Marin Software
Annual Report 2014

Plain-text annual report

MARIN SOFTWARE INC FORM 10-K (Annual Report) Filed 02/20/15 for the Period Ending 12/31/14 Address Telephone 123 MISSION ST 25TH FLOOR SAN FRANCISCO, CA 94105 415-399-2580 CIK 0001389002 Symbol MRIN SIC Code 7374 - Computer Processing and Data Preparation and Processing Services Industry Computer Services Sector Technology Fiscal Year 12/31 http://www.edgar-online.com © Copyright 2015, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K For the fiscal year ended December 31, 2014 OR Commission File Number: 001-35838 Marin Software Incorporated (Exact name of registrant as specified in its charter) 123 Mission Street, 25th Floor San Francisco, CA 94105 (415) 399-2580 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Securities registered pursuant to section 12(g) of the Act: Not applicable Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1) No  Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of Act. Yes (cid:1) No  Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes  No (cid:1) Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes  No (cid:1) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  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): Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:1) No  Based on the closing price of the Registrant’s Common Stock on the New York Stock Exchange of $11.77 on the last business day of the Registrant’s most recently completed second fiscal quarter, which was June 30, 2014, the aggregate market value of its shares held by non-affiliates was approximately $229 million. Shares of the Registrant’s Common Stock held by each executive officer and director and by each entity or person that owned 5 percent or more of the Registrant’s outstanding Common Stock were excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of January 31, 2015, there were approximately 35.4 million shares of the Registrant’s Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant’s definitive proxy statement for its 2015 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed within 120 days of the Registrant’s fiscal year ended December 31, 2014, are incorporated by reference in Part III of this Report on Form 10-K. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part of this Form 10-K.  Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (cid:1) Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Delaware 20-4647180 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) Title of each class Name of each exchange on which registered Common stock, par value $0.001 per share New York Stock Exchange Large accelerated filer (cid:1) Accelerated filer  Non-accelerated filer (cid:1) Smaller reporting company (cid:1) Table of Contents MARIN SOFTWARE INCORPORATED FORM 10-K For the Fiscal Year Ended December 31, 2014 TABLE OF CONTENTS Page PART I. 1 Item 1. Business 1 Item 1A. Risk Factors 5 Item 1B. Unresolved Staff Comments 26 Item 2. Properties 26 Item 3. Legal Proceedings 26 Item 4. Mine Safety Disclosures 26 PART II. 26 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. Selected Consolidated Financial Data 29 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 53 Item 8. Financial Statements and Supplementary Data 54 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 55 Item 9A. Controls and Procedures 55 Item 9B. Other Information 56 PART III. 56 Item 10. Directors, Executive Officers and Corporate Governance 56 Item 11. Executive Compensation 56 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 56 Item 13. Certain Relationships and Related Transactions, and Director Independence 56 Item 14. Principal Accountant Fees and Services 56 PART IV. 56 Item 15. Exhibits and Financial Statement Schedules 56 Index to Consolidated Financial Statements F-1 Signatures Table of Contents SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements contained in this Annual Report on Form 10-K other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “may,” “potentially,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” “seek,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations, estimates and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These statements reflect our beliefs and certain assumptions based upon information available to us at the time we file this Annual Report on Form 10-K or the time of the documents incorporated by reference. Such forward-looking statements are only predictions, which may differ materially from actual results or future events. Although we believe that our expectations, estimates and projections reflected in the forward-looking statements are reasonable, we cannot be sure that they will be achieved. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. As used in this report, the terms “Marin,” “Registrant,” “we,” “us,” “our,” and “the Company” mean Marin Software Incorporated and its subsidiaries unless the context indicates otherwise. Table of Contents PART I We provide a leading cross-channel advertising cloud platform that enables digital marketers to improve performance of their online advertising campaigns, realize efficiencies and time savings, and make better business decisions. Our integrated platform is a software-as-a-service (“SaaS”) analytics, workflow and optimization solution for marketing professionals, allowing them to effectively manage their digital advertising spend across search, display, social and mobile advertising channels. Our software solution is designed to help our customers: Advertisers use our platform to create, target and convert precise audiences based on recent buying signals from users’ search, social and display interactions. Our platform is integrated with leading publishers such as Baidu, Bing, Facebook, Google, Twitter, Yandex, Yahoo! and Yahoo! Japan. Additionally, we have integrations with more than 45 leading web analytics and ad-serving solutions and key enterprise applications, enabling our customers to more accurately measure the return on investment of their marketing programs. Our software platform serves as an integration point for advertising performance, sales and revenue data, allowing advertisers to connect the dots between advertising spend and revenue outcomes. Through an intuitive interface, we enable our customers to simultaneously run large-scale digital advertising campaigns across multiple publishers and channels, making it easy for marketers to create, publish, modify and optimize campaigns in real time. Our predictive bid management and optimization technology also allows advertisers to forecast outcomes and optimize campaigns across multiple publishers and channels to achieve their business goals. Our optimization technology can help advertisers increase ad spend on those campaigns, publishers and channels that are performing well while reducing investment in those that are not. This category of solutions, which we refer to as cross-channel bid and campaign optimization, helps businesses intelligently and efficiently measure, manage, and optimize their digital advertising spend to achieve desired business results. We completed our acquisition of NowSpots, Inc., which conducted business as Perfect Audience (“Perfect Audience”), in June 2014 to complement our offered solutions. Perfect Audience offers advertisers a SaaS demand-side platform to purchase display impressions and retarget audiences across the web, Facebook and Twitter. With the acquisition, we expanded our cross-channel capabilities by adding new programmatic display and social advertising functions while expanding our audience retargeting tools. This acquisition is more fully described in Note 3 to the Consolidated Financial Statements. In February 2015 we completed the acquisition of SocialMoov, a Paris-based company, which is a social advertising software platform for Facebook and Twitter advertisers. SocialMoov offers advertisers and agencies novel social advertising tools designed to increase engagement and return on investment. This acquisition will provide us with innovative social advertising technologies, including Facebook video advertising, Twitter application program interface (“API”) integration and television synchronization, which will augment our current social offering. 1 ITEM 1. BUSINESS • measure the effectiveness of their advertising campaigns through our proprietary reporting and analytics capabilities; • manage and execute campaigns through our intuitive user interface and underlying technology that streamlines and automates key functions, such as ad creation and bidding, across multiple publishers and channels; and • optimize campaigns across multiple publishers and channels in real time based on market and business data to achieve desired revenue outcomes using our predictive bid management technology. Table of Contents Headquartered in San Francisco, we were founded in 2006. The mailing address of our headquarters is 123 Mission Street, 25th Floor, San Francisco, California 94105 and our telephone number at that location is (415) 399-2580. As of December 31, 2014, our customers collectively managed more than $7.2 billion in annualized ad spend on our platform, which we believe makes us the largest offeror of independent advertising cloud solutions. Offered Solutions Our cloud-based platform helps our customers to measure, manage and optimize their digital marketing campaigns to improve performance of their online advertising campaigns, realize efficiencies and time savings, and make better business decisions. We currently offer two editions of our search platform that leverage the same underlying technology. Our software platform is comprised of the following modules: Technology & Supporting Platform We designed our cloud-based platform to support large global advertisers. The majority of our software is written in Java. Our hardware consists of industry-standard servers and network infrastructure. Our standard operating system is Linux. Our software platform is character-set, language, currency, and time-zone independent. Our technology platform has the following key benefits: 2 • Enterprise Edition . Targeting large advertisers and agencies, Marin Enterprise is designed to provide digital advertisers with the power, scale and flexibility required to manage large-scale advertising campaigns. • Professional Edition . Targeting mid-market advertisers and agencies, Marin Professional is designed for rapid deployment and offers customers a complete workflow, analysis and optimization solution for managing digital advertising. • Optimization . Our Optimization functionalities help advertisers manage bids across publishers to meet revenue goals and identify opportunities for campaign improvements leading to improved financial performance and efficiencies. • Reporting and Analytics . Our Reporting and Analytics module enables advertisers to report results at a business level and analyze cross-channel performance trends, leading to improved visibility and significant time savings. • Campaign Management . Our Campaign Management module provides the digital advertiser with a unified interface to create, manage and optimize campaigns across a broad range of publishers, leading to greater efficiencies and increased flexibility. • Connect . Our Connect family of products enables advertisers automate and streamline their ability to capture revenue, cost and audience data from a range of sources such as ad servers, analytics systems, CRM platforms, publishers and third party databases. Through integrations across multiple data sources, our Connect module can assist advertisers in having a holistic picture of their digital advertising campaigns. • Scalability . Our software platform is designed to handle billions of ad units across thousands of advertisers, while delivering a responsive browsing and editing experience. As the number of advertisers and resulting computing and storage requirements grow, we can add hardware to our platform to accommodate growing demand. • Availability . Our customers are highly dependent on the availability of our platform, which is designed to be available 24x7, 365 days a year. We operate our own hardware and use third-party data centers that offer server redundancy, back-up communications and power and physical security. Table of Contents Customers We market and sell our solutions to advertisers directly and through advertising agencies that use our platform on behalf of their customers. Advertisers that we serve through our relationships with agencies have historically represented about half our revenues. There were no customers that accounted for greater than 10% of our revenues in 2014, 2013 or 2012. Competition The digital advertising platform market is highly competitive, fragmented, and subject to changes in both technology and customer behavior. We face significant competition today and expect competition to intensify in the future. To maintain and improve our competitive position, we must keep pace with the evolving needs of our customers and continue to develop and introduce new modules, features and services in a timely and efficient manner. We currently compete with large, well-established companies, such as Adobe Systems Incorporated and Google Inc. (through its wholly-owned subsidiary DoubleClick), and privately-held companies, such as Kenshoo Ltd. We also compete with in-house proprietary tools, tools from publishers and custom solutions, including spreadsheets. We believe the principal competitive factors in our market include the following: Apart from cross-channel platform competitors, we also compete with channel solutions in display and social. Competitors in display include public companies such as Criteo S.A. and Rocket Fuel Inc., as well as privately-held companies such as AdRoll Inc. and MediaMath Inc., while in social we compete with public companies such as Salesforce.com (through its wholly-owned subsidiary Social.com), and privately-held companies such as Nanigans, Inc. Our ability to remain competitive will largely depend on our ongoing performance in the areas of our solution breadth and depth as well as customer support. Sales and Marketing We sell our solutions directly to advertisers and to agencies in a wide range of industries through our global sales team. Our sales cycle can vary substantially by advertiser and agency, but typically is one to nine months. We have a number of account executive sales teams organized by geography and market segments. We also have Customer Success professionals who are responsible for long-term customer satisfaction and retention, renewal, and driving an increase in the volume of media managed by customers on our platform. Our marketing team is focused on driving awareness and demand generation across major markets. This team provides thought leadership in the form of white papers, benchmarking reports, bylines, presenting at industry conferences and speaking to the press. In addition, they are responsible for the creation of field enablement assets such as case studies, blog posts and corporate and product collateral. 3 • Security . Our software platform manages a large quantity of customer data. We employ technologies, policies and procedures to protect customer data. Our primary third-party data center has SSAE 16 attestations. • solution quality, breadth, flexibility and functionality; • tangible platform benefits; • level of customer satisfaction and our ability to respond to customer needs rapidly; • breadth and quality of advertiser and agency relationships; • ability to innovate and develop new or improved products and modules; • ability to respond to changes in publishers’ APIs; • brand awareness and reputation; and • size of customer base. Table of Contents Research and Development Our research and development team is responsible for the design, development, and maintenance of our platform. Our research and development process emphasizes frequent, iterative and incremental development cycles. Within our research and development organizations, we have several project teams that focus on platform and feature development for our integrated vertical offerings as part of our Ad Cloud solutions. Each of these project teams includes engineers, quality engineers and product managers, as needed, responsible for the initial and ongoing development for their projects. Total research and development expense was $28.8 million, $20.7 million and $14.0 million and for the years ended December 31, 2014, 2013 and 2012. Employees As of December 31, 2014, we had a total of 571 regular full-time employees, including 170 employees located outside the United States. