million of principal payments which would have been due between July 1 and September 30, 2011. The deferred principal was due in full on October 1, 2011. On November 4, 2011, we entered into an amendment to this agreement to defer the repayment of the deferred principal balance of $1.0 million due October 1, 2011 and $1.0 million of principal payments which would have been due between October 1 and December 31, 2011 until January 1, 2012.

F-34

INTELEPEER, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

14. Subsequent Events (Continued)

        On July 1, 2011, we entered into an agreement with one of our equipment financing providers to defer $1.2 million of principal payments which would have been due between July 1 and December 31, 2011. The deferred principal was due in full on December 31, 2011. On December 13, 2011 we entered into an amendment to this agreement to defer the repayment of the deferred principal balance of $1.2 million due December 31, 2011 and $201,000 of principal payments which would have been due on January 1, 2012 until January 31, 2012.

        We agreed to issue effective August 19, 2011, fully vested stock options to purchase common stock to certain long-term employees whose nonstatutory options had expired. The options, for an aggregate of 182,055 shares of common stock, have an exercise price of $1.63 per share. The fair value of the options of $2.1 million has been recorded in the statement of operations during the nine months ended September 30, 2011, using the Black-Scholes option pricing model.

        We have evaluated subsequent events through December 14, 2011, the date the financial statements were available to be issued.

F-35

Shares

Common Stock

Prospectus

Joint Book-Running Managers

J.P. Morgan Deutsche Bank Securities Barclays Capital

Co-Managers

RBC Capital Markets William Blair & Company

                        , 2012

        Until                                     , all dealers that effect transactions in these securities, whether or not participating in the offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.    Other Expenses of Issuance and Distribution.

        The following are the estimated expenses to be incurred in connection with the issuance and distribution of the securities registered under this registration statement, other than underwriting discounts and commissions. All amounts shown are estimates except the SEC registration fee and the Financial Industry Regulatory Authority, Inc. filing fee. The following expenses will be borne solely by the registrant.

SEC registration fee	$	11,610
FINRA filing fee	$	10,500
Exchange listing fee			*
Legal fees and expenses			*
Accounting fees and expenses			*
Printing expenses			*
Transfer agent fees and expenses			*
Miscellaneous expenses			*
Total	$

*

Estimate

Item 14.    Indemnification of Directors and Officers.

        Section 145(a) of the DGCL provides, in general, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the corporation), because he or she is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit, or proceeding, if he or she 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 corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

        Section 145(b) of the DGCL provides, in general, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor because the person is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if he or she 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 corporation, except that no indemnification shall be made with respect to any claim, issue, or matter as to which he or she shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, he or she is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or other adjudicating court shall deem proper.

II-1

        Section 145(e) of the DGCL provides that expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may 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 or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized by Section 145 of the DGCL. Section 145(e) of the DGCL further provides that such expenses (including attorneys' fees) incurred by former directors and officers or other employees or agents of the corporation may be so paid upon such terms and conditions as the corporation deems appropriate.

        Section 145(g) of the DGCL provides, in general, that a corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify the person against such liability under Section 145 of the DGCL.

        Our amended and restated bylaws that will be in effect upon completion of this offering will provide that we will indemnify, to the fullest extent permitted by the DGCL, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was one of our directors or officers or, while serving as one of our directors or officers, is or was serving at our request as a director, officer, employee, or agent of another corporation or of another entity, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such person, subject to limited exceptions relating to indemnity in connection with a proceeding (or part thereof) initiated by such person. Our amended and restated bylaws that will be in effect upon completion of this offering will further provide for the advancement of expenses to each of our officers and directors.

        Our amended and restated certificate of incorporation that will be in effect upon completion of this offering will provide that, to the fullest extent permitted by the DGCL, as the same exists or may be amended from time to time, our directors shall not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director. Under Section 102(b)(7) of the DGCL, the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty can be limited or eliminated except (i) for any breach of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the DGCL (relating to unlawful payment of dividend or unlawful stock purchase or redemption); or (iv) for any transaction from which the director derived an improper personal benefit.

        We also currently have and intend to maintain a general liability insurance policy which covers certain liabilities of directors and officers of our company arising out of claims based on acts or omissions in their capacities as directors or officers, whether or not we would have the power to indemnify such person against such liability under the DGCL or the provisions of our amended and restated certificate of incorporation or amended and restated bylaws.

        We have entered into indemnification agreements with each of our directors and our executive officers that provide that we will indemnify each of our directors and such officers to the fullest extent permitted by law and by our amended and restated certificate of incorporation or amended and restated bylaws.

II-2

Item 15.    Recent Sales of Unregistered Securities.

        Since January 1, 2008, we have issued the following securities that were not registered under the Securities Act:

1.

Between January 1, 2008 and September 2011, we granted options to employees, directors and consultants to purchase an aggregate of 6,494,199 shares of our common stock under our 2003 Stock Plan at exercise prices ranging from $0.28 to $18.00. During this period, options to purchase (i) 4,999 shares of our common stock have been exercised for an exercise price of $0.78, (ii) 20,686 shares of our common stock have been exercised for an exercise price of $0.28, (iii) 8,582 shares of our common stock have been exercised for an exercise price of $0.88, (iv) 2,737 shares of our common stock have been exercised for an exercise price of $1.32, (v) 26,839 shares of our common stock have been exercised for an exercise price of $1.63, (vi) 7,353 shares of our common stock have been exercised for an exercise price of $2.04 and (vii) 1,565 shares of our stock have been exercised for an exercise price of $3.40 for cash consideration to us in the aggregate amount of $88,384. Of these options, 2,247,375 were deemed exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act, and/or Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering.



2.

In January 2008, we issued 457,734 shares of our Series B preferred Stock and warrants to purchase 137,319 shares of Series B preferred stock with an exercise price of $0.02 per share to accredited investors for an aggregate purchase price of approximately $675,000.



3.

On June 5, 2008, June 17, 2008, and August 1, 2008 we issued and sold an aggregate principal amount of $2,050,000 of subordinated convertible promissory notes to accredited investors.



4.

In October 2008, we issued 8,770,525 shares of our Series C preferred stock to accredited investors at a purchase price per share of $2.1194 for cash payments and $1.6955 for issuances upon conversion of the above-mentioned promissory notes.



5.

In December 2008, we issued a warrant to purchase 35,387 shares of common stock with an exercise price of $0.88 per share to an accredited investor in connection with an agreement with a lender to increase the size of a credit facility by $2.5 million.



6.

In May 2009, we issued warrants to purchase 206,400 shares of Series C preferred stock with an exercise price of $2.1194 per share to accredited investors in connection with the execution of loan agreements to borrow up to $8 million and the borrowing of approximately $1.1 million under one of those agreements.



7.

In June 2009, a commercial lender vested in a warrant to purchase 18,326 shares of Series C preferred stock with an exercise price of $2.1194 per share in connection with the Company's borrowing of approximately $1.1 million under an existing loan agreement.



8.

In October 2009, a commercial lender and accredited investor vested in a warrant to purchase 30,062 shares of Series C preferred stock with an exercise price of $2.1194 per share in connection with the Company's decision to borrow approximately $1.8 million under an existing loan agreement.



9.

In October 2009, we issued warrants to purchase 47,183 shares of Series C preferred stock with an exercise price of $2.1194 per share to an accredited investor in connection with an agreement with a lender to increase the size of a credit facility by $2.0 million.



10.

In February 2010, the expiration dates with respect to certain warrants to purchase 180,819 shares of common stock were extended to February 24, 2015 in connection with the execution of an agreement eliminating an obligation of the Company to redeem the warrants for cash.

II-3

11.

In May 2010, we issued warrants to purchase 141,549 shares of Series C preferred stock with an exercise price of $2.1194 per share to accredited investors in connection with the execution of a loan agreement permitting the Company to borrow up to $20 million for equipment purchases and working capital.



12.

In May 2010, we issued warrants to purchase 11,560 shares of common stock with an exercise price of $3.40 per share to an accredited investor in connection with an amendment to an existing loan agreement to defer approximately $1.3 million of principal payments that otherwise would have been due during the period between April 15, 2010 through December 31, 2010 under the loan agreement.



13.

In June 2010, we issued an option to purchase 75,000 shares of common stock at an exercise price of $0.06 per share outside of our stock option plan to Daniel Quandt in connection with services rendered.



14.

In October 2010, warrants to purchase 1,227 shares of common stock were exercised for an exercise price of $1.63 for total proceeds to us of $2,000.



15.

In October 2010, warrants to purchase 5,100 shares of Series B preferred stock were exercised for an exercise price of $0.02 for total proceeds to us of $102.



16.

In February 2011, warrants to purchase 722,127 shares of Series B preferred stock were exercised for an exercise price of $0.02 for total proceeds to us of $14,442.



17.

In June 2011, warrants to purchase 1,227 shares of common stock were exercised for an exercise price of $1.63 for total proceeds to us of $2,000.



18.

In June 2011, we issued outside of our stock plan options to purchase an aggregate of 109,769 shares of common stock to certain long-time employees whose nonstatutory stock options had expired. The exercise prices of the fully-vested options range from $1.63 to $2.04 per share; the options were issued in exchange for the rendering of services.



19.

In July 2011, we issued warrants to purchase 5,500 shares of common stock with an exercise price of $13.20, in connection with a lender's agreement to defer until December 31, 2011 the Company's obligation to make payments of approximately $1.2 million under an existing loan agreement.



20.

In August 2011, we issued outside of our stock plan options to purchase an aggregate of 182,055 shares of common stock to certain long-time employees whose nonstatutory stock options had expired. The exercise price of the fully-vested options is $1.63 per share; the options were issued in exchange for the rendering of services.

        Except as noted above, the issuance of options, shares issued upon exercise of options and restricted stock described in the first item above was deemed exempt from registration under the Securities Act in reliance on Rule 701 promulgated thereunder as transactions pursuant to compensatory benefit plans and contracts relating to compensation. The other issuances of securities described above were deemed exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act, and/or Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering. All of the foregoing securities are deemed restricted securities for purposes of the Securities Act.

II-4

Item 16.    Exhibits.

(a)

Exhibits.

Number		Description
	1.1	Form of Underwriting Agreement.
	3.1**	Amended and Restated Certificate of Incorporation, as corrected and amended, as currently in effect.
	3.2**	Form of Amended and Restated Certificate of Incorporation to be effective upon completion of the offering.
	3.3**	Amended and Restated Bylaws, as currently in effect.
	3.4**	Form of Amended and Restated Bylaws to be effective upon completion of the offering.
	3.5	Certificate of Amendment to Amended and Restated Certificate of Incorporation, as corrected and amended, as currently in effect.
	3.6	Certificate of Amendment to Amended and Restated Certificate of Incorporation, as corrected and amended, as currently in effect.
	4.1*	Specimen of Stock Certificate.
	4.2**	Registration Rights Agreement by and among IntelePeer, Inc. and the investors listed on Exhibit A thereto, as amended.
	4.3**	Common Stock Purchase Warrant issued May 4, 2010 to Vogen Funding, L.P.
	4.4**	Stock Purchase Warrant to Purchase Common Stock issued June 14, 2007 to Vogen Funding, L.P.
	4.5**	Stock Purchase Warrant to Purchase Common Stock issued December 3, 2008 to Vogen Funding, L.P.
	4.6**	Stock Purchase Warrant to Purchase Common Stock issued October 4, 2004 to Vencore Solutions LLC.
	4.7**	Stock Purchase Warrant to Purchase Common Stock issued September 20, 2006 to Vencore Solutions LLC.
	4.8**	Stock Purchase Warrant to Purchase Series A Preferred Stock issued January 28, 2005 to Vencore Solutions LLC.
	4.9**	Stock Purchase Warrant to Purchase Series B Preferred Stock issued June 12, 2006 to Vencore Solutions LLC.
	4.10**	Form of Stock Purchase Warrant to Purchase Common Stock issued in connection with November 12, 2004 Bridge Financing.
	4.11**	Stock Purchase Warrant to Purchase Common Stock issued February 24, 2005 to DNJ Leasing II, L.P.
	4.12**	Stock Purchase Warrant to Purchase Common Stock issued August 1, 2005 to DNJ Leasing II, L.P.
	4.13**	Amendment to Stock Purchase Warrants to Purchase Common Stock by and between IntelePeer, Inc. & DNJ Capital Partners II, LLC, dated October 23, 2010.
	4.14**	Warrant to Purchase Stock issued October 20, 2004 to Silicon Valley Bank.
	4.15**	Warrant to Purchase Stock issued December 3, 2004 to Silicon Valley Bank.
	4.16**	Warrant to Purchase Stock issued January 28, 2005 to Silicon Valley Bank.

II-5

Number		Description
	4.17**	Warrant to Purchase Shares of Series C Preferred Stock issued May 1, 2009 to Compass Horizon Funding Company LLC.
	4.18**	Warrant to Purchase Series C Preferred Stock issued May 14, 2009 to Atel Ventures, Inc.
	4.19**	Warrant Agreement by and between IntelePeer, Inc. and Hercules Technology II, L.P., dated May 5, 2010.
	4.20**	Warrant Agreement by and between IntelePeer, Inc. and Comerica Bank, dated May 5, 2010.
	4.21**	Common Share Purchase Warrant issued July 1, 2011 to Vogen Funding, L.P.
	4.22	Stockholder Agreement dated August 3, 2011 with VantagePoint Venture Partners 2006(Q), L.P. and Kennet II L.P.
	5.1*	Opinion of DLA Piper LLP (US).
	10.1†**	2003 Stock Option and Restricted Stock Plan and Form of Stock Option Agreement under the 2003 Stock Option and Restricted Stock Plan.
	10.2†**	Amended and Restated 2003 Stock Option and Restricted Stock Plan and Form of Stock Option Agreement under the Amended and Restated 2003 Stock Option and Restricted Stock Plan.
	10.3†**	2011 Equity Incentive Plan and Form of Stock Option Agreement, Form of Restricted Stock Units Agreement and Form of Restricted Stock Agreement under the 2011 Equity Incentive Plan.
	10.4**	Form of Indemnification Agreement to be entered into by and between IntelePeer, Inc. and each of its directors and executive officers.
	10.5†**	Amended and Restated Executive Employment Agreement with Frank Fawzi, dated May 6, 2011.
	10.6†**	Amended and Restated Executive Employment Agreement with Andre Simone, dated May 6, 2011.
	10.7†**	Amended and Restated Executive Employment Agreement with Haydar Haba, dated May 6, 2011.
	10.8†**	Offer Letter Agreement with John Belanger, dated December 10, 2003.
	10.9†**	Offer Letter Agreement with Phillip Bronsdon, dated August 21, 2007.
	10.10†**	Offer Letter Agreement with Raymond Smets, dated January 11, 2011.
	10.11†**	Offer Letter Agreement with Lawrence Irving, dated January 26, 2011.
	10.12**	Sublease Agreement between IntelePeer, Inc. and Con-way, Inc., dated August 1, 2008.
	10.13**	First Amendment to Sublease Agreement between IntelePeer, Inc. and Con-way, Inc., dated April 12, 2011.
	10.14	Commercial Lease Agreement between IntelePeer, Inc. and Garvin Partners, dated August 24, 2011.
	10.15	Loan and Security Agreement among IntelePeer, Inc., Hercules Technology II, L.P. and Comerica Bank, dated May 5, 2010, as amended to date.
	10.16**	Loan and Security Agreement with East West Bank, dated May 16, 2011.
	10.17	Form of Non-Plan Fully Vested Stock Option Agreement.
	21.1**	List of Subsidiaries.

II-6

Number		Description
	23.1*	Consent of DLA Piper LLP (US) (included in Exhibit 5.1).
	23.2	Consent of BDO USA, LLP, Independent Registered Public Accounting Firm.
	24.1**	Power of Attorney.
	24.2	Power of Attorney from Keith Olsen

*

To be filed by amendment.

**

Previously filed.

†

Indicates a management contract or any compensatory plan, contract, or arrangement.

Item 17.    Undertakings.

        The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

        Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC 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 us of expenses incurred or paid by a director, officer, or controlling person of us 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 counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by the registrant is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

        The undersigned hereby undertakes that:

(i)

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.



(ii)

For purposes 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-7

SIGNATURES

        Pursuant to the requirements of the Securities Act, the registrant has duly caused this Amendment No. 4 to this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Mateo, State of California on December 15, 2011.

INTELEPEER, INC.
By:	/s/ FRANK FAWZI Frank Fawzi President and Chief Executive Officer, Chairman of the Board of Directors

        Pursuant to the requirements of the Securities Act, this Amendment No. 4 to this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ FRANK FAWZI Frank Fawzi	President and Chief Executive Officer, Chairman of the Board of Directors (Principal Executive Officer)	December 15, 2011
/s/ ANDRE SIMONE Andre Simone	Chief Financial Officer and Secretary (Principal Financial Officer)	December 15, 2011
* Todd Smith	Vice President and Corporate Controller (Principal Accounting Officer)	December 15, 2011
* Haydar Haba	Founder, Chief Visionary Officer, Director	December 15, 2011
* William Harding	Director	December 15, 2011
* Keith Olsen	Director	December 15, 2011
* Javier Rojas	Director	December 15, 2011

II-8

Signature	Title	Date
* Raymond Smets	Director	December 15, 2011
* Lawrence Irving	Director	December 15, 2011

*By /s/ FRANK FAWZI
Attorney-in-Fact

II-9

EXHIBIT INDEX

Number		Description
	1.1	Form of Underwriting Agreement.
	3.1**	Amended and Restated Certificate of Incorporation, as corrected and amended, as currently in effect.
	3.2**	Form of Amended and Restated Certificate of Incorporation to be effective upon completion of the offering.
	3.3**	Amended and Restated Bylaws, as currently in effect.
	3.4**	Form of Amended and Restated Bylaws to be effective upon completion of the offering.
	3.5	Certificate of Amendment to Amended and Restated Certificate of Incorporation, as corrected and amended, as currently in effect.
	3.6	Certificate of Amendment to Amended and Restated Certificate of Incorporation, as corrected and amended, as currently in effect.
	4.1*	Specimen of Stock Certificate.
	4.2**	Registration Rights Agreement by and among IntelePeer, Inc. and the investors listed on Exhibit A thereto, as amended.
	4.3**	Common Stock Purchase Warrant issued May 4, 2010 to Vogen Funding, L.P.
	4.4**	Stock Purchase Warrant to Purchase Common Stock issued June 14, 2007 to Vogen Funding, L.P.
	4.5**	Stock Purchase Warrant to Purchase Common Stock issued December 3, 2008 to Vogen Funding, L.P.
	4.6**	Stock Purchase Warrant to Purchase Common Stock issued October 4, 2004 to Vencore Solutions LLC.
	4.7**	Stock Purchase Warrant to Purchase Common Stock issued September 20, 2006 to Vencore Solutions LLC.
	4.8**	Stock Purchase Warrant to Purchase Series A Preferred Stock issued January 28, 2005 to Vencore Solutions LLC.
	4.9**	Stock Purchase Warrant to Purchase Series B Preferred Stock issued June 12, 2006 to Vencore Solutions LLC.
	4.10**	Form of Stock Purchase Warrant to Purchase Common Stock issued in connection with November 12, 2004 Bridge Financing.
	4.11**	Stock Purchase Warrant to Purchase Common Stock issued February 24, 2005 to DNJ Leasing II, L.P.
	4.12**	Stock Purchase Warrant to Purchase Common Stock issued August 1, 2005 to DNJ Leasing II, L.P.
	4.13**	Amendment to Stock Purchase Warrants to Purchase Common Stock by and between IntelePeer, Inc. & DNJ Capital Partners II, LLC, dated October 23, 2010.
	4.14**	Warrant to Purchase Stock issued October 20, 2004 to Silicon Valley Bank.
	4.15**	Warrant to Purchase Stock issued December 3, 2004 to Silicon Valley Bank.
	4.16**	Warrant to Purchase Stock issued January 28, 2005 to Silicon Valley Bank.

Number		Description
	4.17**	Warrant to Purchase Shares of Series C Preferred Stock issued May 1, 2009 to Compass Horizon Funding Company LLC.
	4.18**	Warrant to Purchase Series C Preferred Stock issued May 14, 2009 to Atel Ventures, Inc.
	4.19**	Warrant Agreement by and between IntelePeer, Inc. and Hercules Technology II, L.P., dated May 5, 2010.
	4.20**	Warrant Agreement by and between IntelePeer, Inc. and Comerica Bank, dated May 5, 2010.
	4.21**	Common Stock Purchase Warrant issued July 1, 2011 to Vogen Funding, L.P.
	4.22	Stockholder Agreement dated August 3, 2011 with VantagePoint Venture Partners 2006(Q), L.P. and Kennet II L.P.
	5.1*	Opinion of DLA Piper LLP (US).
	10.1†**	2003 Stock Option and Restricted Stock Plan and Form of Stock Option Agreement under the 2003 Stock Option and Restricted Stock Plan.
	10.2†**	Amended and Restated 2003 Stock Option and Restricted Stock Plan and Form of Stock Option Agreement under the Amended and Restated 2003 Stock Option and Restricted Stock Plan.
	10.3†**	2011 Equity Incentive Plan and Form of Stock Option Agreement, Form of Restricted Stock Units Agreement and Form of Restricted Stock Agreement under the 2011 Equity Incentive Plan.
	10.4**	Form of Indemnification Agreement to be entered into by and between IntelePeer, Inc. and each of its directors and executive officers.
	10.5†**	Amended and Restated Executive Employment Agreement with Frank Fawzi, dated May 6, 2011.
	10.6†**	Amended and Restated Executive Employment Agreement with Andre Simone, dated May 6, 2011.
	10.7†**	Amended and Restated Executive Employment Agreement with Haydar Haba, dated May 6, 2011.
	10.8†**	Offer Letter Agreement with John Belanger, dated December 10, 2003.
	10.9†**	Offer Letter Agreement with Phillip Bronsdon, dated August 21, 2007.
	10.10†**	Offer Letter Agreement with Raymond Smets, dated January 11, 2011.
	10.11†**	Offer Letter Agreement with Lawrence Irving, dated January 26, 2011.
	10.12**	Sublease Agreement between IntelePeer, Inc. and Con-way, Inc., dated August 1, 2008.
	10.13**	First Amendment to Sublease Agreement between IntelePeer, Inc. and Con-way, Inc., dated April 12, 2011.
	10.14	Commercial Lease Agreement between IntelePeer, Inc. and Garvin Partners, dated August 24, 2011.
	10.15	Loan and Security Agreement among IntelePeer, Inc., Hercules Technology II, L.P. and Comerica Bank, dated May 5, 2010, as amended to date.
	10.16**	Loan and Security Agreement with East West Bank, dated May 16, 2011.
	10.17	Form of Non-Plan Fully Vested Stock Option Agreement.
	21.1**	List of Subsidiaries.

Number		Description
	23.1*	Consent of DLA Piper LLP (US) (included in Exhibit 5.1).
	23.2	Consent of BDO USA, LLP, Independent Registered Public Accounting Firm.
	24.1**	Power of Attorney.
	24.2	Power of Attorney from Keith Olsen

*

To be filed by amendment.

**

Previously filed.

†

Indicates a management contract or any compensatory plan, contract, or arrangement.

EX-1.1

Exhibit 1.1

INTELEPEER, INC.

[          ] Shares of Common Stock

(par value $0.0001 per share)

Underwriting Agreement

[                          ], 2011

J.P. Morgan Securities LLC

Deutsche Bank Securities Inc.

Barclays Capital Inc.

As Representatives of the

several Underwriters listed

in Schedule 1 hereto

c/o J.P. Morgan Securities LLC
383 Madison Avenue
New York, New York 10179

c/o Deutsche Bank Securities Inc.

60 Wall Street, 4th Floor

New York, New York 10005

c/o Barclays Capital Inc.

745 Seventh Avenue

New York, NY  10019

Ladies and Gentlemen:

IntelePeer, Inc., a Delaware corporation (the “Company”), proposes to issue and sell to the several Underwriters listed in Schedule 1 hereto (the “Underwriters”), for whom you are acting as representatives (the “Representatives”), an aggregate of [              ] shares of Common Stock, par value $0.0001 per share, of the Company, and certain stockholders of the Company named in Schedule 2 hereto (the “Selling Stockholders”) propose severally and not jointly to sell to the several Underwriters an aggregate of [              ] shares of Common Stock of the Company (collectively, the “Underwritten Shares”).  In addition, the Company proposes to issue and sell, at the option of the Underwriters, up to an additional [                ] shares of Common Stock of the Company, and the Selling Stockholders propose severally and not jointly to sell, at the option of the Underwriters, up to an additional [              ] shares of Common Stock of the Company (collectively, the “Option Shares”).  The Underwritten Shares and the Option Shares are herein referred to as the “Shares”.  The shares of Common Stock of the Company to be outstanding after giving effect to the sale of the Shares are referred to herein as the “Stock”.

The Company and the Selling Stockholders hereby confirm their agreement with the several Underwriters concerning the purchase and sale of the Shares, as follows:

1.             Registration Statement.  The Company has prepared and filed with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the “Securities Act”), a registration statement (File No. 333-174080), including a prospectus, relating to the Shares.  Such registration statement, as amended at the time it became effective, including the information, if any, deemed pursuant to Rule 430A, 430B or 430C under the Securities Act to be part of the registration statement at the time of its effectiveness (“Rule 430 Information”), is referred to herein as the “Registration Statement”; and as used herein, the term “Preliminary Prospectus” means each prospectus included in such registration statement (and any amendments thereto) before effectiveness, any prospectus filed with the Commission pursuant to Rule 424(a) under the Securities Act and the prospectus included in the Registration Statement at the time of its effectiveness that omits Rule 430 Information, and the term “Prospectus” means the prospectus in the form first used (or made available upon request of purchasers pursuant to Rule 173 under the Securities Act) in connection with confirmation of sales of the Shares.  If the Company has filed an abbreviated registration statement pursuant to Rule 462(b) under the Securities Act (the “Rule 462 Registration Statement”), then any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462 Registration Statement.  Capitalized terms used but not defined herein shall have the meanings given to such terms in the Registration Statement and the Prospectus.

At or prior to the Applicable Time (as defined below), the Company had prepared the following information (collectively with the pricing information set forth on Annex A, the “Pricing Disclosure Package”): a Preliminary Prospectus dated [                          ], 2011 and each “free-writing prospectus” (as defined pursuant to Rule 405 under the Securities Act) listed on Annex A hereto.

“Applicable Time” means [          ] [A/P].M., New York City time, on [            ], 2011.

2.             Purchase of the Shares by the Underwriters.  (a)  The Company agrees to issue and sell, and each of the Selling Stockholders agrees, as to the extent indicated in Schedule 2 hereto, severally and not jointly, to sell, the Underwritten Shares to the several Underwriters as provided in this Agreement, and each Underwriter, on the basis of the representations, warranties and agreements set forth herein and subject to the conditions set forth herein, agrees, severally and not jointly, to purchase at a price per share (the “Purchase Price”) of $[          ] from the Company the respective number of Underwritten Shares set forth opposite such Underwriter’s name in Schedule 1 hereto and from each of the Selling Stockholders the number of Underwritten Shares (to be adjusted by you so as to eliminate fractional shares) determined by multiplying the aggregate number of Underwritten Shares to be sold by each of the Selling Stockholders as set forth opposite their respective names in Schedule 2 hereto by a fraction, the numerator of which is the aggregate number of  Underwritten Shares to be purchased by such Underwriter as set forth opposite the name of such Underwriter in Schedule 1 hereto and

2

the denominator of which is the aggregate number of Underwritten Shares to be purchased by all the Underwriters from all of the Selling Stockholders hereunder.

In addition, the Company agrees to issue and sell, and each of the Selling Stockholders agrees, severally and not jointly, as and to the extent indicated in Schedule 2 hereto, to sell, the Option Shares to the several Underwriters as provided in this Agreement, and the Underwriters, on the basis of the representations, warranties and agreements set forth herein and subject to the conditions set forth herein, shall have the option to purchase, severally and not jointly, from each of the Company and each Selling Stockholder at the Purchase Price less an amount per share equal to any dividends or distributions declared by the Company and payable on the Underwritten Shares but not payable on the Option Shares.  If any Option Shares are to be purchased, the number of Option Shares to be purchased by each Underwriter shall be the number of Option Shares which bears the same ratio to the aggregate number of Option Shares being purchased as the number of Underwritten Shares set forth opposite the name of such Underwriter in Schedule 1 hereto (or such number increased as set forth in Section 12 hereof) bears to the aggregate number of Underwritten Shares being purchased from the Company and the Selling Stockholders by the several Underwriters, subject, however, to such adjustments to eliminate any fractional Shares as the Representatives in their sole discretion shall make.  Any such election to purchase Option Shares shall be made in proportion to the maximum number of Option Shares to be sold by the Company and by each Selling Stockholder as set forth in Schedule 2 hereto.

The Underwriters may exercise the option to purchase Option Shares at any time in whole, or from time to time in part, on or before the thirtieth day following the date of the Prospectus, by written notice from the Representatives to the Company and the Attorneys-in-Fact (as defined below).  Such notice shall set forth the aggregate number of Option Shares as to which the option is being exercised and the date and time when the Option Shares are to be delivered and paid for, which may be the same date and time as the Closing Date (as hereinafter defined) but shall not be earlier than the Closing Date or later than the tenth full business day (as hereinafter defined) after the date of such notice (unless such time and date are postponed in accordance with the provisions of Section 12 hereof).  Any such notice shall be given at least two business days prior to the date and time of delivery specified therein.

(b)           The Company and the Selling Stockholders understand that the Underwriters intend to make a public offering of the Shares as soon after the effectiveness of this Agreement as in the judgment of the Representatives is advisable, and initially to offer the Shares on the terms set forth in the Prospectus.  The Company and the Selling Stockholders acknowledge and agree that the Underwriters may offer and sell Shares to or through any affiliate of an Underwriter, it being understood that such affiliate shall be subject to the terms of this Agreement.

(c)           Payment for the Shares shall be made by wire transfer in immediately available funds to the accounts specified by the Company and the Attorneys-in-Fact or any of them (with regard to payment to the Selling Stockholders), to the Representatives in the case of the Underwritten Shares, at the offices of Goodwin Procter LLP, 135

3

Commonwealth Drive, Menlo Park, California 94025 at 10:00 A.M., New York City time, on [          ], 2011, or at such other time or place on the same or such other date, not later than the fifth business day thereafter, as the Representatives, the Company and the Attorneys-in-Fact may agree upon in writing or, in the case of the Option Shares, on the date and at the time and place specified by the Representatives in the written notice of the Underwriters’ election to purchase such Option Shares.  The time and date of such payment for the Underwritten Shares is referred to herein as the “Closing Date”, and the time and date for such payment for the Option Shares, if other than the Closing Date, is herein referred to as the “Additional Closing Date”.

Payment for the Shares to be purchased on the Closing Date or the Additional Closing Date, as the case may be, shall be made against delivery to the Representatives for the respective accounts of the several Underwriters of the Shares to be purchased on such Closing Date or the Additional Closing Date, as the case may be, with any transfer taxes payable in connection with the sale of such Shares duly paid by the Company or the Selling Stockholders, as applicable.  Delivery of the Shares shall be made through the facilities of The Depository Trust Company (“DTC”) unless the Representatives shall otherwise instruct.  The certificates for the Shares will be made available for inspection and packaging by the Representatives at the office of DTC or its designated custodian not later than 1:00 P.M., New York City time, on the business day prior to the Closing Date or the Additional Closing Date, as the case may be.

(d)           Each of the Company and each Selling Stockholder acknowledges and agrees that the Underwriters are acting solely in the capacity of an arm’s length contractual counterparty to the Company and the Selling Stockholders with respect to the offering of Shares contemplated hereby (including in connection with determining the terms of the offering) and not as a financial advisor or a fiduciary to, or an agent of, the Company, the Selling Stockholders or any other person.  Additionally, neither the Representatives nor any other Underwriter is advising the Company, the Selling Stockholders or any other person as to any legal, tax, investment,  accounting or regulatory matters in any jurisdiction.  The Company and the Selling Stockholders shall consult with their own advisors concerning such matters and shall be responsible for making its own independent investigation and appraisal of the transactions contemplated hereby, and the Underwriters shall have no responsibility or liability to the Company or the Selling Stockholders with respect thereto.  Any review by the Underwriters of the Company, the transactions contemplated hereby or other matters relating to such transactions will be performed solely for the benefit of the Underwriters and shall not be on behalf of the Company or the Selling Stockholders.

3.             Representations and Warranties of the Company.  The Company represents and warrants to each Underwriter and the Selling Stockholders that:

(a)           Preliminary Prospectus.  No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus included in the Pricing Disclosure Package, at the time of filing thereof, complied in all material respects with the Securities Act, and no Preliminary Prospectus, at the time of filing thereof, contained any untrue

4

statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation and warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use in any Preliminary Prospectus, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 9(c) hereof.

(b)           Pricing Disclosure Package. The Pricing Disclosure Package as of the Applicable Time did not, and as of the Closing Date and as of the Additional Closing Date, as the case may be, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation and warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use in such Pricing Disclosure Package, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 9(c) hereof.

(c)           Issuer Free Writing Prospectus.  Other than the Registration Statement, the Preliminary Prospectus and the Prospectus, the Company (including its agents and representatives, other than the Underwriters in their capacity as such) has not prepared, used, authorized, approved or referred to and will not prepare, use, authorize, approve or refer to any “written communication” (as defined in Rule 405 under the Securities Act) that constitutes an offer to sell or solicitation of an offer to buy the Shares (each such communication by the Company or its agents and representatives (other than a communication referred to in clause (i) below) an “Issuer Free Writing Prospectus”) other than (i) any document not constituting a prospectus pursuant to Section 2(a)(10)(a) of the Securities Act or Rule 134 under the Securities Act or (ii) the documents listed on Annex A hereto, each electronic road show and any other written communications approved in writing in advance by the Representatives.  Each such Issuer Free Writing Prospectus complied in all material respects with the Securities Act, has been or will be (within the time period specified in Rule 433) filed in accordance with the Securities Act (to the extent required thereby) and, when taken together with the Preliminary Prospectus accompanying, or delivered prior to delivery of, such Issuer Free Writing Prospectus, did not, and as of the Closing Date and as of the Additional Closing Date, as the case may be, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation and warranty with respect to any statements or omissions made in each such Issuer Free Writing Prospectus or Preliminary Prospectus in reliance upon and in

5

conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use in such Issuer Free Writing Prospectus or Preliminary Prospectus, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 9(c) hereof.

(d)           Registration Statement and Prospectus.  The Registration Statement has been declared effective by the Commission.  No order suspending the effectiveness of the Registration Statement has been issued by the Commission, and no proceeding for that purpose or pursuant to Section 8A of the Securities Act against the Company or related to the offering of the Shares has been initiated or, to the knowledge of the Company, threatened by the Commission; as of the applicable effective date of the Registration Statement and any post-effective amendment thereto, the Registration Statement and any such post-effective amendment complied and will comply in all material respects with the Securities Act, and did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading; and as of the date of the Prospectus and any amendment or supplement thereto and as of the Closing Date and as of the Additional Closing Date, as the case may be, the Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation and warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use in the Registration Statement and the Prospectus and any amendment or supplement thereto, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 9(c) hereof.

(e)           Financial Statements.  The financial statements (including the related notes thereto) of the Company and its consolidated subsidiaries included in the Registration Statement, the Pricing Disclosure Package and the Prospectus comply in all material respects with the applicable requirements of the Securities Act and present fairly the financial position of the Company and its consolidated subsidiaries as of the dates indicated and the results of their operations and the changes in their cash flows for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles in the United States applied on a consistent basis throughout the periods covered thereby, and any supporting schedules included in the Registration Statement present fairly the information required to be stated therein; the other financial information included in the Registration Statement, the Pricing Disclosure Package and the Prospectus has been derived from the accounting records of the Company and its consolidated subsidiaries and presents fairly the information shown thereby; and the pro forma financial information and the related notes thereto included in the Registration Statement, the Pricing Disclosure Package

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and the Prospectus have been prepared in accordance with the applicable requirements of the Securities Act and the assumptions underlying such pro forma financial information are reasonable and are set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(f)            No Material Adverse Change.  Since the date of the most recent financial statements of the Company included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (i) there has not been any change in the capital stock (other than the issuance of shares of Common Stock upon exercise of stock options and warrants described as outstanding in, and the grant of options and awards under existing equity incentive plans described in, the Registration Statement, the Pricing Disclosure Package and the Prospectus), short-term debt or long-term debt of the Company or any of its subsidiaries, or any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of capital stock, or any material adverse change, or any development involving a prospective material adverse change, in or affecting the business, properties, management, financial position, stockholders’ equity, results of operations or prospects of the Company and its subsidiaries taken as a whole; (ii) neither the Company nor any of its subsidiaries has entered into any transaction or agreement (whether or not in the ordinary course of business) that is material to the business of the Company and its subsidiaries taken as a whole or incurred any liability or obligation, direct or contingent, that is material to the business of the Company and its subsidiaries taken as a whole; and (iii) neither the Company nor any of its subsidiaries has sustained any loss or interference with its business that is material to the business of the Company and its subsidiaries taken as a whole and that is either from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority, except in each case as otherwise disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(g)           Organization and Good Standing.  The Company and each of its subsidiaries have been duly incorporated and are validly existing and in good standing under the laws of their respective jurisdictions of organization, are duly qualified to do business and are in good standing in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged, except where the failure to be so qualified or in good standing or have such power or authority would not, individually or in the aggregate, have a material adverse effect on the business, properties, management, financial position, stockholders’ equity, results of operations or prospects of the Company and its subsidiaries taken as a whole or on the performance by the Company of its obligations under this Agreement (a “Material Adverse Effect”).  The Company does not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed in Exhibit 21 to the Registration

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Statement.  The subsidiaries listed in Schedule 3 to this Agreement are the only significant subsidiaries of the Company.

(h)           Capitalization.  As of the date hereof, the Company has an authorized capitalization as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus under the heading “Capitalization”; all the outstanding shares of capital stock of the Company (including the Shares to be sold by the Selling Stockholders) have been duly and validly authorized and issued and are fully paid and non-assessable and are not subject to any pre-emptive or similar rights; except as described in or expressly contemplated by the Pricing Disclosure Package and the Prospectus, there are no outstanding rights (including, without limitation, pre-emptive rights), warrants or options to acquire, or instruments convertible into or exchangeable for, any shares of capital stock or other equity interest in the Company or any of its subsidiaries, or any contract, commitment, agreement, understanding or arrangement of any kind relating to the issuance of any capital stock of the Company or any such subsidiary, any such convertible or exchangeable securities or any such rights, warrants or options; the capital stock of the Company conforms in all material respects to the description thereof contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus; and all the outstanding shares of capital stock or other equity interests of each subsidiary owned, directly or indirectly, by the Company have been duly and validly authorized and issued, are fully paid and non-assessable (except, in the case of any foreign subsidiary, for directors’ qualifying shares) and are owned directly or indirectly by the Company, free and clear of any lien, charge, encumbrance, security interest, restriction on voting or transfer or any other claim of any third party.

(i)            Stock Options.  With respect to the stock options (the “Stock Options”) granted pursuant to the stock-based compensation plans of the Company and its subsidiaries (the “Company Stock Plans”), (i) each Stock Option intended to qualify as an “incentive stock option” under Section 422 of the Code so qualifies, (ii) each grant of a Stock Option was duly authorized no later than the date on which the grant of such Stock Option was by its terms to be effective (the “Grant Date”) by all necessary corporate action, including, as applicable, approval by the board of directors of the Company (or a duly constituted and authorized committee thereof) and any required stockholder approval by the necessary number of votes or written consents, and the award agreement governing such grant (if any) was duly executed and delivered by each party thereto, (iii) each such grant was made in accordance with the terms of the Company Stock Plans and all other applicable laws and regulatory rules or requirements, and (iv) each such grant was properly accounted for in accordance with GAAP in the financial statements (including the related notes) of the Company.

(j)            Due Authorization.  The Company has full right, power and authority to execute and deliver this Agreement and to perform its obligations hereunder; and all action required to be taken for the due and proper

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authorization, execution and delivery by it of this Agreement and the consummation by it of the transactions contemplated hereby has been duly and validly taken.

(k)           Underwriting Agreement.  This Agreement has been duly authorized, executed and delivered by the Company.

(l)            The Shares.  The Shares to be issued and sold by the Company hereunder have been duly authorized by the Company and, when issued and delivered and paid for as provided herein, will be duly and validly issued, will be fully paid and nonassessable and will conform to the descriptions thereof in the Registration Statement, the Pricing Disclosure Package and the Prospectus; and the issuance of the Shares is not subject to any preemptive or similar rights.

(m)          No Violation or Default.  Neither the Company nor any of its subsidiaries is (i) in violation of its charter or by-laws; (ii) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject; or (iii) in violation of any applicable law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (ii) and (iii) above, for any such default or violation that would not, individually or in the aggregate, have a Material Adverse Effect.

(n)           No Conflicts.  The execution, delivery and performance by the Company of this Agreement, the issuance and sale of the Shares by the Company, the issuance by the Company of the Shares to be issued upon the exercise of the Options (as defined below) and the consummation by the Company of the transactions contemplated by this Agreement will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (ii) result in any violation of the provisions of the charter or by-laws or similar organizational documents of the Company or any of its subsidiaries or (iii) result in the violation of any law or statute or any judgment, order, rule  or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (i) and (iii) above, for any such conflict, breach, violation or default that would not, individually or in the aggregate, have a Material Adverse Effect.

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(o)           No Consents Required.  No consent, approval, authorization, order, license, registration or qualification of or with any court or arbitrator or governmental or regulatory authority is required for the execution, delivery and performance by the Company of this Agreement, the issuance and sale of the Shares and the consummation of the transactions contemplated by this Agreement, except for the registration of the Shares under the Securities Act and such consents, approvals, authorizations, orders and registrations or qualifications as may be required by the Financial Industry Regulatory Authority, Inc. (“FINRA”) and under applicable state securities laws in connection with the purchase and distribution of the Shares by the Underwriters.

(p)           Legal Proceedings.  Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no legal, governmental or regulatory investigations, actions, suits or proceedings pending to which the Company or any of its subsidiaries is or, to the knowledge of the Company, may be a party or to which any property of the Company or any of its subsidiaries is or, to the knowledge of the Company, may be the subject that, individually or in the aggregate, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have a Material Adverse Effect; to the knowledge of the Company, no such investigations, actions, suits or proceedings are threatened or contemplated by any governmental or regulatory authority or threatened by others; and (i) there are no current or pending legal, governmental or regulatory actions, suits or proceedings that are required under the Securities Act to be described in the Registration Statement, the Pricing Disclosure Package or the Prospectus that are not so described in the Registration Statement, the Pricing Disclosure Package and the Prospectus and (ii) there are no statutes, regulations or contracts or other documents that are required under the Securities Act to be filed as exhibits to the Registration Statement or described in the Registration Statement, the Pricing Disclosure Package or the Prospectus that are not so filed as exhibits to the Registration Statement or described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(q)           Independent Accountants.  BDO USA, LLP, who have certified certain financial statements of the Company and its subsidiaries is an independent registered public accounting firm with respect to the Company and its subsidiaries within the applicable rules and regulations adopted by the Commission and the Public Company Accounting Oversight Board (United States) and as required by the Securities Act.