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We have not experienced any work stoppages, and we consider our relations with our employees to be good. Intellectual Property Our intellectual property rights are a key component of our success. We rely on a combination of patent, trademark, copyright, unfair competition and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish, maintain and protect our proprietary rights. As of December 31, 2014, we had two issued patents and five patent applications pending in the United States. We own and use trademarks on or in connection with our products and services, including one trademark registered with the European Union and Australia and unregistered common law marks and pending trademark applications in the United States, China, Japan and Singapore. We have also registered numerous Internet domain names. Available Information The mailing address of our headquarters is 123 Mission Street, 25th Floor, San Francisco, California 94105 and our telephone number at that location is (415) 399-2580. Our website is www.marinsoftware.com. Through a link on the Investor Center section of our website, we make available the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”): our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. All such filings are free of charge. The information posted to our website is not incorporated into this Annual Report on Form 10-K. The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. 4 Table of Contents Our operations and financial results are subject to various risks and uncertainties, including those described below, which could adversely affect our business, results of operations, cash flows, financial conditions, and the trading price of our common stock. Risks Related to Our Business We have a history of losses and we may not achieve or sustain profitability in the future. We have incurred significant losses in each fiscal year since our incorporation in 2006. We experienced net losses of $33.2 million during 2014. As of December 31, 2014, we had an accumulated deficit of $146.4 million. The losses and accumulated deficit were due to the substantial investments we made to grow our business and acquire customers. We anticipate that our cost of revenues and operating expenses will increase in the foreseeable future as we continue to invest to grow our business and acquire customers and develop our platform and new functionality. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenues sufficiently to offset these higher expenses. Many of our efforts to generate revenues from our business are new and unproven, and any failure to increase our revenues or generate revenues from new solutions could prevent us from attaining or increasing profitability. Furthermore, to the extent we are successful in increasing our customer base, we also could incur increased losses because costs associated with entering into customer contracts are generally incurred up front, while customers are billed over the term of the contract generally through our usage-based pricing model. We do not expect to be profitable in 2015 on the basis of generally accepted accounting principles in the United States (“GAAP”) and we cannot be certain that we will be able to attain profitability on a quarterly or annual basis, or if we do, that we will sustain profitability. Our limited operating history makes it difficult to evaluate our current business and future prospects. Although we began our operations in March 2006, we did not begin generating substantial revenues until 2009. Our limited operating history may make it difficult to evaluate our current business and our future prospects. We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly developing and changing industries, including challenges in forecasting accuracy, hiring and retaining qualified employees, determining appropriate investments of our limited resources, market acceptance of our existing and future solutions, competition from established companies with greater financial and technical resources, acquiring and retaining customers, managing customer deployments and developing new solutions. Our current operations infrastructure may require changes in order for us to achieve profitability and scale our operations efficiently. For example, we may need to automate portions of our solution to decrease our costs, ensure our marketing infrastructure is designed to drive highly qualified leads cost effectively and implement changes in our sales model to improve the predictability of our sales and reduce our sales cycle. If we fail to implement these changes on a timely basis or are unable to implement them due to factors beyond our control, our business may suffer, our revenue may decline and we may not be able to achieve further growth or profitability. We cannot assure you that we will be successful in addressing these and other challenges we may face in the future. Our usage-based pricing model makes it difficult to forecast revenues from our current customers and future prospects. We primarily have a usage-based pricing model in which most of our fees are calculated as a percentage of customers’ advertising spend managed on our platforms. This pricing model makes it difficult to accurately forecast revenues because our customers’ advertising spend managed by our platforms may vary from month to month based on the variety of industries in which our advertisers operate, the seasonality of those industries and fluctuations in our customers’ advertising budgets or other factors. Our contracts with our direct advertiser customers generally contain a minimum monthly fee, which is generally greater than one-half of our estimated monthly revenues from the customer at the time the contract is signed, and, as a result, the monthly minimum 5 ITEM 1A. RISK FACTORS Table of Contents may not be a good indicator of our revenues from that customer. In addition, advertisers that use our platform through our agency customers typically do not have a minimum monthly spend amount or a minimum term during which they must use our platform and, as a result, the ability to forecast revenues from these advertisers is difficult. If we incorrectly forecast revenues for these advertisers and the amount of revenue is less than projections we provide to investors, the price of our common stock could decline substantially. Additionally, if we overestimate usage, we may incur additional expenses in adding infrastructure, without a commensurate increase in revenues, which would harm our gross margins and other operating results. The market for advertising cloud solutions is relatively new and dependent on growth in various digital advertising channels. If this market develops more slowly or differently than we expect, our business, growth prospects and financial condition would be adversely affected. The market for advertising cloud solutions such as ours is relatively new and these solutions may not achieve or sustain high levels of demand and market acceptance. While search and display advertising has been used successfully for several years, marketing via new cloud-based advertising channels such as mobile and social media is not as well established. The future growth of our business could be constrained by the level of acceptance and expansion of emerging cloud-based advertising channels, as well as the continued use and growth of existing channels, such as search and display advertising. Even if these channels become widely adopted, advertisers and agencies may not make significant investments in solutions such as ours that help them manage their digital advertising spend across publisher platforms and advertising channels. It is difficult to predict customer adoption rates, customer demand for our platform, the future growth rate and size of the advertising cloud solutions market or the entry of competitive solutions. Any expansion of the market for advertising cloud solutions depends on a number of factors, including the growth of the cloud-based advertising market, the growth of social and mobile as advertising channels and the cost, performance and perceived value associated with advertising cloud solutions. If advertising cloud solutions do not achieve widespread adoption, or there is a reduction in demand for digital advertising caused by weakening economic conditions, decreases in corporate spending or otherwise, it could result in reduced usage, which could decrease revenues or otherwise adversely affect our business. If we are unable to maintain our relationships with, and access to, publishers, advertising exchange platforms and other platforms that aggregate the supply of advertising inventory, our business will suffer. We currently depend on relationships with various publishers, including Baidu, Bing, Facebook, Google, Twitter, Yandex, Yahoo! and Yahoo! Japan, as well as advertising exchange platforms and aggregators of advertising inventory, including Google’s DoubleClick Ad Exchange, Yahoo!’s Right Media, Facebook’s Exchange, Microsoft’s Ad Exchange, Twitter’s MoPub and AppNexus. Our subscription services interface with these publishers’ platforms through APIs, such as the Google AdWords API or Facebook API. We are subject to the respective platforms’ standard API terms and conditions, which govern the use and distribution of data from these platforms. Our business significantly depends on having access to these APIs, particularly the Google AdWords API, which the substantial majority of our customers use, on commercially reasonable terms and our business would be harmed if any of these publishers, advertising exchanges or aggregators of advertising inventory discontinues or limits access to their platforms, modifies their terms of use or other policies or place additional restrictions on us as API users, or charges API license fees for API access. Moreover, some of these publishers, such as Google, market competitive solutions for their platforms. Because the advertising inventory suppliers control their APIs, they may develop competitive offerings that are not subject to the limits imposed on us through the API terms and conditions. Currently, restrictions in these API agreements limit our ability to implement certain functionality, require us to implement functionality in a particular manner or require us to implement certain required minimum functionality, causing us to devote development resources to implement certain functionality that we would not otherwise include in our subscription services and to incur costs for personnel to provide services to implement functionality that we are prohibited from automating. Publishers, advertising exchanges and advertising inventory aggregators update their API terms of use from time to time and new versions of these terms could impose additional restrictions on us. In addition, publishers, advertising 6 Table of Contents exchanges and advertising inventory aggregators continually update their APIs and may update or modify functionality, which requires us to modify our software to accommodate these changes and to devote technical resources and personnel to these efforts which could otherwise be used to focus on other priorities. Any of these outcomes could cause demand for our products to decrease, our research and development costs to increase, and our results of operations and financial condition to be harmed. Our growth depends in part on the success of our relationships with advertising agencies. Our future growth will depend, in part, on our ability to enter into successful relationships with advertising agencies. Identifying agencies and negotiating and documenting relationships with them requires significant time and resources. These relationships may not result in additional customers or enable us to generate significant revenues. Our contracts for these relationships are typically non-exclusive and do not prohibit the agency from working with our competitors or from offering competing services. Frequently, these agencies do in fact work with our competitors and compete with us. In addition, we often work with, or seek to work with, high-profile brands directly. This may not be possible where, for example, those brands obtain advertising services exclusively or primarily from advertising agencies. We generally bill agencies for their customers’ use of our platforms, but in most cases the agency’s customer has no direct contractual commitment to make payment to us. Furthermore, some of these agency contracts include provisions whereby the agency is not liable for making payment to us for our subscription services if the agency does not receive a corresponding payment from its client on whose behalf the subscription services were rendered. These provisions may result in longer collections periods or our inability to collect payment for some of our subscription services. If we are unsuccessful in establishing or maintaining our relationships with these agencies on commercially reasonable terms, or if these relationships are not profitable for us, our ability to compete in the marketplace or to grow our revenues could be impaired and our operating results would suffer. We may not be able to compete successfully against current and future competitors. The overall market for advertising cloud solutions is rapidly evolving, highly competitive, complex, fragmented, and subject to changing technology and shifting customer needs. We face significant competition in this market and we expect competition to intensify in the future. We currently compete with large, well-established companies, such as Adobe Systems Incorporated and Google Inc. (through its wholly-owned subsidiary DoubleClick), and privately-held companies, such as Kenshoo Ltd. We also compete with channel-specific offerings, in-house proprietary tools, tools from publishers and custom solutions, including spreadsheets. Increased competition may result in reduced pricing for our solutions, longer sales cycles or a decrease of our market share, any of which could negatively affect our revenues and future operating results and our ability to grow our business. A number of competitive factors could cause us to lose potential sales or to sell our solutions at lower prices or at reduced margins, including, among others: 7 • potential customers may choose to develop or continue to use internal solutions rather than paying for our solutions or may choose to use a competitor’s solution that has different or additional technical capabilities; • companies may enter our market by expanding their platforms or acquiring a competitor; • some of our competitors, such as Adobe and Google, have greater financial, marketing and technical resources than we do, allowing them to leverage a larger installed customer base, adopt more aggressive pricing policies, and devote greater resources to the development, promotion and sale of their products and services than we can; • companies marketing search, social, display, mobile or web analytics services could bundle advertising cloud solutions or offer such products at a lower price as part of a larger product sale; Table of Contents We cannot assure you that we will be able to compete successfully against current and future competitors. If we cannot compete successfully, our business, results of operations and financial condition could be negatively impacted. Our business depends on our customers’ continued willingness to manage advertising spend on our platforms. In order for us to improve our operating results, it is important that our customers continue to manage their advertising spend on our platforms, increase their usage and also purchase additional solutions from us. In the case of our direct advertiser customers, we offer our solutions primarily through subscription contracts and generally bill customers over the related subscription period, which is generally one year or longer. During the term of their contracts, our direct advertiser customers generally have no obligation to maintain or increase their advertising spend on our platform beyond a specified minimum monthly fee, which is typically set at the time the contract is signed and is generally greater than half of the monthly amount we anticipate the customer will spend. Our direct advertiser customers generally have no renewal obligation after the initial or then-current renewal subscription period expires, and even if customers renew contracts, they may decrease the level of their digital advertising spend managed through our platform, resulting in lower revenues from that customer. Advertisers that we serve through our arrangements with our advertising agencies generally do not have any contractual commitment to use our platform. Our customers’ usage may decline or fluctuate as a result of a number of factors, including, but not limited to, their satisfaction with our platforms and our customer support, the frequency and severity of outages, the pricing of our, or competing, solutions, the effects of global economic conditions and reductions in spending levels or changes in our customers’ strategies regarding digital advertising. Due to our limited historical experience, we may not be able to accurately predict future usage trends. If our customers renew on less favorable terms or reduce their advertising spend on our platforms, our revenues may grow more slowly than expected or decline. We incur upfront costs associated with onboarding advertisers to our platform and may not recoup our investment if we do not maintain the advertiser relationship over time. Our operating results may be negatively affected if we are unable to recoup our upfront costs for onboarding new advertisers to our platform. Upfront costs when adding new advertisers generally include sales commissions for our sales force, expenses associated with entering customer data into our platform and other implementation-related costs. Because our customers, including direct advertisers and agencies, are billed over the term of the contract, if new customers sign contracts with short initial subscription periods and do not renew their subscriptions, or otherwise do not continue to use our platform to a level that generates revenues in excess of our upfront expenses, our operating results could be negatively impacted. In cases in which the implementation process is particularly complex, the revenues resulting from the customer under our contract may not cover the upfront investment, so if a significant number of these customers do not renew their contracts, it could negatively affect our operating results. Because we generally bill our customers over the term of the contract, near term decline in new or renewed subscriptions may not be reflected immediately in our operating results. Most of our revenues in each quarter are derived from contracts entered into with our customers during previous quarters. Consequently, a decline in new or renewed subscriptions in any one quarter may not be fully reflected in our revenues for that quarter. Such declines, however, would negatively affect our revenues in future periods and the effect of significant downturns in sales and market acceptance of our solutions, and potential 8 • channel-specific competitors, such as AdRoll Inc, Criteo S.A., MediaMath Inc., Nanigans, Inc., Rocket Fuel Inc. and Salesforce.com (through its wholly-owned subsidiary Social.com), may devote greater resources to the development, promotion and sale of their channel-specific products and services than we can; and • publishers generally offer their tools for free, or at a reduced price, as their primary compensation is via the sale of advertising on their own or syndicated websites. Table of Contents changes in our rate of renewals or renewal terms, may not be fully reflected in our results of operations until future periods. In addition, we may be unable to adjust our cost structure rapidly, or at all, to take account of reduced revenues. Our subscription model also makes it difficult for us to rapidly increase our total revenues through additional sales in any period, as revenues from new customers must be earned over the applicable subscription term based on the value of their monthly advertising spend. We have been dependent on our customers’ use of search advertising. Any decrease in the use of search advertising or our inability to further penetrate social and display advertising channels would harm our business, growth prospects, operating results and financial condition. Historically, our customers have primarily used our solutions for managing their search advertising, including mobile search advertising, and the substantial majority of our revenues are derived from advertisers that use our platform to manage their search advertising. We expect that search advertising will continue to be the primary channel used by our customers for the foreseeable future. Should our customers lose confidence in the value or effectiveness of search advertising, the demand for our solutions may decline. In addition, our failure to achieve market acceptance of our solution for the management of social and display advertising spend would harm our growth prospects, operating results and financial condition. Our sales cycle can be long and unpredictable and require considerable time and expense, which may cause our operating results to fluctuate. The sales cycle for our solutions, from initial contact with a potential lead to contract execution and implementation, varies widely by customer, but is typically one to nine months. Some of our customers undertake a significant evaluation process that frequently involves not only our solutions but also those of our competitors, which has in the past resulted in extended sales cycles. Our sales efforts involve educating our customers about the use, technical capabilities and benefits of our platform. In addition, under certain circumstances, we sometimes offer an initial term, typically of a few months in duration, to new customers who may terminate their subscription at any time during this initial period before the fixed term contract commences. We have no assurance that the substantial time and money spent on our sales efforts will produce any sales. If our sales efforts result in a new customer subscription, the customer may terminate its subscription during the initial period, after we have incurred the expenses associated with entering the customer’s data in our platform and related training and support. If sales expected from a customer are not realized in the time period expected or not realized at all, or if a customer terminates during the initial period, our business, operating results and financial condition could be adversely affected. Our ability to generate revenue depends on our collection of significant amounts of data from various sources. Our ability to optimize the delivery of internet advertisements for our customers depends on our ability to successfully leverage data, including data that we collect from our customers as well as data provided by publishers and from third parties. Using cookies and similar tracking technologies, we collect information about the interaction of users with our advertisers’ and publishers’ websites. Our ability to successfully leverage such data is dependent upon our continued ability to access and utilize such data. Our ability to access and use such data could be restricted by a number of factors, including consumer choice, restrictions imposed by advertisers and publishers, changes in technology, and new developments in laws, regulations, and industry standards. If consumer resistance to the collection and sharing of the data used to deliver targeted advertising, increased visibility of consent / Do Not Track mechanisms as a result of industry regulatory and/or legal developments, and/or the development and deployment of new technologies result in a material impact on our ability to collect data, this will materially impair the results of our operations. 9 Table of Contents Material defects or errors in our software platform could harm our reputation, result in significant costs to us and impair our ability to sell our subscription services. The software applications underlying our subscription services are inherently complex and may contain material defects or errors, which may cause disruptions in availability, misallocation of advertising spend or other performance problems. Any such errors, defects, disruptions in service or other performance problems with our software platform could negatively impact our customers’ businesses or the success of their advertising campaigns and cause harm to our reputation. If we have any errors, defects, disruptions in service or other performance problems with our software platform, customers could elect not to renew or reduce their usage or delay or withhold payment to us, which could result in an increase in our provision for doubtful accounts or an increase in the length of collection cycles for accounts receivable. Errors, defects, disruptions in service or other performance problems could also result in customers making warranty or other claims against us, our giving credits to our customers toward future advertising spend or costly litigation. As a result, material defects or errors in our platform could have a material adverse impact on our business and financial performance. The costs incurred in correcting any material defects or errors in our software platform may be substantial and could adversely affect our operating results. After the release of new versions of our software, defects or errors may be identified from time to time by our internal team and by our customers. We implement bug fixes and upgrades as part of our regularly scheduled system maintenance. If we do not complete this maintenance according to schedule or if customers are otherwise dissatisfied with the frequency and/or duration of our maintenance services, customers could elect not to renew, or delay or withhold payment to us, or cause us to issue credits, make refunds or pay penalties. We primarily derive our revenues from a single software platform and any factor adversely affecting subscriptions to our platform could harm our business and operating results. We primarily derive our revenues from sales of a single software platform. As such, any factor adversely affecting subscriptions to our platform, including product release cycles, market acceptance, product competition, performance and reliability, reputation, price competition, and economic and market conditions, could harm our business and operating results. If mobile connected devices, their operating systems or content distribution channels, including those controlled by our competitors, develop in ways that prevent our advertising campaigns from being delivered to their users, our ability to grow our business will be impaired. Our success in the mobile channel depends upon the ability of our technology platform to integrate with mobile inventory suppliers and provide advertising for most mobile connected devices, as well as the major operating systems that run on them and the applications that are downloaded onto them. The design of mobile devices and operating systems is controlled by third parties with whom we do not have any formal relationships. These parties frequently introduce new devices, and from time to time they may introduce new operating systems or modify existing ones. Network carriers may also impact the ability to access specified content on mobile devices. If our solution were unable to work on these devices or operating systems, either because of technological constraints or because an operating system or app developer, device maker or carrier wished to impair our ability to purchase inventory and provide advertisements, our ability to generate revenue could be significantly harmed. We primarily use a single third-party data center to deliver our services. Any disruption of service at this facility could harm our business. While we utilize two third-party data centers in total, we manage a significant portion of our services and serve substantially all of our customers from only a single third-party data center facility. While we control the actual computer, network and storage systems upon which our platform runs, and deploy them to the data center facility, we do not control the operation of the facility. The owner of the facility has no obligation to renew the 10 Table of Contents agreement with us on commercially reasonable terms, or at all. If we are unable to renew the agreement on commercially reasonable terms, we may be required to transfer to a new facility or facilities, and we may incur significant costs and possible service interruption in connection with doing so. The facility is vulnerable to damage or service interruption resulting from human error, intentional bad acts, earthquakes, hurricanes, floods, fires, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events. Moreover, while we have a disaster recovery plan in place, we do not maintain a “hot failover” instance of our software platform permitting us to immediately switch over in the event of damage or service interruption at our data center. The occurrence of a natural disaster or an act of terrorism, any outages or vandalism or other misconduct, or a decision to close the facility without adequate notice or other unanticipated problems could result in lengthy interruptions in our services. Any changes in service levels at the facility or any errors, defects, disruptions or other performance problems at or related to the facility that affect our services could harm our reputation and may damage our customers’ businesses. Interruptions in our services might reduce our revenues, subject us to potential liability, or result in reduced usage of our platform. In addition, some of our customer contracts require us to issue credits for downtime in excess of certain levels and in some instances give our customers the ability to terminate their subscriptions. We also depend on third-party Internet-hosting providers and continuous and uninterrupted access to the Internet through third-party bandwidth providers to operate our business. If we lose the services of one or more of our Internet-hosting or bandwidth providers for any reason or if their services are disrupted, for example due to viruses or “denial-of-service” or other attacks on their systems, or due to human error, intentional bad acts, power loss, hardware failures, telecommunications failures, fires, wars, terrorist attacks, floods, earthquakes, hurricanes, tornadoes or similar events, we could experience disruption in our ability to offer our solutions or we could be required to retain the services of replacement providers, which could increase our operating costs and harm our business and reputation. If we cannot efficiently implement our solutions for customers, we may lose customers. Our customers have a variety of different data formats, enterprise applications and infrastructure and our platform must support our customers’ data formats and integrate with complex enterprise applications and infrastructures. If our platform does not currently support a customer’s required data format or appropriately integrate with a customer’s applications and infrastructure, then we may choose to configure our platform to do so, which would increase our expenses. Additionally, we do not control our customers’ implementation schedules. As a result, as we have experienced in the past, if our customers do not allocate internal resources necessary to meet their implementation responsibilities or if we face unanticipated implementation difficulties, the implementation may be delayed. Further, in the past, our implementation capacity has at times constrained our ability to successfully implement our solutions for our customers in a timely manner, particularly during periods of high demand. If the customer implementation process is not executed successfully or if execution is delayed, we could incur significant costs, customers could become dissatisfied and decide not to increase usage of our platform, not to use our platform beyond an initial period prior to their term commitment and revenue recognition could be delayed. In addition, competitors with more efficient operating models with lower implementation costs could penetrate our customer relationships. Additionally, large customers may request or require specific features or functions unique to their particular business processes, which increase our upfront investment in sales and deployment efforts and the revenues resulting from the customers under our typical contract length may not cover the upfront investments. If prospective large customers require specific features or functions that we do not offer, then the market for our solution will be more limited and our business could suffer. In addition, supporting large customers could require us to devote significant development services and support personnel and strain our personnel resources and infrastructure. If we are unable to address the needs of these customers in a timely fashion or further develop and 11 Table of Contents enhance our solution, these customers may not renew their subscriptions, seek to terminate their relationship with us, renew on less favorable terms, or reduce their advertising spend on our platform. If any of these were to occur, our revenues may decline and our operating results could be adversely affected. If we are unable to maintain or expand our sales and marketing capabilities, we may not be able to generate anticipated revenues. Increasing our customer base and achieving broader market acceptance of our software platform will depend to a significant extent on our ability to expand our sales and marketing operations and activities. We expect to be substantially dependent on our sales force to obtain new customers. We are expanding our sales team in order to increase revenues from new and existing customers and to further penetrate our existing markets and expand into new markets, but may not be able to attract and hire qualified sales personnel quickly enough or at all. Our solutions require a sophisticated sales force with specific sales skills and technical knowledge. Competition for qualified sales personnel is intense, and we may not be able to retain our existing sales personnel or attract, integrate or retain sufficient highly qualified sales personnel. Our ability to achieve revenue growth in the future will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of sales personnel. These new employees require significant training and experience before they achieve full productivity. As a result, the cost of hiring and carrying new representatives cannot be offset by the revenues they produce for a significant period of time. Our recent hires and planned hires may not become productive as quickly as we would like, and we may not be able to hire or retain sufficient numbers of qualified individuals in the markets where we do business. Our business will be seriously harmed if these expansion efforts do not work as planned or generate a corresponding significant increase in revenues. Any failure to offer high-quality technical support services may adversely affect our relationships with our customers and harm our financial results. Our customers depend on our support organization to resolve any technical issues relating to our solutions. In addition, our sales process is highly dependent on the quality of our solutions, our business reputation and on strong recommendations from our existing customers. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could harm our reputation, adversely affect our ability to sell our solutions to existing and prospective customers, and harm our business, operating results and financial condition. We offer technical support services with our solutions and may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. We also may be unable to modify the format of our support services to compete with changes in support services provided by competitors. It is difficult to predict customer demand for technical support services and if customer demand increases significantly, we may be unable to provide satisfactory support services to our customers. Additionally, increased customer demand for these services, without corresponding revenues, could increase costs and adversely affect our operating results. If our security measures are breached or unauthorized access to customer data or our data is otherwise obtained, our solutions may be perceived as not being secure, customers may reduce the use of or stop using our solutions and we may incur significant liabilities. In the ordinary course of our business, we maintain sensitive data on our networks, including our intellectual property and proprietary or confidential business information relating to our business and that of our customers and business partners. The secure maintenance of this information is critical to our business and reputation. We believe that companies have been increasingly subject to a wide variety of security incidents, cyber-attacks and other attempts to gain unauthorized access. These threats can come from a variety of sources, ranging in 12 Table of Contents sophistication from an individual hacker to a state-sponsored attack. Cyber threats may be generic, or they may be custom-crafted against our information systems. Over the past year, cyber-attacks have become more prevalent and much harder to detect and defend against. Our network and storage applications may be subject to unauthorized access by hackers or breached due to operator error, malfeasance or other system disruptions. It is often difficult to anticipate or immediately detect such incidents and the damage caused by such incidents. These data breaches and any unauthorized access or disclosure of our information or intellectual property could result in the loss of information, litigation, indemnity obligations and other liability. While we have security measures in place, our systems and networks are subject to ongoing threats and therefore these security measures may be breached as a result of third-party action, including cyber-attacks or other intentional misconduct by computer hackers, employee error, malfeasance or otherwise. This could result in one or more third parties obtaining unauthorized access to our customers’ data or our data, including intellectual property and other confidential business information. Because 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. Third parties may also 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 customers’ data or our data, including intellectual property and other confidential business information. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed, we could lose potential sales and existing customers or we could incur other liabilities, which could adversely affect our business. We must develop and introduce enhancements and new features that achieve market acceptance or that keep pace with technological developments to remain competitive in our evolving industry. We operate in a dynamic market characterized by rapidly changing technologies and industry and legal standards. The introduction of new advertising cloud solutions by our competitors, the market acceptance of solutions based on new or alternative technologies, or the emergence of new industry standards could render our platform obsolete. Our ability to compete successfully, attract new customers and increase revenues from existing customers depends in large part on our ability to enhance and improve our existing cross-channel performance advertising cloud platform and to continually introduce or acquire new features that are in demand by the market we serve. We also must update our software to reflect changes in publishers’ APIs and terms of use. The success of any enhancement or new solution depends on several factors, including timely completion, adequate quality testing, appropriate introduction and market acceptance. Any new platform or feature that we develop or acquire may not be introduced in a timely or cost-effective manner, may contain defects or may not achieve the broad market acceptance necessary to generate significant revenues. If we are unable to anticipate or timely and successfully develop or acquire new offerings or features or enhance our existing platform to meet customer requirements, our business and operating results will be adversely affected. Our growth depends in part on the success of our strategic relationships with third parties. Our future growth will depend on our ability to enter into successful strategic relationships with third parties. For example, we are seeking to establish relationships with third parties to develop integrations with complementary technology and content. These relationships may not result in additional customers or enable us to generate significant revenues. Identifying partners and negotiating and documenting relationships with them require significant time and resources. Our contracts for these relationships are typically non-exclusive and do not prohibit the other party from working with our competitors or from offering competing services. If we are unsuccessful in establishing or maintaining our relationships with these third parties, our ability to compete in the marketplace or to grow our revenues could be impaired and our operating results would suffer. As a result of our customers’ increased usage of our software platform, we will need to continually improve our hosting infrastructure to avoid service interruptions or slower system performance. We have experienced continued growth in the number of advertisers, transactions and data that our hosting infrastructure supports. We seek to maintain sufficient excess capacity in our infrastructure to meet the needs of 13 Table of Contents all of our customers. We also seek to maintain excess capacity to facilitate the rapid provision of new customer deployments and the expansion of existing customer deployments. For example, if we secure a large customer or a group of customers that require significant amounts of bandwidth or storage, we may need to increase bandwidth, storage, power or other elements of our application architecture and our infrastructure, and our existing systems may not be able to scale in a manner satisfactory to our existing or prospective customers. The amount of infrastructure needed to support our customers is based on our estimates of anticipated usage. If we were to experience unforeseen increases in usage, we could be required to increase our infrastructure investments resulting in increased costs or reduced gross margins, and if we do not accurately predict our infrastructure capacity requirements, our customers could experience service outages that may subject us to financial penalties and liabilities and result in customer losses. If our hosting infrastructure capacity fails to keep pace with increased sales, customers may experience service interruptions or slower system performance as we seek to obtain additional capacity, which could harm our reputation and adversely affect our revenue growth. As use of our software platform grows and as customers use it for more complicated tasks, we will need to devote additional resources to improving our application architecture and our infrastructure in order to maintain the performance of our software platform. We may need to incur additional costs to upgrade or expand our computer systems and architecture in order to accommodate increased demand if our systems cannot handle current or higher volumes of usage. In addition, increasing our systems and infrastructure in advance of new customers would cause us to have increased cost of revenues, which can adversely affect our gross margins until we increase revenues that are spread over the increased costs. Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand. Our success and ability to compete depends in part upon our intellectual property. We primarily rely on a combination of copyright, trade secret and trademark laws, as well as confidentiality procedures and contractual restrictions with our employees, customers, partners and others to establish and protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be inadequate or we may be unable to secure intellectual property protection for all of our solutions. In particular, we have two issued U.S. patents. If we are unable to protect our intellectual property, our competitors could use our intellectual property to market products and services similar to ours and our ability to compete effectively would be impaired. Moreover, others may independently develop technologies that are competitive to ours or infringe our intellectual property. The enforcement of our intellectual property rights depends on our legal actions against these infringers being successful, but we cannot be sure these actions will be successful, even when our rights have been infringed. In addition, defending our intellectual property rights might entail significant expense and diversion of management resources. Any of our intellectual property rights may be challenged by others or invalidated through administrative processes or litigation. Any patents issued in the future may not provide us with competitive advantages or may be successfully challenged by third parties. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Effective protection of our intellectual property may not be available to us in every country in which our solutions are available. The laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property. We might be required to spend significant resources to monitor and protect our intellectual property rights, and our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Litigation to protect and 14 Table of Contents enforce our intellectual property rights could be costly, time-consuming and distracting to management, whether or not it is resolved in our favor, and could ultimately result in the impairment or loss of portions of our intellectual property. We could incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights. In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights. Companies in the Internet and technology industries are increasingly bringing and becoming subject to suits alleging infringement of proprietary rights, particularly patent rights, and our competitors may hold patents or have pending patent applications, which could be related to our business. These risks have been amplified by the increase in third parties, which we refer to as non-practicing entities, whose sole primary business is to assert such claims. We have received in the past, and expect to receive in the future, notices that claim we or our customers using our solutions have misappropriated or misused other parties’ intellectual property rights. If we are sued by a third party that claims that our technology infringes its rights, the litigation could be expensive and could divert our management resources. We do not currently have an extensive patent portfolio of our own, which may limit the defenses available to us in any such litigation. In addition, in most instances, we have agreed to indemnify our customers against certain claims that our subscription services infringe the intellectual property rights of third parties. Our business could be adversely affected by any significant disputes between us and our customers as to the applicability or scope of our indemnification obligations to them. The results of any intellectual property litigation to which we might become a party, or for which we are required to provide indemnification, may require us to do one or more of the following: If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement claims against us or any obligation to indemnify our customers for such claims, such payments or costs could have a material adverse effect upon our business and financial results. Our use of open source technology could impose limitations on our ability to commercialize our software platform. We use open source software in our platform. Some open source software licenses require users who distribute open source software as part of their software to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code on unfavorable terms or at no cost. The terms of various open source licenses have not been interpreted by the U.S. courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our software platform. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur and we may be required to release our proprietary source code, pay damages for breach of contract, re-engineer our applications, discontinue sales in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our development efforts, any of which could cause us to breach customer contracts, harm our reputation, result in customer losses or claims, increase our costs or otherwise adversely affect our business and operating results. 