(r)            Title to Real and Personal Property.  The Company and its subsidiaries have good title to, or have valid rights to lease or otherwise use, all items of real and personal property and assets that are material to the respective businesses of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances, claims and defects and imperfections of title except those that (i) do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries or (ii) could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

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(s)Intellectual Property.  The Company and its subsidiaries own or possess adequate rights to use all patents, patent applications, inventions, trademarks, service marks, trade names, trademark registrations, service mark registrations, domain names, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses as currently conducted and as proposed to be conducted as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus (collectively, “Intellectual Property”), and the conduct of their respective businesses does not and will not conflict in any material respect with any such rights of others.  The Company and its subsidiaries have not received any notice of any claim of infringement, misappropriation or conflict with any such rights of others.  There are no valid and enforceable rights of third parties to the Intellectual Property that are or would be infringed by the business currently conducted or proposed to be conducted as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, by the Company and its subsidiaries.  The Company has no knowledge of any infringement by any third party of any of the Intellectual Property or other similar rights of the Company or any of its subsidiaries.  Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (i) the Company is not aware of outstanding options, licenses or agreements of any kind relating to the Intellectual Property which are required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus and (ii) neither the Company nor any of its subsidiaries is a party to or bound by any options, licenses or agreements with respect to the intellectual property or other similar rights of any other person or entity which are required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.  All Intellectual Property owned by the Company or its subsidiaries is free and clear of all liens, encumbrances, defects or other restrictions (other than non-exclusive licenses granted in the ordinary course of business), except those that could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.  The Company is not aware of any basis for a finding that any of the Intellectual Property is invalid or unenforceable.  The Company and its subsidiaries are not subject to any judgment, order, writ, injunction or decree of any court or any federal, state, local, foreign or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or any arbitrator, nor has it entered into or is it a party to any agreement made in settlement of any pending or threatened litigation, which materially restricts or impairs their use of any Intellectual Property.  The Company and its subsidiaries have taken reasonable and customary actions to protect their rights in and prevent the unauthorized dissemination or publication of their confidential information and trade secrets, protect any confidential information provided to them by any other person, and obtain ownership of all works of authorship and inventions made by its employees, consultants and contractors and which relate to the business of the Company and its subsidiaries as currently conducted and as proposed to be conducted as described in the Registration Statement, the Pricing Disclosure

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Package and the Prospectus.  All founders, key employees and other employees involved in the development of software have signed confidentiality and invention assignment agreements with the Company.  The Company is not aware of any technology employed by the Company or any of its subsidiaries which has been obtained or is being used by the Company or its subsidiaries in violation of any contractual obligation binding on the Company or any of its subsidiaries or any of its directors, executive officers or employees, or otherwise in violation of the rights of any persons.

(t)No Undisclosed Relationships.  No relationship, direct or indirect, exists between or among the Company or any of its subsidiaries, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of its subsidiaries, on the other, that is required by the Securities Act to be described in the Registration Statement and the Prospectus and that is not so described in such documents and in the Pricing Disclosure Package.

(u)Investment Company Act.  The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof received by the Company as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, will not be required to register as an “investment company” or an entity “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder (collectively, the “Investment Company Act”).

(v)Taxes.  Except as otherwise disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has paid all federal, state, local and foreign taxes and filed all tax returns required to be paid or filed through the date hereof except for any tax that is being contested in good faith and for which an adequate reserve for accrual has been established in accordance with generally accepted accounting principals in the United States; and there is no tax deficiency that has been, or could reasonably be expected to be, asserted against the Company or any of its properties or assets, except where the failure to pay or file or where such deficiency would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(w)Licenses and Permits.  The Company and its subsidiaries possess all licenses, certificates, permits and other authorizations issued by, and have made all declarations and filings with, the appropriate federal, state, local or foreign governmental or regulatory authorities that are necessary for the ownership or lease of their respective properties or the conduct of their respective businesses as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except where the failure to possess or make the same would not, individually or in the aggregate, have a Material Adverse Effect; and except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, neither the Company nor any of its subsidiaries has received notice of any revocation or modification of any such license, certificate, permit or

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authorization or has any reason to believe that any such license, certificate, permit or authorization will not be renewed in the ordinary course, except where such revocation, modification or non-renewal would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(x)No Labor Disputes.  No labor disturbance by or dispute with employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is contemplated or threatened, and the Company is not aware of any existing or imminent labor disturbance by, or dispute with, the employees of any of its or its subsidiaries’ principal suppliers, contractors or customers, except as would not have a Material Adverse Effect.

(y)Compliance with and Liability under Environmental Laws.  (i) The Company and its subsidiaries (a) are, and at all prior times were, in compliance with any and all applicable federal, state, local and foreign laws, rules, regulations, requirements, decisions, judgments, decrees, orders and the common law relating to pollution or the protection of the environment, natural resources or human health or safety, including those relating to the generation, storage, treatment, use, handling, transportation, Release or threat of Release of Hazardous Materials (collectively, “Environmental Laws”), (b) have received and are in compliance with all permits, licenses, certificates or other authorizations or approvals required of them under applicable Environmental Laws to conduct their respective businesses, (c) have not received notice of any actual or potential liability under or relating to, or actual or potential violation of, any Environmental Laws, including for the investigation or remediation of any Release or threat of Release of Hazardous Materials, and have no knowledge of any event or condition that would reasonably be expected to result in any such notice, (d) are not conducting or paying for, in whole or in part, and investigation, remediation or other corrective action pursuant to any Environmental Law at any location, and (e) are not a party to any order, decree or agreement that imposes any obligation or liability under any Environmental Law, and (ii) there are no costs or liabilities associated with Environmental Laws of or relating to the Company or its subsidiaries, except in the case of each of (i) and (ii) above, for any such matter, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (iii) except as described the Registration Statement, the Pricing Disclosure Package and the Prospectus, (a) there are no proceedings that are pending, or, to the knowledge of the Company, contemplated, against the Company or any of its subsidiaries under any Environmental Laws in which a governmental entity is also a party, other than such proceedings regarding which it is reasonably believed no monetary sanctions of $100,000 or more will be imposed, (b) the Company and its subsidiaries are not aware of any facts or issues regarding compliance with Environmental Laws, or liabilities or other obligations under Environmental Laws, including the Release or threat of Release of Hazardous Materials, that individually or in the aggregate could reasonably be expected to have a Material Adverse Effect, and (c) none of the Company and its subsidiaries anticipates material capital expenditures relating to any Environmental Laws.

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(z)Hazardous Materials.  There has been no storage, generation, transportation, use, handling, treatment, Release or threat of Release of Hazardous Materials by, relating to or caused by the Company or any of its subsidiaries (or, to the knowledge of the Company and its subsidiaries, any other entity (including any predecessor) for whose acts or omissions the Company or any of its subsidiaries is or could reasonably be expected to be liable) at, on, under or from any property or facility now or previously owned, operated or leased by the Company or any of its subsidiaries, or at, on, under or from any other property or facility, in violation of any Environmental Laws or in a manner or amount or to a location that could reasonably be expected to result in any liability under any Environmental Law, except for any violation or liability which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  “Hazardous Materials” means any material, chemical, substance, waste, pollutant, contaminant, compound, mixture, or constituent thereof, in any form or amount, including petroleum (including crude oil or any fraction thereof) and petroleum products, natural gas liquids, asbestos and asbestos containing materials, naturally occurring radioactive materials, brine, and drilling mud, regulated or which can give rise to liability under any Environmental Law.  “Release” means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, or migrating in, into or through the environment, or in, into, from or through any building or structure.

(aa)Compliance with ERISA.  (i) Each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), for which the Company or any member of its “Controlled Group” (defined as any organization which is a member of a controlled group of corporations within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the “Code”)) would have any liability (each, a “Plan”) has been maintained in compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations, including but not limited to, ERISA and the Code, except for noncompliance that could not reasonably be expected to result in material liability to the Company or its subsidiaries;  (ii) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, excluding transactions effected pursuant to a statutory or administrative exemption, has occurred with respect to any Plan that could reasonably be expected to result in a material liability to the Company or its subsidiaries; (iii) neither the Company nor any member of its Controlled Group have ever maintained or contributed to or participated in a Plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA) or a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA; and (iv) there is no pending audit or investigation by the Internal Revenue Service, the U.S. Department of Labor or any other governmental agency or any foreign regulatory agency with respect to any Plan that could reasonably be expected to result in material liability to the Company or its subsidiaries.

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(bb)Disclosure Controls.  The Company and its subsidiaries maintain an effective system of “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that complies with the requirements of the Exchange Act and that has been designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.

(cc)Accounting Controls.  The Company and its subsidiaries maintain systems of “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that comply with the requirements of the Exchange Act and have been designed by, or under the supervision of, the Company’s principal executive and principal financial officer, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no material weaknesses in the Company’s internal controls.  The Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which have adversely affected or are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

(dd)Insurance.  The Company and its subsidiaries have insurance covering their respective properties, operations, personnel and businesses, including business interruption insurance, which insurance is in amounts and insures against such losses and risks as are generally maintained by companies engaged in the same or similar businesses and at the same or similar stage of development and which the Company reasonably believes are adequate to protect the Company and its subsidiaries and their respective businesses; and neither the Company nor any of its subsidiaries has (i) received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required

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or necessary to be made in order to continue such insurance or (ii) any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage at reasonable cost from similar insurers as may be necessary to continue its business.

(ee)No Unlawful Payments.  Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its subsidiaries has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

(ff)Compliance with Money Laundering Laws.  The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

(gg)Compliance with OFAC.  None of the Company, any of its subsidiaries or, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”); and the Company will not, directly or indirectly, use the proceeds of the offering of the Shares hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

(hh)No Restrictions on Subsidiaries.  No subsidiary of the Company is currently prohibited, directly or indirectly, under any agreement or other instrument to which it is a party or is subject, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s properties or assets to the Company or any other subsidiary of the Company.

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(ii)No Broker’s Fees.  Neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against the Company or any of its subsidiaries or any Underwriter for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Shares.

(jj)No Registration Rights.  No person has the right to require the Company or any of its subsidiaries to register any securities for sale under the Securities Act by reason of the filing of the Registration Statement with the Commission, the issuance and sale of the Shares by the Company or, to the knowledge of the Company, the sale of the Shares to be sold by the Selling Stockholders hereunder, except for such rights as have been satisfied or waived.

(kk)No Stabilization.  The Company has not taken, directly or indirectly, any action designed to or that could reasonably be expected to cause or result in any stabilization or manipulation of the price of the Shares.

(ll)Business with Cuba.  The Company has complied with all provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida, as amended) relating to doing business with the Government of Cuba or with any person or affiliate located in Cuba.

(mm)Margin Rules.  The application of the proceeds received by the Company from the issuance, sale and delivery of the Shares as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus will not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System or any other regulation of such Board of Governors.

(nn)Forward-Looking Statements.  No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.

(oo)Statistical and Market Data.  Nothing has come to the attention of the Company that has caused the Company to believe that the statistical and market-related data included in the Registration Statement, the Pricing Disclosure Package and the Prospectus is not based on or derived from sources that are reliable and accurate in all material respects.

(pp)The Options.  The unissued Shares issuable upon the exercise of options (the “Options”) to be exercised by certain of the Selling Stockholders (the “Optionholders”) have been duly authorized by the Company and validly and reserved for issuance, and at the time of delivery to the Underwriters with respect to such Shares, such Shares will be issued and delivered in accordance with the provisions of the Stock Option Agreements between the Company and such Selling Stockholders pursuant to which such Options were granted (the “Option

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Agreements”) and will be validly issued, fully paid and non-assessable and will conform to the description thereof in Pricing Disclosure Package and the Prospectus.

(qq)The Option Agreements.  The Options were duly authorized and issued pursuant to the Option Agreements and constitute valid and binding obligations of the Company and the Optionholders are entitled to the benefits provided by the Option Agreements; the Option Agreements were duly authorized, executed and delivered and constitute valid and legally binding agreements enforceable against the Company in accordance with their terms except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally or by equitable principles relating to enforceability; and the Options and the Option Agreements conform to the descriptions thereof in Pricing Disclosure Package and the Prospectus.

(rr)Sarbanes-Oxley Act.  The Company has taken all necessary actions to ensure that, upon the effectiveness of the Registration Statement, it will be in compliance with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith, including Section 402 related to loans and Sections 302 and 906 related to certifications.

(ss)Status under the Securities Act.  At the time of filing the Registration Statement and any post-effective amendment thereto, at the earliest time thereafter that the Company or any offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the Securities Act) of the Shares and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405 under the Securities Act.

(tt)Regulatory Matters.  The execution, delivery and performance by the Company of this Agreement: (i) does not and will not breach or otherwise violate any regulation order, ruling, judgment, decree, authorization, or license of the Federal Communications Commission or any state regulatory agency, or any contractor or other entity appointed by the Federal Communications Commission or a state regulatory agency to administer a federal or state program, respectively; (ii) does not and will not violate any federal or state communications or telecommunications law, rule or regulation applicable to the Company or its subsidiaries; and (iii) does not and will not require any filing with or approval, consent, authorization or order of, or qualification with the Federal Communications Commission, any contractor or other entity appointed by the Federal Communications Commission or a state regulatory agency to administer a federal or state program, respectively, or any federal or state agency, except such as have been obtained.

4.Representations and Warranties of the Selling Stockholders.  Each of the Selling Stockholders severally represents and warrants to each Underwriter and the Company that:

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(a)Required Consents; Authority.  Except for such consents, approvals, authorizations and orders as would not reasonably be expected to result, individually or in the aggregate, in a material adverse effect on the ability of such Selling Stockholder to consummate the transactions contemplated by this Agreement, the Power of Attorney and the Custody Agreement (a “Selling Stockholder Material Adverse Effect”) all consents, approvals, authorizations and orders necessary for the execution and delivery by such Selling Stockholder of this Agreement and the Power of Attorney (the “Power of Attorney”) and the Custody Agreement (the “Custody Agreement”) hereinafter referred to, and for the sale and delivery of the Shares to be sold by such Selling Stockholder hereunder, have been obtained; and such Selling Stockholder has full right, power and authority to enter into this Agreement, the Power of Attorney and the Custody Agreement and to sell, assign, transfer and deliver the Shares to be sold by such Selling Stockholder hereunder; this Agreement, the Power of Attorney and the Custody Agreement have each been duly authorized, executed and delivered by such Selling Stockholder.

(b)No Conflicts.  The execution, delivery and performance by such Selling Stockholder of this Agreement, the Power of Attorney and the Custody Agreement, the sale of the Shares to be sold by such Selling Stockholder and the consummation by such Selling Stockholder of the transactions contemplated herein or therein will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of such Selling Stockholder pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which such Selling Stockholder is a party or by which such Selling Stockholder is bound or to which any of the property or assets of such Selling Stockholder is subject, (ii) result in any violation of the provisions of the charter or by-laws of such Selling Stockholder (to the extent applicable) or (iii) result in the violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory agency, except, in the case of (i) or (iii) above, for such conflicts, breaches, violations or defaults a that could not reasonably be expected, individually or in the aggregate, to have a Selling Stockholder Material Adverse Effect.

(c)Title to Shares.  Such Selling Stockholder has good and valid title to the Shares to be sold at the Closing Date or the Additional Closing Date, as the case may be, by such Selling Stockholder hereunder (other than the Shares to be issued upon exercise of Options), free and clear of all liens, encumbrances, equities or adverse claims; such Selling Stockholder will have, immediately prior to the Closing Date or the Additional Closing Date, as the case may be, assuming due issuance of any Shares to be issued upon exercise of Options, good and valid title to the Shares to be sold at the Closing Date or the Additional Closing Date, as the case may be, by such Selling Stockholder, free and clear of all liens, encumbrances, equities or adverse claims; and, upon delivery of the certificates representing such Shares and payment therefor pursuant hereto, good and valid

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title to such Shares, free and clear of all liens, encumbrances, equities or adverse claims, will pass to the several Underwriters.

(d)No Stabilization.  Such Selling Stockholder has not taken and will not take, directly or indirectly, any action designed to or that could reasonably be expected to cause or result in any stabilization or manipulation of the price of the Shares.

(e)Pricing Disclosure Package.  The Pricing Disclosure Package, as of the Applicable Time did not, and at the Closing Date and as of the Additional Closing Date, as the case may be, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that such Selling Stockholder’s representations under this Section 4(e) shall only apply to any untrue statement of a material fact or omission to state a material fact made in reliance upon and in conformity with information furnished by such Selling Stockholder, in writing to the Company, relating to such Selling Stockholder expressly for use in the Pricing Disclosure Package, it being understood and agreed that for the purposes of this Agreement, the only information so furnished by such Selling Stockholder consists of the legal name, address and number of shares of Common Stock owned by such Selling Stockholder before and after the offering and the other information with respect to such Selling Stockholder (excluding percentages) which appear in the table (and corresponding footnotes) under the caption “Principal and Selling Stockholders” (with respect to each Selling Stockholder, the “Selling Stockholder Information”).

(f)Issuer Free Writing Prospectus.  Other than the Registration Statement, the Preliminary Prospectus and the Prospectus, such Selling Stockholder (including its agents and representatives, other than the Underwriters in their capacity as such) has not prepared, used, authorized, approved or referred to and will not prepare, use, authorize, approve or refer to any  Issuer Free Writing Prospectus, other than (i) any document not constituting a prospectus pursuant to Section 2(a)(10)(a) of the Securities Act or Rule 134 under the Securities Act or (ii) the documents listed on Annex A hereto, each electronic road show and any other written communications approved in writing in advance by the Company and the Representatives.

(g)Registration Statement and Prospectus.  As of the applicable effective date of the Registration Statement and any post-effective amendment thereto, the Registration Statement and any such post-effective amendment complied and will comply in all material respects with the Securities Act, and did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading; and as of the date of the Prospectus and any amendment or supplement thereto and as of the Closing Date and as of the Additional Closing Date, as the case may be, the Prospectus will not contain any

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untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that such Selling Stockholder’s representations under this Section 4(g) shall only apply to any untrue statement of a material fact or omission to state a material fact made in reliance upon and in conformity with information relating to such Selling Stockholder furnished by or on behalf of such Selling Stockholder in writing to the Company expressly for use in the Registration Statement, the Pricing Disclosure Package or the Prospectus and any amendment or supplement thereto, it being understood and agreed that the only such information furnished by or on behalf of such Selling Stockholder consists of the Selling Stockholder Information.

(h)Material Information.  As of the date hereof, as of the Closing Date and as of the Additional Closing Date, as the case may be, that the sale of the Shares by such Selling Stockholder is not and will not be prompted by any material information concerning the Company which is not set forth in the Registration Statement, the Pricing Disclosure Package or the Prospectus.

Each of the Selling Stockholders represents and warrants that certificates in negotiable form representing all of the Shares to be sold by such Selling Stockholders hereunder other than any such Shares to be issued upon the exercise of Options, have been, and each of the Selling Stockholders who is selling Shares upon the exercise of Options represents and warrants that duly completed and executed irrevocable Option exercise notices, in the forms specified by the relevant Option Agreement, with respect to all of the Shares to be sold by such Selling Stockholders hereunder have been, placed in custody under a Custody Agreement relating to such Shares, in the form heretofore furnished to you, duly executed and delivered by such Selling Stockholder to American Stock Transfer & Trust Company, LLC, as custodian (the “Custodian”), and that such Selling Stockholder has duly executed and delivered Powers of Attorney, in the form heretofore furnished to you, appointing the person or persons indicated in Schedule 2 hereto, and each of them, as such Selling Stockholder’s Attorneys-in-fact (the “Attorneys-in-Fact” or any one of them the “Attorney-in Fact”) with authority to execute and deliver this Agreement on behalf of such Selling Stockholder, to determine the purchase price to be paid by the Underwriters to the Selling Stockholders as provided herein, to authorize the delivery of the Shares to be sold by such Selling Stockholder hereunder, to authorize (if applicable) the exercise of the Options to be exercised with respect to the Shares to be sold by such Selling Stockholder hereunder and otherwise to act on behalf of such Selling Stockholder in connection with the transactions contemplated by this Agreement and the Custody Agreement.

Each of the Selling Stockholders specifically agrees that the Shares represented by the certificates or the irrevocable Option exercise notice, in either case held in custody for such Selling Stockholder under the Custody Agreement, are subject to the interests of the Underwriters hereunder, and that the

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arrangements made by such Selling Stockholder for such custody, and the appointment by such Selling Stockholder of the Attorneys-in-Fact by the Power of Attorney, are to that extent irrevocable.  Each of the Selling Stockholders specifically agrees that the obligations of such Selling Stockholder hereunder shall not be terminated by operation of law, whether by the death or incapacity of any individual Selling Stockholder, or, in the case of an estate or trust, by the death or incapacity of any executor or trustee or the termination of such estate or trust, or in the case of a partnership, corporation or similar organization, by the dissolution of such partnership, corporation or organization, or by the occurrence of any other event.  If any individual Selling Stockholder or any such executor or trustee should die or become incapacitated, or if any such estate or trust should be terminated, or if any such partnership, corporation or similar organization should be dissolved, or if any other such event should occur, before the delivery of the Shares hereunder, certificates representing such Shares shall be delivered by or on behalf of such Selling Stockholder in accordance with the terms and conditions of this Agreement and the Custody Agreement, and actions taken by the Attorneys-in-Fact pursuant to the Powers of Attorney shall be as valid as if such death, incapacity, termination, dissolution or other event had not occurred, regardless of whether or not the Custodian, the Attorneys-in-Fact, or any of them, shall have received notice of such death, incapacity, termination, dissolution or other event.

5.Further Agreements of the Company.  The Company covenants and agrees with each Underwriter that:

(a)Required Filings.  The Company will file the final Prospectus with the Commission within the time periods specified by Rule 424(b) and Rule 430A, 430B or 430C under the Securities Act, will file any Issuer Free Writing Prospectus to the extent required by Rule 433 under the Securities Act; and will furnish copies of the Prospectus and each Issuer Free Writing Prospectus (to the extent not previously delivered) to the Underwriters in New York City prior to 10:00 A.M., New York City time, on the business day next succeeding the date of this Agreement in such quantities as the Representatives may reasonably request.

(b)Delivery of Copies.  The Company will deliver, without charge, (i) to the Representatives, three signed copies of the Registration Statement as originally filed and each amendment thereto, in each case including all exhibits and consents filed therewith; and (ii) to each Underwriter (A) a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) and (B) during the Prospectus Delivery Period (as defined below), as many copies of the Prospectus (including all amendments and supplements thereto and each Issuer Free Writing Prospectus) as the Representatives may reasonably request.  As used herein, the term “Prospectus Delivery Period” means such period of time after the first date of the public offering of the Shares as in the opinion of counsel for the Underwriters a prospectus relating to the Shares is required by law to be delivered (or required to be delivered but for Rule 172 under the Securities Act) in connection with sales of the Shares by any Underwriter or dealer.

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(c)Amendments or Supplements, Issuer Free Writing Prospectuses.  Before preparing, using, authorizing, approving, referring to or filing any Issuer Free Writing Prospectus, and before filing any amendment or supplement to the Registration Statement or the Prospectus, the Company will furnish to the Representatives and counsel for the Underwriters a copy of the proposed Issuer Free Writing Prospectus, amendment or supplement for review and will not prepare, use, authorize, approve, refer to or file any such Issuer Free Writing Prospectus or file any such proposed amendment or supplement to which the Representatives reasonably object.

(d)Notice to the Representatives.  The Company will advise the Representatives promptly, and confirm such advice in writing, (i) when the Registration Statement has become effective; (ii) when any amendment to the Registration Statement has been filed or becomes effective; (iii) when any supplement to the Prospectus or any Issuer Free Writing Prospectus or any amendment to the Prospectus has been filed; (iv) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or the receipt of any comments from the Commission relating to the Registration Statement or any other request by the Commission for any additional information; (v) of the issuance by the Commission of any order suspending the effectiveness of the Registration Statement or preventing or suspending the use of any Preliminary Prospectus, any of the Pricing Disclosure Package or the Prospectus or the initiation or threatening of any proceeding for that purpose or pursuant to Section 8A of the Securities Act; (vi) of the occurrence of any event within the Prospectus Delivery Period as a result of which the Prospectus, the Pricing Disclosure Package or any Issuer Free Writing Prospectus as then amended or supplemented would include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing when the Prospectus, the Pricing Disclosure Package or any such Issuer Free Writing Prospectus is delivered to a purchaser, not misleading; and (vii) of the receipt by the Company of any notice with respect to any suspension of the qualification of the Shares for offer and sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and the Company will use its reasonable best efforts to prevent the issuance of any such order suspending the effectiveness of the Registration Statement, preventing or suspending the use of any Preliminary Prospectus, any of the Pricing Disclosure Package or the Prospectus or suspending any such qualification of the Shares and, if any such order is issued, will obtain as soon as possible the withdrawal thereof.

(e)Ongoing Compliance.  (1) If during the Prospectus Delivery Period (i) any event shall occur or condition shall exist as a result of which the Prospectus as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing when the Prospectus is delivered to a purchaser, not misleading or (ii) it is necessary to amend or supplement the Prospectus to comply with applicable law, the Company will

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immediately notify the Underwriters thereof and forthwith prepare and, subject to paragraph (c) above, file with the Commission and furnish to the Underwriters and to such dealers as the Representatives may designate such amendments or supplements to the Prospectus as may be necessary so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances existing when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus will comply with applicable law and (2) if at any time prior to the Closing Date (i) any event shall occur or condition shall exist as a result of which the Pricing Disclosure Package as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing when the Pricing Disclosure Package is delivered to a purchaser, not misleading or (ii) it is necessary to amend or supplement the Pricing Disclosure Package to comply with applicable law, the Company will immediately notify the Underwriters thereof and forthwith prepare and, subject to paragraph (c) above, file with the Commission (to the extent required) and furnish to the Underwriters and to such dealers as the Representatives may designate, such amendments or supplements to the Pricing Disclosure Package as may be necessary so that the statements in the Pricing Disclosure Package as so amended or supplemented will not, in the light of the circumstances existing when the Pricing Disclosure Package is delivered to a purchaser, be misleading or so that the Pricing Disclosure Package will comply with applicable law.

(f)Blue Sky Compliance.  The Company will use its reasonable best efforts in cooperation with the Underwriters to qualify the Shares for offer and sale under, or will obtain exemptions from the application of, the securities or Blue Sky laws of such jurisdictions as the Representatives shall reasonably request and will continue such qualifications in effect so long as required for distribution of the Shares; provided that the Company shall not be required to (i) qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction where it would not otherwise be required to so qualify, (ii) file any general consent to service of process in any such jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it is not otherwise so subject.

(g)Earning Statement.  The Company will make generally available to its security holders and the Representatives as soon as practicable an earning statement that satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 of the Commission promulgated thereunder covering a period of at least twelve months beginning with the first fiscal quarter of the Company occurring after the “effective date” (as defined in Rule 158) of the Registration Statement; provided that the Company shall not be required to provide documents that are available through the Commission’s Electronic Data Gathering, Analysis and Retrieval System.

(h)Clear Market.  For a period of 180 days after the date of the Prospectus, the Company will not (i) offer, pledge, sell, contract to sell, sell any

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option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, or file with the Commission a registration statement under the Securities Act relating to, any shares of Stock or any securities convertible into or exercisable or exchangeable for Stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Stock or any such other securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Stock or such other securities, in cash or otherwise, without the prior written consent of J.P. Morgan Securities LLC and Deutsche Bank Securities Inc., other than the Shares to be sold hereunder and any shares of Stock of the Company issued upon the exercise of options granted under Company Stock Plans. Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period, the Company issues an earnings release or material news or a material event relating to the Company occurs; or (2) prior to the expiration of the 180-day restricted period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the 180-day restricted period, the restrictions imposed by this Agreement shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.  In addition to the foregoing, the Company will not release or waive (or otherwise consent to the release or waiver of) any of the restrictions set forth the section entitled “Market Stand-Off Agreement” or any successor provision or any similar restrictions on transfer contained in that certain Registration Rights Agreement by and among the Company and the investors listed on Exhibit A thereto, as amended (the “Registration Rights Agreement”) for any holder of securities of the Company during the 180-day restricted period (or any extension thereof pursuant to the preceding sentence) without the prior written consent of J.P. Morgan Securities LLC and Deutsche Bank Securities Inc.  If J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. agree to release or waive the restrictions set forth in any “lock-up” agreement delivered pursuant to Section 8(n) of this Agreement for an officer or director of the Company and provide the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company will announce the impending release or waiver by a press release substantially in the form of Annex C hereto through a major news service at least two business days before the effective date of the release or waiver.

(i)Use of Proceeds.  The Company will apply the net proceeds from the sale of the Shares as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus under the heading “Use of proceeds”.

(j)No Stabilization.  The Company will not take, directly or indirectly, any action designed to or that could reasonably be expected to cause or result in any stabilization or manipulation of the price of the Stock.

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(k)Exchange Listing.  The Company will use its reasonable best efforts to list for quotation the Shares on the Nasdaq Global Market (the “Nasdaq Market”).

(l)Reports.  So long as the Shares are outstanding, the Company will furnish to the Representatives, as soon as they are available, copies of all reports or other communications (financial or other) furnished to holders of the Shares, and copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange or automatic quotation system; provided that the Company shall not be required to provide documents that are available through the Commission’s Electronic Data Gathering, Analysis and Retrieval System.

(m)Record Retention.  The Company will, pursuant to reasonable procedures developed in good faith, retain copies of each Issuer Free Writing Prospectus that is not filed with the Commission in accordance with Rule 433 under the Securities Act.

(n)Filings.  The Company will file with the Commission such reports as may be required by Rule 463 under the Securities Act.

6.Further Agreements of the Selling Stockholders.  Each of the Selling Stockholders covenants and agrees with each Underwriter that:

(a)Clear Market.  It has delivered to the Representatives a “lock-up” agreement substantially in the form of Exhibit A hereto.

(b)Tax Form.  It will deliver to the Representatives prior to or at the Closing Date a properly completed and executed United States Treasury Department Form W-9 (or other applicable form or statement specified by the Treasury Department regulations in lieu thereof) in order to facilitate the Underwriters’ documentation of their compliance with the reporting and withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982 with respect to the transactions herein contemplated.

7.Certain Agreements of the Underwriters.  Each Underwriter hereby represents and agrees that:

(a)It has not used, authorized use of, referred to or participated in the planning for use of, and will not use, authorize use of, refer to or participate in the planning for use of, any “free writing prospectus”, as defined in Rule 405 under the Securities Act (which term includes use of any written information furnished to the Commission by the Company and not incorporated by reference into the Registration Statement and any press release issued by the Company) other than (i) a free writing prospectus that contains no “issuer information” (as defined in Rule 433(h)(2) under the Securities Act) that was not included (including through incorporation by reference) in the Preliminary Prospectus or a previously filed Issuer Free Writing Prospectus, (ii) any Issuer Free Writing Prospectus listed on

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Annex A or prepared pursuant to Section 3(c) or Section 5(c) above (including any electronic road show), or (iii) any free writing prospectus prepared by such underwriter and approved by the Company in advance in writing (each such free writing prospectus referred to in clauses (i) or (iii), an “Underwriter Free Writing Prospectus”).

(b)It has not and will not, without the prior written consent of the Company, use any free writing prospectus that contains the final terms of the Shares unless such terms have previously been included in a free writing prospectus filed with the Commission; provided that Underwriters may use a term sheet substantially in the form of Annex B hereto without the consent of the Company; provided further that any Underwriter using such term sheet shall notify the Company, and provide a copy of such term sheet to the Company, prior to, or substantially concurrently with, the first use of such term sheet.

(c)It is not subject to any pending proceeding under Section 8A of the Securities Act with respect to the offering (and will promptly notify the Company and the Selling Stockholders if any such proceeding against it is initiated during the Prospectus Delivery Period).

8.Conditions of Underwriters’ Obligations.  The obligation of each Underwriter to purchase the Underwritten Shares on the Closing Date or the Option Shares on the Additional Closing Date, as the case may be, as provided herein is subject to the performance by the Company and each of the Selling Stockholders of their respective covenants and other obligations hereunder and to the following additional conditions:

(a)Registration Compliance; No Stop Order.  No order suspending the effectiveness of the Registration Statement shall be in effect, and no proceeding for such purpose, or pursuant to Section 8A under the Securities Act shall be pending before or threatened by the Commission; the Prospectus and each Issuer Free Writing Prospectus shall have been timely filed with the Commission under the Securities Act (in the case of an Issuer Free Writing Prospectus, to the extent required by Rule 433 under the Securities Act) and in accordance with Section 5(a) hereof; and all requests by the Commission for additional information shall have been complied with to the reasonable satisfaction of the Representatives.

(b)Representations and Warranties.  The respective representations and warranties of the Company and the Selling Stockholders contained herein shall be true and correct on the date hereof and on and as of the Closing Date or the Additional Closing Date, as the case may be; and the statements of the Company and its officers and of each of the Selling Stockholders and their officers made in any certificates delivered pursuant to this Agreement shall be true and correct on and as of the Closing Date or the Additional Closing Date, as the case may be.

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(c)No Downgrade.  Subsequent to the earlier of (A) the Applicable Time and (B) the execution and delivery of this Agreement, if there are any debt securities or preferred stock of or guaranteed by the Company or any of its subsidiaries that are rated by a “nationally recognized statistical rating organization”, as such term is defined by the Commission for purposes of Rule 436(g)(2) under the Securities Act, (i) no downgrading shall have occurred in the rating accorded any such debt securities or preferred stock and (ii) no such organization shall have publicly announced that it has under surveillance or review, or has changed its outlook with respect to, its rating of any such debt securities or preferred stock (other than an announcement with positive implications of a possible upgrading).

(d)No Material Adverse Change.  No event or condition of a type described in Section 3(f) hereof shall have occurred or shall exist, which event or condition is not described in the Pricing Disclosure Package (excluding any amendment or supplement thereto) and the Prospectus (excluding any amendment or supplement thereto) and the effect of which in the judgment of the Representatives makes it impracticable or inadvisable to proceed with the offering, sale or delivery of the Shares on the Closing Date or the Additional Closing Date, as the case may be, on the terms and in the manner contemplated by this Agreement, the Pricing Disclosure Package and the Prospectus.

(e)Officer’s Certificate.  The Representatives shall have received on and as of the Closing Date or the Additional Closing Date, as the case may be, (x) a certificate of the chief financial officer or chief accounting officer of the Company and one additional senior executive officer of the Company who is satisfactory to the Representatives (i) confirming that such officers have carefully reviewed the Registration Statement, the Pricing Disclosure Package and the Prospectus and, to the knowledge of such officers, the representations of the Company set forth in Sections 3(b) and 3(d) hereof are true and correct, (ii) confirming that the other representations and warranties of the Company in this Agreement are true and correct and that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date or the Additional Closing Date, as the case may be, and (iii) to the effect set forth in paragraphs (a), (c) and (d) above and (y) a certificate of each of the Selling Stockholders, in form and substance reasonably satisfactory to the Representatives, (A) confirming that the representations of such Selling Stockholder set forth in Sections 4(e), 4(f) and 4(g) hereof are true and correct and (B) confirming that the other representations and warranties of such Selling Stockholder in this Agreement are true and correct and that such Selling Stockholder has complied with all agreements and satisfied all conditions on their part to be performed or satisfied hereunder at or prior to such Closing Date.

(f)Comfort Letters.  On the date of this Agreement and on the Closing Date or the Additional Closing Date, as the case may be, BDO USA, LLP shall have furnished to the Representatives, at the request of the Company, letters,

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dated the respective dates of delivery thereof and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representatives, containing statements and information of the type customarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus; provided that the letter delivered on the Closing Date or the Additional Closing Date, as the case may be, shall use a “cut-off” date no more than three business days prior to such Closing Date or such Additional Closing Date, as the case may be.

(g)Opinion and 10b-5 Statement of Counsel for the Company.  DLA Piper LLP (US), counsel for the Company, shall have furnished to the Representatives, at the request of the Company, their written opinion and 10b-5 statement, dated the Closing Date or the Additional Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representatives.

(h)Opinion of Special Regulatory Counsel for the Company.  Bingham McCutchen LLP, special counsel for the Company with respect to regulatory matters, shall have furnished to the Representatives, at the request of the Company, their written opinion, dated the Closing Date or the Additional Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representatives.

(i)Opinion of Counsel for the Selling Stockholders. [                    ], counsel for the Selling Stockholders, shall have furnished to the Representatives, at the request of the Selling Stockholders, their written opinion, dated the Closing Date or the Additional Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representatives.

(j)Opinion and 10b-5 Statement of Counsel for the Underwriters.  The Representatives shall have received on and as of the Closing Date or the Additional Closing Date, as the case may be, an opinion and 10b-5 statement of Goodwin Procter LLP, counsel for the Underwriters, with respect to such matters as the Representatives may reasonably request, and such counsel shall have received such documents and information as they may reasonably request to enable them to pass upon such matters.

(k)No Legal Impediment to Issuance and/or Sale.  No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any federal, state or foreign governmental or regulatory authority that would, as of the Closing Date or the Additional Closing Date, as the case may be, prevent the issuance or sale of the Shares by the Company or the sale of the Shares by the Selling Stockholders; and no injunction or order of any federal, state or foreign court shall have been issued that would, as of the Closing Date or the Additional Closing Date, as the case may be, prevent the issuance or

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sale of the Shares by the Company or the sale of the Shares by the Selling Stockholders.

(l)Good Standing.  The Representatives shall have received on and as of the Closing Date or the Additional Closing Date, as the case may be, satisfactory evidence of the good standing of the Company and its subsidiaries in their respective jurisdictions of organization and their good standing as foreign entities in such other jurisdictions as the Representatives may reasonably request, in each case in writing or any standard form of telecommunication from the appropriate governmental authorities of such jurisdictions.

(m)Exchange Listing.  The Shares to be delivered on the Closing Date or Additional Closing Date, as the case may be, shall have been approved for listing on the Nasdaq Market, subject to official notice of issuance.

(n)Lock-up Agreements.  The “lock-up” agreements, each substantially in the form of Exhibit A hereto, between you and certain stockholders, officers and directors of the Company relating to sales and certain other dispositions of shares of Stock or certain other securities, delivered to you on or before the date hereof, shall be full force and effect on the Closing Date or Additional Closing Date, as the case may be.

(o)Additional Documents.  On or prior to the Closing Date or the Additional Closing Date, as the case may be, the Company and the Selling Stockholders shall have furnished to the Representatives such further certificates and documents as the Representatives may reasonably request.

All opinions, letters, certificates and evidence mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Underwriters.

9.Indemnification and Contribution.

(a)Indemnification of the Underwriters by the Company.  The Company agrees to indemnify and hold harmless each Underwriter, its affiliates, directors and officers and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, reasonable legal fees and other reasonable expenses incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, that arise out of, or are based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, not misleading, (ii) or any untrue statement or alleged untrue statement of a material fact contained in the Prospectus (or any amendment or supplement thereto), any Issuer Free Writing Prospectus, any “issuer information” filed or required to be filed pursuant to Rule 433(d) under the Securities Act

30

or any Pricing Disclosure Package (including any Pricing Disclosure Package that has subsequently been amended), or caused by any omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in subsection (c) below.

(b)Indemnification of the Underwriters by the Selling Stockholders.  Each of the Selling Stockholders severally and not jointly in proportion to the number of Shares to be sold by such Selling Stockholder hereunder agrees to indemnify and hold harmless each Underwriter, its affiliates, directors and officers and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) above, provided that each Selling Stockholder’s agreement to indemnify and hold harmless hereunder shall only apply insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information furnished in writing by or on behalf of such Selling Stockholder expressly for use in the Registration Statement, the Prospectus (or any amendment or supplement thereto), any Issuer Free Writing Prospectus or any Pricing Disclosure Package, it being understood and agreed that the only such information furnished by or on behalf of such Selling Stockholder consists of such Selling Stockholder’s Selling Stockholder Information. No Selling Stockholder shall be liable under the indemnity agreement contained in this paragraph in excess of an amount equal to the aggregate net proceeds (after deducting underwriting commissions and discounts but before deducting expenses) applicable to the Shares sold by such Selling Stockholder pursuant to this Agreement.

(c)Indemnification of the Company and the Selling Stockholders.  Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each of the Selling Stockholders to the same extent as the indemnity set forth in paragraph (a) above, but only with respect to any losses, claims, damages or liabilities that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to such Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use in the Registration Statement, the Prospectus (or any amendment or supplement thereto), any Issuer Free Writing Prospectus or any Pricing Disclosure Package, it being understood and agreed upon that the only such information furnished by any Underwriter consists of the following information in the Prospectus furnished on behalf of each Underwriter: the concession and reallowance figures appearing in the third paragraph

31

under the caption “Underwriting”, the information contained in the thirteenth paragraph (stabilization) under the caption “Underwriting”.

(d)Notice and Procedures.  If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnification may be sought pursuant to the preceding paragraphs of this Section 9, such person (the “Indemnified Person”) shall promptly notify the person against whom such indemnification may be sought (the “Indemnifying Person”) in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under the preceding paragraphs of this Section 9 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under the preceding paragraphs of this Section 9.  If any such proceeding shall be brought or asserted against an Indemnified Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably satisfactory to the Indemnified Person (who shall not, without the consent of the Indemnified Person, be counsel to the Indemnifying Person) to represent the Indemnified Person in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are materially different from or in addition to those available to the Indemnifying Person; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interest between them. It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be paid or reimbursed as they are incurred. Any such separate firm for any Underwriter, its affiliates, directors and officers and any control persons of such Underwriter shall be designated in writing by J.P. Morgan Securities LLC, any such separate firm for the Company, its directors, its officers who signed the Registration Statement and any control persons of the Company shall be designated in writing by the Company and any such separate firm for the Selling Stockholders shall be designated in writing by the Attorneys-in-Fact or any one of them. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested that an Indemnifying Person reimburse the Indemnified Person for fees and expenses of counsel as

32

contemplated by this paragraph, the Indemnifying Person shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by the Indemnifying Person of such request and (ii) the Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement. No Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (x) includes an unconditional release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person.

(e)Contribution.  If the indemnification provided for in paragraphs (a), (b) and (c) above is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Stockholders, on the one hand, and the Underwriters on the other, from the offering of the Shares and with the proportions among the Company and the Selling Stockholders to reflect the relative fault of the Company and the Selling Stockholders or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of the Company and the Selling Stockholders, on the one hand, and the Underwriters on the other, in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations and with the proportions among the Company and the Selling Stockholders to reflect the relative fault of the Company and the Selling Stockholders. The relative benefits received by the Company and the Selling Stockholders, on the one hand, and the Underwriters on the other, shall be deemed to be in the same respective proportions as the net proceeds (before deducting expenses) received by the Company and the Selling Stockholders from the sale of the Shares and the total underwriting discounts and commissions received by the Underwriters in connection therewith, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate offering price of the Shares. The relative fault of the Company and the Selling Stockholders, on the one hand, and the Underwriters on the other, and among the Company and the Selling Stockholders shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Selling Stockholders or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. No Selling Stockholder shall be liable under the contribution agreement contained in this paragraph in excess of an amount equal to the aggregate net proceeds (after deducting underwriting

33

commissions and discounts but before deducting expenses) applicable to the Shares sold by such Selling Stockholder pursuant to this Agreement.

(f)Limitation on Liability.  The Company, the Selling Stockholders, the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Selling Stockholders or the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (e) above. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in paragraph (e) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with any such action or claim. Notwithstanding the provisions of this Section 9, in no event shall (i) an Underwriter be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter with respect to the offering of the Shares exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission or (ii) a Selling Stockholder be required to contribute, other than to the extent the losses, claims, damages, liabilities or expenses arose from the written information furnished to the Company by such Selling Stockholder expressly for use in the Registration Statement, the Pricing Disclosure Package or the Prospectus, any amount in excess of the amount by which the total net proceeds received by such Selling Stockholder (before deducting expenses) exceeds the amount of any damages that such Selling Stockholder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations to contribute pursuant to this Section 9 are several in proportion to their respective purchase obligations hereunder and not joint. Moreover, each Selling Stockholder’s obligations to contribute pursuant to this Section 9 are several and not joint in proportion to the number of Shares sold by such Selling Stockholder.

(g)Non-Exclusive Remedies.  The remedies provided for in this Section 9 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Person at law or in equity.

10.Effectiveness of Agreement.  This Agreement shall become effective upon the execution and delivery hereof by the parties hereto.

11.Termination.  This Agreement may be terminated in the absolute discretion of the Representatives, by notice to the Company and the Selling Stockholders, if after the execution and delivery of this Agreement and prior to the Closing Date or, in the case of the Option Shares, prior to the Additional Closing Date (i) trading generally shall have been suspended or materially limited on or by any of the New York Stock Exchange, the American Stock Exchange, The Nasdaq Stock Market, the Chicago Board Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade; (ii)

34

trading of any securities issued or guaranteed by the Company shall have been suspended on any exchange or in any over-the-counter market; (iii) a general moratorium on commercial banking activities shall have been declared by federal or New York State authorities; or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis, either within or outside the United States, that, in the judgment of the Representatives, is material and adverse and makes it impracticable or inadvisable to proceed with the offering, sale or delivery of the Shares on the Closing Date or the Additional Closing Date, as the case may be, on the terms and in the manner contemplated by this Agreement, the Pricing Disclosure Package and the Prospectus.

12.Defaulting Underwriter.

(a)If, on the Closing Date or the Additional Closing Date, as the case may be, any Underwriter defaults on its obligation to purchase the Shares that it has agreed to purchase hereunder on such date, the non-defaulting Underwriters may in their discretion arrange for the purchase of such Shares by other persons satisfactory to the Company and the Selling Stockholders on the terms contained in this Agreement.  If, within 36 hours after any such default by any Underwriter, the non-defaulting Underwriters do not arrange for the purchase of such Shares, then the Company and the Selling Stockholders shall be entitled to a further period of 36 hours within which to procure other persons satisfactory to the non-defaulting Underwriters to purchase such Shares on such terms.  If other persons become obligated or agree to purchase the Shares of a defaulting Underwriter, either the non-defaulting Underwriters or the Company and the Selling Stockholders may postpone the Closing Date or the Additional Closing Date, as the case may be, for up to five full business days in order to effect any changes that in the opinion of counsel for the Company, counsel for the Selling Stockholders or counsel for the Underwriters may be necessary in the Registration Statement and the Prospectus or in any other document or arrangement, and the Company agrees to promptly prepare any amendment or supplement to the Registration Statement and the Prospectus that effects any such changes.  As used in this Agreement, the term “Underwriter” includes, for all purposes of this Agreement unless the context otherwise requires, any person not listed in Schedule 1 hereto that, pursuant to this Section 12, purchases Shares that a defaulting Underwriter agreed but failed to purchase.

(b)If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by the non-defaulting Underwriters, the Company and the Selling Stockholders as provided in paragraph (a) above, the aggregate number of Shares that remain unpurchased on the Closing Date or the Additional Closing Date, as the case may be, does not exceed one-eleventh of the aggregate number of Shares to be purchased on such date, then the Company and the Selling Stockholders shall have the right to require each non-defaulting Underwriter to purchase the number of Shares that such Underwriter agreed to purchase hereunder on such date plus such Underwriter’s pro rata share (based on the number of Shares that such Underwriter agreed to purchase on such date) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made.

35

(c)If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by the non-defaulting Underwriters, the Company and the Selling Stockholders as provided in paragraph (a) above, the aggregate number of Shares that remain unpurchased on the Closing Date or the Additional Closing Date, as the case may be, exceeds one-eleventh of the aggregate amount of Shares to be purchased on such date, or if the Company and the Selling Stockholders shall not exercise the right described in paragraph (b) above, then this Agreement or, with respect to any Additional Closing Date, the obligation of the Underwriters to purchase Shares on the Additional Closing Date, shall terminate without liability on the part of the non-defaulting Underwriters.  Any termination of this Agreement pursuant to this Section 12 shall be without liability on the part of the Company, except that the Company will continue to be liable for the payment of expenses as set forth in Section 13 hereof and except that the provisions of Section 9 hereof shall not terminate and shall remain in effect.

(d)Nothing contained herein shall relieve a defaulting Underwriter of any liability it may have to the Company, the Selling Stockholders or any non-defaulting Underwriter for damages caused by its default.

13.Payment of Expenses.

(a)Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, the Company will pay or cause to be paid all costs and expenses incident to the performance of its obligations hereunder, including without limitation, (i) the costs incident to the authorization, issuance, sale, preparation and delivery of the Shares and any taxes payable in that connection; (ii) the costs incident to the preparation, printing and filing under the Securities Act of the Registration Statement, the Preliminary Prospectus, any Issuer Free Writing Prospectus, any Pricing Disclosure Package and the Prospectus (including all exhibits, amendments and supplements thereto) and the distribution thereof; (iii) the costs of reproducing and distributing this Agreement; (iv) the fees and expenses of the Company’s counsel and independent accountants; (v) the fees and expenses incurred in connection with the registration or qualification and determination of eligibility for investment of the Shares under the state or foreign securities or blue sky laws of such jurisdictions as the Representatives may designate and the preparation, printing and distribution of a Blue Sky Memorandum (including the related fees and expenses of counsel for the Underwriters); (vi) the cost of preparing stock certificates; (vii) the costs and charges of any transfer agent and any registrar; (viii) all expenses and application fees incurred in connection with any filing with, and clearance of the offering by, FINRA; (ix) all expenses incurred by the Company in connection with any “road show” presentation to potential investors, it being understood that the Underwriters will pay all of the travel, lodging and other expenses of the Underwriters or any of their employees incurred by them in connection with the road show; provided that the Company and the Underwriters shall each bear 50% of the costs associated with any aircraft used in connection with the “road show” undertaken in connection with the marketing of the offering of the Shares; and (x) all expenses and application fees related to the listing of the Shares on the Nasdaq Market.  It is further understood that each Selling Stockholder shall pay all underwriting discounts, selling commissions and transfer taxes

36

payable in connection with its sale of Shares to the Underwriters and that the Company shall pay all other reasonable fees and expenses of the Selling Stockholders incurred in connection with this Agreement and the transactions contemplated hereby (including without limitation the reasonable fees and expenses of their respective counsel).

(b)If the Company or the Selling Stockholders for any reason fail to tender the Shares for delivery to the Underwriters (other than as a result of the instances described in Section 12) or the Underwriters decline to purchase the Shares for any reason permitted under this Agreement (other than as a result of the instances described in clauses (iii) or (iv) of Section 11 or pursuant to Section 12), the Company and the Selling Stockholders agree to reimburse the Underwriters for all out-of-pocket costs and expenses (including the fees and expenses of their counsel) reasonably incurred by the Underwriters in connection with this Agreement and the offering contemplated hereby.

14.Persons Entitled to Benefit of Agreement.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and any controlling persons referred to in Section 9 hereof.  Nothing in this Agreement is intended or shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein.  No purchaser of Shares from any Underwriter shall be deemed to be a successor merely by reason of such purchase.

15.Survival.  The respective indemnities, rights of contribution, representations, warranties and agreements of the Company, the Selling Stockholders and the Underwriters contained in this Agreement or made by or on behalf of the Company, the Selling Stockholders or the Underwriters pursuant to this Agreement or any certificate delivered pursuant hereto shall survive the delivery of and payment for the Shares and shall remain in full force and effect, regardless of any termination of this Agreement or any investigation made by or on behalf of the Company, the Selling Stockholders or the Underwriters.

16.Certain Defined Terms.  For purposes of this Agreement, (a) except where otherwise expressly provided, the term “affiliate” has the meaning set forth in Rule 405 under the Securities Act; (b) the term “business day” means any day other than a day on which banks are permitted or required to be closed in New York City; and (c) the term “subsidiary” has the meaning set forth in Rule 405 under the Securities Act.

17.Miscellaneous.

(a)Authority of J.P. Morgan Securities LLC and Deutsche Bank Securities Inc.  Any action by the Underwriters hereunder may be taken by J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. on behalf of the Underwriters, and any such action taken by J.P. Morgan Securities LLC or Deutsche Bank Securities Inc. shall be binding upon the Underwriters.

(b)Notices.  All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted and

37

confirmed by any standard form of telecommunication.  Notices to the Underwriters shall be given to the Representatives c/o J.P. Morgan Securities LLC, 383 Madison Avenue, New York, New York 10179 (fax: (212) 622-8358), Attention: Equity Syndicate Desk; c/o Deutsche Bank Securities Inc., 60 Wall Street, 4th Floor, New York, New York 10011 (fax: (212) 797-9344), Attention: ECM Syndicate Desk, with a copy to the General Counsel (fax: (212) 797-4561); and c/o Barclays Capital Inc., 745 Seventh Avenue, New York, New York 10019 (fax: (646) 834-8133), Attention: Syndicate Registration.  Notices to the Company shall be given to it at IntelePeer, Inc., 2855 Campus Drive, Suite 200, San Mateo, California 94403 (fax: (650) 287-2628); Attention: Andre Simone.  Notices to the Selling Stockholders shall be given to the Attorneys-in-Fact at IntelePeer, Inc., 2855 Campus Drive, Suite 200, San Mateo, California 94403 (fax: (650) 287-2628); Attention: Frank Fawzi and Andre Simone.

(c)Governing Law.  This Agreement and any claim, controversy or dispute arising under or related to this Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in such state.

(d)Counterparts.  This Agreement may be signed in counterparts (which may include counterparts delivered by any standard form of telecommunication), each of which shall be an original and all of which together shall constitute one and the same instrument.

(e)Amendments or Waivers.  No amendment or waiver of any provision of this Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto.

(f)Headings.  The headings herein are included for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.

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If the foregoing is in accordance with your understanding, please indicate your acceptance of this Agreement by signing in the space provided below.

Very truly yours,
INTELEPEER, INC.
By:
	Title:
SELLING STOCKHOLDERS
By:
	Name:
	Title:
By:
	Name:
	Title:
As Attorneys-in-Fact acting on
behalf of each of the Selling
Stockholders named in
Schedule 2 to this Agreement.

39

Accepted: [                    ], 2011
J.P. MORGAN SECURITIES LLC
DEUTSCHE BANK SECURITIES INC.
BARCLAYS CAPITAL INC.
For themselves and on behalf of the
several Underwriters listed
in Schedule 1 hereto.
J.P. MORGAN SECURITIES LLC
By:
	Authorized Signatory
DEUTSCHE BANK SECURITIES INC.
By:
	Authorized Signatory
By:
	Authorized Signatory
BARCLAYS CAPITAL INC.
By:
	Authorized Signatory

40

Schedule 1

Underwriter	Number of Shares
J.P. Morgan Securities LLC	[            ]
Deutsche Bank Securities Inc.	[            ]
Barclays Capital Inc.	[            ]
RBC Capital Markets, LLC	[            ]
William Blair & Company, L.L.C.	[            ]
Total

Sch. 1-1

Schedule 2

Selling Stockholders: Number of
Underwritten Shares: Number of
Option Shares:

Attorneys-in-Fact acting on behalf of each of the Selling Stockholders named in this Schedule 2:

Frank Fawzi

Andre Simone

Sch. 2-1

Schedule 3

Significant Subsidiaries

IntelePeer Virginia, Inc.

Sch. 3-1

Annex A

a.  Pricing Disclosure Package

b.  Pricing Information Provided Orally by Underwriters

Annex A-1

Annex B

IntelePeer, Inc.

Pricing Term Sheet

Annex B-1

Annex C

[Form of Press Release]

IntelePeer, Inc.

[Date]

IntelePeer, Inc. (the “Company”) announced today that J.P. Morgan Securities LLC and Deutsche Bank Securities Inc., as representatives for the underwriters in the Company’s recent public sale of [          ] shares of common stock, are [waiving][releasing] a lock-up restriction with respect to [          ] shares of the Company’s common stock held by [certain officers or directors][an officer or director] of the Company.  The [waiver][release] will take effect on [          ] [    ], 20[    ], and the shares may be sold on or after such date.

This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.

Annex C-1

Exhibit A

FORM OF LOCK-UP AGREEMENT

A-1

EX-3.5

Exhibit 3.5

CERTIFICATE OF AMENDMENT

TO

CERTIFICATE OF INCORPORATION

OF

INTELEPEER, INC.

IntelePeer, Inc. (the “Corporation”), a corporation duly organized and existing under the General Corporation Law of the State of Delaware, does hereby certify that:

1.The Board of Directors of the Corporation, acting in accordance with the provisions of Sections 141 and 242 of the General Corporation Law of the State of Delaware, adopted resolutions setting forth a proposed amendment to the Corporation’s Certificate of Incorporation as follows:

Section A of Article IV shall be amended to read in full as follows:

“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 80,000,000 shares of Common Stock, par value $0.0001 per share (the “Common Stock”) and 44,760,592 shares of Preferred Stock, par value $0.0001 per share (the “Preferred Stock”).  The Preferred Stock shall be divided into three series.  The first series of Preferred Stock shall consist of 1,280,210 shares and shall be designated “Series A Preferred Stock.”  The second series of Preferred Stock shall consist of 24,730,382 shares and shall be designated “Series B Preferred Stock.”  The third series of Preferred Stock shall consist of 18,750,000 shares and shall be designated “Series C Preferred Stock.  Immediately upon filing of this Certificate of Amendment with the Secretary of State of the State of Delaware, every 1.5 shares of the Corporation’s Series C Preferred Stock shall be combined and reconstituted as 1 share of Series C Preferred Stock, every 1.5 shares of the Corporation’s Series B Preferred Stock shall be combined and reconstituted as 1 share of Series B Preferred Stock, every 1.5 shares of the Corporation’s Series A Preferred Stock outstanding immediately prior to such filing shall be combined and reconstituted as 1 share of the Corporation’s Series A Preferred Stock and every 1.5 shares of the Corporation’s Common Stock outstanding immediately prior to such filing shall be combined and reconstituted as 1 share of the Corporation’s Common Stock.  The split of the outstanding shares of Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock and Common Stock shall be referred to as the “Reverse Split.”

The Reverse Split shall occur without any further action on the part of the Corporation or the holders thereof and whether or not certificates representing the holders’ shares prior to the Reverse Split are surrendered for cancellation.

No fractional interest in a share of Preferred Stock or Common Stock shall be deliverable upon the Reverse Split.  All shares of any series of Preferred Stock (including fractions thereof), and all shares of Common Stock (including fractions thereof) held by a holder immediately prior to the Reverse Split shall be aggregated for purposes of determining whether the Reverse Split would result in the issuance of a fractional share.  Any fractional share resulting from such

1

aggregation of Preferred Stock or Common Stock upon the Reverse Split shall be rounded down to the nearest whole share.  The Corporation shall not be obliged to issue certificates evidencing the shares of Preferred Stock or Common Stock outstanding as a result of the Reverse Split unless and until the certificates evidencing the shares held by a holder prior to the Reverse Split are either delivered to the Corporation or its transfer agent, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates.

2.The foregoing Certificate of Amendment of Certificate of Incorporation has been duly approved by the stockholders in accordance with Sections 228 and 242 of the General Corporation Law.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to Certificate of Incorporation to be executed this 9th day of August, 2011.

/s/ Andre Simone

Andre Simone, Chief Financial Officer

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EX-3.6

Exhibit 3.6

CERTIFICATE OF AMENDMENT

TO

CERTIFICATE OF INCORPORATION

OF

INTELEPEER, INC.

IntelePeer, Inc. (the “Corporation”), a corporation duly organized and existing under the General Corporation Law of the State of Delaware, does hereby certify that:

1.The Board of Directors of the Corporation, acting in accordance with the provisions of Sections 141 and 242 of the General Corporation Law of the State of Delaware, adopted resolutions setting forth a proposed amendment to the Corporation’s Certificate of Incorporation as follows:

Section A of Article IV shall be amended to read in full as follows:

“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 80,000,000 shares of Common Stock, par value $0.0001 per share (the “Common Stock”) and 44,760,592 shares of Preferred Stock, par value $0.0001 per share (the “Preferred Stock”).  The Preferred Stock shall be divided into three series.  The first series of Preferred Stock shall consist of 1,280,210 shares and shall be designated “Series A Preferred Stock.”  The second series of Preferred Stock shall consist of 24,730,382 shares and shall be designated “Series B Preferred Stock.”  The third series of Preferred Stock shall consist of 18,750,000 shares and shall be designated “Series C Preferred Stock.

Immediately upon filing of this Certificate of Amendment with the Secretary of State of the State of Delaware, every 1.33333333 shares of the Corporation’s Series C Preferred Stock shall be combined and reconstituted as 1 share of Series C Preferred Stock, every 1.33333333 shares of the Corporation’s Series B Preferred Stock shall be combined and reconstituted as 1 share of Series B Preferred Stock, every 1.33333333 shares of the Corporation’s Series A Preferred Stock outstanding immediately prior to such filing shall be combined and reconstituted as 1 share of the Corporation’s Series A Preferred Stock and every 1.33333333 shares of the Corporation’s Common Stock outstanding immediately prior to such filing shall be combined and reconstituted as 1 share of the Corporation’s Common Stock.  The combination and reconstitution of the outstanding shares of Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock and Common Stock shall be referred to as the “Reverse Split.”

The Reverse Split shall occur without any further action on the part of the Corporation or the holders thereof and whether or not certificates representing the holders’ shares prior to the Reverse Split are surrendered for cancellation.

No fractional interest in a share of Preferred Stock or Common Stock shall be deliverable upon the Reverse Split.  All shares of any series of Preferred Stock (including fractions thereof), and all shares of Common Stock (including fractions thereof) held by a holder immediately prior to the Reverse Split shall be aggregated for purposes of determining whether the Reverse Split would result in the issuance of a fractional share.  Any shares resulting from such aggregation of

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fractional interests of a holder of Preferred Stock or Common Stock upon the Reverse Split shall be rounded down to the nearest whole share.  The Corporation shall not be obliged to issue certificates evidencing the shares of Preferred Stock or Common Stock outstanding as a result of the Reverse Split unless and until the certificates evidencing the shares held by a holder prior to the Reverse Split are either delivered to the Corporation or its transfer agent, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates.

2.The foregoing Certificate of Amendment of Certificate of Incorporation has been duly approved by the stockholders in accordance with Sections 228 and 242 of the General Corporation Law.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to Certificate of Incorporation to be executed this 29th day of September, 2011.

/s/ Andre Simone

Andre Simone, Chief Financial Officer

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EX-4.22

Exhibit 4.22

IntelePeer, Inc.

STOCKHOLDER AGREEMENT

This Stockholder Agreement (as it may be amended from time to time in accordance with the terms hereof, the “Agreement”), dated as of August 3, 2011, is made by and among VantagePoint Venture Partners 2006 (Q), L.P. (“VantagePoint”),KENNET II L.P. (“Kennet”) and IntelePeer, Inc., a Delaware corporation (the “Company”).

RECITALS

A.            The Company is proposing to sell common shares, par value $0.0001 per share, to the public in an initial public offering (SEC File No. 333-17480) (the “IPO”); and

B.            VantagePoint and Kennet (individually, an “Investor” and collectively, the “Investors”) collectively own greater than fifty percent of the Company’s outstanding shares prior to the IPO.  The Investors and the Company wish to set forth certain governance and other rights and obligations between them applicable after the consummation of the IPO.

NOW, THEREFORE, in consideration of the foregoing and the mutual promises, covenants and agreements of the parties hereto, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

SECTION 1

DEFINITIONS

1.1           Definitions.  As used in this Agreement, the following terms shall have the following meanings:

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person.  For these purposes, “control” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Agreement” has the meaning set forth in the preamble.

“Board of Directors” means the board of directors of the Company.

“Business Day” means any day other than a Saturday, Sunday or day on which banking institutions in San Francisco, California are authorized or obligated by law or executive order to close.

“Certificate” means the amended and restated certificate of incorporation and amended and restated bylaws of the Company, as applicable.

“Company” has the meaning set forth in the preamble.

“Company Shares” means shares of the Company’s common stock.

“Effective Date” means the effective date of the Registration Statement filed by the Company with the Securities and Exchange Commission relating to the IPO.

“Investors” has the meaning set forth in the preamble, and includes any Affiliate of the Investors.

“IPO” has the meaning set forth in the recitals.

“Necessary Action” means, with respect to a specified result, all actions necessary to cause such result, including (i) voting or providing a written consent or proxy with respect to the Company Shares, and including designees as Company nominees in proxy and other documents, recommending election and soliciting proxies with respect to any Sponsor Director, and opposing any removal, replacement or “withhold” votes with respect to any Sponsor Director, (ii) causing the adoption of stockholders’ resolutions and amendments to the Certificate, (iii) causing members of the Board of Directors to act in a certain manner or causing them to be removed in the event they do not act in such a manner, (iv) executing agreements and instruments, and (v) making, or causing to be made, with governmental, administrative or regulatory authorities, all filings, registrations or similar actions that are required to achieve such result.

“Person” means an individual, partnership, limited liability company, corporation, trust, association, estate, unincorporated organization or a government or any agency or political subdivision thereof.

“Sponsor Director” means any member of the Board of Directors designated by one of the Investors.

1.2           Other Interpretive Provisions.

(a)           The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

(b)           The words “hereof”, “herein”, “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and any subsection and Section references are to this Agreement unless otherwise specified.

(c)           The term “including” is not limiting and means “including without limitation.”

(d)           The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.

(e)           Whenever the context requires, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms.

1.3           Effectiveness of Provisions.  The provisions of Section 3 shall take effect upon the Effective Date.  In the event that the Effective Date has not occurred by December 31, 2011, this Agreement shall terminate and shall have no further force or effect.

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SECTION 2

REPRESENTATIONS AND WARRANTIES

Each of the parties to this Agreement hereby represents and warrants to each other party to this Agreement that as of the date such party executes this Agreement:

2.1           Existence; Authority; Enforceability.  Such party has the power and authority to enter into this Agreement and to carry out its obligations hereunder.  Such party is duly organized and validly existing under the laws of its jurisdiction of organization, and the execution of this Agreement, and the consummation of the transactions contemplated herein, have been authorized by all necessary action, and no other act or proceeding on its part is necessary to authorize the execution of this Agreement or the consummation of any of the transactions contemplated hereby.  This Agreement has been duly executed by it and constitutes its legal, valid and binding obligations, enforceable against it in accordance with its terms.

2.2           Absence of Conflicts.  The execution and delivery by such party of this Agreement and the performance of its obligations hereunder does not and will not (a) conflict with, or result in the breach of any provision of the constitutive documents of such party; (b) result in any violation, breach, conflict, default or event of default (or an event which with notice, lapse of time, or both, would constitute a default or event of default), or give rise to any right of acceleration or termination or any additional payment obligation, under the terms of any contract, agreement or permit to which such party is a party or by which such party’s assets or operations are bound or affected; or (c) violate any law applicable to such party.

2.3           Consents.  Other than any consents which have already been obtained, no consent, waiver, approval, authorization, exemption, registration, license or declaration is required to be made or obtained by such party in connection with (a) the execution, delivery or performance of this Agreement or (b) the consummation of any of the transactions contemplated herein.

SECTION 3

GOVERNANCE

3.1           Board Designation.

(a)           Designation Rights.  So long as an Investor beneficially owns not less than 50% of the number of Company Shares owned by such Investor immediately prior to the IPO (the “Share Ownership Threshold”), such Investor shall be entitled to designate one member of the Board of Directors.  If an Investor ceases to satisfy the Share Ownership Threshold, then such Investor shall not be entitled to designate any member of the Board of Directors.  The Company shall use its best efforts to cause the persons designated by the Investor to be elected to the Board of Directors.  Section 2.15 of the Company’s bylaws in effect following the IPO shall not apply to the Investors’ rights and the Company’s obligations under this paragraph.

(b)           Initial Designation.  The initial directors designated by the Investors pursuant to Section 3.1(a) are William Harding (who shall serve as a Class III director designated by VantagePoint in accordance with the Certificate) and Javier Rojas (who shall serve as a Class I director designated by Kennet in accordance with the Certificate).

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3.2           Removal and Replacement; Vacancies.

(a)           A Sponsor Director may be removed by, and only by, the affirmative vote or written consent of the Investor which originally designated such director, which removal may be made at any time by such Investor in its sole discretion and if, prior to his or her appointment to the Board of Directors, any person is unable or unwilling to serve as a Sponsor Director, then the Investor which designated such person shall be entitled to designate a replacement.  If, following appointment to the Board of Directors, any Sponsor Director resigns, is removed, or is unable to serve for any reason prior to the expiration of his or her term as a director, then, the Investor which designated such director shall be solely entitled to designate a replacement.  If the Investor fails to do so within sixty (60) days, the right of such Investor pursuant to Section 3.1 shall terminate.

(b)           To the extent an Investor desires to remove a Sponsor Director, then such Investor shall send a written notice to the Secretary of the Company stating the name of the Sponsor Director to be removed from the Board of Directors and, upon receipt of such notice by the Secretary of the Company, such Sponsor Director shall be deemed to have resigned from the Board of Directors, and the vacancy in one or more classes of directors created thereby (and, thereafter, any vacancy created in that particular directorship) shall be filled by the Investor removing such Sponsor Director in its discretion, it being understood that neither the Company nor the Board of Directors shall have the power to fill any such vacancy.

3.3           Committees.

(a)           Composition.  So long as an Investor is entitled to designate a Sponsor Director under Section 3.1, it shall have the right to designate its Sponsor Director to serve as a member of each committee of the Board of Directors other than the Audit Committee; provided, further, however, that no such right to designate a Sponsor Director to a Board of Directors committee would violate the U.S. federal securities laws, the rules and regulations promulgated thereunder and applicable listing standards and rules of the securities exchange on which a class of the Company’s securities are listed (without regard to any available “controlled company” exceptions to such laws, rules and regulations and standards).  To the extent that a Sponsor Director is removed from the Board pursuant to Section 3.2, such Sponsor Director shall be deemed to have resigned from all committees upon which such Sponsor Director is serving.  Any vacancies on the Board of Director’s committees created thereby (and, thereafter, any vacancies created in these committee memberships) shall, to the extent the Investor continues to have the right to appoint a Sponsor Director to the Board of Directors’ committees, be filled by the Investor which originally designated the Sponsor Director in its discretion.

(b)           Authority.  No committee of the Board of Directors shall have the power to act for the Board of Directors where such action would require the Investor’s approval pursuant to Section 3.4 or 3.5 or otherwise expressly require the vote or consent of a majority of the Board of Directors under applicable law, the Certificate or this Agreement.

3.4           Actions Requiring The Investors Approval.  So long as both of the Investors continue to have a right to designate a Sponsor Director pursuant to Section 3.1 hereof and the Investors collectively beneficially own 35% or more of the voting power of the Company Shares, the Company shall not take any of the following actions without the approval of the Sponsor Directors then in office unless such action has been approved by or is subject to the approval of a vote of the stockholders of the Company:

(a)           issue any new class or series of equity security (in one or more steps) having economic rights senior to the Company’s Shares or having voting rights other than those granted to the common

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stock generally (other than issuances that would not dilute the percentage interest in Company Shares of any Company stockholder or otherwise adversely affect the rights of the Investors, including the issuance of a new class of shares for a stockholder rights plan);

(b)           issue new securities (including any security or other right convertible into or exercisable for any equity security) in one or a series of related transactions which dilute the outstanding Company Shares by more than 20%; provided that the foregoing shall not apply to the issuance of new securities to the owners of a business in connection with Company’s acquisition of that business or its assets; or

(c)           change the advance notice provision in the Company’s bylaws for stockholder proposals or director nominations, or delay the Company’s annual meeting by more than 90 days from the date originally set by the Board of Directors.

3.5           Other Changes.  For so long as an Investor has a right to designate a Sponsor Director pursuant to Section 3.1, such Investor’s approval shall be required for the Company to take any of the following actions:

(a)           Change the authorized number of directors of the Company to a size above eight (8) or below six (6);

(b)           change the class of directors of any Sponsor Director; or

(c)           amend the Certificate or the Company’s bylaws if the amendment impairs the Investor’s rights under this Agreement.

SECTION 4

CONSENTS

4.1           Consents.  Concurrent with the execution of this Agreement, each of the Investors (a) agrees to execute and deliver to the Company a stockholder consent approving the form of Restated Certificate of Incorporation and Bylaws as filed as Exhibits 3.2 and 3.4 to Amendment No. 2 to the Registration Statement filed by the Company with the Securities and Exchange Commission in connection with the IPO (the “Registration Statement”) and (b) confirms their approval of a waiver of (i) the fourth sentence of Section 3 (c) of that certain Registration Rights Agreement dated as of October 31, 2008, by and among the Company and the other signatories thereto, as amended to date (the “Rights Agreement”) such that such sentence shall not apply to the IPO as long as the IPO is completed prior to December 31, 2011 and to the extent it is necessary to allocate shares among the participating selling stockholders the shares sold in the IPO by the Investors are not less than the number that they would be able to sell if the shares sold in the IPO by all selling stockholders are allocated proportionately among them based on their relative numbers of shares which each has irrevocably elected to sell and (ii) the right to invoke the second demand registration right pursuant to Section 2 of the Rights Agreement.

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SECTION 5

GENERAL PROVISIONS

5.1           Waiver by The Investors.  The rights and obligations contained in this Agreement are in addition to the relevant provisions of the Certificate in force from time to time and shall be construed to comply with such provisions.  To the extent that this Agreement is determined to be in contravention of the Certificate, this Agreement shall constitute a waiver by the Investors, to the fullest extent permissible under applicable laws, of any right the Investors may have pursuant to the Certificate that is inconsistent with this Agreement.

5.2           Assignment; Benefit.

(a)           The rights and obligations hereunder shall not be assignable without the prior written consent of the other parties hereto.  Any assignment of rights or obligations in violation of this Section shall be null and void.

(b)           This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, and their respective successors and permitted assigns.

5.3           Termination.  The obligations set forth in Section 3 of this Agreement shall terminate at such time as set forth in such Section or upon the termination of this Agreement.  This Agreement shall terminate on the later of the date three years from the Effective Date or the third annual meeting of stockholders after the IPO; provided that the Company shall have no obligation to nominate any Sponsor Director for election at the third annual meeting of stockholders after the IPO.

5.4           Severability.  In the event that any provision of this Agreement shall be invalid, illegal or unenforceable such provision shall be construed by limiting it so as to be valid, legal and enforceable to the maximum extent provided by law and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

5.5           Entire Agreement; Amendment.  This Agreement sets forth the entire understanding and agreement between the parties with respect to the subject matter hereof and supersedes and replaces any prior understanding, agreement or statement of intent, in each case written or oral, of any kind and every nature with respect hereto.  No provision of this Agreement may be amended, modified or waived in whole or in part at any time without an agreement in writing executed by each of the parties hereto.  No waiver of any breach of any of the terms of this Agreement shall be effective unless such waiver is expressly made in writing and executed and delivered by the party against whom such waiver is claimed.  The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach.  Except as otherwise expressly provided herein, no failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder, or otherwise available in respect hereof at law or in equity, shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

5.6           Counterparts.  This Agreement may be executed in any number of separate counterparts each of which when so executed shall be deemed to be an original and all of which together shall constitute one and the same agreement.

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5.7           Notices.  Unless otherwise specified herein, all notices, consents, approvals, reports, designations, requests, waivers, elections and other communications authorized or required to be given pursuant to this Agreement shall be in writing and shall be given, made or delivered (and shall be deemed to have been duly given, made or delivered upon receipt) by personal hand-delivery, by facsimile transmission, by electronic mail, by mailing the same in a sealed envelope, registered first-class mail, postage prepaid, return receipt requested, or by air courier guaranteeing overnight delivery, addressed to the parties at the following addresses (or at such other address for such party as shall be specified by like notice):

if to VantagePoint, to:

VantagePoint Capital Partners
1001 Bayhill Drive, Suite 300
San Bruno, California 94066
Attn:       General Counsel
Tel: (650) 866-3100

Fax: (650) 869-6078

if to Kennett:

KENNET II L.P.
950 Tower Lane, Suite 1710
Foster City, CA 94404

Attn:  Javier Rojas
Tel: 650.573.8700

if to the Company:

IntelePeer, Inc.
2855 Campus Drive, Suite 200
San Mateo, CA 94403

Attn:  Frank Fawzi
Tel: 650.525.9200

with a copy (which shall not constitute notice) to:

DLA Piper LLP (US)

2000 University Avenue
East Palo Alto, CA 94303

Attn:  Peter M. Astiz, Esq.

Tel: 650.833.2000

Fax: 650.833.2001

5.8           Governing Law.  THIS AGREEMENT AND ANY RELATED DISPUTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.

5.9           Jurisdiction.  ANY ACTION OR PROCEEDING AGAINST THE PARTIES RELATING IN ANY WAY TO THIS AGREEMENT MAY BE BROUGHT EXCLUSIVELY IN THE COURTS OF THE STATE OF DELAWARE OR (TO THE EXTENT SUBJECT MATTER JURISDICTION EXISTS THEREFORE) THE UNITED STATES DISTRICT COURT FOR THE

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DISTRICT OF DELAWARE, AND THE PARTIES IRREVOCABLY SUBMIT TO THE JURISDICTION OF BOTH SUCH COURTS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING.  ANY ACTIONS OR PROCEEDINGS TO ENFORCE A JUDGMENT ISSUED BY ONE OF THE FOREGOING COURTS MAY BE ENFORCED IN ANY JURISDICTION.

5.10         Waiver of Jury Trial.  TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, THE INVESTORS WAIVES, AND COVENANTS THAT SUCH PARTY WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH THE DEALINGS OF THE INVESTORS OR THE COMPANY IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT, TORT OR OTHERWISE.  The Company or the Investors may file an original counterpart or a copy of this Section  with any court as written evidence of the consent of such party to the waiver of their rights to trial by jury.

5.11         Specific Performance.  It is hereby agreed and acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them by this Agreement and that, in the event of any such failure, an aggrieved party will be irreparably damaged and will not have an adequate remedy at law.  Any such party shall, therefore, be entitled (in addition to any other remedy to which such party may be entitled at law or in equity) to injunctive relief, including specific performance, to enforce such obligations, without the posting of any bond, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law.

(signature page follows)

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The parties are signing this Agreement as of the date stated in the introductory clause.

INTELEPEER, INC., a Delaware corporation
By:	/s/ Andre Simone
INVESTOR:
VANTAGEPOINT VENTURE PARTNERS 2006 (Q), L.P.
By:	VantagePoint Venture Associates 2006, LLC,
	its General Partner
By:	/s/Alan E. Salzman
	Title: Managing Member
INVESTOR:
Execution by KENNET II L.P. acting by its manager KENNET CAPITAL MANAGEMENT (JERSEY) LTD.*
Executed by:
/s/ Sue Fossey
for and on behalf of
KENNET II L.P.
acting by its manager
KENNET CAPITAL MANAGEMENT (JERSEY) LTD.
Execution by KING STREET PARTNERS L.P. acting by its manager KENNET CAPITAL MANAGEMENT (JERSEY) LTD.*
Executed by:
/s/ Sue Fossey
*for and on behalf of
KING STREET PARTNERS L.P.
acting by its manager
KENNET CAPITAL MANAGEMENT (JERSEY) LTD.

EX-10.14

Exhibit 10.14

COMMERCIAL LEASE AGREEMENT

THIS LEASE AGREEMENT is made and entered into by and between Garvin Partners, (“Landlord”), a Delaware corporation, and IntelePeer, Inc. (“Tenant”) a Delaware corporation.

W I T N E S S E T H:

1.     PREMISES:  Landlord hereby leases to Tenant, and Tenant leases from Landlord for the Term (as defined below) and subject to the provisions herein the Premises consisting of approximately 15,744 rentable square feet described on Exhibit “A” attached hereto (hereinafter referred to as the “Demised Premises” or “Premises”) situated within the City and County of Denver, State of Colorado, also known as Suite 100 (5,639 rsf); Suite 150 (3,598 rsf); and Suite B100 (4,540 rsf); and Studio (1,967 rsf), 2300 15th Street, Denver, Colorado (“Building”), including the right to use, in common with others, as the same may exist from time to time at the discretion of the Landlord, the lobbies, entrances, stairs, elevators and other public or common portions of the Building together with parking and other rights set forth herein (collectively, “Building Complex”).

2.     TERM:  The Term of this lease shall be 12 months beginning on or about September 1, 2011, and terminating at 12:00 midnight on August 31, 2012 (“Term”).

3.RENT:  Tenant shall pay to Landlord as “Base Rent” for the term of this agreement the sum of Three Hundred Fourteen Thousand, Sixty-Three Dollars and 50/100s, ($314,063.50), payable as follows:

For the 12 month period from September 1, 2011 thru August 31, 2012 Tenant shall pay to Landlord the sum of Three Hundred Fourteen Thousand, Sixty-Three Dollars and 50/100s ($314,063.50) in equal monthly installments of Twenty-Six Thousand, One Hundred Seventy-One Dollars and 96/100s ($26,171.96)

All monthly installments of Base Rent and all Additional Rent payable hereunder shall be due and payable on or before the first day of each succeeding calendar month during the Term hereof; provided that, in the event the Term hereof shall commence or end during a calendar month, the rent for any fractional calendar month following the commencement or preceding the end of the term of this Lease shall be pro rated by the number of days the Lease is in effect during such month.

4.SECURITY DEPOSIT:  Tenant has on deposit with Landlord, at time of delivery of this lease, Seventeen Thousand Eight Hundred Forty-One Dollars and 04/100s. ($17,841.04) as a security deposit. Such security deposit shall be held by Landlord without interest as security for the performance by Tenant of Tenant’s covenants and obligations under this lease.  The security deposit is not an advance payment of rent, or the full measure of liquidated damages in case of default by Tenant. Upon the occurrence of any event of default, Landlord may, from time to time, without prejudice to any other remedy provided herein or provided by law, use the Security Deposit to the extent necessary to make good any arrears of rent and any other damage, injury, expense or liability caused to Landlord by such event of default.  Following any such application of the Security Deposit, Tenant shall pay to Landlord, on demand, the amount so applied in order to restore the Security Deposit to its original amount.  If Tenant is not in default, hereunder, any remaining balance of such deposit shall be returned by Landlord to Tenant within 30 days of expiration or termination of this lease.

5.ACCEPTANCE OF PREMISES:  Tenant acknowledges that it has fully inspected the Demised Premises and accepts the Demised Premises, and any buildings and improvements situated thereon, in their present condition as suitable for the purposes for which the same are leased with the changes and improvements represented in Exhibit A.  Landlord’s complete obligation is delivering Premises consistent with Exhibit A.

Landlord, at Landlord’s sole cost and expense, shall ensure that all building standard electrical, HVAC and other mechanical systems are in good working order consistent with Tenant’s current Premises. Specifically excluded from landlord’s responsibilities are any items that are unique to the operation of the studio, and / or those that were installed by the previous tenant.

Tenant shall comply with all governmental laws, building codes, ordinances and regulations applicable to the use and maintenance of the Demised Premises, and shall promptly comply with all governmental orders and directives for the correction, prevention and abatement of nuisances in or upon or connected with the Demised Premises, all at Tenant’s sole expense.

6.CHARACTER OF OCCUPANCY:  The Demised Premises shall be used and occupied only for the purpose of general business offices and storage space for Tenant’s business, and related companies and not otherwise without Landlord’s consent.  Tenant shall at its own expense obtain any and all governmental licenses and permits necessary for such use.

(a)The Premises are to be used for general offices and storage space, and for no other purpose without the prior written consent of Landlord, which consent shall not be unreasonably withheld and shall be deemed granted if Landlord has not objected to such proposed use within five (5) business days after receipt of written request from Tenant.  Tenant shall procure, at its sole expense, all permits or licenses required for the transaction of business at the Premises.

(b)Tenant shall not suffer nor permit the Premises nor any part thereof to be used in any manner, nor anything to be done therein, nor suffer or permit anything to be brought into or kept therein, which would in any way (i) make void or voidable any fire or liability insurance policy then in force with respect to the Demised Premises and Building Complex, (ii) make unobtainable from reputable insurance companies authorized to do business in Colorado any fire insurance with extended coverage, or liability, elevator, boiler or other insurance required to be furnished by Landlord under the terms of any lease or mortgage affecting the Building Complex, (iii) cause or in Landlord’s reasonable opinion be likely to cause physical damage to the Building Complex or any part thereof, (iv) constitute a public or private nuisance, (v) impair, in the opinion of Landlord, the appearance, character or reputation of the Building Complex, or (vi) create waste in, on or around the Premises, Building, or Building Complex.

(c)Tenant shall not use the Premises nor permit anything to be done in or about the Premises or Building Complex which will in any way conflict with any law, statute, ordinance, protective covenants affecting the Building Complex or governmental or quasi-governmental rules or regulations now in force or which may hereafter be enacted or promulgated.  Tenant shall give written notice within five (5) days from receipt thereof to Landlord of any notice it receives of the violation of any law or requirement of any public authority with respect to the Premises or the use or occupation thereof.  Landlord shall give prompt notice to Tenant of any notice it receives relative to the violation by Tenant of any law or requirement of any public authority with respect to the Premises or the use or occupation thereof.

(d)Tenant agrees to submit to Landlord any report or reports or information, which is required by law or regulation relating to Tenant’s operations.