15 • cease offering or using technologies that incorporate the challenged intellectual property; • make substantial payments for legal fees, settlement payments or other costs or damages; • obtain a license, which may not be available on reasonable terms, to sell or use the relevant technology; or • redesign technology to avoid infringement. Table of Contents If the market for cloud-based software develops more slowly than we expect or declines, our business could be harmed. The cloud computing market is not as mature as the market for on-premise software, and it is uncertain whether cloud computing will achieve and sustain high levels of customer demand and market acceptance. If other cloud computing providers experience security incidents, loss of customer data, disruptions in delivery or other problems, the market for cloud computing as a whole, including our solution, may be negatively affected. If cloud computing does not achieve widespread adoption, or there is a reduction in demand for cloud computing caused by a lack of customer acceptance, technological challenges, weakening economic conditions, security or privacy concerns, competing technologies and products, decreases in corporate spending or otherwise, it could result in decreased revenues or increased expenses from development of alternative on-premise solutions and our business could be adversely affected. Because our long-term success depends, in part, on our ability to expand our sales to customers outside the United States, our business will be susceptible to risks associated with international operations. We currently maintain offices and/or have sales personnel in Australia, China, England, France, Germany, Ireland, Japan and Singapore, as well as the United States. As we continue to expand our customer base outside the United States, our business will be increasingly susceptible to risks associated with international operations. However, we have a limited operating history outside the United States, and our ability to manage our business and conduct our operations internationally requires considerable management attention and resources and is subject to particular challenges of supporting a rapidly growing business in an environment of diverse cultures, languages, customs, tax laws, legal systems, alternate dispute systems and regulatory systems. The risks and challenges associated with international expansion include: We have limited experience in marketing, selling and supporting our subscription services internationally, which increases the risk that any potential future expansion efforts that we may undertake will not be successful. Fluctuations in the exchange rate of foreign currencies could result in currency transactions losses. We currently have foreign sales denominated in Australian dollars, British pound sterling, Canadian dollars, Chinese yuan, euros, Japanese yen and Singapore dollars. In addition, we incur a portion of our operating 16 • the need to support and integrate with local publishers and partners; • continued localization of our platform, including translation into foreign languages and associated expenses; • competition with companies that have greater experience in the local markets than we do or who have pre-existing relationships with potential customers in those markets; • compliance with multiple, potentially conflicting and changing governmental laws and regulations, including employment, tax, privacy and data protection laws and regulations; • compliance with anti-bribery laws, including compliance with the Foreign Corrupt Practices Act; • difficulties in invoicing and collecting in foreign currencies and associated foreign currency exposure; • difficulties in staffing and managing foreign operations and the increased travel, infrastructure and legal compliance costs associated with international operations; • different or lesser protection of our intellectual property rights; • difficulties in enforcing contracts and collecting accounts receivable, longer payment cycles and other collection difficulties; • restrictions on repatriation of earnings; and • regional economic and political conditions. Table of Contents expenses in the currencies of the countries where we have offices. We face exposure to adverse movements in currency exchange rates, which may cause our revenues and operating results to differ materially from expectations. If the U.S. dollar strengthens relative to foreign currencies, our non-U.S. revenues would be adversely affected. Conversely, a decline in the U.S. dollar relative to foreign currencies would increase our non-U.S. revenues when translated into U.S. dollars. Our operating results could be negatively impacted depending on the amount of expense denominated in foreign currencies. As exchange rates vary, revenues, cost of revenues, operating expenses and other operating results, when translated, may differ materially from expectations. In addition, our revenues and operating results are subject to fluctuation if our mix of U.S. and foreign currency denominated transactions or expenses changes in the future because we do not currently hedge our foreign currency exposure. Even if we were to implement hedging strategies to mitigate foreign currency risk, these strategies might not eliminate our exposure to foreign exchange rate fluctuations and would involve costs and risks of their own, such as ongoing management time and expertise, external costs to implement the strategies and potential accounting implications. If we fail to develop widespread brand awareness cost-effectively, our business may suffer. We believe that developing and maintaining widespread awareness of our brand in a cost-effective manner is critical to achieving widespread acceptance of our solution and attracting new customers. We expect sales and marketing expenses to increase as a result of our marketing and brand promotion activities. We may not generate customer awareness or increase revenues enough to offset the increased expenses we incur in building our brand. If we fail to successfully promote and maintain our brand, or incur substantial marketing and sales expenses, which are not offset by increased revenues, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building efforts, or to achieve the widespread brand awareness that is essential for broad customer adoption of our solution. Unfavorable conditions in the market for digital advertising or the global economy or reductions in digital advertising spend could limit our ability to grow our business and negatively affect our operating results. Revenue growth and potential profitability of our business depends on digital advertising spend by advertisers in the markets we serve. Our operating results may vary based on changes in the market for digital advertising or the global economy. To the extent that weak economic conditions cause our customers and potential customers to freeze or reduce their advertising budgets, particularly digital advertising, demand for our solution may be negatively affected. Historically, economic downturns have resulted in overall reductions in advertising spend. If economic conditions deteriorate or the rise of geopolitical instability and military hostilities causes economic uncertainty, our customers and potential customers may elect to decrease their advertising budgets or defer or reconsider software and service purchases, which would limit our ability to grow our business and negatively affect our operating results. Our business depends on retaining and attracting qualified personnel, and turnover may result in operational inefficiencies that could negatively affect our business. Our success depends upon the continued service of our talented management, operational and key technical employees, as well as our ability to continue to attract additional highly qualified talent. Turnover amongst our employees could result in operational and administrative inefficiencies and added costs, which could adversely impact our results of operations, stock price and customer relationships. In addition, we must successfully integrate any new personnel that we hire within our organization in order to achieve our operating objectives, and changes in other key positions may temporarily affect our financial performance and results of operations as new employees become familiar with our business. 17 Table of Contents We do not maintain key person life insurance policies on any of our employees. Each of our executive officers, key technical personnel and other employees could terminate his or her relationship with us at any time. Our business also requires skilled technical, sales and other personnel, who are in high demand and are often subject to competing offers. As we expand into additional geographic markets, we will require personnel with expertise in these new areas. Competition for qualified employees is intense in our industry and particularly in San Francisco, California, where most of our employees are based. An inability to retain, attract, relocate and motivate employees required for our business, including the planned expansion of our business, could delay or prevent the achievement of our business objectives and could materially harm our business and our customer relationships. Our business and operations have experienced rapid growth in recent periods, which has placed, and may continue to place, significant demands on our management and infrastructure. If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately. We increased our number of full-time employees from 285 as of December 31, 2011 to 571 as of December 31, 2014. Our growth has placed, and may continue to place, a significant strain on our managerial, administrative, operational, financial and other resources. We intend to further expand our overall headcount and operations both domestically and internationally, with no assurance that we will be able to meet our hiring plans or that our business or revenues will continue to grow. Creating a global organization and managing a geographically dispersed workforce will require substantial management effort, the allocation of valuable management resources and significant additional investment in our infrastructure. We will be required to continue to improve our operational, financial and management controls and our reporting procedures and we may not be able to do so effectively. Further, to accommodate our expected growth we must continually improve and maintain our technology, systems and network infrastructure. As such, we may be unable to manage our expenses effectively in the future, which may negatively impact our gross margins or operating expenses in any particular quarter. If we fail to manage our anticipated growth or change in a manner that does not preserve the key aspects of our corporate culture, the quality of our solutions may suffer, which could negatively affect our brand and reputation and harm our ability to retain and attract customers. Domestic and foreign government regulation and enforcement of data practices and data tracking technologies is expansive, not clearly defined and rapidly evolving. Such regulation could directly restrict portions of our business or indirectly affect our business by constraining our customers’ use of our platform or limiting the growth of our markets. Federal, state, municipal and/or foreign governments and agencies have adopted and could in the future adopt, modify, apply or enforce laws, policies, and regulations covering user privacy, data security, technologies such as cookies that are used to collect, store and/or process data, the taxation of products and services, unfair and deceptive practices, and/or the collection, use, processing, transfer, storage and/or disclosure of data associated with a unique individual. The categories of data regulated under these laws vary widely and are often ill-defined and subject to new applications or interpretation by regulators. Our subscription services enable our customers to collect, manage and store data regarding the measurement and valuation of their digital advertising and marketing campaigns, which may include data that is directly or indirectly obtained or derived through the activities of online or mobile visitors. The uncertainty and inconsistency among these laws, coupled with a lack of guidance as to how these laws will be applied to current and emerging Internet and mobile analytics technologies, creates a risk that regulators, lawmakers or other third parties, such as potential plaintiffs, may assert claims, pursue investigations or audits, or engage in civil or criminal enforcement. These actions could limit the market for our subscription services or impose burdensome requirements on our services and/or customers’ use of our services, thereby rendering our business unprofitable. Some features of our subscription services use cookies, which trigger the data protection requirements of certain foreign jurisdictions, such as the EU Cookie Directive. In addition, although our subscription services do not involve the collection or use of personally identifiable information from visitors, our services collect 18 Table of Contents anonymous data about visitors’ interactions with our advertiser clients that may be subject to regulation under current or future laws or regulations. If our privacy or data security measures fail to comply with these current or future laws and regulations in any of the jurisdictions in which we collect information, we may be subject to litigation, regulatory investigations, civil or criminal enforcement, audits or other liabilities in such jurisdictions, or our advertisers may terminate their relationships with us. This area of the law is currently under intense government scrutiny and many governments, including the U.S. government, are considering a variety of proposed regulations that would restrict or impact the conditions under which data obtained from or through the activities of visitors could be collected, processed or stored. In addition, regulators such as the Federal Trade Commission and the California Attorney General are continually proposing new regulations and interpreting and applying existing regulations in new ways. Changes to existing laws or new laws regulating the solicitation, collection or processing of personal and consumer information, truth-in-advertising and consumer protection could affect our customers’ utilization of digital advertising and marketing, potentially reducing demand for our subscription services, or impose restrictions that make it more difficult or expensive for us to provide our services. If legislation dampens the growth in web and mobile usage or access to the Internet, our results of operations could be harmed. Legislation enacted in the future could dampen the growth in web and mobile usage and decrease its acceptance as a medium of communications and commerce or result in increased adoption of new modes of communication and commerce that may not be serviced by our products. In addition, government agencies or private organizations may begin to impose taxes, fees or other charges for accessing the Internet, which could result in slower growth or a decrease in ecommerce, use of social media and/or use of mobile devices. Any of these outcomes could cause demand for our platform to decrease, our costs to increase, and our results of operations and financial condition to be harmed. If our customers fail to abide by applicable privacy laws or to provide adequate notice and/or obtain consent from end users, we could be subject to litigation or enforcement action or reduced demand for our services. Industry self-regulatory standards may be implemented in the future that could affect demand for our platform and our ability to access data we use to provide our platform. Our customers utilize our services to support and measure their direct interactions with visitors and we must rely on our customers to implement and administer any notice or choice mechanisms required under applicable laws. If customers fail to abide by these laws, it could result in litigation or regulatory or enforcement action against our customers or against us directly. In addition, self-regulatory organizations (such as the Network Advertising Initiative) to which our customers may belong may impose opt-in or opt-out requirements on our customers, which may in the future require our customers to provide various mechanisms for users to opt-in or opt-out of the collection of any data, including anonymous data, with respect to such users’ web or mobile activities. The online and/or mobile industries may adopt technical or industry standards, or federal, state, local or foreign laws may be enacted that allow users to opt-in or opt-out of data that is necessary to our business. In particular, some government regulators and standard-setting organizations have suggested- a “Do Not Track” standard that allows users to express a preference, independent of cookie settings in their browser, not to have website browsing recorded. All the major internet browsers have implemented some version of a “Do Not Track” setting. Furthermore, publishers may implement alternative tracking technologies that make it more difficult to access the data necessary to our business or make it more difficult for us to compete with the publisher’s own advertising management solutions. If any of these events were to occur in the future, it could have a material effect on our ability to provide services and for our customers to collect the data that is necessary to use our services. 19 Table of Contents Our revenues may be adversely affected if we are required to charge sales taxes in additional jurisdictions or other taxes for our solutions. We collect or have imposed upon us sales or other taxes related to the solutions we sell in certain states and other jurisdictions. Additional states, countries or other jurisdictions may seek to impose sales or other tax collection obligations on us in the future, or states or jurisdictions in which we already pay tax may increase the amount of taxes we are required to pay. A successful assertion by any state, country or other jurisdiction in which we do business that we should be collecting sales or other taxes on the sale of our products and services could, among other things, create significant administrative burdens for us, result in substantial tax liabilities for past sales, discourage clients from purchasing solutions from us or otherwise substantially harm our business and results of operations. We may experience quarterly fluctuations in our operating results due to a number of factors which make our future results difficult to predict and could cause our operating results to fall below expectations or our guidance. Our quarterly operating results may fluctuate due to a variety of factors, many of which are outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful. You should not rely on our past results as indicative of our future performance. If our revenues or operating results fall below the expectations of investors or securities analysts, or below any guidance we may provide to the market, the price of our common stock could decline substantially. In addition to other risk factors listed in this section, factors that may affect our quarterly operating results include the following: Based upon all of the factors described above, we have a limited ability to forecast our future revenues, costs and expenses, and as a result, our operating results may from time to time fall below our estimates or the expectations of public market analysts and investors. 