7.SERVICES AND UTILITIES:  Landlord agrees without charge to furnish Tenant with hot and cold running water in common areas, heating, ventilating and/or air conditioning in season during normal business hours and electric lighting for the Demised Premises and the common areas of the building.  With respect to any additional HVAC or electrical requirements of the Tenant, Landlord may furnish it only at Tenant’s written request and Tenant shall bear the entire charge thereof, which will be an amount equal to Landlord’s actual costs.  Such additional charges shall be payable with the next scheduled monthly rent payment.  In the event of any interruption, reduction or discontinuance of services, Landlord shall not be liable for damages to Tenant as a result thereof, or cause or permit an abatement or reduction or set-off of rent or operate to release Tenant from any of the Tenant’s obligations hereunder.

8.MAINTENANCE AND REPAIRS:  Tenant shall at its expense keep the Demised Premises in good condition and repair.  Tenant shall be responsible for the full cost of repair or

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replacement for damages to the Demised Premises or Building Complex caused by the negligence of Tenant, its employees, agents or invitees.  Tenant agrees that it will keep the Demised Premises in a safe, sanitary and orderly condition at all times.  Tenant, at its own expense, shall collect and dispose of all excess trash and refuse at frequent intervals.  Tenant agrees that nothing shall be done or kept in the Demised Premises which might impair the value of the Demised Premises or which would constitute waste.  At the end of the Term or other termination of this Lease, Tenant shall deliver the premises with all improvements thereon in good repair and condition, reasonable wear and tear only excepted.

In the event Tenant shall fail to maintain the Demised Premises in accordance with this paragraph 8, Landlord shall have the right (but not the obligation) to cause all repairs or other maintenance to be made and the reasonable costs therefor expended by Landlord shall be paid by Tenant on written demand.  Landlord shall have no liability to Tenant for any damage or interference with the use of the Demised Premises by Tenant as a result of performing such work.

9.     ALTERATIONS, ADDITIONS AND IMPROVEMENTS:  Tenant shall not make any alterations, additions or improvements to the Demised Premises without prior written consent of Landlord; provided however, that Tenant shall be entitled to make nonstructural nonmechanical alterations costing less than $10,000.00 without Landlord’s consent.  If Landlord gives its consent, Landlord reserves the right to approve the Tenant’s selection of contractor for such alterations and Tenant will provide Landlord with such information as reasonably determined by Landlord to make an informed decision about said contractor.

(a)Tenant, at any time and from time to time during the term, at its sole cost and expense, and provided Tenant has obtained any required consent from Landlord, which shall be in a timely manner and not unreasonably withheld, may make improvements, alterations, additions, installations, substitutions, betterments and decorations (collectively “Improvements”) in and to the Premises, provided:

(i)  the Improvements will not result in a violation of any certificate of occupancy applicable to the Premises or to the Building Complex;

(ii) the Improvements will not require a change in any certificate of occupancy applicable to the Premises or Building Complex without Landlord’s prior consent, not to be unreasonably withheld;

(iii) except with respect to permitted signage, the outside appearance of the Building Complex or any part thereof shall not be affected in any way, and such Improvements shall not adversely affect or weaken or impair (temporarily or permanently) the structure or lessen the value of the Premises or Building Complex, either during the making of such Improvements or upon their completion;

(iv) there shall be no Improvements to the exterior, roof, foundation, structural, or affecting the mechanical, plumbing, electrical or HVAC systems of the Building Complex without the prior consent of the Landlord, not to be unreasonably withheld or delayed and which shall be deemed granted if Landlord has not objected thereto within five (5) business days after receipt of written request from Tenant;

(v) in performing the work involved in making such Improvements, Tenant shall be bound by and observe all of the terms of this Lease and any applicable laws, regulations, or covenants affecting the Building Complex; and

(vi) at all times during construction in the Premises, Tenant shall post in a conspicuous place and continuously maintain the posting of a notice of non-liability of Landlord for such work, in the form of Exhibit D attached hereto and incorporated herein by this reference.

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(vii)  Tenant acknowledges the historical nature of the building and will not do anything, nor permit anything to be done by its contractors, employees, invitees, etc., that will adversely affect the building.  It is understood that no drilling into bricks or timbers is permitted, without express written consent of Landlord.

(b)  Unless Tenant shall notify Landlord otherwise, all Improvements to the Premises, including, by way of illustration but not by limitation, all counters, screens, grilles, special cabinetry work, partitions, paneling, carpeting, drapes or other window coverings and light fixtures, shall be deemed a part of the real estate and the property of Landlord and shall remain upon and be surrendered with the Premises as a part thereof without molestation, disturbance or injury at the end of the Lease term, whether by lapse of time or otherwise, unless Landlord, by written notice to Tenant at the time improvements are approved, shall elect to have Tenant remove all or any of such alterations, improvements or additions at the end of the term (excluding non-movable walls, HVAC duct work and electrical improvements), and in such event, Tenant shall, at the end of the term, remove, at its sole cost and expense, such alterations, improvements and additions and restore the Premises to the condition in which the Premises were prior to the making of the same, reasonable wear and tear excepted.  Any such removal, whether required or permitted by Landlord, shall be at Tenant’s sole cost and expense, and Tenant shall restore the Premises to the condition in which the Premises were prior to the making of the same, reasonable wear and tear excepted.  All movable partitions, machines and equipment, telephone system, shelving or removable improvements which are installed in the Premises by or for Tenant, without expense to Landlord, and can be removed without structural damage to or defacement of the Building or the Premises, and all furniture, furnishings, telephone systems, shelving, removable improvements and other articles of personal property owned by Tenant and located in the Premises (all of which are herein called “Tenant’s Property”) shall be and remain the property of Tenant and may be removed by it at any time during the term of this Lease.  However, if any of Tenant’s Property is removed, Tenant shall repair or pay the cost of repairing any damage to the Building or the Premises resulting from such removal.  All additions or improvements which are to be surrendered with the Premises shall be surrendered with the Premises, as a part thereof, at the end of the term or the earlier termination of this Lease.

(c)Prior to the commencement of any Improvements to the Premises or Building Complex costing $10,000.00 or more in any one instance, Tenant shall deliver to Landlord certificates issued by insurance companies qualified to do business in the State of Colorado evidencing that workmen’s compensation, public liability insurance and property damage insurance, all in amounts, with companies and on forms reasonably satisfactory to Landlord, are in force and maintained by all contractors and subcontractors engaged by Tenant to perform such work.  All such policies shall name Landlord as an additional insured and shall provide that the same may not be canceled or modified without thirty (30) days prior written notice to Landlord.

(d)Tenant, at its sole cost and expense, shall cause any permitted Improvements in or about the Premises to be performed in compliance with all applicable requirements of insurance bodies having jurisdiction.

10.SIGNS:  Tenant shall not place or affix any signs, either lighted or unlighted, including material supplied by manufacturers of merchandise offered for sale, or other objects upon or within the Demised Premises that illuminate, or are otherwise visible from the exterior of the building, or paint or otherwise deface the exterior walls of the Demised Premises without the prior written consent of Landlord.  Tenant shall have the right to standard building directory and suite signage at Landlord’s expense one time. Any signs installed by Tenant shall conform with applicable laws.  Permission will not be granted for any advertising which fails to comply with the City and County of Denver’s design standards or any advertising material, fixture or equipment which extends beyond the Demised Premises.  Tenant shall remove all signs installed by the tenant at the termination of this Lease and shall repair any damage and close any holes caused or revealed by such removal.

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11.INSURANCE:  Landlord at its expense shall procure and maintain the hazard, fire and extended coverage on the Building.  Tenant shall procure at its expense, and keep in force at all times during the term hereof:

(a)Comprehensive general liability insurance in the amounts of:  One Million Dollars ($1,000,000.00) each occurrence combined single limit for bodily injury, property damage and personal injury; Two Million Dollars ($2,000,000.00) aggregate for bodily injury and property damage for products and completed operations The commercial general liability policy shall be written on an occurrence basis, including public liability and property damage, in form and company acceptable to and approved by Landlord, covering the Demised Premises, the operations of both the Tenant and each and every permitted assignee hereunder and products therein, which amounts may be increased upon Landlord’s request at any time during the term of this Lease. Landlord, its officials and employees shall be listed as additional insured with respect to this Lease with additional insured coverage for the commercial general liability at least as broad as Insurance Services Office Form CG2011.

(b)Tenant shall maintain at its cost insurance for fire, hazard and extended coverage on Tenant’s property and the contents of the Demised Premises.

(c)Tenant shall maintain at all times adequate worker’s compensation insurance consistent with Colorado statutory requirements (including occupational disease hazards) with an authorized insurance company, or through the Colorado State Compensation Insurance Fund or through an authorized self-insurance plan approved by the State of Colorado, insuring the payment of compensation to all its employees.

(d)Certificates evidencing the existence of the policies, in such form as the Landlord may require, shall be delivered to the Landlord prior to the Commencement Date.  Upon request by Landlord, Tenant agrees at any time during the Term of this Lease, to furnish the original or a certified copy of said policy or policies.

Each such policy or certificate shall contain a provision insuring contractual liability of Tenant to the Landlord.  Each such policy or certificate shall contain a valid provision or endorsement that “This policy will not be canceled, or materially changed, reduced or altered, without first giving 30 days prior written notice thereof to Landlord.”

A renewal certificate shall be delivered to Landlord at least 30 days prior to a policy’s expiration date, except for any policy expiring after the Expiration Date of this Lease or any extension thereof.

12.DAMAGE OR DESTRUCTION TO BUILDING:

(a)In the event that the Demised Premises or the Building Complex are damaged by fire or other insured casualty and the insurance proceeds have been made available therefor by the holder or holders of any mortgages or deeds of trust covering the Building Complex, the damage shall be repaired by and at the expense of Landlord to the extent of such insurance proceeds available therefore, provided such repairs and restoration can, in Landlord’s reasonable opinion, be made within one hundred twenty (120) days after the occurrence of such damage without the payment of overtime or other premiums, and until such repairs and restoration are completed, the Base Rent shall be abated in proportion to the part of the Demised Premises which is unusable by Tenant in the conduct of its business, or unleasable, as mutually agreed by Landlord and Tenant, (but there shall be no abatement of Base Rent by reason of any portion of the Premises being unusable for a period equal to three days or less).  Landlord agrees to notify Tenant within forty-five (45) days after such casualty if it estimates that it will be unable to repair and restore the Premises within said one hundred twenty (120) day period.  Such notice shall set forth the approximate length of time Landlord estimates will be required to complete such repairs and restoration.  Notwithstanding anything to the contrary contained herein, if Landlord cannot or estimates it cannot make

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such repairs and restoration within said one hundred twenty (120) day period, then Tenant may, by written notice to Landlord cancel this Lease, provided such notice is given to Landlord within thirty (30) days after Landlord notifies Tenant of the estimated time for completion of such repairs and restoration.  Notwithstanding the preceding sentence, Tenant may not cancel this Lease as hereinabove stated if the damage to the Premises or the Building is in whole or in part the result of the act, omission, fault or negligence of Tenant, its agents, contractors, employees, licensees or invitees.  Except as provided in this Paragraph 12, and except to the extent caused by Landlord’s negligence, there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant’s business or property arising from the making of any such repairs, alterations or improvements in or to the Building, Premises or fixtures, appurtenances and equipment.  Tenant understands that Landlord will not carry insurance of any kind on Tenant’s Property, including furniture and furnishings, or on any fixtures or equipment removable by Tenant under the provisions of this Lease, or any improvement installed in the Premises by or on behalf of Tenant, and that Landlord shall not be obligated to repair any damage thereto or replace the same, except to the extent such damage is caused by the negligence of Landlord.

(b)In case the Building throughout shall be so injured or damaged, whether by fire or otherwise (though the Demised Premises may not be affected, or if affected, can be repaired within said 120 days) that Landlord, within forty-five (45) days after the happening of such injury, shall decide not to reconstruct or rebuild the Building, then notwithstanding anything contained herein to the contrary, upon notice in writing to that effect given by Landlord to Tenant within said forty-five (45) days, Tenant shall be obligated for Base Rent, properly apportioned up to date of such casualty, this Lease shall terminate from the date of delivery of said written notice, and both parties hereto shall be released and discharged from all further obligations hereunder (except those obligations which expressly survive termination of the Lease term).  A total destruction of the Building shall automatically terminate this Lease.

13.CONDEMNATION:

(a) If the whole of the Demised Premises or so much thereof as to render the balance unusable by Tenant for the proper conduct of its business or unleasable (as mutually determined by Landlord and Tenant), or shall be taken under power of eminent domain or transferred under threat thereof, then this Lease, at the option of either Landlord or Tenant exercised by either party giving notice to the other of such election within thirty (30) days after such conveyance or taking possession, whichever is earlier, shall forthwith cease and terminate and the rent shall be duly apportioned as of the date of such taking or conveyance.  No award for any partial or entire taking shall be apportioned and Tenant hereby assigns to Landlord any award which may be made in such taking or condemnation, together with any and all rights of Tenant now or hereafter arising in or to the same or any part thereof.  Notwithstanding the foregoing, Tenant shall be entitled to seek, directly from the condemning authority, an award for its removable trade fixtures, equipment and personal property and relocation expenses, if any, to the extent Landlord’s award is not diminished.  In the event of a partial taking which does not result in a termination of this Lease, Base Rent shall be reduced in proportion to the reduction in the size of the Demised Premises so taken and this Lease shall be modified accordingly.  Promptly after obtaining knowledge thereof, Landlord or Tenant, as the case may be, shall notify the other of any pending or threatened condemnation or taking affecting the Demised Premises or the Building Complex.

(b)If all or any portion of the Demised Premises shall be condemned or taken for governmental occupancy for a limited period (not to exceed 90 days), this Lease shall not terminate and Landlord shall be entitled to receive the entire amount of any such award or payment thereof as damages, rent or otherwise.  Tenant hereby assigns to Landlord any award which may be made in such temporary taking, together with any and all rights of Tenant now or hereafter arising in or to the same or any part thereof.  Tenant shall be entitled to receive

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an abatement of Base Rent in proportion to the reduction in the size of the Demised Premises so taken.

14.ASSIGNMENT AND SUBLETTING:  Tenant shall not, without the prior written consent of Landlord, which consent shall not be unreasonably be withheld or delayed, assign this Lease or sublet the Demised Premises or any portion thereof.  Any assignment or subletting shall be expressly subject to all terms and provisions of this Lease.  In the event of any assignment or subletting, Tenant shall remain fully liable for the full performance of all Tenant’s obligations under this Lease.  Tenant shall not assign its rights hereunder or sublet the Demised Premises without first obtaining a written agreement from assignee or sublessee whereby assignee or sublessee agrees to be bound by the terms of this Lease.  No such assignment or subletting shall constitute a novation. In the event of the occurrence of an event of default while the Demised Premises are assigned or sublet, Landlord, in addition to any other remedies provided herein or by law, may at Landlord’s option, collect directly from such assignee or subtenant all rents becoming due under such assignment of subletting and apply such rent against any sums due to Landlord hereunder.  No direct collection by Landlord from any such assignee or subtenant shall release Tenant from the performance of its obligations hereunder.  Fifty percent of any excess rent over the Base Rent paid by any assignee or subtenant hereunder shall be paid over to Landlord as Additional Rent.  Notwithstanding the foregoing, Tenant shall be entitled to assign this Lease to a parent, or wholly owned subsidiary upon notice to Landlord.

15.  ESTOPPEL CERTIFICATE:

Tenant or Landlord further agree at any time and from time to time on or before five (5) days after receipt of written request by Landlord or Tenant, to execute, acknowledge and deliver to the other an estoppel certificate certifying (to the extent it believes the same to be true) that 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), that there have been no defaults thereunder by Landlord or Tenant (or if there have been defaults, setting forth the nature thereof), the date to which the rent and other charges have been paid, if any, that Tenant claims no present charge, lien, claim or offset against rent, if the rent is not prepaid for more than one month in advance, and such other matters as may be reasonably required by Landlord, Landlord’s mortgagee, or any potential purchaser of the Building, it being intended that any such statement delivered pursuant to this Paragraph may be relied upon by any prospective purchaser of all or any portion of Landlord’s interest herein, or a holder of any mortgage or deed of trust encumbering any portion of the Building Complex.  Tenant’s failure to deliver such statement within such time shall be a default under this Lease.

16.DEFAULT:

(a)The following events (herein referred to as an “event of default”) shall constitute a default by Tenant hereunder:

(1)Tenant shall fail to pay, within ten (10) days after due, any installment of Base Rent, Additional Rent or any other amounts payable hereunder;

(2)This Lease or the estate of Tenant hereunder shall be transferred to or shall pass to or devolve upon any other person or party in violation of the provisions of this Lease, except as permitted herein;

(3)This Lease or the Demised Premises or any part thereof shall be taken upon execution or by other process of law directed against Tenant, or shall be taken upon or subject to any attachment at the instance of any creditor or claimant against Tenant, and said attachment shall not be discharged or disposed of within thirty (30) days after the levy thereof;

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(4)Tenant shall file a petition in bankruptcy or insolvency or for reorganization or arrangement under the bankruptcy laws of the United States or under any insolvency act of any state, or shall voluntarily take advantage of any such law or act by answer or otherwise, or shall be dissolved or shall make an assignment for the benefit of creditors;

(5)  Involuntary proceedings under any such bankruptcy law or insolvency act or for the dissolution of Tenant shall be instituted against Tenant, or a receiver or trustee shall be appointed of all or substantially all of the property of Tenant, and such proceedings shall not be dismissed or such receivership or trusteeship vacated within thirty (30) days after such institution or appointment;

(6)Tenant shall fail to take possession of the Demised Premises within sixty (60) days of the Commencement Date;

(7)Tenant shall abandon or permanently vacate the Premises for thirty (30) consecutive days without the timely payment of rent hereunder;

(8)Tenant shall fail to perform any of the other agreements, terms, covenants or conditions hereof on Tenant’s part to be performed, and such nonperformance shall continue for a period of thirty (30) days after written notice thereof by Landlord to Tenant; provided, however, that if Tenant cannot reasonably cure such nonperformance within thirty (30) days, Tenant shall not be in default if it commences cure within said thirty (30) days and, in Landlord’s sole judgment, diligently pursues the same to completion;

(9)Tenant shall fail to obtain a release of any mechanic’s lien, as required herein;

(10) A general partner of Tenant (if Tenant is a general or limited partnership), becomes a debtor under any state or federal bankruptcy proceedings, or becomes subject to receivership or trusteeship proceedings, whether voluntary or involuntary;

(b)Upon the occurrence of an event of default, Landlord shall have the right, at its election, then or at any time thereafter and while any such event of default shall continue, either:

(1)To give Tenant written notice of Landlord’s intention to terminate this Lease on the date such notice is given or on any later date specified therein, whereupon, on the date specified in such notice, Tenant’s right to possession of the Demised Premises shall cease and this Lease shall thereupon be terminated; provided however, all of Tenant’s obligations, including but not limited to, the amount of Base Rent and other obligations reserved in this Lease for the balance of the term hereof, shall immediately be accelerated and due and payable.

(2)To re-enter and take possession of the Demised Premises or any part thereof and repossess the same as Landlord’s former estate and expel Tenant and those claiming through or under Tenant, and remove the effects of both or either, without being deemed guilty of any manner of trespass and without prejudice to any remedies for arrears of rent or preceding breach of covenants or conditions.  Should Landlord elect to re-enter the Demised Premises as provided in this Paragraph 16(b)(2) or should Landlord take possession pursuant to legal proceedings or pursuant to any notice provided for by law, Landlord may, from time to time, without terminating this Lease, relet the Demised Premises or any part thereof in Landlord’s or Tenant’s name, but for the account of Tenant, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the term of this Lease) and on such conditions and upon such other terms (which may include

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concessions of free rent and alteration and repair of the Premises) as Landlord, in its reasonable discretion, may determine, and Landlord may collect and receive the rents therefore.  Although Landlord acknowledges an obligation to attempt to mitigate damages, Landlord shall in no way 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 such reletting.  No such re-entry or taking possession of the Demised Premises by Landlord shall be construed as an election on Landlord’s part to terminate this Lease unless a written notice of such intention be given to Tenant.  No notice from Landlord hereunder or under a forcible entry and detainer statute or similar law shall constitute an election by Landlord to terminate this Lease unless such notice specifically so states.  Landlord reserves the right following any such re-entry and/or reletting, to exercise its right to terminate this Lease by giving Tenant such written notice, in which event, this Lease will terminate as specified in said notice.

(c)  In the event that Landlord does not elect to terminate this Lease as permitted in Paragraph 16(b)(1) hereof, but on the contrary, elects to take possession as provided in Paragraph 16(b)(2), Tenant shall pay to Landlord (i) the rent and other sums as herein provided, which would be payable hereunder if such repossession had not occurred, less (ii) the net proceeds, if any, of any reletting of the Premises after deducting all Landlord’s reasonable expenses in connection with such reletting, including but without limitation, all repossession costs, brokerage commissions, legal expenses, attorneys’ fees, expenses of employees, reasonable alteration and repair costs and expenses of preparation for such reletting.  If, in connection with any reletting, the new lease term extends beyond the existing term, or the premises covered thereby include other premises not part of the Demised Premises, a fair apportionment of the rent received from such reletting and the expenses incurred in connection therewith as provided aforesaid will be made in determining the net proceeds from such reletting.  Tenant shall pay such rent and other sums to Landlord monthly on the days on which the rent would have been payable hereunder if possession had not been retaken.  In the event Landlord is able to relet the Premises at a higher rent, whether or not the Lease is terminated, Tenant shall not be entitled to any credit for any portion of such excess rent.

(d) Suit or suits for the recovery of the amounts and damages set forth above may be brought by Landlord, from time to time, at Landlord’s election and nothing herein shall be deemed to require Landlord to await the date whereon this Lease or the term hereof would have expired had there been no such default by Tenant or no such termination, as the case may be.

(e)  After an event of default by Tenant, Landlord may sue for or otherwise collect all rents, issues and profits payable under all leases on the Premises, including those past due and unpaid.

(f)  No failure by Landlord or Tenant to insist upon the strict performance of any agreement, term, covenant or condition hereof or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial rent during the continuance of any such breach, shall constitute a waiver of any such breach of such agreement, term, covenant or condition.  No agreement, term, covenant or condition hereof to be performed or complied with by Tenant, and no breach thereof, shall be waived, altered or modified except by written instrument executed by Landlord.  No waiver of any breach shall affect or alter this Lease, but each and every agreement, term, covenant and condition hereof shall continue in full force and effect with respect to any other then existing or subsequent breach thereof.  Notwithstanding any unilateral termination of this Lease, this Lease shall continue in force and effect as to any provisions hereof which require observance or performance of Landlord or Tenant subsequent to termination.

(g)  Nothing contained in this Paragraph shall limit or prejudice the right of Landlord to prove and obtain as liquidated damages in any bankruptcy, insolvency, receivership,

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reorganization or dissolution proceeding, an amount equal to the maximum allowed by any statute or rule of law governing such proceeding and in effect at the time when such damages are to be proved, whether or not such amount be greater, equal to or less than the amounts recoverable, either as damages or rent, referred to in any of the preceding provisions of this Paragraph.

(h)  Any rents or other amounts owing to Landlord hereunder which are not paid within ten (10) days of the date they are due, shall thereafter bear interest from the due date at the rate of twelve percent (12%) per annum (“Interest Rate”) until paid.  Similarly, any amounts paid by Landlord to cure any default of Tenant or to perform any obligation of Tenant, shall, if not repaid by the Tenant within fifteen (15) days of demand by Landlord, thereafter bear interest from the date paid by Landlord at the Interest Rate until paid.  In addition to the foregoing, Tenant shall pay to Landlord whenever any Base Rent, Additional Rent or any other sums due hereunder remain unpaid more than ten (10) days after the due date thereof, a late charge equal to five percent (5%) of the amount due.

(i)  Each right and remedy provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease now or hereafter existing at law or in equity or by statute or otherwise, including, but not limited to, suits for injunctive or declaratory relief and specific performance.  The exercise or commencement of the exercise by Landlord of any one or more of the rights or remedies provided for in this Lease now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or subsequent exercise by Landlord of any or all other rights or remedies provided for in this Lease, or now or hereafter existing at law or in equity or by statute or otherwise.  All costs incurred by Landlord in connection with collecting any amounts and damages owing by Tenant pursuant to the provisions of this Lease or to enforce any provision of this Lease, including by way of example, but not limitation, reasonable attorneys’ fees from the date any such matter is turned over to an attorney, shall also be recoverable by the prevailing party.

17.PARKING AND COMMON AREAS:  It is understood and agreed that the Tenant shall have the right to use Sixteen (16) parking spaces at no additional charge in the parking lots adjacent to the building.  Tenant shall have the right to rent Twelve (12) additional parking spaces at an initial cost of $50.00 per space per month, subject to increase in accordance with Landlord’s customary charges for such spaces, which spaces shall be available on a first come first served basis. This cost, if any, will deemed to be additional rent.  The parking rental shall be payable on the same dates and times as the monthly installments of the minimum rental due hereunder.  Landlord reserves the right to adjust additional parking spaces rented, but not the initial Sixteen (16) included spaces or the Twelve (12) additional spaces the Tenant pays for.  In addition, Landlord shall have the right, without obligation, and from time to time, to change the number, sizes, locations, shapes and arrangements of parking areas and other common areas, designate loading or handicapped parking areas, change the level or grade of parking surfaces, and do and perform such other acts in and to said areas of improvements as Landlord, in its sole discretion but within reason and applied uniformly, deems advisable for the use thereof.  In any event, the number of parking spaces shall not be reduced.  Except as otherwise specifically provided herein, all unassigned parking areas, access roads, courtyards, and other areas, facilities or improvements furnished by Landlord are for the general and non-exclusive use in common of all tenants of the Building, and those persons invited upon the land upon which the premises are situated and shall be subject to the exclusive control and management of Landlord.  Landlord shall have the right, without obligation, to establish, modify and enforce such rules and regulations, which the Landlord may, in its sole opinion, deem reasonable and/or necessary.

18.  NOTICES:  Any notice or document required or permitted to be delivered hereunder may be delivered in person or shall be deemed to be delivered, whether actually received or not, when deposited in the United States mail, postage prepaid, registered or certified mail, return receipt requested, addressed to the parties at the addresses indicated below, or at such other addresses as may have theretofore been specified by written notice delivered in accordance herewith

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LANDLORD:	TENANT:
Garvin Partners	IntelePeer, Inc.
8269 E 23rd Ave.	2300 15th Street
Denver, CO 80238	Denver, CO 80202
	And to:
	IntelePeer Inc.
	Attn: CFO
	950 Tower Lane, Suite 450
	Foster City, CA 94404

19.QUIET ENJOYMENT:  Subject to the provisions of this Lease, Landlord covenants that, so long as Tenant is not in default under the terms of this Lease that Tenant shall peacefully and quietly have, hold and enjoy the Premises for the Term of this Lease.  Landlord shall not be responsible for the acts or omissions of any other tenant or third party which may interfere with Tenant’s use and enjoyment of the Premises.  In the event of any transfer or transfers of Landlord’s interest in the Premises or in the real property of which the Premises are a part, other than a transfer for security purposes only, the transferor shall be automatically relieved of any and all obligations and liabilities on the part of Landlord accruing from and after the date of such transfer, providing the transferee assumes the obligation and liabilities of the transferor.

20.ENTRY BY LANDLORD:  Landlord and its agents shall have the right to enter the Premises at all reasonable times and after reasonable notice for the purpose of examining or inspecting the same, to supply any services to be provided by Landlord hereunder, to show the same to prospective purchasers of the Building, to make such alterations, repairs, improvements or additions to the Premises or to the Building as Landlord may be required or permitted to make under the Lease, and during the last ninety (90) days of the term, to show the same to prospective tenants of the Premises upon reasonable notice to Tenant.  Landlord and its agent may enter the Premises at all times and without advance notice for the purpose of responding to an actual or apparent emergency.  Landlord shall use commercially reasonable efforts not to unreasonably interfere with the Tenant’s business operations in the Premises during any period of entry by Landlord pursuant to this paragraph.

21.MECHANIC’S LIENS:  Tenant shall pay or cause to be paid all costs for work done by or on behalf of Tenant or caused to be done by or on behalf of Tenant on the Premises of a character which will or may result in liens against Landlord’s interest in the Premises, Building or Building Complex. Tenant warrants that it will keep the Demised Premises and Building Complex free and clear of all mechanic’s liens and other liens on account of work done for or on behalf of Tenant or persons claiming under Tenant.  Tenant hereby agrees to indemnify, defend and save Landlord harmless of and from all liability, loss, damages, costs or expenses, including reasonable attorneys’ fees, incurred in connection with any claims of any nature whatsoever for work performed for, or materials or supplies furnished to Tenant, including lien claims of laborers, materialmen or others. Should any such liens be filed or recorded against the Premises, Building Complex with respect to work done for or materials supplied to or on behalf of Tenant or should any action affecting the title thereto be commenced, Tenant shall cause such liens to be released of record within thirty (30) days after notice thereof.  If Tenant desires to contest any such claim of lien, Tenant shall nonetheless cause such lien to be released of record by the posting of adequate security with a court of competent jurisdiction as may be provided by applicable law.  If Tenant shall be in default in paying any charge for which such a mechanic’s lien or suit to foreclose such a lien has been recorded or filed and shall not have caused the lien to be released as aforesaid, Landlord may (but without being required to do so) pay such lien or claim and any costs associated therewith, and the amount so paid, together with

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interest at the Interest Rate and reasonable attorneys’ fees incurred in connection therewith, shall be immediately due from Tenant to Landlord as Additional Rent.

22.DAMAGE TO PROPERTY, INJURY TO PERSONS:

(a)  Tenant, as a material part of the consideration to be rendered to Landlord under this Lease, hereby indemnifies and agrees to hold harmless Landlord, its agents, employees, contractors, legal representatives, successors and assigns, from any and all claims of liability for any injury or damage to any person or property whatsoever occurring in, on or about the Premises or the Building Complex or any part thereof, to the extent such injury or damage is caused by the negligence, fault or omission of Tenant, its agents, contractors, employees, licensees or invitees.  Tenant further agrees to indemnify and to hold Landlord harmless from and against any and all claims arising from any breach or default in the performance of any obligation on Tenant’s part to be performed under the terms of this Lease, or arising from any act or negligence of Tenant, or any of its agents, contractors, employees, licensees or invitees.  Such indemnities shall include by way of example, but not limitation, all costs, reasonable attorneys’ fees, expenses and liabilities incurred in or about any such claim, action or proceeding, but shall exclude all claims, damages and expenses to the extent caused by the negligence of Landlord, its agents, employees and contractors.

(b)  Landlord and Tenant shall not be liable to each other for any damage by or from any act or negligence of any co-tenant or other occupant of the Building Complex, or by any owner or occupant of adjoining or contiguous property.  Landlord and Tenant shall not be liable to each other for any injury, damage, or loss to persons or property resulting in whole or in part from the criminal activities of others.  To the extent not covered by normal fire and extended coverage insurance, Tenant agrees to indemnify Landlord against all damage to the Building Complex, as well as all damage to persons or property of other tenants or occupants thereof, to the extent caused by the misuse, neglect, act, omission or negligence of Tenant or any of its agents, contractors, employees, licensees or invitees.

(c)  Neither Landlord nor its agents or employees shall be liable for any damage to property entrusted to Landlord, its agents or employees, or employees of the building manager, if any, nor for the loss or damage to any property occurring by theft or otherwise, nor for any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak from any part of the Building Complex or from the pipes, appliances or plumbing works therein or from the roof, street or subsurface or from any other place or resulting from dampness, or any other cause whatsoever; provided, however, nothing contained herein shall be construed to relieve Landlord from liability for any personal injury resulting from its negligence.  Neither Landlord nor its agents or employees shall be liable for interference with the lights, view or other incorporeal hereditaments, nor shall Landlord be liable for any latent defect in the Premises or in the Building or Building Complex.  Tenant shall give prompt notice to Landlord in case of fire or accidents in or about the Premises or the Building or of defects therein or in the fixtures or equipment located therein.  Neither Tenant nor its agents or employees shall be liable for any damage to property entrusted to Tenant, its agents or employees, if any.

(d)  In case any claim, demand, action or proceeding is made or brought against Landlord, its agents or employees, by reason of any obligation on Tenant’s part to be performed under the terms of this Lease, or arising from any act or negligence of Tenant, its agents or employees, or which gives rise to Tenant’s obligation to indemnify Landlord, Tenant shall be responsible for all costs and expenses, including but not limited to reasonable attorneys’ fees incurred in defending or prosecution of the same, as applicable.

23.REMOVAL OF TENANT’S PROPERTY:  All movable furniture and personal effects of Tenant not removed from the Premises upon the vacation or abandonment thereof or upon the termination of this Lease for any cause whatsoever shall conclusively be deemed to have been

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abandoned and may be appropriated, sold, stored, destroyed or otherwise disposed of by Landlord without notice to Tenant and without obligation to account therefor, and Tenant shall reimburse Landlord for all expenses incurred in connection with the disposition of such property.

24.HOLDING OVER:  Should Tenant hold over after the termination of this Lease, after expiration of the initial Term or any exercised renewal terms, and continue to pay rent, Tenant shall become a tenant from month to month only upon each and all of the terms herein provided as may be applicable to such month to month tenancy and any such holding over shall not constitute an extension of this Lease.  During such holding over, Tenant shall pay monthly rent equal to one hundred twenty-five percent (125%) of the last monthly rental rate plus all other monetary charges as provided herein.  Such tenancy shall continue until terminated by Landlord, or Tenant upon at least thirty (30) days’ written notice prior to the last day of the calendar month intended as the date of termination of such month to month tenancy.

25.SURRENDER AND NOTICE:  Upon the expiration or earlier termination of this Lease, Tenant shall promptly quit and surrender to Landlord the Premises broom clean, in good order and condition, ordinary wear and tear excepted, and Tenant shall remove all of its movable furniture and other effects and such alterations, additions and improvements as Landlord shall require Tenant to remove pursuant to Paragraph 9 hereof.  In the event Tenant fails to so vacate the Premises on a timely basis as required, Tenant shall be responsible to Landlord for all costs and damages, including but not limited to any amounts required to be paid to third parties who were to have occupied the Premises, incurred by Landlord as a result of such failure, plus interest thereon at the Interest Rate on all amounts not paid by Tenant within thirty (30) days of demand, until paid in full.

26.SUBORDINATION AND ATTORNMENT:  This Lease, and all rights of Tenant hereunder, are and shall be subject and subordinate in all respects to all present and future ground leases, overriding leases and underlying leases and/or grants of term of the real property and/or the Building or the Building Complex now or hereafter existing and to all deeds of trust, mortgages and building loan agreements, including leasehold mortgages and building loan agreements, which may now or hereafter affect the Building or the Building Complex or any of such leases, whether or not such deeds of trust or mortgages shall also cover other lands or buildings, to each and every advance made or hereafter to be made under such deeds of trust or mortgages, and to all renewals, modifications, replacements and extension of such leases, deeds of trust and mortgages.  The provisions of this Paragraph shall be self-operative and no further instrument of subordination shall be required.  However, in confirmation of such subordination, Tenant shall promptly execute and deliver to Landlord (or such other party so designated by Landlord) at Tenant’s own cost and expense, within five (5) days after request from Landlord an instrument, in recordable form if required, that Landlord, the lessor of any such lease or the holder of any such deed of trust or mortgage or any of their respective successors in interest or assigns may request evidencing such subordination.  Failure by Tenant to comply with the requirements of this Paragraph shall be a default hereunder.  The leases to which this Lease is, at the time referred to, subject and subordinate pursuant to this Paragraph are hereinafter sometimes called “superior leases” and the deeds of trust or mortgages to which this Lease is, at the time referred to, subject and subordinate are hereinafter sometimes called “superior deeds of trust” or “superior mortgages”.  The lessor of a superior lease or the beneficiary of a superior deed of trust or superior mortgage or their successors in interest or assigns are hereinafter sometimes collectively referred to as a “superior party”.  Notwithstanding any of the foregoing, Tenant shall not be required to execute any instrument of subordination, and therefore, no subordination with respect to any future ground lease, mortgage or deed of trust shall occur unless such superior party shall grant and deliver to Tenant a non-disturbance agreement in the form then being used by such superior party for such purposes, providing that Tenant, notwithstanding a default by Landlord, shall be entitled to remain in possession of the Premises in accordance with the terms of this Lease for so long as Tenant shall not be in default of any term, condition or covenant of this Lease.  Further, Tenant shall attorn to such superior party.

27.PAYMENTS AFTER TERMINATION:  No payments of money by Tenant to Landlord after the termination of this Lease, in any manner, or after giving of any notice (other than a demand for payment of money) by Landlord to Tenant, shall reinstate, continue or extend the term

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of this Lease or affect any notice given to Tenant prior to the payment of such money, it being agreed that after the service of notice of the commencement of a suit or other final judgment granting Landlord possession of the Premises, Landlord may receive and collect any sums of rent due, or any other sums of money due under the terms of this Lease or otherwise exercise its rights and remedies hereunder.  The payment of such sums of money, whether as rent or otherwise, shall not waive said notice or in any manner affect any pending suit or judgment theretofore obtained.

28.LIABILITY OF LANDLORD:  Landlord’s liability under this Lease shall be limited to Landlord’s estate and interest in the Building (or to the proceeds thereof) and no other property or other assets of Landlord or its partners (if Landlord is a partnership), agents, employees, legal representatives, successors or assigns, shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant’s remedies under or with respect to this Lease, the relationship of Landlord and Tenant hereunder or Tenant’s use and occupancy of the Premises.  Nothing contained in this Paragraph shall be construed to permit Tenant to offset against rents due a successor landlord, a judgment (or other judicial process) requiring the payment of money by reason of any default of a prior landlord, except as otherwise specifically set forth herein.

29.RIGHTS RESERVED TO LANDLORD:

(a)   Landlord shall have the following rights without liability to Tenant for damage or injury to property, person or business and without effecting an eviction or disturbance of Tenant’s use or possession of the Premises or giving rise to any claim for setoffs or abatement of rent:

(1) To enter the Premises as more fully provided in this Lease.

(2) To have pass keys to the Premises.

(3) To decorate, remodel, repair, alter or otherwise prepare the Premises for reoccupancy during the last three (3) months of the term hereof, only IF, during or prior to such time, Tenant has vacated the Premises, or at any time after Tenant abandons the Premises.

(4) To have access to all mail chutes according to the rules of the United States Postal Service.

(5) To do or permit to be done any work in or about any adjacent or nearby building, land, street or alley.

30.FORCE MAJEURE CLAUSE:  Wherever there is provided in this Lease a time limitation for performance by Landlord or Tenant of any obligation, including but not limited to obligations related to construction, repair, maintenance or service, but excluding any rental obligation of Tenant, the time provided for shall be extended for as long as and to the extent that delay in compliance with such limitation is due to an act of God, governmental control or other factors beyond the reasonable control of such party.

31.ATTORNEYS’ FEES:  In the event of any dispute hereunder, or any default in the performance of any term or condition of this Lease, the prevailing party shall be entitled to recover all costs and expenses associated therewith, including reasonable attorneys’ fees.

32.ADDITIONAL RENT:  Tenant shall pay to Landlord without abatement, deduction, set-off or counterclaim, and without prior notice or demand the Base Rent as described in Paragraph 3 and additional rent as described below.

(1)  All charges payable by Tenant other than Base Rent are called “Additional Rent”.  Unless this Lease provides otherwise, Additional Rent is to be paid with the next monthly installment of Base Rent.

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(2)  Definitions:

“Expense Base Year”:  The calendar year 2011

“Expense Comparison Year”:  Each calendar year after the calendar year 2011.

“Expense Stop”:  The cost of Building Operating Expenses for the Expense Base year divided by the total number of rentable square feet in the Building.

The “Base Rent” Tenant pays for the Demised Premises during the calendar year in which the term of this Lease begins includes Tenant’s share of the Building Operating Expenses for such calendar year.  In the event Tenant’s share of the projected Building Operating Expenses for any Expense Comparison Year during the Lease Term (as determined by Landlord) exceeds the cost of the Building Operating Expenses incurred during the Expense Base Year, then the Base Rent Tenant pays during each such Expense Comparison Year shall be increased by the amount of such excess over the Expense Stop multiplied by Tenant’s Rentable Area.  Landlord will pay all Building Operating Expenses through December 31, 2011.  Landlord shall further have the right to adjust the Additional Rent to be paid by Tenant pursuant to this paragraph periodically during the renewal year if it reasonably deems it necessary to do so.  Tenant’s Rentable Area is 15,744 square feet and its percentage with respect to Operating Expenses of the building is 32%

“Operating Expenses” are all reasonable and customary costs and expenses of ownership, operation, maintenance, management, repair and insurance of the Building, as determined according to generally accepted accounting principles applied by Landlord in its sole discretion, including, but not limited to the following costs:  all supplies, materials, labor and equipment, used in or related to the operation and maintenance of the Building Complex; all utilities, including but not limited to, water, electricity, gas, heating, lighting, sewer, waste disposal, security, air-conditioning and ventilating costs and all charges relating to the use, ownership or operation of the Building; all maintenance, management, janitorial and service agreements related to the Building; all legal expenses and accounting costs relating to the operation and management of the Building and the Building Complex; all insurance premiums and costs, including but not limited to the premiums and costs of fire, casualty and liability coverage, rent abatement and earthquake insurance and any other type of insurance related to the Building; all maintenance costs relating to the public and service areas within the around the Building, including but not limited to, sidewalks, landscaping, service areas, driveways, parking areas, walkways, building exteriors (including painting), signs and directories, including for example, costs of resurfacing and restriping parking areas; amortization over the useful life (along with reasonable financing charges) of capital improvements made to the Building which may be required by any government authority or law or regulation that was not applicable to the Building at the time it was renovated in 1983 and not as a result of special requirements for any tenant’s use of the Building, which will improve the operating efficiency of the Building; all Landlord’s costs in managing, maintaining, repairing, operating and insuring the Building, including for example, clerical, supervisory and janitorial staff, and all Real Property taxes as defined herein; however, such costs shall not include depreciation on the Building or personal property or equipment located therein, loan payments, executive salaries, finders fees or real estate broker commissions, costs of alterations of space or other improvements made for tenants of the Building other than those specifically set forth on Exhibit C; interest on loan payments; capital improvements; costs of excess or additional services provided to any tenant that are billed directly to such tenant; any income, estate, inheritance or transfer taxes.

“Real Property Taxes” are (i) any fee, license fee, business license fee, commercial rental tax, levy, charge, assessment, penalty or tax imposed by any taxing authority against the Building; (ii) any tax or fee on Landlord’s right to receive, or the receipt of, rent or income from the Building or against ‘s business of leasing the Building, (iii) any tax or charge for fire protection, streets, sidewalks, road maintenance, refuse or other services provided to the Building by any governmental agency; (iv) any tax imposed upon this transaction, or based upon a re-assessment of the Building due to a change in ownership or transfer of all or part of Landlord’s interest in the

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Building; and (v) any charge or fee replacing, substituting for, or in addition to any tax previously included within the definition of real property tax.  Real Property Taxes do not, however, include Landlord’s federal or state income, franchise, inheritance or estate taxes.

(1)  Prior to the commencement date of the Expense Comparison Year, Landlord will provide Tenant a statement of Landlord’s best estimate of Tenant’s share of the increase, if any, in Operating Expenses for the coming year over the costs for the Expense Base Year.  This amount will be divided by twelve (12) and beginning with the next regular Base Rent payment, Tenant will pay 1/12th of the increase multiplied by the number of elapsed months from the commencement of the Expense Comparison Year and thereafter will continue to pay 1/12th of the increase each month until Tenant receives the next Expense Comparison Year’s statement.  Landlord acknowledges and agrees that in no event shall Tenant’s increase in Operating Expenses exceed five percent (5%) from the previous calendar year with respect to those expenses which Landlord can control.  The foregoing expense cap does not apply to expenses which Landlord cannot control, such as Real Estate Taxes, insurance, utility charges and snow removal costs, for which Tenant shall pay its prorata share, without any expense cap.  By April 1 of each year of the Lease term, Landlord will provide Tenant a statement showing the total actual Operating Expenses for the calendar year just ended, and Tenant’s share of any increase, if any, over the Expense Base Year.  If Tenant’s estimates paid to date for the preceding calendar year are less than Tenant’s share of the increase, Tenant will pay the difference within 15 days of the date of said statement.  In the event that Tenant has paid more than his share of estimates for the preceding calendar year, Landlord will pay this excess to Tenant with said statement.

(2)  Tenant will not be entitled to any reduction, refund, offset, allowance or rebate in Base Rent or any other sums due if the Operating Expenses for any Expense Comparison Year are less than those of the Expense Base Year nor shall the failure by Landlord to provide Tenant with a statement by April 1st of each year constitute a waiver by Landlord of its right to collect Tenant’s share of any increase in Operating Expenses.  In addition, if for any reason Landlord should not elect to bill Tenant for lump sum Operating Expense increases or estimates for a particular Expense Comparison Year, Landlord’s right to charge Tenant for such expenses in subsequent years is not waived.

(3)  Landlord shall keep separate records of all Operating Expenses in its usual and customary manner, not substantially inconsistent with generally accepted standard in the office building industry, consistently applied.  In the event Tenant is charged for any increase in Building Operating Expenses over the Expense Stop as provided in this paragraph 32, then such records shall be available for inspection by Tenant not more frequently than once in every 12-month period, not later than 90 days after the expiration or termination of this Lease, and only upon ten (10) days’ prior written notice to Landlord.  Any such inspection by Tenant shall be conducted (i) at a reasonable time; and (ii)in a manner so as not to unduly disrupt the conduct of Landlord’s business.  Any shortfall or excess revealed and verified by Tenant’s inspection shall be paid to the applicable party within thirty (30) days after the other party is notified of such shortfall or excess.

33.MISCELLANEOUS:

(a)  The rules and regulations attached hereto as Exhibit B, as well as such rules and regulations as may hereafter be adopted by Landlord for the health and safety of the Premises and the Building and the occupants thereof as may be required by applicable law, ordinance, insurance policy or underwriters, are hereby expressly made a part hereof, and Tenant agrees to obey all such rules and regulations.  The violation of any of such rules and regulations by Tenant shall be deemed a breach of this Lease by Tenant affording Landlord all the remedies set forth herein.  Landlord shall not be responsible to Tenant for the nonperformance by any other tenant or occupant of the Building of any of said rules and regulations.

(b)  This Lease shall be construed as though the covenants herein between Landlord and Tenant are independent and not dependent and Tenant shall not be entitled to any setoff of the rent or other amounts owing hereunder against Landlord, if Landlord fails to perform its obligations

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set forth herein, except as herein specifically set forth; provided, however, the foregoing shall in no way impair the right of Tenant to commence a separate action against Landlord for any violation by Landlord of the provisions hereof so long as notice is first given to Landlord and any holder of a mortgage or deed of trust covering the Building Complex or any portion thereof whose address Tenant has been notified in writing and so long as an opportunity has been granted to Landlord and such holder to correct such violation.

(c)  If any clause or provision of this Lease is illegal, invalid or unenforceable under present or future laws effective during the term of this Lease, then and in that event, it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby, and it is also the intention of the parties to this Lease that in lieu of each clause or provision of this Lease that is illegal, invalid or unenforceable, there shall be added as a part of this Lease a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable, provided such addition does not increase or decrease the obligations of or derogate from the rights or powers of either Landlord or Tenant.

(d)  The captions of each paragraph are added as a matter of convenience only and shall be considered of no effect in the construction of any provision or provisions of this Lease.

(e)  Except as herein specifically set forth, all terms, conditions and covenants to be observed and performed by the parties hereto shall be applicable to and binding upon their respective heirs, administrators, executors, successors and assigns.  The terms, conditions and covenants hereof shall also be considered to be covenants running with the land.

(f)  Except as otherwise specifically provided herein, in the event Landlord shall fail to perform any of the agreements, terms, covenants or conditions hereof on Landlord’s part to be performed, and such nonperformance shall continue for a period of thirty (30) days after written notice thereof, from Tenant to Landlord, or if such performance cannot be reasonably had within such thirty (30) day period, and Landlord shall not in good faith have commenced such performance within such thirty (30) day period and proceed therewith to completion within ninety (90) days (unless out of Landlord’s control), it shall be considered a default of Landlord under this Lease, and cause for termination of the Lease.  Tenant shall give written notice to Landlord in the matter herein set forth and shall afford Landlord a reasonable opportunity to cure any such default.  In addition, Tenant shall send notice of such default by certified or registered mail, with proper postage prepaid, to the holder of any mortgages or deeds of trust covering the Building Complex or any portion thereof of whose address Tenant has been notified in writing and shall afford such holder a reasonable opportunity to cure any alleged default on Landlord’s behalf.

(g)  If there is more than one entity or person which or who are the Tenants under this Lease, the obligations imposed upon Tenant under this Lease shall be joint and several.

(h)  No act or thing done by Landlord or Landlord’s agent or Tenant during the term hereof, including but not limited to any agreement to accept surrender of the Premises or to amend or modify this Lease, shall be deemed to be binding upon the other unless such act or things shall be by an officer of Landlord or Tenant or a party designated in writing by Landlord or Tenant as so authorized to act.  The delivery of keys to Landlord, or Landlord’s agent, employees or officers shall not operate as a termination of this Lease or a surrender of the Premises.  No payment by Tenant or receipt by Landlord of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy available to Landlord.

(i)  Tenant acknowledges and agrees that it has not relied upon any statements, representations, agreements or warranties, except such as are expressed in this Lease together with the Exhibits attached hereto.

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(j)  Intentionally deleted.

(k)  All private telephone systems and/or other related telecommunications or computer equipment and lines may not be installed without Landlord’s prior consent, which shall not be unreasonably withheld.  In addition, if Landlord gives consent all equipment must be installed within Tenant’s Demised Premises or in designated “telephone closet” and, upon termination of this Lease removed and the Demised Premises restored to the same condition as before such installation.  Landlord will not be held responsible for any damage or effects resulting from power failures unless caused by intentional misconduct of the Landlord.

(l)   No invitee may be admitted after ordinary business hours unless accompanied by a Tenant employee having the right of admission and Tenant shall exercise due care to cause persons gaining entry under such special rights to avoid loss or damage to the property of Landlord and other tenants or occupants.  Any keys issued hereunder shall remain the property of Landlord, shall not be duplicated, and shall be returned to Landlord upon request.

(m)  Tenant, its officers, agents and employees shall cooperate and comply with the provisions of the Federal Drug-Free Workplace Act of 1988 and Denver Executive Order No. 94, or any successor thereto, concerning the use, possession or sale of alcohol or drugs.

(n)  In connection with the performance of work under this Lease, Tenant agrees not to refuse to hire, discharge, promote or demote, or to discriminate in matters of compensation against any person otherwise qualified, solely because of race, color, religion, national origin, gender, age, military status, sexual orientation, marital status, or physical or mental disability.

a.This Lease, together with Exhibits A, B, and C attached hereto, contains the entire agreement of the parties and may not be amended or modified in any manner except by an instrument in writing signed by both parties.  Tenant shall not record this Lease or a memorandum hereof.

34. OPTION TO RENEW

Provided that the Tenant is not in default and has fulfilled all of their obligations under this lease, Tenant shall be entitled to renew the lease (“Option to Renew”) for 1 (one) additional 24 month Term (“Option Term”), with written notice to the Landlord 6 months prior to the expiration of original Term of this lease; except that the new Rent for this Option Term, consistent with the Fair Market Value of such Rent for similar office space, must be agreed upon by Landlord and Tenant 3 months before the expiration of the original Term of this lease, otherwise this Option To Renew, together with any and all other Tenant rights therein, will expire and Landlord will be free to market the space to other potential tenants.

EXECUTED this 24th day of August, 2011.
LANDLORD:	/s/ Brian Brieske
ATTEST:

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TENANT:	/s/ Andre Simone
	CFO
ATTEST:

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EXHIBIT A

Demised Premises

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EXHIBIT B

RULES AND REGULATIONS

Landlord and Tenant agree that the following Rules and Regulations shall be and hereby are made a part of this Lease, and Tenant agrees that Tenant’s employees and agents, or any others permitted by Tenant to occupy or enter the Premises, will at all times abide by said Rules and Regulations:

1.Water closets and other water fixtures shall not be used for any purpose other than that for which the same are intended, and any damage resulting to the same from misuse on the part of Tenant, Tenant’s agents or employees, shall be paid for by Tenant.  No person shall waste water by tying back or wedging the faucets or in any other manner.

2.No animals shall be allowed in the offices, halls, corridors and elevators in the Building. (However, service animals are permitted.) No person shall unreasonably disturb the occupants of adjoining buildings or premises by the use of any radio, sound equipment or musical instrument or by the making of loud or improper noises.

3.Tenant shall not allow anything to be placed on the outside of the Building, nor allow anything to be thrown by Tenant, Tenant’s agents or employees, out of the windows or doors, or down the corridors, elevator shafts, or ventilating ducts or shafts of the Building.

4.At the termination of this tenancy, Tenant shall promptly return to Landlord all keys to offices, toilet rooms or vaults.

5.Except as currently existing or as allowed by any approved plans for Improvements, Tenant shall not install or operate any steam or gas engine or boiler, or carry on any mechanical operation in the Premises.  Except in connection with the operation of any steam or gas engine or boiler, or except as permitted by the approved plans or as required to service or utilize any mechanical components currently existing at the Building (all of which shall otherwise be in compliance with all applicable laws), the use of oil, gas or inflammable liquids for heating, lighting or any other purpose is expressly prohibited.  Explosives or other articles deemed extra hazardous shall not be brought into the Building Complex.

6.Any painting or decorating as may be agreed to be done by and at the expense of Landlord shall be done during regular weekday working hours.  Should Tenant desire such work on Saturdays, Sundays, holidays or outside of regular working hours, Tenant shall pay for the extra cost thereof.

7.Landlord shall at all times during the last ninety (90) days of the term, have the right, by Landlord’s representatives or agents, to enter the Premises and show the same to persons wishing to lease them, and may, at any time within sixty (60) days preceding the termination of Tenant’s lease term, place upon the doors and windows of the Premises a “For Rent” sign, which notice shall not be removed by Tenant.

9.Tenant shall not commit any act or permit anything in or about the Building which shall or might subject Landlord to any liability or responsibility for injury to any person or property by reason of any business or operation being carried on in or about the Building or for any other reason.

10. Tenant shall not use the Building for lodging, sleeping, or for any immoral or illegal purpose or for any purpose that will damage the Building, or the reputation thereof, or for any purposes other than those specified in the Lease.

11. Canvassing, soliciting, and peddling in the Building are prohibited, and Tenant shall cooperate to prevent such activities.

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12. Tenant shall not conduct mechanical or manufacturing operations, or place or use any inflammable combustible explosive, or hazardous fluid, chemical, device, substance or material in or about the Building.  Tenant shall comply with all statutes, ordinances, rules, orders, regulations and requirements imposed by governmental or quasi-governmental authorities in connection with fire and public safety and fire prevention and shall not commit any act or permit any object to be brought or kept in the Building, which shall result in a change of the rating of the Building by the Insurance Services Officer or any similar person or entity.

13. Tenant shall not use the building for manufacturing or for the storage of goods, wares or merchandise, except as such storage may be incidental to the use of the Premises for general office purposes, and television production and communication center, and except in such portions of the Premises as may be specifically designated by Landlord for such storage.  Tenant shall not occupy the Building or permit any portion of the Building to be occupied for the manufacture or direct sale of liquor, narcotics, or tobacco in any form, or as a medical office, barber shop, manicure shop, music or dance studio or employment agency.

14. Tenant shall not deposit any trash, refuse, cigarettes, or other substances of any kind within or out of the Building except in the refuse containers provided therefore.  Tenant shall not introduce into the Building any substance which might add an undue burden to the cleaning or maintenance of the Premises or the Building.  Tenant shall exercise its best efforts to keep the sidewalks, entrances, passages, courts, lobby areas, garages or parking areas, elevators, stairways, vestibules, public corridors and halls in and about the Building clean and free from rubbish.

15. Landlord its agents or representatives reserve the right to exclude or expel from the Building any person, who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs or who shall in any manner act in violation of the rules and regulations of the Building.

16. Tenant shall not use the washrooms, restrooms and plumbing fixtures of the Building, and appurtenances thereto, for any other purpose then the purposes for which they were constructed, and Tenant shall not deposit any sweepings, rubbish, rags or other improper substances therein.  Tenant shall not waste water by interfering or tampering with the faucets or otherwise.  If Tenant or Tenant’s servants, employees, contractors, jobbers, agents, licensees, invitees, guests or visitors cause any damage to such washrooms, restrooms, plumbing fixtures or appurtenances, such damage shall be repaired at Tenant’s expense and Landlord shall not be responsible therefor.

17. Subject to applicable fire or other safety regulations, all doors opening into Common Area and all doors upon the perimeter of the Premises shall be kept closed and, during nonbusiness hours, locked, except when in use for ingress or egress.  If Tenant uses the Premises after regular business hours or on nonbusiness days, Tenant shall lock any entrance doors to the Building or to the Premises used by Tenant immediately after using such doors.

18. During the term of the Lease, Tenant in conducting any activity on the Demised Premises, shall comply with all applicable statutes, laws, ordinances, rules, orders, regulations and requirements (collectively “Environmental Requirements”) of the federal, state and local governments and all departments thereof including but not limited to Environmental Requirements regarding the presence, storage, use, maintenance and disposal of toxic, hazardous or contaminated substances (“Hazardous Materials or Special Wastes”) and regarding releases or threatened releases of Hazardous Materials or Special Wastes to the environment.  For purposes of this Lease the term “Hazardous Materials” shall refer to those materials, including without limitation asbestos and asbestos-containing materials, polychlorinated biphenyls (PCBs), oil or any other petroleum products, natural gas, source material, pesticides, and any hazardous waste, toxic substance or related material, including any substance defined or treated as a “hazardous substance”, “hazardous waste” or “toxic substance” (or comparable term) in the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Sec. 9601 et seq. (1990)), the Toxic Substance Control Act (15 U.S.C. Sec. 2601 et seq. (1990)), and any rules or regulations promulgated pursuant to such

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statutes or any other applicable federal or state statute. Tenant shall comply with the City’s Ordinance 196, as amended on March 18, 1991 (amendments to the City Uniform Public Code related to water conservation fixtures).  In no event shall the aforesaid be construed to mean that Landlord has given or will give its consent to Tenant’s storing, using, maintaining or removing hazardous materials in, on or about the Premises.

Tenant shall acquire all necessary federal, state and local environmental permits and comply with all applicable federal and state environmental permit requirements.

Tenant agrees to ensure that its Demised Premises are designed, operated and maintained in a manner that minimizes environmental impact through appropriate preventive measures and complies with all federal, state and local environmental requirements.  Tenant agrees to evaluate methods to reduce the generation and disposal of waste materials.  Tenant will not cause or allow any discharge or disposal of any hazardous substances, hazardous wastes or petroleum product to floors, floor drains, storm or sanitary sewer systems, or the land surface at the Demised Premises.

In the case of a release, spill or leak as a result of Tenant’s activities, Tenant shall immediately control and remediate the contaminated media to applicable federal, state and local standards.  Tenant shall reimburse the Landlord and the City for any penalties and all cost and expense, including without limitation attorney’s fees, incurred by the Landlord or the City as a result of the release or disposal by Tenant of any pollutant or hazardous material on the City’s property.  Tenant shall also immediately notify the Landlord and the City in writing of the release, spill or leak, the control and remediation response actions taken by Tenant, and any responses, notifications or actions taken by any federal, state or local agency with regard to such release, spill or leak.

Tenant shall make available for inspection and copying, upon reasonable notice and at reasonable times, any or all of the documents and materials that Tenant has prepared pursuant to any requirement hereunder or submitted to any governmental or regulatory agency.  If there is a requirement to file any notice or report of a release or threatened release of a substance on, under or about the Demised Premises, Tenant shall provide a copy of such report or notice to Landlord and the City.

At Landlord’s request, Tenant shall conduct testing and monitoring as is reasonable necessary to determine whether any hazardous substance or other contamination has entered the soil, groundwater, or surface water on or under the Demised Premises due to Tenant’s use or occupancy of the Demised Premises.

19. Tenant shall not permit its employees or agents to smoke in any areas of the Building Complex required by law to be maintained as a non-smoking area.

20.  Tenant shall conduct its operations in an orderly and proper manner so as not to commit any nuisance in the Demised Premises or annoy, disturb or be offensive to others in the vicinity of the Demised Premises and shall take all reasonable measures, using the latest know and practicable devices and means, to eliminate any unusual, nauseous or objectionable noise, gases, vapors, odors and vibrations.

21.  Tenant agrees that nothing shall be done or kept on the Demised Premises and no improvements, changes, alterations, additions, maintenance or repairs shall be made to the DemisedPremises which might impair the structural soundness of the building or result in an overload of utility lines.

22.Tenant recognizes the historical nature of the building and shall not drill, hammer, or otherwise mark the brick, post, beam or other historical surfaces.

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EXHIBIT C

PERSONAL GUARANTEE

Not applicable.

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EXHIBIT D

NOTICE OF NONLIABILITY OF LANDLORD

IN ACCORDANCE WITH THE COLORADO GENERAL MECHANIC’S LIEN LAW, SECTION 38-22-105(2), NOTICE IS HEREBY GIVEN BY GARVIN PARTNERS (THE “OWNER”) TO ALL SUPPLIERS, CONTRACTORS, SUBCONTRACTORS OR OTHER PERSONS PROVIDING LABOR, MATERIALS OR EQUIPMENT TO THE PROPERTY LOCATED AT 2300 15TH STREET, DENVER, COLORADO (THE “PROPERTY”) AT THE INSTANCE AND REQUEST OF                                                                                                                                            (THE “TENANTS”), OR THEIR CONTRACTORS, SUBCONTRACTORS OR AGENTS, FOR THE CONSTRUCTION, ALTERATION, REMOVAL, ADDITION OR OTHER IMPROVEMENTS TO THE PROPERTY; THAT THE OWNER WILL NOT BE RESPONSIBLE FOR ANY OBLIGATIONS, DEBTS OR CHARGES OF ANY NATURE ON ACCOUNT OF ANY MATERIALS SUPPLIED, LABOR PERFORMED OR EQUIPMENT FURNISHED IN CONNECTION WITH SUCH CONSTRUCTION, ALTERATION, ADDITION, REPAIR OR OTHER IMPROVEMENT RENDERED ON BEHALF OF THE TENANTS; AND THAT NEITHER THIS PROPERTY NOR ANY IMPROVEMENTS LOCATED THEREON WILL BE SUBJECT TO ANY LIEN FOR MATERIALS SUPPLIED, LABOR PERFORMED OR EQUIPMENT FURNISHED IN CONNECTION WITH SUCH CONSTRUCTION, ALTERATION, ADDITION OR OTHER IMPROVEMENT THEREON, NOR SHALL THE LANDS NECESSARY FOR THE CONVENIENT USE AND OCCUPANCY OF THIS PROPERTY BE SUBJECT TO SUCH LIEN.

DATED:                                       , 201  

GARVIN PARTNERS

By:

Its:

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EX-10.15

Exhibit 10.15

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT is made and dated as of May 5, 2010 and is entered into by and between INTELEPEER, INC., a Delaware corporation, and each of its subsidiaries, (hereinafter collectively referred to as the “Borrower”), on the one hand, and HERCULES TECHNOLOGY II, L.P., a Delaware limited partnership (“Hercules”), and COMERICA BANK, a Michigan banking corporation (“Comerica” and collectively with Hercules, the “Lenders”; each of the Lenders individually, a “Lender”).

RECITALS

A.Borrower has requested that the Lenders make available to Borrower an equipment loan in an aggregate principal amount of up to Ten Million Dollars ($10,000,000) (the “Equipment Loan”);

B.Borrower has requested that the Lenders make available to Borrower a revolving facility in an aggregate principal amount of up to Ten Million Dollars ($10,000,000) (the “Revolving Loan”); and

C.The Lenders are willing to make the Equipment Loan and the Revolving Loan on the terms and conditions set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, Borrower and the Lenders agree as follows:

SECTION 1.  DEFINITIONS AND RULES OF CONSTRUCTION

1.1Unless otherwise defined herein, the following capitalized terms shall have the following meanings:

“Account Control Agreement(s)” means any agreement entered into by and among a Lender, Borrower and a third party Bank or other institution (including a Securities Intermediary) with which Borrower maintains a Deposit Account or an account holding Investment Property, which grants such Lender a perfected first priority security interest in the subject account or accounts.

“ACH Authorization” means the ACH Debit Authorization Agreement in substantially the form of Exhibit I.

“Advance(s)” means an Equipment Loan Advance and/or a Revolving Loan Advance.

“Advance Date” means the funding date of any Advance.

“Advance Request” means a request for an Advance submitted by Borrower to the Lenders in substantially the form of Exhibit A.

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“Agreement” means this Loan and Security Agreement, as amended from time to time.

“Approved Plan” means, with respect to the 2010 calendar year, the business plan attached as Annex I hereto, and with respect to each subsequent calendar year, a board-approved business plan of Borrower that reasonably demonstrates the ability of Borrower to satisfy the Secured Obligations when due.

“Assignee” has the meaning given to it in Section 11.13.

“Borrower Products” means all products, software, service offerings, technical data or technology currently being designed, manufactured or sold by Borrower or which Borrower intends to sell, license, or distribute in the future including any products or service offerings under development, collectively, together with all products, software, service offerings, technical data or technology that have been sold, licensed or distributed by Borrower since its incorporation.

“Borrowing Base” means 80% of Eligible Accounts.

“Borrowing Base Certificate” means a borrowing base certificate substantially in the form of Exhibit H.

“Cash” means all cash and liquid funds.

“Change in Control” means any (i) reorganization, recapitalization, consolidation or merger (or similar transaction or series of related transactions) of Borrower, or sale or exchange of outstanding shares (or similar transaction or series of related transactions) of Borrower, in each case in which the holders of Borrower’s outstanding shares immediately before consummation of such transaction or series of related transactions do not, immediately after consummation of such transaction or series of related transactions, retain shares representing more than fifty percent (50%) of the voting power of the surviving entity of such transaction or series of related transactions (or the parent of such surviving entity if such surviving entity is wholly owned by such parent), in each case without regard to whether Borrower is the surviving entity, or (ii) sale or issuance by Borrower of new shares of Preferred Stock of Borrower to investors, none of whom are current investors in Borrower, and such new shares of Preferred Stock are senior to all existing Preferred Stock and Common Stock with respect to liquidation preferences, and the aggregate liquidation preference of the new shares of Preferred Stock is more than fifty percent (50%) of the aggregate liquidation preference of all shares of Preferred Stock of the Company; provided, however, an Initial Public Offering shall not constitute a Change in Control.

“Claims” has the meaning given to it in Section 11.10.

“Closing Date” means the date of this Agreement.

“Collateral” means the property described in Section 3.

“Confidential Information” has the meaning given to it in Section 11.12.

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“Contingent Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent Obligation” shall not include endorsements for collection or deposit in the ordinary course of business.  The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.

“Copyright License” means any written agreement granting any right to use any Copyright or Copyright registration, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.

“Copyrights” means all copyrights, whether registered or unregistered, held pursuant to the laws of the United States, any State thereof, or of any other country.

“Deposit Accounts” means any “deposit accounts,” as such term is defined in the UCC, and includes any checking account, savings account, or certificate of deposit.

“EBITDA” means net profit before tax plus interest expense (net of capitalized interest expense), depreciation expense and amortization expense.

“Eligible Accounts” means Accounts receivable arising in the ordinary course of Borrower’s business.  The Lenders reserve the right at any time and from time to time after the Closing Date, to adjust any of the criteria set forth below and to establish new criteria in its good faith credit judgment.  Unless otherwise agreed by the Lenders, Eligible Accounts shall not include the following:

(a)Accounts that the account debtor has failed to pay in full within 90 days of invoice date;

(b)Accounts owing by an account debtor, including its Affiliates, whose total obligations to Borrower exceed 25% of all Accounts (except for Accounts receivable by Borrower within 60 days of the invoice date owed by Sprint Nextel Corporation, Quest Communications International Inc., AT&T Inc., Verizon Communications Inc., and other Fortune 500 companies reasonably acceptable to the Lenders, in each case whose total obligations to Borrower exceed 35% of all Accounts), to the extent those obligations exceed that percentage, except as approved by the Lenders;

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(c)Accounts owing by an account debtor, including its Affiliates, 25% of whose Accounts the account debtor has failed to pay within 90 days of invoice date;

(d)Accounts owing by an account debtor that does not have its principal place of business in the United States, except as approved by the Lenders;

(e)Accounts owing by an account debtor that Borrower owes money, goods and/or services or is otherwise obligated, but only to the extent of the potential amount owed;

(f)Accounts arising out of deferred revenue;

(g)Accounts owing by an Affiliate of Borrower;

(h)Accounts that are the obligation of an account debtor that is the United States government or a political subdivision thereof, or any state, county or municipality or department, agency or instrumentality thereof unless the Lenders, in their sole discretion, have agreed to the contrary in writing and Borrower, if necessary or desirable, has complied with respect to such obligation with the Federal Assignment of Claims Act of 1940, or any applicable state, county or municipal law restricting assignment thereof;

(i)Accounts that arise with respect to goods that are delivered on a bill-and-hold, cash-on-delivery basis or placed on consignment, guaranteed sale or other terms by reason of which the payment by the account debtor is or may be conditional;

(j)Accounts (i) upon which Borrower’s right to receive payment is not absolute or is contingent upon the fulfillment of any condition whatsoever or (ii) as to which Borrower is not able to bring suit or otherwise enforce its remedies against the account debtor through judicial process;

(k)Accounts with respect to which no invoice has been sent within 30 days of the recognition of the related revenue by Borrower; and

(l)Accounts the collection of which the Lenders determine in their good faith credit judgment after inquiry and consultation with Borrower to be doubtful.

“Equipment Loan” has the meaning given to it in the recitals to this Agreement.

“Equipment Loan Advance” means any Equipment Loan funds advanced under Section 2.2 of this Agreement.

“Equipment Loan Interest Rate” means for any day, the prime rate as reported in The Wall Street Journal plus 7%.

“Equipment Loan Maturity Date” means May 5, 2011; provided, that on the Extension Date, the Equipment Loan Maturity Date shall automatically be extended to May 1, 2013, without any further action by Borrower or the Lenders.

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“Equipment Note” means a Promissory Note in substantially the form of Exhibit B-2.

“ERISA” is the Employee Retirement Income Security Act of 1974, and its regulations.

“Event of Default” has the meaning given to it in Section 9.

“Extension Date” means the date on which Borrower delivers notice to the Lenders that all Required PUC Consents have been obtained in order to extend the Equipment Loan Maturity Date and the Revolving Loan Maturity Date.

“Facility Charge” means $160,000.

“Financial Statements” has the meaning given to it in Section 7.1.

“GAAP” means generally accepted accounting principles in the United States of America, as in effect from time to time.

“Indebtedness” means indebtedness of any kind, including (a) all indebtedness for borrowed money or the deferred purchase price of property or services (excluding trade credit entered into in the ordinary course of business due within sixty (60) days), including reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations, and (d) all Contingent Obligations.

“Initial Public Offering” means the initial firm commitment underwritten offering of Borrower’s common stock pursuant to a registration statement under the Securities Act of 1933 filed with and declared effective by the Securities and Exchange Commission.

“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

“Intellectual Property” means all of Borrower’s Copyrights; Trademarks; Patents; Licenses; trade secrets and inventions; mask works; Borrower’s applications therefor and reissues, extensions, or renewals thereof; and Borrower’s goodwill associated with any of the foregoing, together with Borrower’s rights to sue for past, present and future infringement of Intellectual Property and the goodwill associated therewith.

“Investment” means any beneficial ownership (including stock, partnership or limited liability company interests) of or in any Person, or any loan, advance or capital contribution to any Person or the acquisition of all, or substantially all, of the assets of another Person.

“Joinder Agreements” means for each Subsidiary, a completed and executed Joinder Agreement in substantially the form attached hereto as Exhibit G.

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“Lender” has the meaning given to it in the preamble to this Agreement.

“Lender Expenses” are all reasonable audit fees and expenses, and reasonable costs and expenses (including reasonable attorneys’ fees and expenses) for preparing, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings).

“License” means any Copyright License, Patent License, Trademark License or other license of rights or interests.

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, levy, lien or charge of any kind, whether voluntarily incurred or arising by operation of law or otherwise, against any property, any conditional sale or other title retention agreement, and any lease in the nature of a security interest.

“Loan” means the Advances made under this Agreement.

“Loan Documents” means this Agreement, the Notes, the ACH Authorization, the Account Control Agreements, the Joinder Agreements, all UCC Financing Statements, the Warrants, and any other documents executed in connection with the Secured Obligations or the transactions contemplated hereby, as the same may from time to time be amended, modified, supplemented or restated.

“Material Adverse Effect” means a material adverse effect upon: (i) the business, operations, properties, assets, or condition (financial or otherwise) of Borrower; or (ii) the ability of Borrower to perform the Secured Obligations in accordance with the terms of the Loan Documents, or the ability of the Lenders to enforce any of their rights or remedies with respect to the Secured Obligations; or (iii) the Collateral or Lenders’ Liens on the Collateral or the priority of such Liens.

“Maximum Revolving Loan Amount” means Ten Million and No/100 Dollars ($10,000,000).

“Maximum Equipment Loan Amount” means Ten Million and No/100 Dollars ($10,000,000).

“Maximum Rate” shall have the meaning assigned to such term in Section 2.3.

“Note(s)” means any Revolving Note or Equipment Note.

“Patent License” means any written agreement granting any right with respect to any invention on which a Patent is in existence or a Patent application is pending, in which agreement Borrower now holds or hereafter acquires any interest.

“Patents” means all letters patent of, or rights corresponding thereto, in the United States or in any other country, all registrations and recordings thereof, and all applications for letters patent of, or rights corresponding thereto, in the United States or any other country.

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“Permitted Indebtedness” means: (i) Indebtedness of Borrower in favor of the Lenders arising under this Agreement or any other Loan Document; (ii) Indebtedness existing on the Closing Date which is disclosed in Schedule 1A; (iii) Indebtedness secured by a lien described in clause (vii) of the defined term “Permitted Liens”; (iv) Indebtedness to trade creditors incurred in the ordinary course of business, including Indebtedness incurred in the ordinary course of business with corporate credit cards; (v) Indebtedness that also constitutes a Permitted Investment; (vi) Subordinated Indebtedness; (vii) reimbursement obligations in connection with letters of credit that are secured by cash or cash equivalents and issued on behalf of Borrower or a Subsidiary thereof in an amount not to exceed $250,000 at any time outstanding, (viii) other Indebtedness in an amount not to exceed $250,000 at any time outstanding, and (ix) extensions, refinancings and renewals of any items of Permitted Indebtedness, provided that the principal amount is not increased or the terms modified to impose materially more burdensome terms upon Borrower or its Subsidiary, as the case may be.

“Permitted Investment” means: (i) Investments existing on the Closing Date which are disclosed in Schedule 1B; (ii) (a) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one year from the date of acquisition thereof, (b) commercial paper maturing no more than one year from the date of creation thereof and currently having a rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Service, (c) certificates of deposit issued by any bank with assets of at least $500,000,000 maturing no more than one year from the date of investment therein, and (d) money market accounts; (iii) repurchases of stock from former employees, directors, or consultants of Borrower under the terms of applicable repurchase agreements (a) at the original issuance price of such securities in an aggregate amount not to exceed $100,000 in any fiscal year, provided that no Event of Default has occurred, is continuing or would exist after giving effect to the repurchases or (b) in any amount where the consideration for the repurchase consists solely of the cancellation of indebtedness owed by such former employees to Borrower regardless of whether an Event of Default exists; (iv) Investments accepted in connection with Permitted Transfers; (v) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of Borrower’s business; (vi) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not affiliates, in the ordinary course of business, provided that this subparagraph (vi) shall not apply to Investments of Borrower in any Subsidiary; (vii) Investments consisting of loans not involving the net transfer on a substantially contemporaneous basis of cash proceeds to employees, officers or directors relating to the purchase of capital stock of Borrower pursuant to employee stock purchase plans or other similar agreements approved by Borrower’s Board of Directors; (viii) Investments consisting of travel advances, employee relocation loans and other employee loans and advances in the ordinary course of business in an amount not to exceed $100,000 in the aggregate outstanding at any time; (ix) Investments in newly-formed or acquired Subsidiaries organized in the United States, provided that such Subsidiaries enter into a Joinder Agreement promptly after their formation or acquisition by Borrower and execute such other documents as shall be reasonably requested by the Lenders; (x) Investments in subsidiaries organized outside of the United States approved in advance in writing by the Lenders; (xi) joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the nonexclusive licensing of technology, the development of technology or the providing of technical support,

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provided that any cash Investments by Borrower do not exceed $100,000 in the aggregate in any fiscal year; (xii) Investments in prepaid expenses, negotiable instruments held for collection, and deposits to secure the performance of bids, trade contracts (other than for borrowed money), contracts for the purchase of property, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case, incurred in the ordinary course of business, not representing an obligation for borrowed money, and in an amount not to exceed $250,000 in the aggregate; and (xiii) additional Investments that do not exceed $100,000 in the aggregate.

“Permitted Liens” means any and all of the following: (i) Liens in favor of the Lenders; (ii) Liens existing on the Closing Date which are disclosed in Schedule 1C; (iii) Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings; provided, that Borrower maintains adequate reserves therefor in accordance with GAAP; (iv) Liens securing claims or demands of materialmen, artisans, mechanics, carriers, warehousemen, landlords and other like Persons arising in the ordinary course of Borrower’s business and imposed without action of such parties; provided, that the payment thereof is not yet required; (v) Liens arising from judgments, decrees or attachments in circumstances which do not constitute an Event of Default hereunder; (vi) the following deposits, to the extent made in the ordinary course of business:  deposits under worker’s compensation, unemployment insurance, social security and other similar laws, or to secure the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure indemnity, performance or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure statutory obligations (other than liens arising under ERISA or environmental liens) or surety or appeal bonds, or to secure indemnity, performance or other similar bonds; (vii) Liens on Equipment or software or other intellectual property constituting purchase money liens and Liens in connection with capital leases; provided, that no additional such Liens shall be granted unless (A) Borrower is in compliance with Section 7.18 (which shall apply regardless of whether Revolving Loan Advances are outstanding solely for purposes of this clause (vii)), (B) no Event of Default shall have occurred and be continuing immediately following the incurrence of the Indebtedness secured by such Lien and (C) Borrower shall have provided Lenders with a right of first refusal to provide the Indebtedness to be secured by such Lien on the same terms offered by a third party and Lenders shall have failed to exercise such right within 10 Business Days following notice thereof;  (viii) Liens incurred in connection with Subordinated Indebtedness; (ix) leasehold interests in leases or subleases and licenses granted in the ordinary course of business and not interfering in any material respect with the business of Borrower and its Subsidiaries, taken as a whole; (x) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties that are promptly paid on or before the date they become due; (xi) Liens on insurance proceeds securing the payment of financed insurance premiums that are promptly paid on or before the date they become due (provided that such Liens extend only to such insurance proceeds and not to any other property or assets); (xii) statutory and common law rights of set-off and other similar rights as to deposits of cash and securities in favor of banks, other depository institutions and brokerage firms; (xiii) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business so long as they do not materially impair the value or marketability of the related property; (xiv) Liens on cash or cash equivalents securing obligations permitted under clause (vii) of the definition of Permitted Indebtedness; and (xv) Liens incurred in connection with the

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extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (i) through (xi) above; provided, that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced (as may have been reduced by any payment thereon) does not increase.

“Permitted Transfers” means (i) sales of Inventory in the normal course of business, (ii) non-exclusive licenses and similar arrangements for the use of Intellectual Property in the ordinary course of business and licenses that could not result in a legal transfer of title of the licensed property but that may be exclusive in respects other than territory and that may be exclusive as to territory only as to discreet geographical areas outside of the United States in the ordinary course of business, (iii) dispositions of worn-out, obsolete or surplus Equipment at fair market value in the ordinary course of business, (iv) Transfers constituting Permitted Liens or Permitted Investments or permitted under Section 7.8, (v) Transfers of amounts by Borrower to or from one of its investment or deposit accounts to another investment or deposit account maintained with Comerica, and (vi) other Transfers of assets having a fair market value of not more than $100,000 in the aggregate in any fiscal year.

“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, other entity or government.

“Preferred Stock” means at any given time any equity security issued by Borrower that has any rights, preferences or privileges senior to Borrower’s common stock.

“Prepayment Charge” shall have the meaning assigned to such term in Section 2.5.

“PUC” means any state regulatory agency or body that exercises jurisdiction over intrastate telecommunication rates or services or the ownership, construction or operation of any intrastate network facility or telecommunications systems or over Persons who own, construct or operate an intrastate network facility or telecommunications systems, in each case by reason of the nature or type of the business subject to regulation and not pursuant to laws and regulations of general applicability to Persons conducting business in such state.

“Receivables” means (i) all of Borrower’s Accounts, Instruments, Documents, Chattel Paper, Supporting Obligations, letters of credit, proceeds of any letter of credit, and Letter of Credit Rights, and (ii) all customer lists, software, and business records related thereto.

“Required EBITDA Amount” means (a) ($1,520,000), for March 2010, ($1,615,000), for April 2010,  ($1,643,000), for May 2010, ($1,503,000), for June 2010, ($1,257,000), for July 2010, ($925,000), for August 2010, ($724,000), for September 2010, ($417,000), for October 2010, ($153,000), for November 2010, and $49,000, for December 2010, and (b) an amount which shall have been determined by the Lenders on or prior to January 1 of each following calendar year based upon Borrower’s board-approved budget for such

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calendar year, which amount shall at least be sufficient to service Borrower’s obligations under this Agreement.

“Required PUC Consents” means all consents, orders and approvals of PUCs that are required in order for Borrower and its Subsidiaries to (a) incur Loans with a maturity in excess of one (1) year, specifically the District of Columbia, Indiana and New Jersey or (b) grant to the Lenders a Lien pursuant to Section 3.1 on their respective personal property located in the applicable states, specifically Colorado (with respect to the license to offer intrastate telecommunications services only), Georgia and New York.

“Revolving Interest Rate” means for any day, the prime rate as reported in The Wall Street Journal plus 2.05%.

“Revolving Loan” has the meaning given to it in the recitals to this Agreement.

“Revolving Loan Advance” means any Revolving Loan funds advanced under this Agreement.

“Revolving Loan Maturity Date” means May 5, 2011; provided, that on the Extension Date, the Revolving Loan Maturity Date shall automatically be extended to May 5, 2012, without any further action by Borrower or the Lenders.

“Revolving Note” means a Promissory Note in substantially the form of Exhibit B-1.

“SBA” shall have the meaning assigned to such term in Section 7.16.

“SBIC” shall have the meaning assigned to such term in Section 7.16.

“SBIC Act” shall have the meaning assigned to such term in Section 7.16.

“Secured Obligations” means Borrower’s obligations under this Agreement and any Loan Document, including any obligation to pay any amount now owing or later arising.

“Subordinated Indebtedness” means Indebtedness subordinated to the Secured Obligations in amounts and on terms and conditions satisfactory to the Lenders in their sole discretion.

“Subsequent Financing” means the closing of any Borrower equity financing (including, without limitation, any debt financing with an equity component) which becomes effective after the Closing Date involving the issuance of Preferred Stock by Borrower.

“Subsidiary” means an entity, whether corporate, partnership, limited liability company, joint venture or otherwise, in which Borrower owns or controls 50% or more of the outstanding voting securities, including each entity listed on Schedule 1 hereto.

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“Trademark License” means any written agreement granting any right to use any Trademark or Trademark registration, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.

“Trademarks” means all trademarks (registered, common law or otherwise) and any applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof.

“Transfer” shall have the meaning assigned to such term in Section 7.9.

“UCC” means the Uniform Commercial Code as the same is, from time to time, in effect in the State of California; provided, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, the Lenders’ Lien on any Collateral is governed by the Uniform Commercial Code as the same is, from time to time, in effect in a jurisdiction other than the State of California, then the term “UCC” shall mean the Uniform Commercial Code as in effect, from time to time, in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.

“Warrants” means each Warrant Agreement, dated as of even date herewith, between Borrower and each of Hercules and Comerica.

Unless otherwise specified, all references in this Agreement or any Annex or Schedule hereto to a “Section,” “subsection,” “Exhibit,” “Annex,” or “Schedule” shall refer to the corresponding Section, subsection, Exhibit, Annex, or Schedule in or to this Agreement.  Unless otherwise specifically provided herein, any accounting term used in this Agreement or the other Loan Documents shall have the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder shall be computed in accordance with GAAP, consistently applied. Unless otherwise defined herein or in the other Loan Documents, terms that are used herein or in the other Loan Documents and defined in the UCC shall have the meanings given to them in the UCC.

SECTION 2.  THE LOAN

2.1Revolving Loan.

(a)Advances.  Subject to the terms and conditions of this Agreement, Borrower may draw Revolving Loan Advances on or before the day immediately prior to the Revolving Loan Maturity Date in an aggregate principal amount of up to the lesser of the Borrowing Base or the Maximum Revolving Loan Amount, provided Borrower shall request only one (1) such Revolving Loan Advance per month (unless additional Revolving Loan Advances are approved by the Lenders in writing), and each Revolving Loan Advance shall be in a minimum amount of $500,000 or if the amount available to be borrowed under the Maximum Revolving Loan Amount is less than $500,000, then such lesser amount.  Revolving Loan Advances may be repaid and reborrowed at any time, without premium or penalty.  If the aggregate Revolving Loan Advances at any time exceed the lesser of the Borrowing Base or the Maximum Revolving Loan Amount,

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Borrower shall repay the amount of that excess to the Lenders within three (3) business days.

(b)Advance Request. To obtain an Advance, Borrower shall complete, sign and deliver an Advance Request, Borrowing Base and Revolving Note to the Lenders.  The Lenders shall fund each Revolving Loan Advance in the manner requested by the Advance Request provided that each of the conditions precedent to such Revolving Loan Advance is satisfied as of the requested Advance Date.