20 • the level of advertising spend managed through our platform for a particular quarter; • customer renewal rates, and the pricing and usage of our platform in any renewal term; • demand for our platform and the size and timing of our sales; • customers delaying purchasing decisions in anticipation of new releases by us or of new products by our competitors; • network outages or security breaches and any associated expenses; • changes in the competitive dynamics of our industry, including consolidation among competitors or customers; • market acceptance of our current and future solutions; • changes in spending on digital advertising or information technology and software by our current and/or prospective customers; • budgeting cycles of our customers; • our potentially lengthy sales cycle; • our ability to control costs, including our operating expenses; • the amount and timing of infrastructure costs and operating expenses related to the maintenance and expansion of our business, operations and infrastructure; • foreign currency exchange rate fluctuations; and • general economic and political conditions in our domestic and international markets. Table of Contents We might require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all. We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new features or enhance our existing platform, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired. Future acquisitions, strategic investments, partnerships or alliances could be difficult to integrate, divert the attention of key management personnel, disrupt our business, dilute shareholder value and adversely affect our results of operations and financial condition. We recently acquired NowSpots, Inc., doing business as Perfect Audience (“Perfect Audience”) in June 2014 and SocialMoov, a Paris-based company, in February 2015 and may seek to acquire additional businesses, products or technologies in the future. However, we have limited experience in acquiring and integrating businesses, products and technologies. If we identify an appropriate acquisition candidate, we may not be successful in negotiating the terms and/or financing of the acquisition, and our due diligence may fail to identify all of the problems, liabilities or other shortcomings or challenges of an acquired business, product or technology, including issues related to intellectual property, product quality or architecture, regulatory compliance practices, revenue recognition or other accounting practices or employee or client issues. Any acquisition or investment may require us to use significant amounts of cash, issue potentially dilutive equity securities or incur debt. In addition, acquisitions, including our recent acquisitions of Perfect Audience and SocialMoov, involve numerous risks, any of which could harm our business, including: 21 • regulatory and commercial risks relating to retargeting of online advertising and social advertising, the primary businesses of Perfect Audience and SocialMoov, respectively; • difficulties in integrating the operations, technologies, services and personnel of acquired businesses, especially if those businesses operate outside of our core competency; • cultural challenges associated with integrating employees from the acquired company into our organization; • reputation and perception risks associated with the acquired product or technology by the general public; • ineffectiveness or incompatibility of acquired technologies or services; • potential loss of key employees of acquired businesses; • inability to maintain the key business relationships and the reputations of acquired businesses; • diversion of management’s attention from other business concerns; • litigation for activities of the acquired company, including claims from terminated employees, clients, former shareholders or other third parties; • failure to identify all of the problems, liabilities or other shortcomings or challenges of an acquired company, technology, or solution, including issues related to intellectual property, solution quality or Table of Contents If we are unable to successfully integrate Perfect Audience and SocialMoov, or any future business, product or technology we acquire, our business and results of operations may suffer. 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. 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 adversely affect 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. For instance, in connection with our acquisition of Perfect Audience, we issued 1.7 million shares of our common stock, and the SocialMoov acquisition in February 2015 would require us to issue up to 1.6 million shares of our common stock. If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected. As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on the internal control over financial reporting and a report by our independent registered public accounting firm to the extent we decide not to avail ourselves of the exemption provided to an emerging growth company, as defined by The Jumpstart Our Business Act of 2012. If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. In addition, in the future if we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources. We are an emerging growth company, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors. For as long as we continue to be an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies including, but not limited to, the exemption from the requirement of a report on our internal control over financial reporting by our independent registered public accounting firm, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not 22 architecture, regulatory compliance practices, revenue recognition or other accounting practices or employee or client issues; • in the case of foreign acquisitions such as SocialMoov, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries; costs necessary to establish and maintain effective internal controls for acquired businesses; • failure to successfully further develop the acquired technology in order to recoup our investment; and • increased fixed costs. Table of Contents previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We will remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30, (ii) the end of the fiscal year in which we have total annual gross revenues of $1 billion or more during such fiscal year, (iii) the date on which we issue more than $1 billion in non-convertible debt in a three-year period or (iv) March 21, 2018. We may not be able to utilize a significant portion of our net operating loss or research tax credit carryforwards, which could adversely affect our profitability. As of December 31, 2014, we had federal and state net operating loss carryforwards due to prior period losses, which if not utilized will begin to expire in 2026 and 2016 for federal and state purposes, respectively. We also have federal research tax credit carryforwards, which if not utilized will begin to expire in 2026. These net operating loss and research tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our profitability. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended (the Code), our ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if we experience an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. Future issuances of our stock could cause an “ownership change.” It is possible that any future ownership change could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability. Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States. Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change. Risks Related to the Ownership of Our Common Stock The trading prices of the securities of technology companies have been highly volatile. Accordingly, the market price of our common stock has been, and is likely to continue to be, subject to wide fluctuations and could subject us to litigation. Factors affecting the market price of our common stock include: 23 • variations in our revenue, billings, gross margin, operating results, free cash flow, loss per share, number of active advertisers, revenue retention rates, annualized advertising spend on our platform, adjusted EBITDA and how these results compare to analyst expectations; • forward looking guidance on billings, revenue, gross margin, operating results, free cash flow, and loss per share; Table of Contents In addition, the stock market in general has experienced substantial price and volume volatility that is often seemingly unrelated to the operating results of any particular companies. Moreover, if the market for technology stocks, especially advertising cloud and cloud computing-related stocks, or the stock market in general experiences uneven investor confidence, the market price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. The market price for our stock might also decline in reaction to events that affect other companies within, or outside, our industry, even if these events do not directly affect us. Some companies that have experienced volatility in the trading price of their stock have been subject of securities litigation. If we are the subject of such litigation, it could result in substantial costs and a diversion of management’s attention and resources. We do not intend to pay dividends for the foreseeable future. We have never declared nor paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Consequently, stockholders 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 investment. Our directors, officers and their respective affiliates own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval. As of December 31, 2014, our directors, officers and their respective affiliates, beneficially owned approximately 21.0% of our outstanding voting stock. Therefore, these stockholders will continue to have the ability to influence us through this ownership position. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders could be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders. If there are substantial sales of shares of our common stock, the price of our common stock could decline. Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur could depress the market price of our common stock and may make it more difficult for you to sell your common stock at a time and price that you deem appropriate. We are unable to predict the effect that sales may have on the prevailing market price of our common stock. We have a currently effective Registration Statement on Form S-3 registering for sale approximately 1.7 million shares of our common stock in connection with our acquisition of Perfect Audience. In addition, in connection with our acquisition of SocialMoov, we are required to prepare and file a Registration Statement on Form S-3 registering up to 1.6 million shares of our common stock for sale (some of which are subject to contractual restrictions for a period of nine months from the closing of the acquisition and some of which will not be issued, if at all, until the one and two year anniversaries of the closing of the acquisition). After our initial public offering (“IPO”) in March 2013, the holders of an aggregate of 18.8 million shares of our common stock had rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders. To the extent the holders of such shares have not sold the shares otherwise, such holders may continue to have registration rights. Registration of these shares under the 24 • announcements of technological innovations, new products or services, strategic alliances, acquisitions or significant agreements by us or by our competitors; • disruptions in our cloud-based operations or services or disruptions of other prominent cloud-based operations or services; • the economy as a whole, market conditions in our industry, and the industries of our customers; and • any other factors discussed herein. Table of Contents Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act. Any sales of securities by existing stockholders could adversely affect the trading price of our common stock. Delaware law and provisions in our restated certificate of incorporation and restated bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the trading price of our common stock. Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay, or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our restated certificate of incorporation and restated bylaws contain provisions that may make the acquisition of our Company more difficult, including the following: If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline. The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline. 25 • our board of directors are classified into three classes of directors with staggered three-year terms and directors can only be removed from office for cause; • only our board of directors has the right to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • only our chairman of the board, our lead independent director, our chief executive officer, our president, or a majority of our board of directors is authorized to call a special meeting of stockholders; • certain litigation against us can only be brought in Delaware; • our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established, and shares of which may be issued, without the approval of the holders of common stock; and • advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders. Table of Contents None. Our corporate headquarters are located in San Francisco, California, where we occupy facilities totaling approximately 43,000 square feet under a lease which expires in July 2022. We use these facilities for administration, sales and marketing, research and development, engineering, customer support and professional services. We also lease office space in Austin, Chicago and New York in the United States, and Australia, England, France, Germany, Ireland, Japan, and Singapore, which we use principally for sales and marketing, administration, customer support and to deliver professional services locally. We also lease office space in Portland, Oregon and Shanghai, China, which we use principally for engineering. We operate two data centers at third-party facilities located in the United States and Ireland. We believe our facilities are in good condition and adequate for our current needs and for the foreseeable future. See Note 15 to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations and Commitments” for information regarding our lease obligations. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows. Not applicable. PART II Market Price of Our Common Stock Our common stock has traded on the New York Stock Exchange (“NYSE”) since March 22, 2013, under the symbol MRIN. Prior to this date, there was no public market for our common stock. The following tables set forth, for the periods indicated, the high and low sales price of our common shares as reported by the NYSE. 26 ITEM 1B. UNRESOLVED STAFF COMMENTS ITEM 2. PROPERTIES ITEM 3. LEGAL PROCEEDINGS ITEM 4. MINE SAFETY DISCLOSURES ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES High Low Year Ended December 31, 2014 First Quarter $ 12.57 $ 9.17 Second Quarter $ 12.65 $ 8.41 Third Quarter $ 12.14 $ 7.30 Fourth Quarter $ 9.68 $ 7.79 Table of Contents Holders of our Common Shares As of January 31, 2015, there were 114 stockholders of record. The actual number of stockholders is greater than the number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. The number of holders of record also does not include stockholders whose shares may be held in trust by other entities. Dividend Policy We have never declared or paid any cash dividends on our common stock. We currently intend to retain any future earnings and do not expect to pay any cash dividends on our common stock for 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 and overall financial conditions. In addition, the terms of our equipment loan agreement with Silicon Valley Bank currently restrict our ability to pay dividends. Securities Authorized for Issuance under Equity Compensation Plans The information required by this item will be set forth under the heading “Equity Compensation Plan Information” in the definitive Proxy Statement for our 2015 Annual Meeting of Stockholders (the “Proxy Statement” and is incorporated into this report by reference. Unregistered Sales of Equity Securities We made no sales of unregistered securities during the quarter ended December 31, 2014. Use of Proceeds from Public Offering of Common Stock There have been no material changes in our use of the proceeds from our initial public offering in March 2013. Recent Issuer Purchases of Equity Securities The table below provides information with respect to recent repurchases of unvested shares of our common stock. 