(c)Interest. The principal balance of the Revolving Loan shall bear interest thereon from the initial date of the Revolving Loan Advance, calculated at the floating Revolving Interest Rate per annum based upon a year consisting of 360 days and payable for the actual number of days elapsed.

(d)Payment.  Interest only payments shall be due on the first business day of each month, beginning on the first business day of the calendar month immediately following the Advance Date for the initial Revolving Loan Advance.  Notwithstanding any term or condition contained herein or the other Loan Documents to the contrary, the entire principal balance of the Revolving Loan and all accrued but unpaid interest and fees on or relating to the Revolving Loan shall be repaid in full on the Revolving Loan Maturity Date.  Borrower shall make all payments under this Agreement without setoff, recoupment or deduction and regardless of any counterclaim or defense. The Lenders will initiate debit entries to Borrower’s account as authorized on the ACH Authorization on each payment date of all periodic obligations payable to the Lenders with respect to each Revolving Loan Advance.

2.2Equipment Loan.

(a)Advances.  Subject to the terms and conditions of this Agreement, the Lenders agree to make, and Borrower agrees to draw, an Equipment Loan Advance in the amount and for the Equipment set forth on Annex II.  Beginning on the date of this Agreement, and continuing until December 31, 2010, Borrower may request additional Equipment Loan Advances, in minimum increments of $500,000.  The aggregate outstanding Equipment Loan Advances may be up to the Maximum Equipment Loan Amount.

(b)Advance Request.  To obtain an Equipment Loan Advance, Borrower shall complete, sign and deliver to the Lenders an Advance Request, Equipment Notes relating to such Equipment Loan Advance, evidence of clear title to the Collateral to be financed by such Equipment Loan Advance, and such purchase documentation associated with Borrower’s purchase of the property from the vendors of the Equipment related to such Equipment Loan Advance as Lender shall reasonably request, including, without limitation, purchase documentation, invoices, and bills of sale.  The Lenders agree to fund each Equipment Loan Advance in the manner requested by the Advance Request provided that each of the conditions precedent to such Equipment Loan Advance is satisfied as of the requested Advance Date.

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(c)Interest.  The principal balance of each Equipment Loan Advance shall bear interest thereon from such Advance Date at the Equipment Loan Interest Rate based on a year consisting of 360 days, with interest computed daily based on the actual number of days elapsed.  The Equipment Loan Interest Rate will float and change on the day the Prime Rate changes from time to time.

(d)Payment.  Borrower will pay interest only on each Equipment Loan Advance on the first business day of each month, beginning the month after the Advance Date for such Equipment Loan Advance through the payment due on the first business day in December of 2010.  Borrower shall repay the aggregate Equipment Loan principal balance that is outstanding on December 31, 2010 in monthly installments of principal and interest beginning January 1, 2011 and continuing on the first business day of each month thereafter, such monthly installments to be calculated based on a full amortization of the principal balance outstanding on December 31, 2010 over a period of 29 months.  Notwithstanding any term or condition contained herein or the other Loan Documents to the contrary, the entire Equipment Loan principal balance and all accrued but unpaid interest hereunder, shall be due and payable on the Equipment Loan Maturity Date.  Borrower shall make all payments under this Agreement without setoff, recoupment or deduction and regardless of any counterclaim or defense. The Lenders will initiate debit entries to Borrower’s account as authorized on the ACH Authorization on each payment date of all periodic obligations payable to the Lenders under each Equipment Advance.

2.3Maximum Interest.  Notwithstanding any provision in this Agreement, the Notes, or any other Loan Document, it is the parties’ intent not to contract for, charge or receive interest at a rate that is greater than the maximum rate permissible by law that a court of competent jurisdiction shall deem applicable hereto (which under the laws of the State of California shall be deemed to be the laws relating to permissible rates of interest on commercial loans) (the “Maximum Rate”).  If a court of competent jurisdiction shall finally determine that Borrower has actually paid to the Lenders an amount of interest in excess of the amount that would have been payable if all of the Secured Obligations had at all times borne interest at the Maximum Rate, then such excess interest actually paid by Borrower shall be applied as follows:  first, to the payment of principal outstanding on the Notes; second, after all principal is repaid, to the payment of the Lenders’ accrued interest, costs, expenses, professional fees and any other Secured Obligations; and third, after all Secured Obligations are repaid, the excess (if any) shall be refunded to Borrower.

2.4Default Interest.  In the event any payment due is not paid within one (1) business day following notice to the Chief Financial Officer or the Corporate Controller of Borrower of such failure to make such payment, an amount equal to five percent (5%) of the past due amount shall be payable on demand;  provided, that Borrower shall not pay such late charge if the failure to make any such payment when due arises solely from either (i) the Lenders’ failure to effect timely automatic debits of the appropriate funds as authorized on the ACH Authorization and as provided in Sections 2.1(d) and 2.2(d), or (ii) a technical malfunction of an ACH transfer.. In addition, upon the occurrence and during the continuation of an Event of Default hereunder, all Secured Obligations, including principal, interest, compounded interest, and professional fees, shall bear interest at a rate per annum equal to the rate set forth in Section 2.1(c) or 2.2(c), as applicable, plus five

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percent (5%) per annum.  In the event any interest is not paid when due hereunder, delinquent interest shall be added to principal and shall bear interest on interest, compounded at the rate set forth in Section 2.1(c), 2.2(c) or Section 2.4, as applicable.

2.5Prepayment.  At its option upon at least 7 business days prior notice to the Lenders, Borrower may prepay all, but not less than all, of the outstanding Equipment Loan Advances by paying the entire principal balance, all accrued and unpaid interest, together with a prepayment charge equal to the following percentage of the Equipment Loan Advance amount being prepaid: if such Equipment Loan Advance amounts are prepaid in any of the first twelve (12) months following the Closing Date, 3%; after twelve (12) months but prior to twenty four (24) months, 2%; and thereafter, 1% (each, a “Prepayment Charge”).  Borrower agrees that the Prepayment Charge is a reasonable calculation of the Lenders’ lost profits in view of the difficulties and impracticality of determining actual damages resulting from an early repayment of the Equipment Loan Advances.  Borrower shall prepay the outstanding amount of all Advances and all accrued interest and unpaid interest thereon within 90 days of the completion of an Initial Public Offering.

2.6Lockbox.  Borrower shall at all times establish and maintain a lockbox (the “Lockbox”) with Comerica, including execution of such agreements as a Lender requests in connection with such Lockbox.  Borrower shall include the Lockbox billing address on all invoices issued after the Closing Date and shall direct all account debtors to make payments to the Lockbox.  Receipts to the Lockbox shall be swept to a Deposit Account subject to an Account Control Agreement.  If Borrower receives any payments from its account debtors notwithstanding the foregoing instructions, Borrower shall forward all payments to the Lockbox, together with a cash receipts journal on Friday of each week until the Lockbox is fully operational.  Borrower agrees to pay all customary fees associated with the Lockbox, and such Lockbox shall be subject to the sole dominion and control of Lenders.

SECTION 3.  SECURITY INTEREST

3.1As security for the prompt, complete and indefeasible payment when due (whether on the payment dates or otherwise) of all the Secured Obligations, Borrower grants to the Lenders a security interest in all of Borrower’s personal property now owned or hereafter acquired, including the following (collectively, the “Collateral”):  (a) Receivables; (b) Equipment; (c) Fixtures; (d) General Intangibles; (e) Inventory; (f) Investment Property (but excluding thirty-five percent (35%) of the capital stock of any foreign Subsidiary); (g) Deposit Accounts; (h) Cash; (i) Goods; (j) Intellectual Property; and other tangible and intangible personal property of Borrower whether now or hereafter owned or existing, leased, consigned by or to, or acquired by, Borrower and wherever located; and, to the extent not otherwise included, all Proceeds of each of the foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of each of the foregoing.  Notwithstanding the foregoing, the term “Collateral” shall not include, and Borrower shall not grant to the Lenders any Lien on, any of its personal property located in Colorado, Georgia and New York, to the extent the Required PUC Consents for such states have not yet been obtained; provided, that upon receipt of the Required PUC Consents for such state,

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Borrower’s personal property located in such state shall automatically become part of the Collateral without any further action by Borrower or the Lenders.

SECTION 4.  CONDITIONS PRECEDENT TO LOAN

The obligations of the Lenders to make the Loan hereunder are subject to the satisfaction by Borrower of the following conditions:

4.1Initial Advance.  On or prior to the Closing Date, Borrower shall have delivered to the Lenders the following:

(a)executed originals of the Loan Documents, Account Control Agreements, a legal opinion of Borrower’s counsel, and all other documents and instruments reasonably required by the Lenders to effectuate the transactions contemplated hereby or to create and perfect the Liens of the Lenders with respect to all Collateral, in all cases in form and substance reasonably acceptable to the Lenders;

(b)certified copy of resolutions of Borrower’s board of directors evidencing approval of (i) the Loan and other transactions evidenced by the Loan Documents; and (ii) the Warrants and transactions evidenced thereby;

(c)certified copies of the Certificate of Incorporation and the Bylaws, as amended through the Closing Date, of Borrower;

(d)a certificate of good standing for Borrower from its state of incorporation and similar certificates from all other jurisdictions in which it does business and where the failure to be qualified would have a Material Adverse Effect;

(e)payment of the Facility Charge and reimbursement of the current Lender Expenses reimbursable pursuant to this Agreement, which amounts may be deducted from the initial Advance; and

(f)such other documents as the Lenders may reasonably request.

4.2All Advances.  On each Advance Date:

(a)The Lenders shall have received (i) an Advance Request and a Note for the relevant Advance as required by Section 2.1(b) or 2.2(b), as applicable, each duly executed by Borrower’s Chief Executive Officer, Chief Financial Officer, or Corporate Controller, and (ii) any other documents the Lenders may reasonably request.

(b)The representations and warranties set forth in Section 5 of this Agreement and in the Warrants shall be true and correct in all material respects on and as of the Advance Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date.

(c)Borrower shall be in compliance with all the terms and provisions set forth herein and in each other Loan Document on its part to be observed or performed, and at

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the time of and immediately after such Advance no Event of Default shall have occurred and be continuing.

(d)Each Advance Request shall be deemed to constitute a representation and warranty by Borrower on the relevant Advance Date as to the matters specified in paragraphs (b) and (c) of this Section 4.2 and as to the matters set forth in the Advance Request.

4.3No Default.  As of the Closing Date and each Advance Date, (i) no fact or condition exists that would (or would, with the passage of time, the giving of notice, or both) constitute an Event of Default and (ii) no event that has had or would reasonably be expected to have a Material Adverse Effect has occurred and is continuing.

SECTION 5.  REPRESENTATIONS AND WARRANTIES OF BORROWER

Borrower represents and warrants that:

5.1Corporate Status.  Borrower is a corporation duly organized, legally existing and in good standing under the laws of the State of Delaware, and is duly qualified as a foreign corporation in all jurisdictions in which the nature of its business or location of its properties require such qualifications and where the failure to be qualified could reasonably be expected to have a Material Adverse Effect.  Borrower’s present name, former names (if any), locations, place of formation, tax identification number, organizational identification number and other information are correctly set forth in Exhibit C, as may be updated by Borrower in a written notice (including any Compliance Certificate) provided to the Lenders after the Closing Date.

5.2Collateral.  Borrower owns the Collateral, free of all Liens, except for Permitted Liens.  Borrower has the power and authority to grant to the Lenders a Lien in the Collateral as security for the Secured Obligations .

5.3Consents.  Borrower’s execution, delivery and performance of the Notes, this Agreement and all other Loan Documents, and Borrower’s execution of the Warrants, (i) have been duly authorized by all necessary corporate action of Borrower, (ii) will not result in the creation or imposition of any Lien upon the Collateral, other than Permitted Liens and the Liens created by this Agreement and the other Loan Documents, (iii) do not violate any provisions of Borrower’s Certificate of Incorporation, bylaws, or any, law, regulation, order, injunction, judgment, decree or writ to which Borrower is subject and (iv) except as described on Schedule 5.3, do not violate any material contract or agreement or require the consent or approval of any other Person.  The individual or individuals executing the Loan Documents and the Warrants are duly authorized to do so.

5.4Material Adverse Effect.  No event that has had or would reasonably be expected to have a Material Adverse Effect has occurred and is continuing. Borrower is not aware of any event likely to occur that is reasonably expected to result in a Material Adverse Effect.

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5.5Actions Before Governmental Authorities.  Except as described on Schedule 5.5, there are no actions, suits or proceedings at law or in equity or by or before any governmental authority now pending or, to the knowledge of Borrower, threatened against or affecting Borrower or its property.

5.6Laws.  Borrower is not in violation of any law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree of any governmental authority, where such violation or default is reasonably expected to result in a Material Adverse Effect.  Borrower is not in default in any manner under any provision of any material agreement or instrument evidencing indebtedness, or any other material agreement to which it is a party or by which it is bound.

5.7Information Correct and Current.  No information, report, Advance Request, financial statement, exhibit or schedule furnished, by or on behalf of Borrower to the Lenders in connection with any Loan Document or included therein or delivered pursuant thereto contained, contains or will contain any material misstatement of fact or omitted, omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not misleading at the time such statement was made or deemed made. Additionally, any and all financial or business projections provided by Borrower to the Lenders shall be (i) provided in good faith and based on the most current data and information available to Borrower, and (ii) the most current of such projections provided to Borrower’s Board of Directors; provided, however, that the Company does not warrant that it will achieve such financial or business projections and the Lenders recognize that actual results during the period covered by such projections may differ from the projected results.

5.8Tax Matters.  Except as described on Schedule 5.8, (a) Borrower has filed all federal, state and local tax returns that it is required to file, (b) Borrower has duly paid or fully reserved for all taxes or installments thereof (including any interest or penalties) as and when due, which have or may become due pursuant to such returns, and (c) Borrower has paid or fully reserved for any tax assessment received by Borrower for the three (3) years preceding the Closing Date, if any (including any taxes being contested in good faith and by appropriate proceedings).

5.9Intellectual Property Claims.  Borrower is the sole owner of, or otherwise has the right to use, the Intellectual Property, except for licenses granted to its customers in the ordinary course of business.  Except as described on Schedule 5.9, (i) each of the material Copyrights, Trademarks and issued Patents is valid and enforceable, (ii) no material part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and (iii) no claim has been made to Borrower that any material part of the Intellectual Property violates the rights of any third party, except as would not reasonably be expected to result in a Material Adverse Effect.  Exhibit D is a true, correct and complete list of each of Borrower’s Patents, registered Trademarks, registered Copyrights, and material agreements under which Borrower licenses Intellectual Property from third parties (other than shrink-wrap software licenses), together with application or registration numbers, as applicable, owned by Borrower or any Subsidiary, in each case as of the Closing Date. Borrower is not in material breach of, nor has Borrower failed to perform

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any material obligations under, any of the foregoing contracts, licenses or agreements and, to Borrower’s knowledge, no third party to any such contract, license or agreement is in material breach thereof or has failed to perform any material obligations thereunder.

5.10Intellectual Property.  Except as described on Schedule 5.10, Borrower has, or in the case of any proposed business, will have, all material rights with respect to Intellectual Property necessary in the operation or conduct of Borrower’s business as currently conducted and proposed to be conducted by Borrower.  Without limiting the generality of the foregoing, and in the case of Licenses, except for restrictions that are unenforceable under Division 9 of the UCC, Borrower has the right, to the extent required to operate Borrower’s business, to freely transfer, license or assign Intellectual Property without condition, restriction or payment of any kind (other than license payments in the ordinary course of business) to any third party, and Borrower owns or has the right to use, pursuant to valid licenses, all software development tools, library functions, compilers and all other third-party software and other items that are used in the design, development, promotion, sale, license, manufacture, import, export, use or distribution of Borrower Products.

5.11Borrower Products.  Except as described on Schedule 5.11, no Intellectual Property owned by Borrower or Borrower Product has been or is subject to any actual or, to the knowledge of Borrower, threatened litigation, proceeding (including any proceeding in the United States Patent and Trademark Office or any corresponding foreign office or agency) or outstanding decree, order, judgment, settlement agreement or stipulation that restricts in any manner Borrower’s use, transfer or licensing thereof or that may affect the validity, use or enforceability thereof. There is no decree, order, judgment, agreement, stipulation, arbitral award or other provision entered into in connection with any litigation or proceeding that obligates Borrower to grant licenses or ownership interest in any future Intellectual Property related to the operation or conduct of the business of Borrower or Borrower Products.  Borrower has not received any written notice or claim, or, to the knowledge of Borrower, oral notice or claim, challenging or questioning Borrower’s ownership in any Intellectual Property (or written notice of any claim challenging or questioning the ownership in any licensed Intellectual Property of the owner thereof) or suggesting that any third party has any claim of legal or beneficial ownership with respect thereto nor, to Borrower’s knowledge, is there a reasonable basis for any such claim.  Neither Borrower’s use of its Intellectual Property nor the production and sale of Borrower Products infringes the Intellectual Property or other rights of others, except as would not reasonably be expected to result in a Material Adverse Effect.

5.12Financial Accounts.  Exhibit E, as may be updated by Borrower in a written notice provided to the Lenders after the Closing Date, is a true, correct and complete list of (a) all banks and other financial institutions at which Borrower or any Subsidiary maintains Deposit Accounts and (b) all institutions at which Borrower or any Subsidiary maintains an account holding Investment Property, and such exhibit correctly identifies the name, address and telephone number of each bank or other institution, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor.

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5.13Employee Loans.  Except for Permitted Investments, Borrower has no outstanding loans to any employee, officer or director of Borrower nor has Borrower guaranteed the payment of any loan made to an employee, officer or director of Borrower by a third party.

5.14Capitalization and Subsidiaries.  Borrower’s capitalization as of the Closing Date is set forth on Schedule 5.14 annexed hereto.  Borrower does not own any stock, partnership interest or other securities of any Person, except for Permitted Investments.  Attached as Schedule 5.14, as may be updated by Borrower in a written notice provided after the Closing Date, is a true, correct and complete list of each Subsidiary.

5.15Eligible Accounts.  For any Eligible Account in any Borrowing Base Certificate, all statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing such Eligible Accounts are and shall be true and correct (except for any good faith immaterial errors promptly corrected when discovered) and all such invoices, instruments and other documents, and all of Borrower’s books are genuine and in all respects what they purport to be.  All sales and other transactions underlying or giving rise to each Eligible Account shall comply in all material respects with all applicable laws and governmental rules and regulations.  Borrower has no knowledge of any actual or imminent insolvency proceeding of any Account debtor whose accounts are an Eligible Account in any Borrowing Base Certificate.  To the best of Borrower’s knowledge, all signatures and endorsements on all documents, instruments, and agreements relating to all Eligible Accounts are genuine, and all such documents, instruments and agreements are legally enforceable in accordance with their terms.

SECTION 6.  INSURANCE; INDEMNIFICATION

6.1Coverage.  Borrower shall cause to be carried and maintained commercial general liability insurance, on an occurrence form, against risks customarily insured against in Borrower’s line of business.  Such risks shall include the risks of bodily injury, including death, property damage, personal injury, advertising injury, and contractual liability per the terms of the indemnification agreement found in Section 6.3.  Borrower must maintain a minimum of $2,000,000 of commercial general liability insurance for each occurrence.  Borrower has and agrees to maintain a minimum of $2,000,000 of directors and officers’ insurance for each occurrence and $5,000,000 in the aggregate.  So long as there are any Secured Obligations outstanding, Borrower shall also cause to be carried and maintained insurance upon the Collateral, insuring against all risks of physical loss or damage howsoever caused, in an amount not less than the full replacement cost of the Collateral, provided that such insurance may be subject to standard exceptions and deductibles.  Borrower shall also carry and maintain a fidelity insurance policy in an amount not less than $100,000.

6.2Certificates.  Borrower shall deliver to the Lenders certificates of insurance that evidence Borrower’s compliance with its insurance obligations in Section 6.1 and the obligations contained in this Section 6.2.  Borrower’s insurance certificate shall state the Lenders are an additional insured for commercial general liability, a loss payee for all risk property damage insurance, subject to the insurer’s approval, a loss payee for fidelity

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insurance, and a loss payee for property insurance and additional insured for liability insurance for any future insurance that Borrower may acquire from such insurer.  Attached to the certificates of insurance will be additional insured endorsements for liability and lender’s loss payable endorsements for all risk property damage insurance and fidelity.  All certificates of insurance will provide for a minimum of thirty (30) days advance written notice to the Lenders of cancellation or any other change adverse to the Lenders’ interests.  Any failure of the Lenders to scrutinize such insurance certificates for compliance is not a waiver of any of the Lenders’ rights, all of which are reserved.

6.3Indemnity.  Borrower agrees to indemnify and hold each Lender and its officers, directors, employees, agents, in-house attorneys, representatives and shareholders harmless from and against any and all claims, costs, expenses, damages and liabilities (including such claims, costs, expenses, damages and liabilities based on liability in tort, including strict liability in tort), including reasonable attorneys’ fees and disbursements and other costs of investigation or defense (including those incurred upon any appeal), that may be instituted or asserted against or incurred by a Lender or any such Person as the result of credit having been extended, suspended or terminated under this Agreement and the other Loan Documents or the administration of such credit, or in connection with or arising out of the transactions contemplated hereunder and thereunder, or any actions or failures to act in connection therewith, or arising out of the disposition or utilization of the Collateral, excluding in all cases claims resulting solely from such Lender’s gross negligence or willful misconduct. Borrower agrees to pay, and to save each Lender harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all excise, sales or other similar taxes (excluding taxes imposed on or measured by the net income of such Lender) that may be payable or determined to be payable with respect to any of the Collateral or this Agreement.

SECTION 7.  COVENANTS OF BORROWER

Borrower agrees (unless otherwise consented to by the Lenders in writing) as follows:

7.1Financial Reports.  Borrower shall furnish to the Lenders a Compliance Certificate in the form of Exhibit F and the financial statements listed hereinafter (the “Financial Statements”) in accordance with the following provisions:

(a)as soon as practicable (and in any event within 25 days) after the end of each month, unaudited interim and year-to-date financial statements as of the end of such month (prepared on a consolidated and consolidating basis, if applicable), including balance sheet and related statements of income and cash flows accompanied, if applicable, by a report detailing any material contingencies (including the commencement of any material litigation by or against Borrower) or any other occurrence that would reasonably be expected to have a Material Adverse Effect, all certified by Borrower’s Chief Financial Officer or Corporate Controller to the effect that they have been prepared in accordance with GAAP, except (i) for the absence of footnotes, (ii) that they are subject to normal year end adjustments, and (iii) they do not contain certain non-cash items that are customarily included in quarterly and annual financial statements;

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(b)           as soon as practicable (and in any event within 25 days) after the end of each month, a Compliance Certificate (attaching a Borrowing Base Certificate, in the event the Compliance Certificate is delivered when Revolving Loan Advances are outstanding) and agings of accounts receivable and accounts payable, as well as such operating reports, including without limitation, sales backlog reports, as the Lenders shall reasonably request;

(c)           as soon as practicable (and in any event within 25 days) after the end of each calendar quarter, unaudited interim and year-to-date financial statements as of the end of such calendar quarter (prepared on a consolidated and consolidating basis, if applicable), including balance sheet and related statements of income and cash flows accompanied by a report detailing any material contingencies (including the commencement of any material litigation by or against Borrower) or any other occurrence that would reasonably be expected to have a Material Adverse Effect,  certified by Borrower’s Chief Financial Officer or Corporate Controller to the effect that they have been prepared in accordance with GAAP, except (i) for the absence of footnotes, and (ii) that they are subject to normal year end adjustments; as well as the most recent capitalization table for Borrower, including the weighted average exercise price of employee stock options;

(d)           as soon as practicable (and in any event within one hundred fifty (150) days) after the end of each fiscal year, unqualified audited financial statements as of the end of such year (prepared on a consolidated and consolidating basis, if appliable), including balance sheet and related statements of income and cash flows, and setting forth in comparative form the corresponding figures for the preceding fiscal year, certified by a firm of independent certified public accountants selected by Borrower and reasonably acceptable to the Lenders, accompanied by any management report from such accountants;

(e)           promptly after the sending or filing thereof, as the case may be, copies of any proxy statements, financial statements or reports that Borrower has made available to holders of its Preferred Stock and copies of any regular, periodic and special reports or registration statements that Borrower files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or any national securities exchange;

(f)            at the request of a Lender, copies of all notices, minutes, consents and other materials that Borrower has provided or provides to its directors in connection with meetings of the Board of Directors;

(g)           as soon as practicable (and in any event no later than the end of the fiscal year), financial and business projections and budgets, in each case which have been approved by Borrower’s Board of Directors; and

(h)           such operating plans and other financial information reasonably requested by the Lenders.

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The Lenders shall have a right from time to time hereafter to audit Borrower’s Accounts and appraise the Collateral at Borrower’s expense, including an audit prior to the initial Advance to be made hereunder, provided that such audits will be conducted no more often than every six (6) months unless an Event of Default has occurred and is continuing.

The executed Compliance Certificate may be sent via facsimile to the Lenders at (650) 473-9194 or via e-mail to skuo@herculestech.com.  All Financial Statements required to be delivered pursuant to clauses (a), (b) and (c) shall be sent via e-mail to financialstatements@herculestech.com with copies to skuo@herculestech.com and ccheng@comerica.com; provided, that if e-mail is not available or sending such Financial Statements via e-mail is not possible, they shall be sent via facsimile to the Lenders at: (866) 468-8916, attention Chief Credit Officer.

Notwithstanding any term or condition contained in this Section 7.1 to the contrary, Borrower shall have no obligation to prepare consolidating financial statements if its Subsidiaries do not engage in any business or operations.

7.2           Management Rights.  Borrower shall permit any representative that a Lender authorizes, including its attorneys and accountants, to inspect the Collateral and examine and make copies and abstracts of the books of account and records of Borrower at reasonable times and upon reasonable notice during normal business hours; provided that such inspections by the Lenders will be conducted no more often than twice annually unless an Event of Default has occurred and is continuing.  Any such representative shall have the right to meet with management and officers of Borrower to discuss such books of account and records at reasonable times and intervals and upon reasonable notice.  In addition, each Lender shall be entitled at reasonable times and intervals to consult with and advise the management and officers of Borrower concerning significant business issues affecting Borrower.  Such consultations shall not unreasonably interfere with Borrower’s business operations.  The parties intend that the rights granted the Lenders shall constitute “management rights” within the meaning of 29 C.F.R Section 2510.3-101(d)(3)(ii), but that any advice, recommendations or participation by a Lender with respect to any business issues shall not be deemed to give such Lender, nor be deemed an exercise by such Lender of, control over Borrower’s management or policies.

7.3           Further Assurances.  Borrower shall from time to time execute, deliver and file, alone or with a Lender, any financing statements, security agreements, collateral assignments, notices, control agreements, or other documents to perfect or give the highest priority to the Lenders’ Lien on the Collateral (subject to applicable Permitted Liens).  Borrower shall from time to time procure any instruments or documents as may be reasonably requested by a Lender, and take all further action that may be necessary or desirable, or that a Lender may reasonably request, to perfect and protect the Liens granted hereby and thereby.  In addition, and for such purposes only, Borrower hereby authorizes each Lender to execute and deliver on behalf of Borrower and to file such financing statements, collateral assignments, notices, control agreements, security agreements and other documents without the signature of Borrower either in such Lender’s name or in the name of such Lender as agent and attorney-in-fact for Borrower.  Borrower shall protect and defend Borrower’s title to the Collateral and such Lender’s Lien thereon against all

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Persons claiming any interest adverse to Borrower or any Lender other than Permitted Liens.

7.4           Compromise of Agreements.  With respect to Accounts with a combined value in excess of twenty percent (20%) of all of Borrower’s Accounts then outstanding, Borrower shall not (a) grant any material extension of the time of payment thereof, (b) to any material extent, compromise, compound or settle the same for less than the full amount thereof, (c) release, wholly or partly, any Person liable for the payment thereof, or (d) allow any credit or discount whatsoever thereon other than trade discounts granted by Borrower in the ordinary course of business of Borrower.

7.5           Indebtedness.  Borrower shall not create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness, or permit any Subsidiary so to do, other than Permitted Indebtedness, or prepay any Indebtedness or take any actions which impose on Borrower an obligation to prepay any Indebtedness, except for the conversion of Indebtedness into equity securities, the payment of cash in lieu of fractional shares in connection with such conversion, and Indebtedness owed to the Lenders.

7.6           Collateral.  Borrower shall at all times keep the Collateral and all other property and assets used in Borrower’s business or in which Borrower now or hereafter holds any interest free and clear from any legal process or Liens whatsoever (except for Permitted Liens), and shall give each Lender prompt written notice of any legal process affecting the Collateral, such other property and assets, or any Liens thereon (except for Permitted Liens).  Borrower shall cause its Subsidiaries to protect and defend such Subsidiary’s title to its assets from and against all Persons claiming any interest adverse to such Subsidiary, and Borrower shall cause its Subsidiaries at all times to keep such Subsidiary’s property and assets free and clear from any legal process or Liens whatsoever (except for Permitted Liens), and shall give each Lender prompt written notice of any legal process affecting such Subsidiary’s assets.  Borrower shall not agree with any Person other than the Lenders not to encumber its property, except that Borrower may agree with any provider of an equipment lease constituting Permitted Indebtedness under clause (iii) of the definition thereof not to encumber its property, so long as such agreement is limited to the Equipment subject to such equipment lease.  Notwithstanding the foregoing, the existence of legal process described in this Section shall not constitute an Event of Default provided that Borrower is contesting such legal process in good faith by appropriate proceedings, such process would not reasonably be expected to have a Material Adverse Effect, such Liens have no priority over the Liens of the Lenders, and the Borrower has established adequate reserves with respect to such process to the extent required by GAAP.

7.7           Investments.  Borrower shall not directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries so to do, other than Permitted Investments.

7.8           Distributions.  Borrower shall not, and shall not allow any Subsidiary to, (a) repurchase or redeem any class of stock or other equity interest other than pursuant to employee, director or consultant repurchase plans or other similar agreements, provided, however, in each case the repurchase or redemption price does not exceed the original

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consideration paid for such stock or equity interest, or (b) declare or pay any cash dividend or make a cash distribution on any class of stock or other equity interest, except (i) dividends or distributions by a Subsidiary to Borrower, or (ii) payments of de minimis amounts of cash in lieu of fractional shares upon conversion of convertible securities or upon any stock split or consolidation, (c) lend money to any employees, officers or directors or guarantee the payment of any such loans granted by a third party, other than Permitted Investments, or (d) waive, release or forgive any indebtedness owed by any employees, officers or directors in excess of $100,000 in the aggregate.

7.9           Transfers.  Except for Permitted Transfers, Borrower shall not voluntarily or involuntarily transfer, sell, lease, license, lend or in any other manner convey (“Transfer”) any equitable, beneficial or legal interest in any material portion of its assets.  Notwithstanding any term or condition contained herein or in the other Loan Documents to the contrary, Borrower shall not Transfer any Equipment purchased, in whole or in part, with an Equipment Loan Advance without the prior written consent of the Lenders, which consent shall not be unreasonably withheld, conditioned or delayed.

7.10         Mergers or Acquisitions.  Borrower shall not merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or into any other business organization (other than mergers or consolidations of a Subsidiary into another Subsidiary or into Borrower), or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person.

7.11         Taxes.  Borrower and its Subsidiaries shall pay when due all taxes, fees or other charges of any nature whatsoever (together with any related interest or penalties) now or hereafter imposed or assessed against Borrower, any Lender or the Collateral or upon Borrower’s ownership, possession, use, operation or disposition thereof or upon Borrower’s rents, receipts or earnings arising therefrom.  Borrower shall file on or before the due date therefor all personal property tax returns in respect of the Collateral.  Notwithstanding the foregoing, Borrower may contest, in good faith and by appropriate proceedings, taxes for which Borrower maintains adequate reserves therefor in accordance with GAAP.

7.12         Corporate Changes.  Neither Borrower nor any Subsidiary shall change its corporate name, legal form or jurisdiction of formation without twenty (20) days’ prior written notice to the Lenders.  Neither Borrower nor any Subsidiary shall suffer a Change in Control. Neither Borrower nor any Subsidiary shall relocate its chief executive office or its principal place of business unless: (i) it has provided prior written notice to the Lenders; and (ii) such relocation shall be within the continental United States.  Except in connection with Permitted Transfers, neither Borrower nor any Subsidiary shall relocate any item of Collateral (other than (x) sales of Inventory in the ordinary course of business, (y) relocations of Equipment having an aggregate value of up to $150,000 in any fiscal year, and (z) relocations of Collateral from a location described on Exhibit C to another location described on Exhibit C, as the same may be amended) unless (i) it has provided prompt written notice to the Lenders, (ii) such relocation is within the continental United States and, (iii) if such relocation is to a third party bailee, it has delivered a bailee agreement in form and substance reasonably acceptable to the Lenders.

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7.13         Deposit Accounts.  Neither Borrower nor any Subsidiary shall maintain any Deposit Accounts, or accounts holding Investment Property, except at Comerica and with respect to which Hercules shall have an Account Control Agreement (each a “Comerica Account”); provided, that the Borrower may continue to maintain its existing Deposit Accounts and Securities Accounts with Silicon Valley Bank (the “SVB Accounts”) for sixty (60) days following the Closing Date; provided, further, that the Borrower may maintain account number 3300461991 at Silicon Valley Bank for a commercially reasonable period not to exceed one hundred eighty (180) days following the Closing Date, so long as an Account Control Agreement has been entered into with respect to such account within sixty (60) days of following the Closing Date.

7.14         Formation of Subsidiaries.  Borrower shall notify the Lenders of each Subsidiary formed subsequent to the Closing Date and, within 15 days of formation, shall cause any such Subsidiary organized under the laws of any State within the United States to execute and deliver to the Lenders a Joinder Agreement.

7.15         Eligible Accounts.  Borrower shall notify each Lender promptly of any event or circumstance which to Borrower’s knowledge would cause an Account to no longer constitute an Eligible Account.

7.16         SBA Issues.  One or both Lenders have received a license from the U.S. Small Business Administration (“SBA”) to extend loans as a small business investment company (“SBIC”) pursuant to the Small Business Investment Act of 1958, as amended, and the associated regulations (collectively, the “SBIC Act”).  Portions of the loan to Borrower will be made under the SBA license and the SBIC Act.  Addendum 1 to this Agreement outlines various responsibilities of the Lenders and Borrower associated with an SBA loan, and such Addendum 1 is hereby incorporated in this Agreement.

7.17         Use of Proceeds.  The proceeds of the Revolving Loan Advances shall be used only for general corporate purposes.  The proceeds of the Equipment Loan Advances shall be used only to purchase the personal property listed on Annex II and such other Equipment as shall be approved by the Lenders in writing, such approval not to be unreasonably withheld, conditioned or delayed.

7.18         Financial Covenant.  So long as any Revolving Loan Advances are outstanding, Borrower shall maintain its financial condition as follows using GAAP consistently applied and used consistently with prior practices:  (a) monthly revenue, measured on a trailing three calendar month basis, shall at no time be less than 75% of the amount set forth in the Approved Plan, and (b) EBITDA, measured on a trailing three calendar month basis, shall at no time be less than the Required EBITDA Amount.

7.19         Landlord Waivers.  Borrower shall use commercially reasonable efforts to obtain landlord waivers reasonably acceptable to the Lenders respecting each location at which Borrower maintains Collateral within sixty (60) days of the Closing Date.

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7.20         PUC Consents.  Borrower shall use commercially reasonable efforts to obtain, as soon as reasonably practicable following the Closing Date, all Required PUC Consents.

SECTION 8.  RIGHT TO INVEST

8.1           Right to Invest.  Hercules or its assignee or nominee shall have the right, in its discretion, to participate in any Subsequent Financing until such time as Hercules shall have invested an aggregate amount of $1,000,000 in Borrower, in each case on the same terms, conditions and pricing afforded to others participating in such Subsequent Financings.  In order to exercise this right, Hercules must notify Borrower within thirty (30) days following delivery by Borrower of notice of such Subsequent Financing, which exercise shall be subject to approval by Hercules of the definitive documentation for such transaction.

SECTION 9.  EVENTS OF DEFAULT

The occurrence of any one or more of the following events shall be an Event of Default:

9.1           Payments.  Borrower fails to pay any amount due under this Agreement, the Notes or any of the other Loan Documents on the due date; or

9.2           Covenants.  Borrower breaches or defaults in the performance of any covenant or Secured Obligation under this Agreement and (a) with respect to a default under any covenant other than under Sections 6, 7.5, 7.6, 7.7, 7.8, 7.9, 7.16, 7.17 or 7.18, such default continues for more than ten (10) days after the earlier of the date on which (i) the Lenders have given notice of such default to Borrower and (ii) Borrower has actual knowledge of such default or (b) with respect to a default under any of Sections 6, 7.5, 7.6, 7.7, 7.8, 7.9, 7.16, 7.17 or 7.18, the occurrence of such default; or

9.3           Material Adverse Effect.  A circumstance has occurred that would reasonably be expected to have a Material Adverse Effect; or

9.4           Other Loan Documents.  The occurrence of any default under any Loan Document or any other agreement between Borrower and the Lenders and such default continues for more than ten (10) days after the earlier of (a) the Lenders have given notice of such default to Borrower, or (b) Borrower has actual knowledge of such default; or

9.5           Representations.  Any representation or warranty made by Borrower in any Loan Document or in the Warrants shall have been false or misleading in any material respect; or

9.6           Insolvency.  Borrower (A) (i) shall make an assignment for the benefit of creditors; or (ii) shall be unable to pay its debts as they become due, or be unable to pay or perform under the Loan Documents; or (iii) shall file a voluntary petition in bankruptcy; or (iv) shall file any petition, answer, or document seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation pertinent to such circumstances; or (v) shall seek

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or consent to or acquiesce in the appointment of any trustee, receiver, or liquidator of Borrower or of all or any substantial part (i.e., 33-1/3% or more) of the assets or property of Borrower; or (vi) shall cease operations of its business as its business has normally been conducted, or terminate substantially all of its employees; or (vii) shall or its directors or majority shareholders shall take any action initiating any of the foregoing actions described in clauses (i) through (vi); or (B) either (i) sixty (60) days shall have expired after the commencement of an involuntary action against Borrower seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, without such action being dismissed or all orders or proceedings thereunder affecting the operations or the business of Borrower being stayed; or (ii) a stay of any such order or proceedings shall thereafter be set aside and the action setting it aside shall not be timely appealed; or (iii) Borrower shall file any answer admitting or not contesting the material allegations of a petition filed against Borrower in any such proceedings; or (iv) the court in which such proceedings are pending shall enter a decree or order granting the relief sought in any such proceedings; or (v) sixty (60) days shall have expired after the appointment, without the consent or acquiescence of Borrower, of any trustee, receiver or liquidator of Borrower or of all or any substantial part of the properties of Borrower without such appointment being vacated; or

9.7           Attachments; Judgments.  Any portion of Borrower’s assets is attached or seized, or a levy is filed against any such assets, or a judgment or judgments is/are entered for the payment of money, individually or in the aggregate, of at least $200,000, or Borrower is enjoined or in any way prevented by court order from conducting any part of its business, in each case to the extent the same shall not have been vacated, satisfied or stayed for a period of ten (10) days (provided that no Advances will be made during such ten (10) day period); or

9.8           Other Obligations.  The occurrence of any default under any agreement or obligation of Borrower resulting in the right of a third party to accelerate the maturity of Indebtedness in excess of $200,000, or the occurrence of any default under any agreement or obligation of Borrower that would reasonably be expected to have a Material Adverse Effect; provided, however, that an Event of Default under this Section 9.8 caused by the occurrence of a default under such other agreement shall be cured or waived for purposes of this Agreement upon the Lenders receiving written notice from the party asserting such default of such cure or waiver of the default under such other agreement, if at the time of such cure or waiver under such other agreement (a) the Lenders have not declared an Event of Default under this Agreement and/or exercised any rights with respect thereto; (b) any such cure or waiver does not result in an Event of Default under any other provision of this Agreement or any Loan Document; and (c) in connection with any such cure or waiver under such other agreement, the terms of any agreement with such third party are not modified or amended in any manner which could in the good faith judgment of the Lenders be materially less advantageous to Borrower.

9.9           Required PUC Consents.  The failure of the Borrower to obtain the Required PUC Consents set forth in clause (b) of the definition thereof within ninety (90) days of the Closing Date, if the Borrower is not in compliance with the financial covenants set forth in Section 7.18, or within one hundred twenty (120) days of the Closing Date, so long as the

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Borrower is in compliance with the financial covenant set forth in Section 7.18, in each case without regard to whether any Revolving Loan Advances are outstanding.

SECTION 10.  REMEDIES

10.1         General.  Upon and during the continuance of any one or more Events of Default, (i) the Lenders may, at their option, accelerate and demand payment of all or any part of the Secured Obligations together with the Prepayment Charge and declare them to be immediately due and payable (provided, that upon the occurrence of an Event of Default of the type described in Section 9.6, the Notes and all of the Secured Obligations shall automatically be accelerated and made due and payable, in each case without any further notice or act), and (ii) the Lenders may notify any of Borrower’s account debtors to make payment directly to the Lenders, compromise the amount of any such account on Borrower’s behalf and endorse a Lender’s name without recourse on any such payment for deposit directly to a Lender’s account.  The Lenders may exercise all rights and remedies with respect to the Collateral under the Loan Documents or otherwise available to it under the UCC and other applicable law, including the right to release, hold, sell, lease, liquidate, collect, realize upon, or otherwise dispose of all or any part of the Collateral and the right to occupy, utilize, process and commingle the Collateral.  All Lender rights and remedies shall be cumulative and not exclusive.

10.2         Collection; Foreclosure.  Upon the occurrence and during the continuance of any Event of Default, the Lenders may, at any time or from time to time, apply, collect, liquidate, sell in one or more sales, lease or otherwise dispose of, any or all of the Collateral, in its then condition or following any commercially reasonable preparation or processing, in such order as the Lenders may elect.  Any such sale may be made either at public or private sale at its place of business or elsewhere.  Borrower agrees that any such public or private sale may occur upon ten (10) calendar days’ prior written notice to Borrower.  The Lenders may require Borrower to assemble the Collateral and make it available to the Lenders at a place designated by the Lenders that is reasonably convenient to the Lenders and Borrower.  The proceeds of any sale, disposition or other realization upon all or any part of the Collateral shall be applied by the Lenders in the following order of priorities:

First, to the Lenders in an amount sufficient to pay in full their costs and professionals’ and advisors’ fees and expenses as described in Section 11.11;

Second, to the Lenders in an amount equal to the then unpaid amount of the Secured Obligations (including principal, interest, and the default rate interest), in such order and priority as the Lenders may choose in their sole discretion; and

Finally, after the full, final, and indefeasible payment in Cash of all of the Secured Obligations, to any creditor holding a junior Lien on the Collateral, or to Borrower or its representatives or as a court of competent jurisdiction may direct.