27 High Low Year Ended December 31, 2013 First Quarter (from March 22, 2013) $ 19.95 $ 15.15 Second Quarter $ 16.43 $ 8.75 Third Quarter $ 14.37 $ 10.22 Fourth Quarter $ 12.84 $ 8.50 Period Total Number of Shares Purchased (1) Weighted Average Price Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs October 1 – October 31, 2014 555 $ 2.58 — — November 1 – November 30, 2014 1,320 $ 7.55 — — December 1 – December 31, 2014 0 N/A — — Table of Contents Stock Performance Graph The following shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any of our other filings under the Exchange Act or the Securities Act of 1933, as amended, except to the extent we specifically incorporate it by reference into such filing. The following graph shows a comparison from March 22, 2013 (the date our common stock commenced trading on the NYSE) through December 31, 2014, of the cumulative total return for our common stock, the NYSE Composite Index, and the S&P 1500 Data Processing & Outsourced Services Index. The graph assumes an investment of $100 on March 22, 2013 and reinvestment of any dividends. The comparisons in the graph below are required by the Securities and Exchange Commission and are not intended to forecast or be indicative of possible future performance of our common shares. 28 (1) Certain of our shares of our common stock held by employees and service providers are subject to vesting. Unvested shares are subject to a right of repurchase by us in the event the holder of such shares is no longer employed by or providing services for us. All shares in the above table were shares repurchased as a result of our exercising this right and not pursuant to a publicly announced plan or program. Company / Index 3/22/13 3/31/13 6/30/13 9/30/13 12/31/13 3/31/14 6/30/14 9/30/14 12/31/14 Marin Software Inc. 100 117.36 73.14 89.64 73.14 75.50 84.07 61.43 60.43 NYSE Composite Index 100 100.51 101.83 107.58 116.92 119.07 125.00 122.55 124.81 S&P 1500 Data Processing & Outsourced Services 100 103.82 109.57 121.07 141.48 135.24 136.28 137.51 159.17 Table of Contents The following tables present selected historical financial data for our business. You should read this information together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements, related notes and other financial information included elsewhere in this Annual Report on Form 10-K. The selected consolidated financial data in this section are not intended to replace the consolidated financial statements and are qualified in their entirety by the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. We derived the consolidated statements of operations data for the years ended December 31, 2014, 2013 and 2012, and the consolidated balance sheet data as of December 31, 2014 and 2013 from our audited consolidated financial statements included elsewhere in this report. We derived the consolidated statements of operations data for the years ended December 31, 2011 and 2010 and the consolidated balance sheet data as of December 31, 2012, 2011 and 2010 from our audited financial statements not included in this report. Our historical results are not necessarily indicative of the results to be expected in the future. 29 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA Years Ended December 31, 2014 2013 2012 2011 2010 (in thousands, except per share data) Revenues, net $ 99,354 $ 77,315 $ 59,558 $ 36,121 $ 19,005 Cost of revenues (1)(2) 35,614 31,109 24,764 18,691 11,040 Gross profit 63,740 46,206 34,794 17,430 7,965 Operating expenses Sales and marketing (1)(2) 47,716 42,799 32,633 20,357 8,884 Research and development (1)(2) 28,751 20,715 14,014 7,071 4,568 General and administrative (1)(2) 21,257 17,028 13,432 6,679 5,195 Total operating expenses 97,724 80,542 60,079 34,107 18,647 Loss from operations (33,984 ) (34,336 ) (25,285 ) (16,677 ) (10,682 ) Interest expense, net (177 ) (453 ) (520 ) (378 ) (230 ) Other (expenses) income, net (466 ) (571 ) (456 ) (229 ) 78 Loss before benefit from (provision for) income taxes (34,627 ) (35,360 ) (26,261 ) (17,284 ) (10,834 ) Benefit from (provision for) income taxes 1,456 (492 ) (221 ) (139 ) (23 ) Net loss (33,171 ) (35,852 ) (26,482 ) (17,423 ) (10,857 ) Redemption of preferred stock in connection with the Series D financing and deemed dividend — — — — (1,033 ) Net loss available to common stockholders $ (33,171 ) $ (35,852 ) $ (26,482 ) $ (17,423 ) $ (11,890 ) Net loss per share available to common stockholders, basic and diluted (3) $ (0.97 ) $ (1.36 ) $ (6.00 ) $ (4.29 ) $ (3.27 ) Weighted-average shares used to compute net loss per share available to common stockholders, basic and diluted (3) 34,210 26,312 4,417 4,058 3,639 Table of Contents 30 (1) Stock-based compensation included in the consolidated statements of operations data above was allocated as follows: Years Ended December 31, 2014 2013 2012 2011 2010 (in thousands) Cost of revenues $ 765 $ 887 $ 439 $ 165 $ 90 Sales and marketing 1,895 1,304 1,005 226 66 Research and development 3,785 1,346 831 163 58 General and administrative 2,797 1,681 2,673 143 1,172 $ 9,242 $ 5,218 $ 4,948 $ 697 $ 1,386 (2) Amortization of intangible assets included in the consolidated statements of operations data above was allocated as follows: Years Ended December 31, 2014 2013 2012 2011 2010 (in thousands) Cost of revenues $ 399 $ — $ — $ — $ — Sales and marketing 261 — — — — Research and development 397 — — — — General and administrative 74 — — — — $ 1,131 $ — $ — $ — $ — (3) See Note 13 of the consolidated financial statements for an explanation of the calculations of basic and diluted net loss per share available to common stockholders. As of December 31, 2014 2013 2012 2011 2010 (in thousands) Consolidated Balance Sheet Data Cash and cash equivalents $ 68,253 $ 104,407 $ 31,540 $ 1,719 $ 1,172 Property and equipment, net 16,274 14,417 9,224 4,909 3,113 Total assets 128,217 137,377 57,224 18,297 10,653 Debt, current and long-term 3,208 6,215 10,815 6,629 3,195 Convertible preferred stock, net of issuance costs — — 105,710 51,514 35,580 Total stockholders’ equity (deficit) 106,117 115,344 (72,706 ) (48,408 ) (32,578 ) Table of Contents The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those forward-looking statements below. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” included elsewhere in this Annual Report on Form 10-K. This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are often identified by the use of words such as “believe,” “may,” “potentially,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” “seek,” and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors”, set forth in Part I, Item 1A of this Annual Report on Form 10-K. Except as required by law, we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Overview We provide a leading cross-channel advertising cloud platform that enables digital marketers to improve performance of their online advertising campaigns, realize efficiencies and time savings, and make better business decisions. Our integrated platform is a software-as-a-service (“SaaS”) analytics, workflow, and optimization solution for marketing professionals, allowing them to effectively manage their digital advertising spend across search, display, social and mobile advertising channels. Our software solution is designed to help our customers: In December 2014, our customers collectively managed more than $7.2 billion in annualized advertising spend on our platform and for the quarter ended December 31, 2014, we had 818 active advertisers using our solution globally across a wide range of industries. We market and sell our solutions to advertisers directly and through leading advertising agencies. For 2014, 2013 and 2012, our revenues were $99.4 million, $77.3 million and $59.6 million, representing period-over-period growth of 29%, 30% and 65%, respectively. We had net losses of $33.2 million in 2014, $35.9 million in 2013, and $26.5 million in 2012. We earn revenues principally from subscription contracts under which we provide advertisers with access to our search, social and display advertising management platforms, either directly or through the advertiser’s relationship with an agency that has a contract with us. In accordance with the subscription contracts, we charge fees generally based upon the amount of advertising spend that our customers manage through our platform. Our contracts are generally one year or longer in length. Under our subscription contracts with most of our direct advertisers and some of our agency customers, customers are contractually committed to a monthly minimum fee, which is payable on a monthly basis over the duration of the contract and is generally greater than one-half of our estimated monthly revenues from these customers, at the time the contract is signed. However, most of our 31 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • measure the effectiveness of their advertising campaigns through our proprietary reporting and analytics capabilities; • manage and execute campaigns through our intuitive user interface and underlying technology that streamlines and automates key functions, such as ad creation and bidding, across multiple publishers and channels; and • optimize campaigns across multiple publishers and channels in real time based on market and business data to achieve desired revenue outcomes using our predictive bid management technology. Table of Contents subscription contracts with our advertising agency customers do not include a committed monthly minimum fee. Our contractual arrangement is with the advertising agency and the advertiser is not a party to the terms of the contract. Accordingly, most advertisers through our agency customers do not have a commitment to use our services and the advertisers may be added or removed from our platform at the discretion of the respective agency. We invoice the advertising agency for the amounts due under the contract. Historically, approximately half of our revenues have been earned from advertising agency customers. Our subscription fee under most contracts is variable based upon the value of advertising spend that our customers manage through our platform. Our deferred revenues consist of the unearned portion of billed subscription fees. Our subscription contracts indicate the date at which we begin invoicing our customers, which is generally the first day of the month following the execution of the contract. We generally invoice the greater of the minimum fee or the percentage of advertising spend on our platform. The implementation process for new advertisers is typically four to six weeks; however, we generally do not charge a separate implementation fee under our subscription contracts. Our implementation and customer support personnel, as well as costs associated with our operating infrastructure, are included in our cost of revenues. Our cost of revenues and operating expenses have increased in absolute dollars due to our need to increase our headcount to grow our business and to increase data center capacity to support customer revenue growth on our platform. We expect that our cost of revenues will continue to increase in absolute dollars as we continue to invest in our growth. In order to grow revenues, we need to invest in (1) sales and marketing activities by adding sales and customer success representatives globally to target new advertisers and agencies and (2) research and development to further expand our platform and support for additional publishers. These activities will require us to make investments, particularly in research and development and sales and marketing, and if these investments do not generate additional customers or additional advertising spend managed by our platform, our future operating results could be harmed. The majority of our revenues are derived from our advertisers in the United States. We believe the markets outside of the United States offer an opportunity for growth, and we intend to make additional investments in sales and marketing to expand in these markets. Advertisers from outside of the United States represented 34%, 32% and 27% of total revenues for 2014, 2013 and 2012, respectively. We were incorporated in 2006 and initially focused on building the core elements of our cloud-based platform, which we currently use to service our customers. In September 2007, we launched Marin Enterprise, which targets large advertisers and agencies. We released Marin Professional Edition in March 2011, which targets mid-market advertisers and agencies. We have an iterative development process and we typically release new features every one to two months. Additionally, we have continued to expand internationally, opening our London office in 2009, our Paris, Hamburg, Singapore and Sydney offices in 2011, our Dublin and Tokyo offices in 2012 and our Shanghai office in 2013. We completed our acquisition of NowSpots, Inc., which conducted business as Perfect Audience (“Perfect Audience”) in June 2014 to complement our product offerings, which is more fully described in Note 3 to our accompanying Consolidated Financial Statements. In February 2015, we completed our acquisition of SocialMoov to provide us with innovative social advertising technologies that will augment our current social offering, which is further described in Note 18 to our accompanying Consolidated Financial Statements. Key Metrics We regularly review a number of metrics to evaluate growth trends, measure our performance, establish budgets and make strategic decisions. Our selected key metrics include revenue, gross margin, operating expenses, active advertisers, annualized advertising spend on our platform and revenue retention rate. We discuss revenue, gross margin and operating expenses below under “– Components of Results of Operations.” We monitor our key metrics to measure our success. Our revenues are generally based on the amount of advertising 32 Table of Contents spend our customers manage on our platform in a period. As a result, revenues are an important metric to understanding the overall health of our business, and we use revenue trends to formulate financial projections and make strategic business decisions. Number of Active Advertisers We define an active advertiser as an advertiser from whom we recognized revenues in excess of $2,000 in at least one month in a period. We believe the $2,000 threshold best identifies advertisers who are actively using our platform. We focus on revenues in at least one month in a period to account for seasonality in advertising spend by our customers, some of whom may not run digital advertising campaigns in every month of a year but still represent an active advertiser on our platform. We count organizations within the same corporate structure as one advertiser, even if they have signed separate contracts with us for different brands or divisions, whether they are a direct advertiser or an advertiser through an agency. When our subscription contract is with an advertising agency, we include each advertiser whose advertising spend is managed by the agency through our platform as a different advertiser. Advertisers who have advertising spend managed by multiple agencies on our platform are counted as one advertiser. We believe that our ability to increase the number of active advertisers using our platform is a leading indicator of our ability to grow revenues. We had 818, 673 and 531 active advertisers in the quarters ending December 31, 2014, 2013 and 2012, respectively. While our active advertiser count has increased over time, this metric can also fluctuate from quarter to quarter due to seasonality and timing and amount of revenue contributed from new active advertisers and therefore, there is not necessarily a direct correlation between the amount of increased revenues and the change in active advertisers in a particular period. Revenue Retention Rate We believe our ability to retain and grow revenues from our existing advertisers is an indicator of the stability of our revenue base and the long-term value of our advertiser relationships. We assess our ability to retain and grow subscription revenues using a metric we refer to as revenue retention rate. We calculate our revenue retention rate metric by dividing retained revenues by retention base revenues. We define retention base revenues as revenues from all advertisers in the corresponding prior period, and we define retained revenues as revenues from all advertisers from the prior period that remain advertisers in the current period. This metric is calculated on a quarterly basis, and for annual periods, we use an average of the quarterly metrics. Although we have lost individual advertisers over time, advertisers who have remained on our platform have generally, in the aggregate, increased their advertising spend on our platform. At the same time, advertising spend on our platform may vary quarter to quarter, and as a result, quarterly revenue retention rates may fluctuate quarter to quarter. Our annual revenue retention rates were 97%, 97% and 114% in 2014, 2013 and 2012, respectively. Annualized Advertising Spend on our Platform We calculate annualized advertising spend as advertising spend in the last month of a period multiplied by 12. We believe that increases in annualized advertising