The Lenders shall be deemed to have acted reasonably in the custody, preservation and disposition of any of the Collateral if it complies with the obligations of a secured party under the UCC.

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10.3         No Waiver.  The Lenders shall be under no obligation to marshal any of the Collateral for the benefit of Borrower or any other Person, and Borrower expressly waives all rights, if any, to require the Lenders to marshal any Collateral.

10.4         Cumulative Remedies.  The rights, powers and remedies of the Lenders hereunder shall be in addition to all rights, powers and remedies given by statute or rule of law and are cumulative.  The exercise of any one or more of the rights, powers and remedies provided herein shall not be construed as a waiver of or election of remedies with respect to any other rights, powers and remedies of the Lenders.

SECTION 11.  MISCELLANEOUS

11.1         Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective only to the extent and duration of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

11.2         Notice.  Except as otherwise provided herein, any notice, demand, request, consent, approval, declaration, service of process or other communication (except the delivery of Financial Statements, which shall be provided in accordance with Section 7.1) that is required, contemplated, or permitted under the Loan Documents or with respect to the subject matter hereof shall be in writing, and shall be deemed to have been validly served, given, delivered, and received upon the earlier of: (i) the day of transmission by facsimile or hand delivery or delivery by an overnight express service or overnight mail delivery service; or (ii) the third calendar day after deposit in the United States mails, with proper first class postage prepaid, in each case addressed to the party to be notified as follows:

(a)           If to the Lenders:

HERCULES TECHNOLOGY II, L.P.
Legal Department
Attention:  Chief Legal Officer and Steve Kuo
400 Hamilton Avenue, Suite 310
Palo Alto, CA 94301
Facsimile:  650-473-9194

and

COMERICA BANK

Technology & Life Sciences Division

75 E Trimble Road
Mail Code 4770
San Jose, CA 95131
Attn: Manager
Facsimile:  408-556-5091

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With a copy to:

COMERICA BANK

Technology & Life Sciences Division

226 Airport Parkway, Suite 100

San Jose, CA 95110

Attn: Group Manager, Technology and Life Sciences Division
Facsimile:  408-451-8568

(b)           If to Borrower:

IntelePeer, Inc.

Attention:  Andre Simone

2855 Campus Drive

San Mateo, CA 94403

Facsimile:  650-403-0818

or to such other address as each party may designate for itself by like notice.

11.3         Entire Agreement; Amendments.  This Agreement, the Notes, and the other Loan Documents constitute the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and thereof, and supersede and replace in their entirety any prior proposals, term sheets, letters, negotiations or other documents or agreements, whether written or oral, with respect to the subject matter hereof or thereof (including Lenders’ revised proposal letter dated March 5, 2010).  None of the terms of this Agreement, the Notes or any of the other Loan Documents may be amended except by an instrument executed by each of the parties hereto.

11.4         No Strict Construction.  The parties hereto have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

11.5         No Waiver.  The powers conferred upon the Lenders by this Agreement are solely to protect their rights hereunder and under the other Loan Documents and their interest in the Collateral and shall not impose any duty upon the Lenders to exercise any such powers.  No omission or delay by a Lender at any time to enforce any right or remedy reserved to it, or to require performance of any of the terms, covenants or provisions hereof by Borrower at any time designated, shall be a waiver of any such right or remedy to which a Lender is entitled, nor shall it in any way affect the right of such Lender to enforce such provisions thereafter.

11.6         Termination.  This Agreement shall become effective as of the date of execution by Borrower and the Lenders and, subject to Section 6.3, shall continue in full force and effect for so long as any Secured Obligations (other than inchoate indemnity obligations) remain outstanding or any Lender has any obligation to make Advances under

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this Agreement.  Notwithstanding the foregoing, the Lenders shall have the right to terminate their obligation to make Advances under this Agreement immediately and without notice upon the occurrence and during the continuance of an Event of Default.

11.7         Successors and Assigns.  The provisions of this Agreement and the other Loan Documents shall inure to the benefit of and be binding on Borrower and its permitted assigns (if any).  Borrower shall not assign its obligations under this Agreement, the Notes or any of the other Loan Documents without the Lenders’ express prior written consent, and any such attempted assignment shall be void and of no effect.  Each Lender may assign, transfer, or endorse its rights hereunder and under the other Loan Documents in accordance with Section 11.13 without prior notice to Borrower, and all of such rights shall inure to the benefit of such Lender’s successors and assigns.

11.8         Governing Law.  This Agreement, the Notes and the other Loan Documents have been negotiated and delivered to the Lenders in the State of California, and shall have been accepted by the Lenders in the State of California.  Payment to the Lenders by Borrower of the Secured Obligations is due in the State of California.  This Agreement, the Notes and the other Loan Documents shall be governed by, and construed and enforced in accordance with, the laws of the State of California, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.

11.9         Consent to Jurisdiction and Venue.  All judicial proceedings (to the extent that the reference requirement of Section 11.10 is not applicable) arising in or under or related to this Agreement, the Notes or any of the other Loan Documents may be brought in any state or federal court located in the State of California.  By execution and delivery of this Agreement, each party hereto generally and unconditionally: (a) consents to nonexclusive personal jurisdiction in Santa Clara County, State of California; (b) waives any objection as to jurisdiction or venue in Santa Clara County, State of California; (c) agrees not to assert any defense based on lack of jurisdiction or venue in the aforesaid courts; and (d) irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement, the Notes or the other Loan Documents.  Service of process on any party hereto in any action arising out of or relating to this Agreement shall be effective if given in accordance with the requirements for notice set forth in Section 11.2, and shall be deemed effective and received as set forth in Section 11.2.  Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of either party to bring proceedings in the courts of any other jurisdiction.

11.10       Mutual Waiver of Jury Trial / Judicial Reference.

(a)           Because disputes arising in connection with complex financial transactions are most quickly and economically resolved by an experienced and expert person and the parties wish applicable state and federal laws to apply (rather than arbitration rules), the parties desire that their disputes be resolved by a judge applying such applicable laws.  EACH OF BORROWER AND EACH LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY

31

OTHER CLAIM (COLLECTIVELY, “CLAIMS”) ASSERTED BY BORROWER AGAINST A LENDER OR ITS ASSIGNEE OR BY A LENDER OR ITS ASSIGNEE AGAINST BORROWER.  This waiver extends to all such Claims, including Claims that involve Persons other than Borrower and a Lender; Claims that arise out of or are in any way connected to the relationship between Borrower and a Lender; and any Claims for damages, breach of contract, tort, specific performance, or any equitable or legal relief of any kind, arising out of this Agreement, any other Loan Document.

(b)           If the waiver of jury trial set forth in Section 11.10(a) is ineffective or unenforceable, the parties agree that all Claims shall be resolved by reference to a private judge sitting without a jury, pursuant to Code of Civil Procedure Section 638, before a mutually acceptable referee or, if the parties cannot agree, a referee selected by the Presiding Judge of the Santa Clara County, California.  Such proceeding shall be conducted in Santa Clara County, California, with California rules of evidence and discovery applicable to such proceeding.

(c)           In the event Claims are to be resolved by judicial reference, either party may seek from a court identified in Section 11.9, any prejudgment order, writ or other relief and have such prejudgment order, writ or other relief enforced to the fullest extent permitted by law notwithstanding that all Claims are otherwise subject to resolution by judicial reference.

11.11       Professional Fees.  Borrower promises to pay the Lenders’ fees and expenses necessary to finalize the loan documentation, including but not limited to reasonable attorneys fees, UCC searches, filing costs, and other miscellaneous expenses. In addition, Borrower promises to pay any and all reasonable attorneys’ and other reasonable professionals’ fees and expenses (including fees and expenses of in-house counsel) incurred by a Lender after the Closing Date in connection with or related to:  (a) the Loan; (b) the administration, collection, or enforcement of the Loan; (c) the amendment or modification of the Loan Documents; (d) any waiver, consent, release, or termination under the Loan Documents; (e) the protection, preservation, sale, lease, liquidation, or disposition of Collateral or the exercise of remedies with respect to the Collateral; (f) any legal, litigation, administrative, arbitration, or out of court proceeding in connection with or related to Borrower or the Collateral, and any appeal or review thereof; and (g) any bankruptcy, restructuring, reorganization, assignment for the benefit of creditors, workout, foreclosure, or other action related to Borrower, the Collateral, the Loan Documents, including representing a Lender in any adversary proceeding or contested matter commenced or continued by or on behalf of Borrower’s estate, and any appeal or review thereof.

11.12       Confidentiality.  Each Lender acknowledges that certain items of Collateral and information provided to the Lenders by Borrower are confidential and proprietary information of Borrower, if and to the extent such information either (x) is marked as confidential by Borrower at the time of disclosure, or (y) should reasonably be understood to be confidential (the “Confidential Information”).  Accordingly, each Lender agrees that any Confidential Information it may obtain in the course of acquiring, administering, or perfecting  such Lender’s security interest in the Collateral or otherwise in connection with

32

the Loan shall not be disclosed to any other person or entity in any manner whatsoever, in whole or in part, without the prior written consent of Borrower, except that a Lender may disclose any such information:  (a) to its own directors, officers, employees, accountants, counsel and other professional advisors and to its affiliates if such Lender in its sole discretion determines that any such party should have access to such information in connection with such party’s responsibilities in connection with the Loan or this Agreement and, provided that such recipient of such Confidential Information either (i) agrees to be bound by the confidentiality provisions of this paragraph or (ii) is otherwise subject to confidentiality restrictions that reasonably protect against the disclosure of Confidential Information; (b) if such information is generally available to the public; (c) if required or appropriate in any report, statement or testimony submitted to any governmental authority having or claiming to have jurisdiction over such Lender; (d) if required or appropriate in response to any summons or subpoena or in connection with any litigation, to the extent permitted or deemed advisable by a Lender’s counsel; (e) to comply with any legal requirement or law applicable to a Lender; (f) to the extent reasonably necessary in connection with the exercise of any right or remedy under any Loan Document, including a Lender’s sale, lease, or other disposition of Collateral after default; (g) to any participant or assignee of a Lender or any prospective participant or assignee; provided, that such participant or assignee or prospective participant or assignee agrees in writing to be bound by this Section prior to disclosure; or (h) otherwise with the prior consent of Borrower; provided, that any disclosure made in violation of this Agreement shall not affect the obligations of Borrower or any of its affiliates or any guarantor under this Agreement or the other Loan Documents.

11.13       Assignment of Rights.  Borrower acknowledges and understands that each Lender may sell and assign all or part of its interest hereunder and under the Note(s) and Loan Documents to any person or entity (an “Assignee”), other than, during the continuance of an Event of Default, a direct competitor of Borrower.  After such assignment the term “Lender” as used in the Loan Documents shall mean and include such Assignee, and such Assignee shall be vested with all rights, powers and remedies of a Lender hereunder with respect to the interest so assigned; but with respect to any such interest not so transferred, each Lender shall retain all rights, powers and remedies hereby given.  No such assignment by a Lender shall relieve Borrower of any of its obligations hereunder.  Each Lender agrees that in the event of any transfer by it of the Note(s), it will endorse thereon a notation as to the portion of the principal of the Note(s), which shall have been paid at the time of such transfer and as to the date to which interest shall have been last paid thereon.

11.14       Revival of Secured Obligations.  This Agreement and the Loan Documents shall remain in full force and effect and continue to be effective if any petition is filed by or against Borrower for liquidation or reorganization, if Borrower becomes insolvent or makes an assignment for the benefit of creditors, if a receiver or trustee is appointed for all or any significant part of Borrower’s assets, or if any payment or transfer of Collateral is recovered from a Lender.  The Loan Documents and the Secured Obligations and Collateral security shall continue to be effective, or shall be revived or reinstated, as the case may be, if at any time payment and performance of the Secured Obligations or any transfer of Collateral to a Lender, or any part thereof is rescinded, avoided or avoidable,

33

reduced in amount, or must otherwise be restored or returned by, or is recovered from, a Lender or by any obligee of the Secured Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment, performance, or transfer of Collateral had not been made.  In the event that any payment, or any part thereof, is rescinded, reduced, avoided, avoidable, restored, returned, or recovered, the Loan Documents and the Secured Obligations shall be deemed, without any further action or documentation, to have been revived and reinstated except to the extent of the full, final, and indefeasible payment to the Lenders in Cash.

11.15       Counterparts.  This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so delivered shall be deemed an original, but all of which counterparts shall constitute but one and the same instrument.

11.16       No Third Party Beneficiaries.  No provisions of the Loan Documents are intended, nor will be interpreted, to provide or create any third-party beneficiary rights or any other rights of any kind in any person other than the Lenders and Borrower unless specifically provided otherwise herein, and, except as otherwise so provided, all provisions of the Loan Documents will be personal and solely between the Lenders and Borrower.

11.17       Publicity.  Each Lender may use Borrower’s name and logo, and include a brief description of the relationship between Borrower and the Lenders, in such Lender’s marketing materials.

(SIGNATURES TO FOLLOW)

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IN WITNESS WHEREOF, Borrower and each Lender have duly executed and delivered this Loan and Security Agreement as of the day and year first above written.

	BORROWER:
	INTELEPEER, INC.
	Signature:		/s/ Andre Simone
	Print Name:		Andre Simone
	Title:		CFO
Accepted in Palo Alto, California:
	LENDERS:
	HERCULES TECHNOLOGY II, L.P.,
	a Delaware limited partnership
	By:	Hercules Technology SBIC
		Management, LLC, its General Partner
	By:	Hercules Technology Growth
		Capital, Inc., its Manager
	By:	/s/ K. Nicholas Martitsch
	Name:	K. Nicholas Martitsch
	Its:	Associate General Counsel
	COMERICA BANK
	By:	/s/ Calvin Cheng
	Name:	Calvin Cheng
	Title:	Vice President

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Table of Addenda, Exhibits and Schedules

Addendum 1:	SBA Provisions
Exhibit A:	Advance Request Attachment to Advance Request
Exhibit B-1:	Revolving Note
Exhibit B-2:	Equipment Note
Exhibit C:	Name, Locations, and Other Information for Borrower
Exhibit D:	Borrower’s Patents, Trademarks, Copyrights and Licenses
Exhibit E:	Borrower’s Deposit Accounts and Investment Accounts
Exhibit F:	Compliance Certificate
Exhibit G:	Joinder Agreement
Exhibit H:	Borrowing Base Certificate
Exhibit I:	ACH Debit Authorization Agreement
Schedule 1	Subsidiaries
Schedule 1A	Existing Permitted Indebtedness
Schedule 1B	Existing Permitted Investments
Schedule 1C	Existing Permitted Liens
Schedule 5.3	Consents, Etc.
Schedule 5.5	Actions Before Governmental Authorities
Schedule 5.8	Tax Matters
Schedule 5.9	Intellectual Property Claims
Schedule 5.10	Intellectual Property
Schedule 5.11	Borrower Products
Schedule 5.14	Capitalization
Annex I	Approved Plan
Annex II	Financed Equipment

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ADDENDUM 1 to LOAN AND SECURITY AGREEMENT

(a)           Borrower’s Business.  For purposes of this Addendum 1, Borrower shall be deemed to include its “affiliates” as defined in Title 13 Code of Federal Regulations Section 121.103.  Borrower represents and warrants to the Lenders (as of the Closing Date and for a period of one year thereafter) and covenants to the Lenders as follows:

1.Size Status.  Borrower does not have tangible net worth in excess of $18 million or average net income after Federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal years in excess of $6 million;

2.No Relender.  Borrower’s primary business activity does not involve, directly or indirectly, providing funds to others, purchasing debt obligations, factoring, or long-term leasing of equipment with no provision for maintenance or repair;

3.No Passive Business.  Borrower is engaged in a regular and continuous business operation (excluding the mere receipt of payments such as dividends, rents, lease payments, or royalties).  Borrower’s employees are carrying on the majority of day to day operations.  Borrower will not pass through substantially all of the proceeds of the Loan to another entity;

4.No Real Estate Business.  Borrower is not classified under Major Group 65 (Real Estate) or Industry No. 1531 (Operative Builders) of the SIC Manual.  The proceeds of the Loan will not be used to acquire or refinance real property unless Borrower (x) is acquiring an existing property and will use at least 51 percent of the usable square footage for its business purposes; (y) is building or renovating a building and will use at least 67 percent of the usable square footage for its business purposes; or (z) occupies the subject property and uses at least 67 percent of the usable square footage for its business purposes.

5.No Project Finance.  Borrower’s assets are not intended to be reduced or consumed, generally without replacement, as the life of its business progresses, and the nature of Borrower’s business does not require that a stream of cash payments be made to the business’s financing sources, on a basis associated with the continuing sale of assets (e.g., real estate development projects and oil and gas wells).  The primary purpose of the Loan is not to fund production of a single item or defined limited number of items, generally over a defined production period, where such production

37

will constitute the majority of the activities of Borrower (e.g., motion pictures and electric generating plants).

6.No Farm Land Purchases.  Borrower will not use the proceeds of the Loan to acquire farm land which is or is intended to be used for agricultural or forestry purposes, such as the production of food, fiber, or wood, or is so taxed or zoned.

7.No Foreign Investment.  The proceeds of the Loan will not be used substantially for a foreign operation.  At the time of the Loan, Borrower will not have more than 49 percent of its employees or tangible assets located outside the United States.  The representation in this subsection (7) is made only as of the date hereof and shall not continue for one year as contemplated in the first sentence of this Section 1.

(b)           Small Business Administration Documentation.  Each Lender acknowledges that Borrower completed, executed and delivered to it SBA Forms 480, 652 and 1031 (Parts A and B) together with a business plan showing Borrower’s financial projections (including balance sheets and income and cash flows statements) for the period described therein and a written statement (whether included in the purchase agreement or pursuant to a separate statement) from the Borrower regarding its intended use of proceeds from the sale of securities to the Lenders (the “Use of Proceeds Statement”).  Borrower represents and warrants to the Lenders that the information regarding Borrower and its affiliates set forth in the SBA Form 480, Form 652 and Form 1031 and the Use of Proceeds Statement delivered as of the Closing Date is accurate and complete.

(c)           Inspection.  The following covenants contained in this Section (c) are intended to supplement and not to restrict the related provisions of the Loan Documents.  Subject to the preceding sentence, Borrower will permit, for so long as a Lender holds any debt or equity securities of Borrower, such Lender or its representative, at such Lender’s expense, and examiners of the SBA to visit and inspect the properties and assets of Borrower, to examine its books of account and records, and to discuss Borrower’s affairs, finances and accounts with Borrower’s officers, senior management and accountants, all at such reasonable times as may be requested by the Lenders or the SBA.

(d)           Annual Assessment.  Promptly after the end of each calendar year (but in any event prior to February 28 of each year) and at such other times as may be reasonably requested by the Lenders, Borrower will deliver to the Lenders a written assessment of the economic impact of the Lenders’ investment in Borrower, specifying the full-time equivalent jobs created or retained in connection with the investment, the impact of the investment on the businesses of Borrower in terms of expanded revenue and taxes, other economic benefits resulting from the investment (such as technology development or commercialization, minority business development, or expansion of exports) and such other information as may be required regarding Borrower in connection with the filing of SBA Form 468 by a Lender.   The Lenders will assist Borrower with preparing such

38

assessment.  In addition to any other rights granted hereunder, Borrower will grant the Lenders and the SBA access to Borrower’s books and records for the purpose of verifying the use of such proceeds.  Borrower also will furnish or cause to be furnished to the Lenders such other information regarding the business, affairs and condition of Borrower as the Lenders may from time to time reasonably request.

(e)           Use of Proceeds.  Borrower will use the proceeds from the Loan only for general working capital purposes, in the case of the Revolving Loan Advances, and for the financing of Equipment, in the case of the Equipment Loan Advances.  Borrower will deliver to the Lenders from time to time promptly following their reasonable request, a written report, certified as correct by Borrower’s Chief Financial Officer or Corporate Controller, verifying the purposes and amounts for which proceeds from the Loan have been disbursed.  Borrower will supply to the Lenders such additional information and documents as the Lenders reasonably request with respect to its use of proceeds and will permit the Lenders and the SBA to have access to any and all Borrower records and information and personnel as the Lenders deem reasonably necessary to verify how such proceeds have been or are being used, and to assure that the proceeds have been used for the purposes specified in this Addendum 1.

(f)            Activities and Proceeds.  Neither Borrower nor any of its affiliates (if any) will engage in any activities or use directly or indirectly the proceeds from the Loan for any purpose for which a small business investment company is prohibited from providing funds by the SBIC Act, including 13 C.F.R. §107.720.  Without obtaining the prior written approval of the Lenders, Borrower will not change within 1 year of the date hereof, Borrower’s current business activity to a business activity which a licensee under the SBIC Act is prohibited from providing funds by the SBIC Act.

(g)           Redemption Provisions.  Notwithstanding any provision to the contrary contained in the Certificate of Incorporation of Borrower, as amended from time to time (the “Charter”), if, pursuant to the redemption provisions contained in the Charter, the Lenders are entitled to a redemption of their Warrants, such redemption (in the case of the Lenders) will be at a price equal to the redemption price set forth in the Charter (the “Existing Redemption Price”).  If, however, a Lender delivers written notice to Borrower that the then current regulations promulgated under the SBIC Act prohibit payment of the Existing Redemption Price in the case of an SBIC (or, if applied, the Existing Redemption Price would cause the Series C Preferred Stock to lose its classification as an “equity security” and such Lender has determined that such classification is unadvisable), the amount such Lender will be entitled to receive shall be the greater of (i) fair market value of the securities being redeemed taking into account the rights and preferences of such securities plus any costs and expenses of the Lenders incurred in making or maintaining the Warrants, and (ii) the Existing Redemption Price where the amount of accrued but unpaid dividends payable to the Lenders is limited to Borrower’s earnings plus any costs and expenses of the the Lenders incurred in making or maintaining the Warrants; provided, however, the amount calculated in subsections (i) or (ii) above shall not exceed the Existing Redemption Price.

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(h)           Cost of Money.  Notwithstanding any provision to the contrary contained in the Loan Documents, all interest and fees charged pursuant to the Loan Documents shall comply with the provisions of 13 C.F.R. § 107.855, including, without limitation, that such amounts shall not exceed the Cost of Money ceiling (as defined hereafter).  The current Cost of Money ceiling for this Loan is fourteen percent.

(i)            Compliance and Resolution.   Borrower agrees that a failure to comply with Borrower’s obligations under this Addendum will constitute a breach of the obligations of Borrower under the financing agreements between Borrower and the Lenders.  In the event of (i) a failure to comply with Borrower’s obligations under this Addendum; or (ii) an assertion by any governmental regulatory agency (or a Lender believes that there is a substantial risk of such assertion) of a failure to comply with Borrower’s obligations under this Addendum, then (i) such Lender and Borrower will meet and resolve any such issue in good faith to the satisfaction of Borrower, such Lender, and any governmental regulatory agency, and (ii) upon request of Lender, Borrower will cooperate and assist with any assignment of the financing agreements from Hercules Technology II, L.P. to Hercules Technology Growth Capital, Inc.

(j)            Lender References.  Notwithstanding any term or condition contained in the Agreement or the other Loan Documents to the contrary, no Lender shall have rights under this Addendum 1, and Borrower shall not have any obligations to a Lender under this Addendum 1, unless such Lender holds a license from the U.S. Small Business Administration to extend loans as a small business investment company pursuant to the Small Business Investment Act of 1958, as amended, and the associated regulations.

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EXHIBIT A

ADVANCE REQUEST

To: The Lenders: Date:                    ,             

Hercules Technology II, L.P.

400 Hamilton Avenue, Suite 310

Palo Alto, CA 94301

Attn:  Steve Kuo

Facsimile:  (650) 473-9194

Comerica Bank

Technology & Life Sciences Division

75 E Trimble Road
Mail Code 4770
San Jose, CA 95131
Attn: Manager
Facsimile:  (408) 556-5091

With a copy to:

Comerica Bank

Technology & Life Sciences Division

226 Airport Parkway, Suite 100

San Jose, CA 95110

Attn: Group Manager, Technology and Life Sciences Division

Facsimile:  (408) 451-8568

IntelePeer, Inc. (“Borrower”) hereby requests from Hercules Technology II, L.P. (“Hercules”) and Comerica Bank (“Comerica”; and collectively with Hercules, the “Lenders”) an Advance in the amount of                                            Dollars ($                                ) on                             ,            (the “Advance Date”) pursuant to the Loan and Security Agreement between Borrower and the Lenders (the “Agreement”). Capitalized words and other terms used but not otherwise defined herein are used with the same meanings as defined in the Agreement.

Please:

(a)           Issue a check payable to Borrower

or

(b)           Wire Funds to Borrower’s account

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Bank:

Address:

ABA Number:

Account Number:

Account Name:

Borrower represents that the conditions precedent to the Advance set forth in the Agreement are satisfied and shall be satisfied upon the making of such Advance, including but not limited to:  (i) that no event that has had or would reasonably be expected to have a Material Adverse Effect has occurred and is continuing; (ii) that the representations and warranties set forth in the Agreement and in the Warrants are and shall be true and correct in all material respects on and as of the Advance Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date; (iii) that Borrower is in compliance with all the terms and provisions set forth in each Loan Document on its part to be observed or performed; and (iv) that as of the Advance Date, no fact or condition exists that would (or would, with the passage of time, the giving of notice, or both) constitute an Event of Default under the Loan Documents.  Borrower understands and acknowledges that each Lender has the right to review the financial information supporting this representation and, based upon such review in its sole discretion, such Lender may decline to fund the requested Advance.

Borrower hereby represents that Borrower’s corporate status and locations have not changed since the date of the Agreement or, if the Attachment to this Advance Request is completed, are as set forth in the Attachment to this Advance Request.

Borrower agrees to notify each Lender promptly before the funding of the Loan if any of the matters which  have been represented above shall not be true and correct on the Advance Date and if the Lenders have received no such notice before the Advance Date then the statements set forth above shall be deemed to have been made and shall be deemed to be true and correct as of the Advance Date.

Executed as of [              ], 20[     ].

BORROWER:

INTELEPEER, INC.

SIGNATURE:

TITLE:

PRINT NAME:

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ATTACHMENT TO ADVANCE REQUEST

Dated:                             

Borrower hereby represents and warrants to each Lender that Borrower’s current name and organizational status is as follows:

Name:	IntelePeer, Inc.
Type of organization:	Corporation
State of organization:	Delaware
Organization file number:	4231218

Borrower hereby represents and warrants to each Lender that the street addresses, cities, states and postal codes of its current locations are as follows:

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EXHIBIT B-1

SECURED REVOLVING PROMISSORY NOTE

$10,000,000 Maturity Date:  May 5, 2011 

FOR VALUE RECEIVED, IntelePeer, Inc., a Delaware corporation, for itself and each of its Subsidiaries (the “Borrower”) hereby promises to pay to the order of [Hercules Technology II, L.P., a Delaware limited partnership] or the holder of this Promissory Note (as defined below) (the “Lender”) at [400 Hamilton Avenue, Suite 310, Palo Alto, CA 94301] or such other place of payment as the holder of this Secured Revolving Promissory Note (this “Promissory Note”) may specify from time to time in writing, in lawful money of the United States of America, the principal amount of Ten Million Dollars ($10,000,000) or such other principal amount as Lender has advanced to Borrower under Section 2.1 of the Loan Agreement (as defined below), together with interest at a floating rate equal to the prime rate as reported in the Wall Street Journal, and if not reported, then the prime rate next reported in the Wall Street Journal, plus 2.05% per annum based upon a year consisting of 360 days, with interest computed daily based on the actual number of days in each month.

This Promissory Note is a Revolving Note referred to in, and is executed and delivered in connection with, that certain Loan and Security Agreement dated May 5, 2010, by and among Borrower, the Lender and [Comerica Bank, a Michigan banking corporation] (as the same may from time to time be amended, modified or supplemented in accordance with its terms, the “Loan Agreement”), and is entitled to the benefit and security of the Loan Agreement and the other Loan Documents (as defined in the Loan Agreement), to which reference is made for a statement of all of the terms and conditions thereof.  All payments shall be made in accordance with the Loan Agreement.  All terms defined in the Loan Agreement shall have the same definitions when used herein, unless otherwise defined herein.  An Event of Default under the Loan Agreement shall constitute a default under this Promissory Note.

Borrower waives presentment and demand for payment, notice of dishonor, protest and notice of protest under the UCC or any applicable law.   Borrower agrees to make all payments under this Promissory Note without setoff, recoupment or deduction and regardless of any counterclaim or defense.  This Promissory Note has been negotiated and delivered to Lender and is payable in the State of California.  This Promissory Note shall be governed by and construed and enforced in accordance with, the laws of the State of California, excluding any conflicts of law rules or principles that would cause the application of the laws of any other jurisdiction.

BORROWER FOR ITSELF AND
ON BEHALF OF ITS SUBSIDIARIES:	INTELEPEER, INC.
	By:
	Title:

EXHIBIT B-2

SECURED EQUIPMENT PROMISSORY NOTE

$10,000,000	Advance Date:             , 2010
	Maturity Date:  May 5, 2011

FOR VALUE RECEIVED, IntelePeer, Inc., a Delaware corporation, for itself and each of its Subsidiaries (the “Borrower”) hereby promises to pay to the order of [Hercules Technology II, L.P., a Delaware limited partnership] or the holder of this Promissory Note (as defined below) (the “Lender”) at [400 Hamilton Avenue, Suite 310, Palo Alto, CA 94301] or such other place of payment as the holder of this Secured Equipment Promissory Note (this “Promissory Note”) may specify from time to time in writing, in lawful money of the United States of America, the principal amount of Ten Million Dollars ($10,000,000) or such other principal amount as Lender has advanced to Borrower under Section 2.2 of the Loan Agreement (as defined below), together with interest at a floating rate equal to the prime rate as reported in the Wall Street Journal, and if not reported, then the prime rate next reported in the Wall Street Journal, plus 7% per annum based upon a year consisting of 360 days, with interest computed daily based on the actual number of days in each month.

This Promissory Note is an Equipment Note referred to in, and is executed and delivered in connection with, that certain Loan and Security Agreement dated May 5, 2010, by and among Borrower, the Lender and [Comerica Bank, a Michigan banking corporation] (as the same may from time to time be amended, modified or supplemented in accordance with its terms, the “Loan Agreement”), and is entitled to the benefit and security of the Loan Agreement and the other Loan Documents (as defined in the Loan Agreement), to which reference is made for a statement of all of the terms and conditions thereof.  All payments shall be made in accordance with the Loan Agreement.  All terms defined in the Loan Agreement shall have the same definitions when used herein, unless otherwise defined herein.  An Event of Default under the Loan Agreement shall constitute a default under this Promissory Note.

Borrower waives presentment and demand for payment, notice of dishonor, protest and notice of protest under the UCC or any applicable law.   Borrower agrees to make all payments under this Promissory Note without setoff, recoupment or deduction and regardless of any counterclaim or defense.  This Promissory Note has been negotiated and delivered to Lender and is payable in the State of California.  This Promissory Note shall be governed by and construed and enforced in accordance with, the laws of the State of California, excluding any conflicts of law rules or principles that would cause the application of the laws of any other jurisdiction.

BORROWER FOR ITSELF AND
ON BEHALF OF ITS SUBSIDIARIES:	INTELEPEER, INC.
	By:
	Title:

EXHIBIT C

NAME, LOCATIONS, AND OTHER INFORMATION FOR BORROWER

1.  Borrower represents and warrants to each Lender that Borrower’s current name and organizational status as of the Closing Date is as follows:

Name:	IntelePeer, Inc.
Type of organization:	Corporation
State of organization:	Delaware
Organization file number:	4231218

Borrower’s fiscal year ends on December 31.

Borrower’s federal employer tax identification number is: 68-0556257

2.  Borrower represents and warrants to each Lender that for five (5) years prior to the Closing Date, Borrower did not do business under any other name or organization or form except the following:

Name:  Voex, Inc.

Used during dates of:  October 5, 2006 - September 14, 2007

Type of Organization:  Corporation

State of organization:  Delaware

Organization file Number: Same

3.  Borrower represents and warrants to each Lender that its headquarters are located at 2855 Campus Drive, San Mateo, CA  94403.

4.   Borrower represents and warrants to each Lender that as of the Closing Date the Collateral is located at:

60 Hudson St, New York, NY 10013

350 E. Cermak, Chicago, IL 60616

4000 Highlands Pkwy Smyrna, GA 30082

313 Inverness Way S, Englewood, CO 80112

2300 15th St, Denver, CO 80202

1300 Mockingbird Ste 100 Dallas, TX 75247

600 W 7TH, STE 300 Los Angeles, CA 90017

Telehouse North Coriander AVE London E14 2AA

2855 Campus Drive, Suite 200, San Mateo, CA 94403

2558 Beechwood Dr. East Grand Rapids, MI 49506

1100 Dexter Avenue N., Seattle WA 98109 (until 4/30/10)

200 W. Thomas St., Suite 120, Seattle WA 98119 (as of 5/1/10)

EXHIBIT D

BORROWER’S PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES

Patents

Description	Filing Number
INTELLIGENT CALL ROUTING	11/849,044
UNIFIED COMMUNICATIONS SYSTEM	12/499,607
PAYMENT SYSTEM FOR PAYING PEERING PARTNERS IN A TELECOMMUNICATIONS NETWORK	12/729,806
METHOD OF MANAGING A PEERING DATABASE IN A TELECOMMUNICATIONS NETWORK	12/729,770

Registered Trademarks

Description	Serial Number
INTELEPEER	77,260,074, 77/260,067, 77/260,059, 77/260,040, 77/259,994
INTELEPEER APPWORX	77/867,538

Registered Copyrights

None.

Licenses

The only Intellectual Property licensed from third parties is in connection with purchased Equipment.

EXHIBIT E

BORROWER’S DEPOSIT ACCOUNTS AND INVESTMENT ACCOUNTS

EXHIBIT F

COMPLIANCE CERTIFICATE

Hercules Technology II, L.P.
400 Hamilton Avenue, Suite 310

Palo Alto, CA 94301

Attn:  Steve Kuo

Facsimile:  (650) 473-9194

Comerica Bank

Technology & Life Sciences Division

75 E Trimble Road
Mail Code 4770
San Jose, CA 95131
Attn: Manager
Facsimile:  (408) 556-5091

With a copy to:

Comerica Bank

Technology & Life Sciences Division

226 Airport Parkway, Suite 100

San Jose, CA 95110

Attn: Group Manager, Technology and Life Sciences Division
Facsimile:  (408) 451-8568

Reference is made to that certain Loan and Security Agreement dated May 5, 2010 and all ancillary documents entered into in connection with such Loan and Security Agreement all as may be amended from time to time, (hereinafter referred to collectively as the “Loan Agreement”) between Hercules Technology II, L.P. and Comerica Bank as Lenders and IntelePeer, Inc. (the “Company”) as Borrower.  All capitalized terms not defined herein shall have the same meaning as defined in the Loan Agreement.

The undersigned is an officer of the Company, knowledgeable of all Company financial matters, and is authorized to provide certification of information regarding the Company; hereby certifies that in accordance with the terms and conditions of the Loan Agreement, the Company is in compliance for the period ending                        with all covenants, conditions and terms of the Loan Documents and hereby reaffirms that all representations and warranties contained therein are true and correct in all material respects on and as of the date of this Compliance Certificate with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, after giving effect in all cases to any standard(s) of materiality contained in the Loan Documents as to such covenants, conditions, terms, representations and warranties.  Attached are the documents required to be provided under the Loan Agreement in support of the above certification.  The undersigned further certifies that these are prepared in accordance with GAAP (except for the absence of footnotes with respect to unaudited financial statement and subject to normal year end adjustments) and are consistent from one period to the next except as explained below.

REPORTING REQUIREMENT	REQUIRED	CHECK IF ATTACHED
Interim Financial Statements	Monthly within 25 days
Interim Financial Statements	Quarterly within 25 days
Audited Financial Statements	FYE within 150 days

Very Truly Yours,

By:

Name:

Title:

EXHIBIT G

FORM OF JOINDER AGREEMENT

This Joinder Agreement (the “Joinder Agreement”) is made and dated as of [      ], 20[   ], and is entered into among                                     , a                        corporation (“Subsidiary”), and HERCULES TECHNOLOGY II, L.P., a Delaware limited partnership (“Hercules”), and COMERICA BANK, a Michigan banking corporation (“Comerica”; together with Hercules, the “Lenders”).

RECITALS

A.  Subsidiary’s Affiliate, IntelePeer, Inc. (“Company”) [has entered/desires to enter] into that certain Loan and Security Agreement dated May 5, 2010, with the Lenders, as such agreement may be amended (the “Loan Agreement”), together with the other agreements executed  and delivered in connection therewith;

B.  Subsidiary acknowledges and agrees that it will benefit both directly and indirectly from Company’s execution of the Loan Agreement and the other agreements executed and delivered in connection therewith;

AGREEMENT

NOW THEREFORE, Subsidiary and the Lenders agree as follows:

1.The recitals set forth above are incorporated into and made part of this Joinder Agreement.  Capitalized terms not defined herein shall have the meaning provided in the Loan Agreement.

2.By signing this Joinder Agreement, Subsidiary shall be bound by the terms and conditions of the Loan Agreement the same as if it were Borrower (as defined in the Loan Agreement) under the Loan Agreement, mutatis mutandis, provided however, that each Lender shall have no duties, responsibilities or obligations to Subsidiary arising under or related to the Loan Agreement or the other agreements executed and delivered in connection therewith.  Rather, to the extent that a Lender has any duties, responsibilities or obligations arising under or related to the Loan Agreement or the other agreements executed and delivered in connection therewith, those duties, responsibilities or obligations shall flow only to Company and not to Subsidiary or any other person or entity, other than with respect to the obligations of confidentiality set forth in Section 11.12 of the Loan Agreement.  By way of example (and not an exclusive list): (a) a Lender’s providing notice to Company in accordance with the Loan Agreement or as otherwise agreed between Company and a Lender shall be deemed provided to Subsidiary; (b) a Lender’s providing an Advance to Company shall be deemed an Advance to Subsidiary; and (c) Subsidiary shall have no right to request an Advance or make any other demand on a Lender.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURE PAGE TO JOINDER AGREEMENT]

SUBSIDIARY:
.
	By:
	Name:
	Title:
	Address:
	Telephone:
	Facsimile:

HERCULES TECHNOLOGY II, L.P.,
 a Delaware limited partnership

By:	Hercules Technology SBIC Management, LLC,
	its General Partner
By:	Hercules Technology Growth Capital, Inc.,
	its Manager

By:

Name:

Its:

Hercules Technology II, L.P.
400 Hamilton Avenue, Suite 310
Palo Alto, CA 94301
Facsimile:  (650) 473-9194

COMERICA BANK

By:

Name:

Title:

Address:

Comerica Bank

Technology & Life Sciences Division

75 E Trimble Road
Mail Code 4770
San Jose, CA 95131

Attn: Manager
Facsimile:  (408) 556-5091

With a copy to:

Comerica Bank

Technology & Life Sciences Division

226 Airport Parkway, Suite 100

San Jose, CA 95110

Attn: Group Manager, Technology and Life Sciences Division
Facsimile:  (408) 451-8568

EXHIBIT H

BORROWING BASE CERTIFICATE

Borrower: IntelePeer, Inc.

Revolving Loan Commitment Amount: $10,000,000

ACCOUNTS RECEIVABLE
	1.	Accounts Receivable Book Value as of		$
	2.	Additions (please explain on reverse)		$
TOTAL ACCOUNTS RECEIVABLE				$
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
	3.	Amounts over 90 days due	$
	4.	Balance of 25% over 90 day accounts	$
	5.	Concentration Limits	$
	6.	Foreign Accounts	$
	7.	Deferred Revenue	$
	8.	Contra Accounts	$
	9.	Affiliate Accounts	$
	10.	Governmental Accounts	$
	11.	Conditional Payment	$
	12.	Uninvoiced within 30 days	$
	13.	Other (please explain on reverse)	$
	14.	TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS		$
	15.	Eligible Accounts (Total Accounts Receivable minus #14)		$
	16.	LOAN VALUE OF ACCOUNTS ([ ]% of #15)		$
BALANCES
	17.	Maximum Revolving Loan Amount		$	10,000,000
	18.	Total Funds Available (Lesser of #16 or #17)		$
	19.	Present balance owing on Line of Credit		$
	20.	RESERVE POSITION (#18 minus #19)		$

The undersigned represents and warrants that the foregoing is true, complete and correct, and that the information reflected in this Borrowing Base Certificate complies with the representations and warranties set forth in the Loan and Security Agreement between the undersigned and each of Hercules Technology II, L.P. and Comerica Bank.

IntelePeer, Inc.

By:
	Authorized Signer

EXHIBIT I

ACH DEBIT AUTHORIZATION AGREEMENT

Hercules Technology II, L.P.
400 Hamilton Avenue, Suite 310
Palo Alto, CA  94301

Re:  Loan and Security Agreement dated May 5, 2010 between IntelePeer, Inc.
(“Borrower”), Hercules Technology II, L.P. (“Hercules”), and Comerica Bank
(“Comerica”; together with Hercules, the “Lenders”)

In connection with the above referenced Agreement, Borrower hereby authorizes Hercules to initiate debit entries for the periodic payments due under the Agreement to Borrower’s account indicated below. Borrower authorizes the depository institution named below to debit to such account.

DEPOSITORY NAME	BRANCH
CITY	STATE AND ZIP CODE
TRANSIT/ABA NUMBER	ACCOUNT NUMBER

This authority will remain in full force and effect so long as any amounts are due under the Agreement.

(Borrower)(Please Print)

By:

Date:

ANNEX I

APPROVED PLAN

ANNEX II

FINANCED EQUIPMENT

Vendor

Skyline Computer Corporation

Skyline Computer Corporation

Network Equipment Technologies

Safe Systems

Skyline Computer Corporation

Dell

Dell

Dell

Dell

Dell

Dell

Dell

Dell

Dell

Dell

Dell

Dell

Dell

Dell

Dell

Dell

Net Optics

Solarwinds

MJK

AMENDMENT NO. 1
TO
LOAN AND SECURITY AGREEMENT

THIS AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is dated as of December 7, 2010 and is entered into by and among INTELEPEER, INC., a Delaware corporation, and each of its subsidiaries, (hereinafter collectively referred to as the “Borrower”), on the one hand, and HERCULES TECHNOLOGY IT, L.P., a Delaware limited partnership (“Hercules”), and COMERICA BANK, a Texas Banking Association (“Comerica” and collectively with Hercules, “Lenders”; each of the Lenders individually, a “Lender”).  Capitalized terms used herein without definition shall have the same meanings given them in the Loan Agreement (as defined below).

RECITALS

A.Borrower and Lenders have entered into that certain Loan and Security Agreement dated as of May 5, 2010 (as may be amended, restated, or otherwise modified, the “Loan Agreement”), pursuant to which Lenders have agreed to extend and make available to Borrower certain advances of money.

B.Borrower and Lenders have agreed to amend the Loan Agreement upon the terms and conditions more fully set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing Recitals and intending to be legally bound, the parties hereto agree as follows:

1.AMENDMENTS.

1.1SECTION 2.2(A) ADVANCES.  Section 2.2(a) of the Loan Agreement is amended and restated in its entirety as follows:

“(a) Advances.  Subject to the terms and conditions of this Agreement, the Lenders agree to make, and Borrower agrees to draw, an Equipment Loan Advance in the amount and for the Equipment set forth on Annex II.  Beginning on the date of this Agreement, and continuing until January 30, 2011, Borrower may request additional Equipment Loan Advances, in minimum increments of $500,000.  The aggregate outstanding Equipment Loan Advances may be up to the Maximum Equipment Loan Amount.”

2.BORROWER’S REPRESENTATIONS AND WARRANTIES.  Borrower represents and warrants that:

(a)immediately upon giving effect to this Amendment (i) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (ii) no Event of Default has occurred and is continuing with respect to which Borrower has not been notified in writing by Lenders;

(b)Borrower has the corporate power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

(c)the certificate of incorporation, bylaws and other organizational documents of Borrower delivered to Lenders on the Closing Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

(d)the execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized by all necessary corporate action on the part of Borrower;

(e)this Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights; and

(f)as of the date hereof, it has no defenses against the obligations to pay any amounts under the Obligations.  Borrower acknowledges that Lenders have acted in good faith and has conducted in a commercially reasonable manner its relationships with Borrower in connection with this Amendment and in connection with the Loan Documents.

Borrower understands and acknowledges that Lenders are entering into this Amendment in reliance upon, and in partial consideration for, the above representations and warranties, and agrees that such reliance is reasonable and appropriate.

3.LIMITATION.  The amendments set forth in this Amendment shall be limited precisely as written and shall not be deemed (a) to be a waiver or modification of any other term or condition of the Loan Agreement or of any other instrument or agreement referred to therein or to prejudice any right or remedy which Lenders may now have or may have in the future under or in connection with the Loan Agreement or any instrument or agreement referred to therein; or (b) to be a consent to any future amendment or modification or waiver to any instrument or agreement the execution and delivery of which is consented to hereby, or to any waiver of any of the provisions thereof.  Except as expressly amended hereby, the Loan Agreement shall continue in full force and effect.

4.EFFECTIVENESS.  This Amendment shall become effective upon the satisfaction of all the following conditions precedent:

4.1AMENDMENT.  Borrower and Lenders shall have duly executed and delivered this Amendment to Lenders.

5.COUNTERPARTS.  This Amendment may be signed in any number of counterparts, and by different parties hereto in separate counterparts, with the same effect as if the signatures to each such counterpart were upon a single instrument.  All counterparts shall be deemed an original of this Amendment.

6.INTEGRATION.  This Amendment and any documents executed in connection herewith or pursuant hereto contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, offers and negotiations, oral or written, with respect thereto and no extrinsic evidence whatsoever may be introduced in any judicial or arbitration proceeding,

2

if any, involving this Amendment; except that any financing statements or other agreements or instruments filed by Lenders with respect to Borrower shall remain in full force and effect.

7.GOVERNING LAW; VENUE.  THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.  Borrower and Lenders each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California.

[signature page follows]

3

IN WITNESS WHEREOF, the parties have duly authorized and caused this Amendment to be executed as of the date first written above.

BORROWER:
INTELEPEER, INC.
By:	/s/ Andre Simone
Name: Andre Simone
Title: Chief Financial Officer
LENDERS:
HERCULES TECHNOLOGY II, L.P.,
a Delaware limited partnership
By: Hercules Technology SBIC Management
its General Partner
By: Hercules Technology Growth Capital, Inc.
Its Manager
By:	/s/ K. Nicholas Martitsch
Name:  K. Nicholas Martitsch
Its:        Associate General Counsel
COMERICA BANK
By:	/s/ Calvin Cheng
Name: Calvin Cheng
Title: Vice President

IN WITNESS WHEREOF, the parties have duly authorized and caused this Amendment to be executed as of the date first written above.

BORROWER:
INTELEPEER, INC.
By:	/s/ Andre Simone
Name: Andre Simone
Title: CFO
LENDERS:
HERCULES TECHNOLOGY II, L.P.,
a Delaware limited partnership
By: Hercules Technology SBIC Management
its General Partner
By: Hercules Technology Growth Capital, Inc.
Its Manager
By:	/s/ K. Nicholas Martitsch
Name:  K. Nicholas Martitsch
Its:        Associate General Counsel
COMERICA BANK
By:	/s/ Calvin Cheng
Name: Calvin Cheng
Title: Vice President

AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT

THIS AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT is made and dated as of May    , 2011 and is entered into by and between INTELEPEER, INC., a Delaware corporation, and each of its subsidiaries, (hereinafter collectively referred to as the “Borrower”), on the one hand, and HERCULES TECHNOLOGY II, L.P., a Delaware limited partnership (“Hercules”), and COMERICA BANK, a Texas banking association (“Comerica” and collectively with Hercules, the “Lenders”; each of the Lenders individually, a “Lender”).  Capitalized terms used but not defined herein shall have the meanings set forth in the Existing Loan Agreement (as defined below).

RECITALS

A.Borrower and the Lenders are party to that certain Loan and Security Agreement, dated as of May 5, 2010 (as amended by that certain Amendment No. 1 to Loan and Security Agreement, dated as of December 7, 2010, among the Borrower and the Lenders, the “Existing Loan Agreement”), pursuant to the terms and conditions of which the Lenders have agreed to make available to Borrower an equipment loan in an aggregate principal amount of up to Ten Million Dollars ($10,000,000) and a revolving facility in an aggregate principal amount of up to Ten Million Dollars ($10,000,000); and

B.Borrower and the Lenders wish to amend the Existing Loan Agreement on the terms and conditions set forth herein.

AGREEMENT

NOW, THEREFORE, Borrower and the Lenders agree as follows:

1.1Amendment.

(a)The definition of “Required EBITDA Amount” in Section 1.1 of the Existing Loan Agreement is hereby amended and restated to read in its entirety as follows:

“Required EBITDA Amount” means (a) with respect to the 2011 calendar year, the amounts set forth in Annex II, and (b) with respect to each subsequent calendar year, an amount which shall have been determined by the Lenders on or prior to January 1 of such calendar year based upon the Borrower’s board-approved budget for such calendar year, which budget shall have been approved by the Lenders, such approval not to be unreasonably withheld, and which amount shall at least be sufficient to service Borrower’s obligations under this Agreement.

(b)The definition of “Approved Plan” in Section 1.1 of the Existing Loan Agreement is hereby amended and restated to read in its entirety as follows:

“Approved Plan” means, (a) with respect to the 2011 calendar year, the business plan attached as Annex I hereto, and (b) with respect to each subsequent calendar year, a board-approved business plan of Borrower for such calendar

year, which business plan shall have been approved by the Lenders, such approval not to be unreasonably withheld, that reasonably demonstrates the ability of Borrower to satisfy the Secured Obligations when due.”

(c)Section 7.18 of the Existing Loan Agreement is hereby amended and restated to read in its entirety as follows:

“7.18Financial Covenant.  So long as any Revolving Loan Advances are outstanding, Borrower shall maintain its financial condition as follows using GAAP consistently applied and used consistently with prior practices: (a) during the 2011 calendar year and tested on a monthly basis, monthly revenue, measured on a trailing three calendar month basis, of no less than 80% of the amount set forth in the Approved Plan, and for each calendar year thereafter, an amount no less than the minimum amount established by the Lenders in the exercise of their reasonable discretion in connection with their approval of the Approved Plan; provided, that for so long as no Approved Plan exists for any calendar year after the 2011 calendar year, Borrower shall maintain monthly revenue during January of such calendar year of no less than 80% of the sum of (x) monthly revenue in the Approved Plan for the prior calendar year for the month of November, and (y) twice the monthly revenue in the Approved Plan for such year for the month of December, and monthly revenue during February and each following calendar month that no Approved Plan exists of no less than 80% of an amount equal to three times the monthly revenue in the Approved Plan for the immediately preceding calendar year for the month of December, and (b) EBITDA, measured on a trailing three calendar month basis, shall at no time be less than (i) the Required EBITDA Amount for such three calendar month period, during the 2011 calendar year, and (ii) an amount which shall have been determined by the Lenders on or prior to January 1 of each following calendar year based upon Borrower’s board-approved budget for such calendar year, which amount shall at least be sufficient to service Borrower’s obligations under this Agreement, during each subsequent calendar year; provided, that for so long as the Lenders have not set an EBITDA requirement for the Borrower for any calendar year after the 2011 calendar year, Borrower shall maintain EBITDA, measured on a trailing three calendar month basis, for each calendar month beginning on January 1 of such calendar year of no less than the amount required to ensure compliance with this covenant during the month of December of the immediately preceding calendar year during which a minimum EBITDA covenant required had been set by the Lenders.

1.2Replacement of Annex I.  Annex I of the Existing Loan Agreement is hereby deleted and replaced in its entirety with the Annex I attached as Exhibit A to this Amenment.

1.3Insertion of New Annex II.  A new Annex II in the form attached as Exhibit B to this Amendment shall be inserted into the Existing Loan Agreement immediately following Annex I to the Existing Loan Agreement.

2

1.4Required PUC Consents.  Each Lender hereby recognizes and agrees that the Required PUC Consents have been obtained and the Extension Date has occurred.

1.5Representations and Warranties; Defaults.  Borrower confirms that immediately prior and upon giving effect to this Amendment (i) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such dale), and (ii) no Event of Default has occurred and is continuing with respect to which Borrower has not been notified in writing by Lenders.

1.6Limitation.  Except as expressly set forth in Sections 1.1 and 1.2 above, the Existing Loan Agreement and the other Loan Documents shall not be amended, modified, waived or changed in any way, and shall remain in full force and effect.

1.7Integration.  This Amendment and any documents executed in connection herewith or pursuant hereto contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, offers and negotiations, oral or written, with respect thereto and no extrinsic evidence whatsoever may be introduced in any judicial or arbitration proceeding, if any, involving this Amendment; except that any financing statements or other agreements or instruments filed by Lenders with respect to Borrower shall remain in full force and effect.

1.8Governing Law.  This Amendment has been negotiated and delivered to the Lenders in the State of California, and shall have been accepted by the Lenders in the State of California.  This Amendment shall be governed by, and construed and enforced in accordance with, the laws of the State of California, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.

1.9Counterparts.  This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so delivered shall be deemed an original, but all of which counterparts shall constitute but one and the same instrument.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, Borrower and each Lender have duly executed and delivered this Amendment as of the day and year first above written.

BORROWER:
INTELEPEER, INC.
By:	/s/ Andre Simone
Name: Andre Simone
Title: Chief Financial Officer
LENDERS:
HERCULES TECHNOLOGY II, L.P.,
a Delaware limited partnership
By: Hercules Technology SBIC Management
its General Partner
By: Hercules Technology Growth Capital, Inc.
Its Manager
By:	/s/ K. Nicholas Martitsch
Name:  K. Nicholas Martitsch
Its:        Associate General Counsel
COMERICA BANK
By:	/s/ Calvin Cheng
Name: Calvin Cheng
Title: Vice President

AMENDMENT NUMBER THREE
TO
LOAN AND SECURITY AGREEMENT

THIS AMENDMENT NUMBER THREE TO LOAN AND SECURITY AGREEMENT (“Amendment”), is entered into as of June 30, 2011, by and between HERCULES TECHNOLOGY II, L.P., a Delaware limited partnership (“Hercules”), and COMERICA BANK, (“Comerica” and collectively with Hercules, the “Lenders”; each of the Lenders individually, a “Lender”), on the one hand, and INTELEPEER, INC., a Delaware corporation, and each of its subsidiaries, (hereinafter collectively referred to as the “Borrower”), in light of the following:

A.Borrower and Lenders have previously entered into that certain Loan and Security Agreement, dated as of May 5, 2010 (as amended, the “Agreement”).

B.Borrower and Lenders desire to amend certain provisions of the Agreement and the Equipment Notes of Lenders as provided for and on the conditions herein.

NOW, THEREFORE, Borrower and Lenders hereby amend certain provisions of the Agreement and their respective Equipment Notes as follows:

1.Definitions.  All initially capitalized terms used in this Amendment shall have the meanings given to them in the Agreement unless specifically defined herein.

2.Amendments.

(a)The Agreement, and all currently outstanding Equipment Notes are hereby amended such that, from and after July 1, 2011, the regularly scheduled monthly principal installment payments due with respect to such Equipment Notes for the months of July, August and September of 2011, shall be deferred and shall be due and payable on the earliest of (i) October 1, 2011, (ii) the date on which Borrower closes an initial public offering of Borrower’s common stock pursuant to a registration statement filed with the Securities and Exchange Commission (an “IPO”) and (iii) the date on which it is determined that Borrower has failed to achieve at least 95% of its board-approved business plan attached hereto as Exhibit A with respect to trailing three month revenue and EBITDA, in each case measured monthly at the conclusion of each of the months of July, August and September 2011; provided, however, that on or before June 30, 2011, Borrower shall have made to Lenders a cash payment in an aggregate amount equal to 0.75% of the principal balance of the Equipment Notes outstanding on June 30, 2011.

(b)The Agreement and all currently outstanding Equipment Notes are hereby farther amended such that, in the event that an IPO hasn’t occurred by September 30, 2011, Borrower may request on or before September 30, 2011 an additional extension of the date on which regularly scheduled principal installment payments with respect to then outstanding Equipment Notes shall be due and payable to the date that is the earliest of (i) January 1, 2012, (ii) the date of the closing of an IPO, and (iii) the date on which it is determined that Borrower has failed to achieve at least 95% of its board-approved business plan attached hereto as Exhibit A with respect to trailing three month revenue

and EBITDA, in each case measured monthly at the conclusion of each of the months of October, November and December; provided, however, that (x) on or before September 30, 2011, Borrower shall have made to Lenders a cash payment in an aggregate amount equal to 0.75% of the principal balance of the Equipment Notes outstanding as of the date of such payment and (y) approval by the Lenders of such additional extension.

3.Representations and Warranties.  Borrower hereby affirms to Lenders that all of Borrower’s representations and warranties set forth in the Agreement are true, complete and accurate in all respects as of the date hereof.

4.No Defaults.  Borrower hereby affirms to Lenders that, after giving effect to this Amendment, no Event of Default has occurred and is continuing as of the date hereof.

5.Condition Precedent.  The effectiveness of this Amendment is expressly conditioned upon receipt by Lenders of:

(a)an executed copy of this Amendment;

(b)payment of all of Lenders’ costs and expenses incurred in connection with this Amendment.

6.Costs and Expenses.  Borrower shall pay to Lenders all of Lenders’ out-of-pocket costs and expenses (including, without limitation, the fees and expenses of its counsel) arising in connection with the preparation, execution, and delivery of this Amendment and all related documents.

7.Limited Effect.  In the event of a conflict between the terms and provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern.  In all other respects, the Agreement, as amended and supplemented hereby, shall remain in full force and effect.

8.Choice of Law.  This Amendment shall be governed by, construed and interpreted in accordance with the internal laws (and not the law of conflicts) of the state of California.

9.Further Assurances.  Lenders agrees to execute and deliver such further instruments, documents and agreements as Borrower may reasonably request to effect the Accounts Financing and the release of the security interest referenced in Section 2(d) hereinabove.

~~ Signature follow ~~

2

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their authorized representatives the day and year first above written.

BORROWER:
INTELEPEER, INC.
By:	/s/ Andre Simone
Name:  Andre Simone
Title: Chief Financial Officer
LENDERS:
HERCULES TECHNOLOGY II, L.P.,
a Delaware limited partnership
By:	Hercules Technology SBIC Management
	its General Partner
By:	Hercules Technology Growth Capital, Inc.
	Its Manager
By:	/s/ K. Nicholas Martitsch
Name:		K. Nicholas Martitsch
Its:		Associate General Counsel
COMERICA BANK
By:	/s/ Calvin Cheng
Name:  Calvin Cheng
Title: Vice President

AMENDMENT NUMBER FOUR
TO
LOAN AND SECURITY AGREEMENT

THIS AMENDMENT NUMBER FOUR TO LOAN AND SECURITY AGREEMENT (“Amendment”), is entered into as of September 30, 2011, by and between HERCULES TECHNOLOGY II, L.P., a Delaware limited partnership (“Hercules”), and COMERICA BANK, (“Comerica” and collectively with Hercules, the “Lenders”; each of the Lenders individually, a “Lender”), on the one hand, and INTELEPEER, INC., a Delaware corporation, and each of its subsidiaries, (hereinafter collectively referred to as the “Borrower”), in light of the following:

A.Borrower and Lenders have previously entered into that certain Loan and Security Agreement, dated as of May 5, 2010 (as amended, the “Agreement”).

B.Borrower and Lenders desire to amend certain provisions of the Agreement and the Equipment Notes of Lenders as provided for and on the conditions herein.

NOW, THEREFORE, Borrower and Lenders hereby amend certain provisions of the Agreement and their respective Equipment Notes as follows:

1.Definitions.  All initially capitalized terms used in this Amendment shall have the meanings given to them in the Agreement unless specifically defined herein.

2.Approval.  Reference is hereby made to that certain Amendment Number Three to Loan and Security Agreement, dated as of June 30, 2011, by and between Lenders and Borrower (the “Third Amendment”).  In accordance with Section 2(b) of the Third Amendment, Lenders hereby approve an extension of the date on which regularly scheduled principal installment payments with respect to then outstanding Equipment Notes shall be due and payable to the date that is the earliest of (i) January 1, 2012, (ii) the date of the closing of an IPO (as defined in the Third Amendment), and (iii) the date on which it is determined that Borrower has failed to achieve at least 95% of its board-approved business plan attached as Exhibit A to the Third Amendment with respect to trailing three month revenue and EBITDA, in each case measured monthly at the conclusion of each of the months of October, November and December.

3.Amendment.  The Agreement is hereby amended such that an Event of Default shall be deemed to have occurred (a) on January 1, 2012 if, as of such date, Borrower has not (i) closed an IPO or (ii) provided Lenders with a signed written letter of intent or term sheet, or executed definitive transaction agreements with one or more potential investors (which investors, if not existing holders of Borrower securities or instruments of indebtedness, are reasonably acceptable to Lenders) to provide Borrower with additional working capital of at least $9,900,000, net of expenses, costs and fees in exchange for equity securities or instruments of indebtedness subordinated to the Secured Obligations on terms and conditions satisfactory to Lenders in their sole discretion (the “New Financing”), or (b) on February 1, 2012, if Borrower satisfied sub-clause (a)(ii) above and, as of such date, Borrower has not consummated the New Financing.

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4.Representations and Warranties.  Borrower hereby affirms to Lenders that all of Borrower’s representations and warranties set forth in the Agreement are true, complete and accurate in all respects as of the date hereof.

5.No Defaults.  Borrower hereby affirms to Lenders that, after giving effect to this Amendment, no Event of Default has occurred and is continuing as of the date hereof.

6.Condition Precedent.  The effectiveness of this Amendment, including the approval set forth in Section 2 hereof, is expressly conditioned upon receipt by Lenders of:

(a)an executed copy of this Amendment;

(b)a cash payment in an aggregate amount equal to 0.75% of the principal balance of the Equipment Notes outstanding as of the date hereof; and

(c)payment of all of Lenders’ costs and expenses incurred in connection with this Amendment.

7.Costs and Expenses.  Borrower shall pay to Lenders all of Lenders’ out-of-pocket costs and expenses (including, without limitation, the fees and expenses of its counsel) arising in connection with the preparation, execution, and delivery of this Amendment and all related documents.

8.Limited Effect.  In the event of a conflict between the terms and provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern.  In all other respects, the Agreement, as amended and supplemented hereby, shall remain in full force and effect.

9.Choice of Law.  This Amendment shall be governed by, construed and interpreted in accordance with the internal laws (and not the law of conflicts) of the state of California.

10.Further Assurances.  Lenders agrees to execute and deliver such further instruments, documents and agreements as Borrower may reasonably request to effect the Accounts Financing and the release of the security interest referenced in Section 2(d) hereinabove.

— Signature follow —

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their authorized representatives the day and year first above written.

HERCULES TECHNOLOGY II, L.P.		INTELEPEER, INC.,
By:	Hercules Technology SBIC Management	By:	/s/ Andre Simone
	its General Partner	Name: Andre Simone
		Title: Chief Financial Officer
By:	Hercules Technology Growth Capital, Inc.
	Its Manager
By:	/s/ K. Nicholas Martitsch
Name: K. Nicholas Martitsch
Its:       Associate General Counsel
COMERICA BANK
By:	/s/ Robert Shutt
Name: Robert Shutt
Title: Senior Vice President

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Amendment Number Four to Loan and Security Agreement

EX-10.17

Exhibit 10.17

THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA CORPORATIONS CODE.  THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

INTELEPEER, INC.

NON-PLAN FULLY VESTED STOCK OPTION AGREEMENT

Intelepeer, Inc. has granted to the Participant named in the Notice of Grant of Stock Option (the “Grant Notice”) to which this Non-Plan Fully Vested Stock Option Agreement (this “Option Agreement”) is attached an option (the “Option”) to purchase certain shares of Stock upon the terms and conditions set forth in the Grant Notice and this Option Agreement.  The Option has not been granted pursuant to the Intelepeer, Inc. Amended and Restated 2003 Stock Option and Restricted Stock (the “Plan”).  However, as set forth below, unless otherwise defined herein, capitalized terms shall have the meaning set forth in the Plan (the “Applicable Plan Provisions”).  By signing the Grant Notice, the Participant: (a) acknowledges receipt of, and represents that the Participant has read and is familiar with the terms and conditions of, the Grant Notice, this Option Agreement and the Applicable Plan Provisions, (b) accepts the Option subject to all of the terms and conditions of the Grant Notice and this Option Agreement, and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Grant Notice, this Option Agreement or the Applicable Plan Provisions.

1.DEFINITIONS AND CONSTRUCTION.

1.1Definitions.  Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan.  In addition, the following terms shall be defined as follows:

(a)“409A Change in Control” means a change in the “ownership or effective control of the Company” or in the “ownership of a substantial portion of the assets of the Company” (all as defined by Section 409A of the Code);

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(b)“Disability” shall mean that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to last for a continuous period of not less that twelve (12) months; and

(c)“Separation from Service” shall have the meaning determined in accordance with Section 409A of the Code.

1.2Construction.  Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Option Agreement.  Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular.  Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

2.TAX CONSEQUENCES.

2.1Tax Status of Option.  This Option is intended to be a Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option within the meaning of Section 422(b) of the Code.

3.ADMINISTRATION.

All questions of interpretation concerning the Grant Notice, this Option Agreement and the Applicable Plan Provisions shall be determined by the Board.  All determinations by the Board shall be final and binding upon all persons having an interest in the Option.  Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.

4.EXERCISE OF THE OPTION.

4.1Right to Exercise.  The Option shall be exercisable only following the first to occur of the following events:

(a)a Separation from Service by the Participant;

(b)the death of the Participant;

(c)a 409A Change in Control;

(d)the Disability of the Participant; and

(e)June 30, 2013.

Subject to Section 6, once the Option becomes exercisable, the Option shall remain exercisable until the first to occur of (i) ninety (90) days following the first event giving rise to the right to exercise; and (ii) December 31 of the calendar year in which such event

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occurs.  If the Option is not exercised prior to the date determined in the preceding sentence (the “Option Termination Date”), the Option shall terminate.  Notwithstanding the foregoing, to the extent that the Participant is a “specified employee” within the meaning of Section 409A of the Code and the regulations promulgated thereunder as of the date of the Participant’s Separation from Service, if the Option becomes exercisable as a result of such Separation from Service, then the Option shall not be exercisable as set forth above, but instead shall be exercisable on the first business day which is six (6) months after the date of the Participant’s Separation from Service or, if earlier, the date of the Participant’s death following such Separation from Service.

4.2Method of Exercise.  Exercise of the Option shall be by means of electronic or written notice (the “Exercise Notice”) in a form authorized by the Company.  An electronic Exercise Notice must be digitally signed or authenticated by the Participant in such manner as required by the notice and transmitted to the Company or an authorized representative of the Company (including a third-party administrator designated by the Company).  In the event that the Participant is not authorized or is unable to provide an electronic Exercise Notice, the Option shall be exercised by a written Exercise Notice addressed to the Company, which shall be signed by the Participant and delivered in person, by certified or registered mail, return receipt requested, by confirmed facsimile transmission, or by such other means as the Company may permit, to the Company, or an authorized representative of the Company (including a third-party administrator designated by the Company).  Each Exercise Notice, whether electronic or written, must state the Participant’s election to exercise the Option, the number of whole shares of Stock for which the Option is being exercised and such other representations and agreements as to the Participant’s investment intent with respect to such shares as may be required pursuant to the provisions of this Option Agreement.  Further, each Exercise Notice must be received by the Company prior to the termination of the Option as set forth above and in Section 6 and must be accompanied by full payment of the aggregate Exercise Price for the number of shares of Stock being purchased.  The Option shall be deemed to be exercised upon receipt by the Company of such electronic or written Exercise Notice and the aggregate Exercise Price.

4.3Payment of Exercise Price.

(a)Forms of Consideration Authorized.  Except as otherwise provided below, payment of the aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised shall be made (i) in cash or by check or cash equivalent, (ii) if permitted by the Company, by tender to the Company, or attestation to the ownership, of whole shares of Stock owned by the Participant having a Fair Market Value not less than the aggregate Exercise Price, (iii) by means of a Cashless Exercise, as defined in Section 4.3(b), (iv) if permitted by the Company, by means of a Net-Exercise, or (v) by any combination of the foregoing.

(b)Limitations on Forms of Consideration.

(i)Tender of Stock.  Notwithstanding the foregoing, the Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.  If required by the Company, the Option may not be exercised by tender to the Company, or attestation to the

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ownership, of shares of Stock unless such shares either have been owned by the Participant for more than six (6) months or such other period, if any, required by the Company (and not used for another option exercise by attestation during such period) or were not acquired, directly or indirectly, from the Company.

(ii)Cashless Exercise.  A “Cashless Exercise” means the delivery of a properly executed notice together with irrevocable instructions to a broker in a form acceptable to the Company providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares of Stock acquired upon the exercise of the Option pursuant to a program or procedure approved by the Company (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System).  The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve, or terminate any such program or procedure, including with respect to the Participant notwithstanding that such program or procedures may be available to others.

4.4Tax Withholding.  At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate provision for (including by means of a Cashless Exercise to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Participating Company Group, if any, which arise in connection with the Option.  The Company shall have no obligation to deliver shares of Stock until the tax withholding obligations of the Participating Company Group have been satisfied by the Participant.

4.5Certificate Registration.  Except in the event the Exercise Price is paid by means of a Cashless Exercise, the certificate for the shares as to which the Option is exercised shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.

4.6Restrictions on Grant of the Option and Issuance of Shares.  The grant of the Option and the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities.  The Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed.  In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act.  THE PARTICIPANT IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.  ACCORDINGLY, THE PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED.  The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel

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to be necessary to the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained.  As a condition to the exercise of the Option, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.

4.7Fractional Shares.  The Company shall not be required to issue fractional shares upon the exercise of the Option.

5.NONTRANSFERABILITY OF THE OPTION.

During the lifetime of the Participant, the Option shall be exercisable only by the Participant or the Participant’s guardian or legal representative.  The Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.  Following the death of the Participant, the Option, may be exercised by the Participant’s legal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution.

6.TERMINATION OF THE OPTION.

The Option shall terminate and may no longer be exercised after the first to occur of (a) the close of business on the Option Termination Date, or (b) a Change in Control to the extent provided in Section 7.

7.EFFECT OF CHANGE IN CONTROL.

In the event of a Change in Control, the surviving, continuing, successor, or purchasing entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of the Participant, assume or continue in full force and effect the Company’s rights and obligations under the Option or any portion thereof or substitute for the Option or any portion thereof a substantially equivalent option for the Acquiror’s stock.  For purposes of this Section, the Option shall be deemed assumed if, following the Change in Control, the Option confers the right to receive, subject to the terms and conditions of the Plan and this Option Agreement, for each share of Stock subject to the Option immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled; provided, however, that if such consideration is not solely common stock of the Acquiror, the Board may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise of the Option, for each share of Stock subject to the Option, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control.  If any portion of such consideration may be received by holders of Stock pursuant to the Change in Control on a contingent or delayed basis, the Board may, in its sole discretion, determine such Fair Market Value per share as of the time of the Change in Control on the basis of the Board’s good faith

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estimate of the present value of the probable future payment of such consideration.  The Option shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control to the extent that the Option is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised as of the date of the Change in Control.  Notwithstanding the foregoing, shares acquired upon exercise of the Option prior to the Change in Control and any consideration received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of this Option Agreement except as otherwise provided herein.

8.ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.

Subject to any required action by the stockholders of the Company, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number, Exercise Price and kind of shares subject to the Option, in order to prevent dilution or enlargement of the Participant’s rights under the Option.  For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.”  Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number and the Exercise Price shall be rounded up to the nearest whole cent.  In no event may the Exercise Price be decreased to an amount less than the par value, if any, of the stock subject to the Option.  Such adjustments shall be determined by the Board, and its determination shall be final, binding and conclusive.

9.RIGHTS AS A STOCKHOLDER, DIRECTOR, EMPLOYEE OR CONSULTANT.

The Participant shall have no rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of the shares for which the Option has been exercised (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).  No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares are issued, except as provided in Section 8.  If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participant’s employment is “at will” and is for no specified term.  Nothing in this Option Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participant’s Service as a Director, an Employee or Consultant, as the case may be, at any time.

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10.RIGHT OF FIRST REFUSAL.

10.1Grant of Right of First Refusal.  Except as provided in Section 10.7 and Section 15 below, in the event the Participant, the Participant’s legal representative, or other holder of shares acquired upon exercise of the Option proposes to sell, exchange, transfer, pledge, or otherwise dispose of any Vested Shares (the “Transfer Shares”) to any person or entity, including, without limitation, any stockholder of a Participating Company, the Company shall have the right to repurchase the Transfer Shares under the terms and subject to the conditions set forth in this Section 10 (the “Right of First Refusal”).

10.2Notice of Proposed Transfer.  Prior to any proposed transfer of the Transfer Shares, the Participant shall deliver written notice (the “Transfer Notice”) to the Company describing fully the proposed transfer, including the number of Transfer Shares, the name and address of the proposed transferee (the “Proposed Transferee”) and, if the transfer is voluntary, the proposed transfer price, and containing such information necessary to show the bona fide nature of the proposed transfer.  In the event of a bona fide gift or involuntary transfer, the proposed transfer price shall be deemed to be the Fair Market Value of the Transfer Shares, as determined by the Board in good faith.  If the Participant proposes to transfer any Transfer Shares to more than one Proposed Transferee, the Participant shall provide a separate Transfer Notice for the proposed transfer to each Proposed Transferee.  The Transfer Notice shall be signed by both the Participant and the Proposed Transferee and must constitute a binding commitment of the Participant and the Proposed Transferee for the transfer of the Transfer Shares to the Proposed Transferee subject only to the Right of First Refusal.

10.3Bona Fide Transfer.  If the Company determines that the information provided by the Participant in the Transfer Notice is insufficient to establish the bona fide nature of a proposed voluntary transfer, the Company shall give the Participant written notice of the Participant’s failure to comply with the procedure described in this Section 10, and the Participant shall have no right to transfer the Transfer Shares without first complying with the procedure described in this Section 10.  The Participant shall not be permitted to transfer the Transfer Shares if the proposed transfer is not bona fide.

10.4Exercise of Right of First Refusal.  If the Company determines the proposed transfer to be bona fide, the Company shall have the right to purchase all, but not less than all, of the Transfer Shares (except as the Company and the Participant otherwise agree) at the purchase price and on the terms set forth in the Transfer Notice by delivery to the Participant of a notice of exercise of the Right of First Refusal within thirty (30) days after the date the Transfer Notice is delivered to the Company.  The Company’s exercise or failure to exercise the Right of First Refusal with respect to any proposed transfer described in a Transfer Notice shall not affect the Company’s right to exercise the Right of First Refusal with respect to any proposed transfer described in any other Transfer Notice, whether or not such other Transfer Notice is issued by the Participant or issued by a person other than the Participant with respect to a proposed transfer to the same Proposed Transferee.  If the Company exercises the Right of First Refusal, the Company and the Participant shall thereupon consummate the sale of the Transfer Shares to the Company on the terms set forth in the Transfer Notice within sixty (60) days after the date the Transfer Notice is delivered to the Company (unless a longer period is offered by the Proposed Transferee); provided, however, that in the event the Transfer Notice provides for the

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payment for the Transfer Shares other than in cash, the Company shall have the option of paying for the Transfer Shares by the present value cash equivalent of the consideration described in the Transfer Notice as reasonably determined by the Company.  For purposes of the foregoing, cancellation of any indebtedness of the Participant to any Participating Company shall be treated as payment to the Participant in cash to the extent of the unpaid principal and any accrued interest canceled.

10.5Failure to Exercise Right of First Refusal.  If the Company fails to exercise the Right of First Refusal in full (or to such lesser extent as the Company and the Participant otherwise agree) within the period specified in Section 10.4 above, the Participant may conclude a transfer to the Proposed Transferee of the Transfer Shares on the terms and conditions described in the Transfer Notice, provided such transfer occurs not later than ninety (90) days following delivery to the Company of the Transfer Notice.  The Company shall have the right to demand further assurances from the Participant and the Proposed Transferee (in a form satisfactory to the Company) that the transfer of the Transfer Shares was actually carried out on the terms and conditions described in the Transfer Notice.  No Transfer Shares shall be transferred on the books of the Company until the Company has received such assurances, if so demanded, and has approved the proposed transfer as bona fide.  Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by the Participant, shall again be subject to the Right of First Refusal and shall require compliance by the Participant with the procedure described in this Section 10.

10.6Transferees of Transfer Shares.  All transferees of the Transfer Shares or any interest therein, other than the Company, shall be required as a condition of such transfer to agree in writing (in a form satisfactory to the Company) that such transferee shall receive and hold such Transfer Shares or interest therein subject to all of the terms and conditions of this Option Agreement, including this Section 10 providing for the Right of First Refusal with respect to any subsequent transfer.  Any sale or transfer of any shares acquired upon exercise of the Option shall be void unless the provisions of this Section 10 are met.

10.7Transfers Not Subject to Right of First Refusal.  The Right of First Refusal shall not apply to any transfer or exchange of the shares acquired upon exercise of the Option if such transfer or exchange is in connection with an Ownership Change Event.  If the consideration received pursuant to such transfer or exchange consists of stock of a Participating Company, such consideration shall remain subject to the Right of First Refusal unless the provisions of Section 10.9 below result in a termination of the Right of First Refusal.

10.8Assignment of Right of First Refusal.  The Company shall have the right to assign the Right of First Refusal at any time, whether or not there has been an attempted transfer, to one or more persons as may be selected by the Company.

10.9Early Termination of Right of First Refusal.  The other provisions of this Option Agreement notwithstanding, the Right of First Refusal shall terminate and be of no further force and effect upon (a) the occurrence of a Change in Control, unless the Acquiror assumes the Company’s rights and obligations under the Option or substitutes a substantially equivalent option for the Acquiror’s stock for the Option, or (b) the existence of a public market for the class of shares subject to the Right of First Refusal.  A “public market” shall be deemed

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to exist if (i) such stock is listed on a national securities exchange (as that term is used in the Exchange Act) or (ii) such stock is traded on the over-the-counter market and prices therefor are published daily on business days in a recognized financial journal.

11.STOCK DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT.

If, from time to time, there is any stock dividend, stock split or other change, as described in Section 8, in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, then in such event any and all new, substituted or additional securities to which the Participant is entitled by reason of the Participant’s ownership of the shares acquired upon exercise of the Option shall be immediately subject to the Right of First Refusal with the same force and effect as the shares subject to the Right of First Refusal immediately before such event.

12.LEGENDS.

The Company may at any time place legends referencing the Right of First Refusal and any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock subject to the provisions of this Option Agreement.  The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Participant in order to carry out the provisions of this Section.  Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:

12.1“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.”

12.2“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.”

13.LOCK-UP AGREEMENT.

The Participant hereby agrees that in the event of any underwritten public offering of stock, including an initial public offering of stock, made by the Company pursuant to an effective registration statement filed under the Securities Act, the Participant shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the

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Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such public offering; provided, however, that such period of time shall not exceed one hundred eighty (180) days from the effective date of the registration statement to be filed in connection with such public offering.  The foregoing limitation shall not apply to shares registered in the public offering under the Securities Act.  The Participant hereby agrees to enter into any agreement reasonably required by the underwriters to implement the foregoing within a reasonable timeframe if so requested by the Company.

14.RESTRICTIONS ON TRANSFER OF SHARES.

No shares acquired upon exercise of the Option may be sold, exchanged, transferred (including, without limitation, any transfer to a nominee or agent of the Participant), assigned, pledged, hypothecated or otherwise disposed of, including by operation of law in any manner which violates any of the provisions of this Option Agreement, and any such attempted disposition shall be void.  The Company shall not be required (a) to transfer on its books any shares which will have been transferred in violation of any of the provisions set forth in this Option Agreement or (b) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares will have been so transferred.

15.MISCELLANEOUS PROVISIONS.

15.1Further Instruments.  The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Option Agreement.

15.2Binding Effect.  Subject to the restrictions on transfer set forth herein, this Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.

15.3Termination or Amendment.  The Board may terminate or amend the Plan or the Option at any time; provided, however, that except as provided in Section 7 in connection with a Change in Control, no such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Participant unless such termination or amendment is necessary to comply with any applicable law or government regulation.  No amendment or addition to this Option Agreement shall be effective unless in writing.

15.4Delivery of Documents and Notices.  Any document relating to participation in the Plan, or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Option Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery electronic delivery at the e-mail address, if any, provided for the Participant by the Participating Company, or, upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.

10

(a)Description of Electronic Delivery.  The Plan documents, which may include but do not necessarily include:  the Plan, the Grant Notice, this Option Agreement, and any reports of the Company provided generally to the Company’s shareholders, may be delivered to the Participant electronically.  In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice and Exercise Notice called for by Section 4.2 to the Company or to such third party involved in administering this Option as the Company may designate from time to time.  Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.

(b)Consent to Electronic Delivery.  The Participant acknowledges that the Participant has read Section 15.4(a) of this Option Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice and Exercise Notice, as described in Section 15.4(a).  The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing.  The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails.  Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails.  The Participant may revoke his or her consent to the electronic delivery of documents described in Section 15.4(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail.  Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 15.4(a).

15.5Integrated Agreement.  The Grant Notice, this Option Agreement and the Plan, together with any employment, service or other agreement with the Participant and a Participating Company referring to the Option, shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter.  To the extent contemplated herein or therein, the provisions of the Grant Notice, the Option Agreement and the Applicable Plan Provisions shall survive any exercise of the Option and shall remain in full force and effect.

15.6Applicable Law.  This Option Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California.

15.7Counterparts.  The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

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Participant:

Date:

STOCK OPTION EXERCISE NOTICE

Nonstatutory Stock Option

Intelepeer, Inc.

Attention: Chief Financial Officer

2855 Campus Drive, Suite 200

San Mateo, CA 94403

Ladies and Gentlemen:

1.Option.  I was granted an option (the “Option”) to purchase shares of the common stock (the “Shares”) of Intelepeer, Inc. (the “Company”) pursuant to my Notice of Grant of Stock Option (the “Grant Notice”) and my Stock Option Agreement (the “Option Agreement”) as follows:

Date of Grant:
Number of Option Shares:
Exercise Price per Share:	$

2.Exercise of Option.  I hereby elect to exercise the Option to purchase the following number of Shares, all of which are Vested Shares, in accordance with the Grant Notice and the Option Agreement:

Total Shares Purchased:
Total Exercise Price (Total Shares X Price per Share)	$

3.Payments.  I enclose payment in full of the total exercise price for the Shares in the following form(s), as authorized by my Option Agreement:

TM  Cash:	$
TM  Check:	$
TM  Net Exercise	Contact Plan Administrator
TM  Tender of Company Stock:	Contact Plan Administrator

4.Tax Withholding.  I enclose payment in full of my withholding taxes, if any, as follows:

(Contact Plan Administrator for amount of tax due.)

TM  Cash:	$
TM  Check:	$

5.Participant Information.

My address is:                                                                                   

My Social Security Number is:                                                                                   

6.Binding Effect.  I agree that the Shares are being acquired in accordance with and subject to the terms, provisions and conditions of the Grant Notice, the Option Agreement, including the Right of First Refusal set forth therein, to all of which I hereby expressly assent.  This Agreement shall inure to the benefit of and be binding upon my heirs, executors, administrators, successors and assigns.

7.Transfer.  I understand and acknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and that consequently the Shares must be held indefinitely unless they are subsequently registered under the Securities Act, an exemption from such registration is available, or they are sold in accordance with Rule 144 or Rule 701 under the Securities Act.  I further understand and acknowledge that the Company is under no obligation to register the Shares.  I understand that the certificate or certificates evidencing the Shares will be imprinted with legends which prohibit the transfer of the Shares unless they are registered or such registration is not required in the opinion of legal counsel satisfactory to the Company.

I am aware that Rule 144 under the Securities Act, which permits limited public resale of securities acquired in a nonpublic offering, is not currently available with respect to the Shares and, in any event, is available only if certain conditions are satisfied.  I understand that any sale of the Shares that might be made in reliance upon Rule 144 may only be made in limited amounts in accordance with the terms and conditions of such rule and that a copy of Rule 144 will be delivered to me upon request.

I understand that I am purchasing the Shares pursuant to the terms of the Grant Notice and my Option Agreement, copies of which I have received and carefully read and understand.

	Very truly yours,
	(Signature)
Receipt of the above is hereby acknowledged.
Intelepeer, Inc.
By:
Title:
Dated:

EX-23.2

EXHIBIT 23.2

Consent of Independent Registered Public Accounting Firm

IntelePeer, Inc.
San Mateo, California

        We hereby consent to the use in the Prospectus constituting a part of this Registration Statement (Amendment No. 4 to Form S-1) of our report dated May 9, 2011, except as to the fourth and fifth paragraphs of Note 14, which are as of December 14, 2011, relating to the financial statements of IntelePeer, Inc., which is contained in that Prospectus.

        We also consent to the reference to us under the caption "Experts" in the Prospectus.

BDO USA, LLP
San Francisco, California

December 14, 2011

EX-24.2

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Exhibit 24.2

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints Frank Fawzi and Andre Simone, jointly and severally, 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 IntelePeer, 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, 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 and about the premises hereby ratifying and confirming all that said attorneys-in-fact and agents, or his, her, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following person in the capacity and on the date indicated.

Signature	Title	Date
/s/ KEITH OLSEN Keith Olsen	Director	August 3, 2011

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Exhibit 24.2

POWER OF ATTORNEY