spend generally lead to increases in revenues over time. However, we believe that other factors related to the terms of customer agreements and seasonality can make it difficult to directly correlate annual advertising spend to changes in revenues in a particular period. Our customers collectively managed $7.2 billion, $6.0 billion and $4.7 billion in annualized advertising spend on our platform in December 2014, 2013 and 2012, respectively. Components of Results of Operations Revenues We generate revenues principally from subscription contracts under which we provide advertisers with access to our search, social and display advertising management platform, either directly or through the advertiser’s relationship with an agency with whom we have a contract. Under our subscription contracts with most direct advertisers and some of our agency customers, customers contractually commit to a monthly minimum fee, which is generally greater than one-half of our estimated monthly revenues from these customers, at the time the 33 Table of Contents contract is signed. However, most of our subscription contracts with our advertising agency customers do not include a committed monthly minimum fee. Additionally, advertisers we serve through our arrangements with our advertising agencies generally do not have a minimum commitment to continue using our services. Our subscription fee under most contracts is variable based upon the value of advertising spend that our customers manage through our platform, although some customers pay a flat monthly rate over the term of their subscription contract. Our deferred revenues consist of the unearned portion of billed subscription fees. Cost of Revenues Cost of revenues primarily includes personnel costs, consisting of salaries, benefits, bonuses and stock-based compensation, for employees associated with our cloud infrastructure and global services for implementation and ongoing customer service organizations. Other costs of revenues include fees paid to contractors who supplement our support and data center personnel, expenses related to the use of a third-party data center, depreciation of data center equipment, amortization of capitalized internal-use software development costs, amortization of intangible assets and allocated overhead. We intend to continue to invest additional resources in our global services teams and in the capacity of our hosting service infrastructure. As we continue to invest in technology innovation through our research and development organization, we expect to have increased amortization of capitalized internal-use software development costs. We expect that this investment in technology should not only expand the breadth and depth of our cross-channel performance advertising cloud platform but also increase the efficiency of how we deliver these solutions, enabling us to improve our gross margin over time. The level and timing of investment in these areas could affect our cost of revenues in the future. Sales and Marketing Expenses Sales and marketing expenses include personnel costs, sales commissions and other costs including travel and entertainment, marketing and promotional events, public relations, marketing activities, professional fees and allocated overhead. All of these costs are expensed as incurred, including sales commissions. Our commission plans provide that payment of commissions to our sales representatives are paid based on the actual amounts we invoice customers over a period that is generally up to five months following the execution of the applicable customer contract. We plan to continue investing in sales and marketing by increasing the number of sales and account management employees, expanding our domestic and international sales and marketing activities, building brand awareness and sponsoring additional marketing events, which we believe will enable us to add new customers and increase penetration within our existing customer base. We expect that, in the future, sales and marketing expenses will increase in absolute dollars and continue to be our largest operating expense category. Research and Development Expenses Research and development expenses consist primarily of personnel costs for our product development and engineering employees and executives, including salaries, benefits, stock-based compensation expense and bonuses. Also included are non-personnel costs such as professional fees payable to third-party development resources, amortization of intangible assets and allocated overhead. Our research and development efforts are focused on enhancing our software architecture, adding new features and functionality to our platform and improving the efficiency with which we deliver these services to our customers. We expect that, in the future, research and development expenses will increase in absolute dollars, partially offset by the capitalization of internal-use software development costs. We believe that these investments are necessary to maintain and improve our competitive position. 34 Table of Contents General and Administrative Expenses General and administrative expenses consist primarily of personnel costs, including salaries, benefits, stock-based compensation expense and bonuses, for our administrative, legal, human resources, finance and accounting employees and executives. Also included are non-personnel costs, such as travel-related expenses, audit fees, tax services and legal fees, as well as professional fees, insurance and other corporate expenses, along with amortization of intangible assets and allocated overhead. We expect to incur incremental costs associated with supporting the growth of our business, both in terms of size and geographic expansion, and to meet the increased compliance requirements associated with our continued operation as a public company. Such costs include increases in our accounting and legal personnel, additional consulting, legal and audit fees, insurance costs, board of directors’ compensation and the costs of achieving and maintaining compliance with the Sarbanes-Oxley Act of 2002. As a result, we expect our general and administrative expenses to increase in absolute dollars in future periods but to decrease as a percentage of revenues over time. Other Expenses, Net and Interest Expenses, Net Other expenses, net primarily consists of foreign currency transaction gains and losses. Interest expense, net, consists primarily of interest income earned on our cash equivalents offset by the interest expense for our capital lease payments and borrowings under our equipment advances and revolving line of credit. Benefit from (Provision for) Income Taxes The benefit from (provision for) income taxes consists of federal, state and foreign income taxes. Due to recent losses, we maintain a valuation allowance against our deferred tax assets as of December 31, 2014. We consider all available evidence, both positive and negative, in assessing the extent to which a valuation allowance should be applied against our deferred tax assets. Results of Operations The following table is a summary of our consolidated statements of operations. The period-to-period comparisons of results are not necessarily indicative of results for future periods. 35 Years Ended December 31, 2014 2013 2012 (in thousands) Revenues, net $ 99,354 $ 77,315 $ 59,558 Cost of revenues (1)(2) 35,614 31,109 24,764 Gross profit 63,740 46,206 34,794 Operating expenses Sales and marketing (1)(2) 47,716 42,799 32,633 Research and development (1)(2) 28,751 20,715 14,014 General and administrative (1)(2) 21,257 17,028 13,432 Total operating expenses 97,724 80,542 60,079 Loss from operations (33,984 ) (34,336 ) (25,285 ) Interest expense, net (177 ) (453 ) (520 ) Other expenses, net (466 ) (571 ) (456 ) Loss before benefit from (provision for) income taxes (34,627 ) (35,360 ) (26,261 ) Benefit from (provision for) income taxes 1,456 (492 ) (221 ) Net loss $ (33,171 ) $ (35,852 ) $ (26,482 ) Table of Contents The following table sets forth our consolidated results of operations for the specified periods as a percentage of our revenues for those periods. Percent of revenue figures are rounded and therefore may not subtotal exactly. 36 (1) Stock-based compensation included in the consolidated statements of operations data above was as follows: Years Ended December 31, 2014 2013 2012 (in thousands) Cost of revenues $ 765 $ 887 $ 439 Sales and marketing 1,895 1,304 1,005 Research and development 3,785 1,346 831 General and administrative 2,797 1,681 2,673 $ 9,242 $ 5,218 $ 4,948 (2) Amortization of intangible assets included in the consolidated statements of operations data above was as follows: Years Ended December 31, 2014 2013 2012 (in thousands) Cost of revenues $ 399 $ — $ — Sales and marketing 261 — — Research and development 397 — — General and administrative 74 — — $ 1,131 $ — $ — Years Ended December 31, 2014 2013 2012 Revenues, net 100 % 100 % 100 % Cost of revenues 36 40 42 Gross profit 64 60 58 Operating expenses Sales and marketing 48 55 55 Research and development 29 27 24 General and administrative 21 22 23 Total operating expenses 98 104 101 Loss from operations (34 ) (44 ) (42 ) Interest expense — (1 ) (1 ) Other expenses, net — (1 ) (1 ) Loss before benefit from (provision for) income taxes (35 ) (46 ) (44 ) Benefit from (provision for) income taxes 1 (1 ) — Net loss (33 )% (46 )% (44 )% Table of Contents The following tables set forth our consolidated revenues by geographic area: Adjusted EBITDA Adjusted EBITDA is a financial measure that is not calculated in accordance with generally accepted accounting principles in the United States (GAAP). We define Adjusted EBITDA as net loss, adjusted for stock-based compensation expense, depreciation, the amortization of internally developed software, the amortization of intangible assets, the capitalization of internally developed software, interest expense, net, the benefit from or provision for income taxes, other income or expenses, net, and the non-recurring costs associated with acquisitions. Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP. We believe Adjusted EBITDA is useful to investors in evaluating our operating performance for the following reasons: We understand that, although Adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results of operations as reported under GAAP. These limitations include: 37 Years Ended December 31, 2014 2013 2012 (in thousands) Revenues, net by geography United States of America $ 65,745 $ 52,725 $ 43,429 International 33,609 24,590 16,129 Total revenues, net $ 99,354 $ 77,315 $ 59,558 Years Ended December 31, 2014 2013 2012 Revenues, net by geography United States of America 66 % 68 % 73 % International 34 32 27 Total revenues, net 100 % 100 % 100 % • Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance without regard to items, such as stock-based compensation expense, depreciation and amortization, capitalized software development costs, interest expense, net, benefit from or provision for income taxes, other income or expenses, net and non-recurring costs associated with acquisitions, that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired; • Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, including the preparation of our annual operating budget, as a measure of operating performance and the effectiveness of our business strategies and in communications with our board of directors concerning our financial performance; and • Adjusted EBITDA provides consistency and comparability with our past financial performance, facilitates period-to-period comparisons of operations and also facilitates comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. • Depreciation and amortization are non-cash charges, and the assets being depreciated or amortized will often have to be replaced in the future; Adjusted EBITDA does not reflect any cash requirements for these replacements; Table of Contents The following table presents a reconciliation of net loss, the most comparable GAAP measure, to Adjusted EBITDA for each of the periods indicated: Comparison of the Years Ended December 31, 2014 and 2013 Revenues Revenues increased $22.0 million, or 29%, for 2014 as compared to 2013. This increase was driven primarily by growth in revenues from both new and existing advertisers in all geographies as our ongoing investment in sales and marketing resources resulted in increased demand for our platform worldwide. During the year, we also began to generate revenues from advertisers who utilized our newly acquired display re-targeting functionalities. During 2014, we generated $13.4 million of revenue from new advertisers, and $8.6 million of additional revenue from our existing advertisers. We define a new advertiser as an advertiser from whom we earned revenue during the current fiscal period and from whom we did not earn any revenue during the immediately prior fiscal period. There were no customers that accounted for greater than 10% of our revenues in 2014 or 2013. Revenues in 2014 from the United States, United Kingdom and other international locations represented 66%, 10% and 24%, respectively, of revenues, and in 2013, revenues from the United States, United Kingdom and other international locations represented 68%, 9% and 23%, respectively, of revenues. 38 • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs or contractual commitments; • Adjusted EBITDA does not reflect cash requirements for income taxes and the cash impact of other income or expense; and • Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. Years Ended December 31, 2014 2013 2012 (in thousands) Net loss $ (33,171 ) $ (35,852 ) $ (26,482 ) Depreciation 5,669 4,722 2,642 Amortization of internally developed software 1,905 1,156 525 Amortization of intangible assets 1,131 — — Interest expense, net 177 453 520 (Benefit from) provision for income taxes (1,456 ) 492 221 EBITDA (25,745 ) (29,029 ) (22,574 ) Stock-based compensation expense 9,242 5,218 4,948 Capitalization of internally developed software (3,146 ) (3,216 ) (1,743 ) Acquisition related expenses 351 — — Other expenses, net 466 571 456 Adjusted EBITDA $ (18,832 ) $ (26,456 ) $ (18,913 ) Years Ended December 31, Change 2014 2013 $ % (dollars in thousands) Total revenues, net $ 99,354 $ 77,315 $ 22,039 29 % Table of Contents Cost of Revenues and Gross Margin Cost of revenues increased $4.5 million, or 14%, as compared to 2013. This primarily results from increases of $1.5 million in depreciation and amortization expense (related to internally developed software) and $1.2 million in hosting costs to support the increased use of our hosted platform, as well as an increase of $0.9 million in compensation and benefits expenses and $0.4 million of allocated overhead, resulting from an increase in the average number of global services and platform infrastructure personnel during 2014. Amortization of intangible assets acquired as part of the acquisition of Perfect Audience in June 2014 amounted to $0.4 million for the year ended December 31, 2014. Our gross margin increased to 64% during 2014 from 60% during 2013. This increase was due to the achievement of greater operational efficiency from personnel dedicated to our cloud infrastructure and global services precipitated by upgraded functionality and capabilities delivered by our engineering team. Sales and Marketing Sales and marketing expenses increased $4.9 million, or 11%, as compared to 2013. The increases were primarily due to an increase our average global sales and marketing headcount during 2014, contributing to an increase of $3.9 million in personnel-related costs, consisting primarily of increased employee compensation, benefits and travel costs associated with our sales force. The remaining $1.0 million increase during 2014 is primarily the result of an increase in allocated overhead of $0.6 million due to the growth in headcount relative to the rest of our company, and amortization expense of $0.3 million related to intangible assets acquired as part of the acquisition of Perfect Audience in June 2014. Research and Development Research and development expenses increased $8.0 million, or 39%, as compared to 2013. This primarily reflected an increase in average research and development headcount during 2014, resulting in an increase of $6.9 million in compensation expense. During 2014, allocated overhead increased $0.6 million due to the increase in headcount, and amortization of intangible assets acquired as part of the acquisition of Perfect Audience in June 2014 amounted to $0.4 million. 39 Years Ended December 31, Change 2014 2013 $ % (dollars in thousands) Cost of revenues $ 35,614 $ 31,109 $ 4,505 14 % Gross profit 63,740 46,206 17,534 38 Gross margin 64 % 60 % Years Ended December 31, Change 2014 2013 $ % (dollars in thousands) Sales and marketing $ 47,716 $ 42,799 $ 4,917 11 % Percent of revenues, net 48 % 55 % Years Ended December 31, Change 2014 2013 $ % (dollars in thousands) Research and development $ 28,751 $ 20,715 $ 8,036 39 % Percent of revenues, net 29 % 27 % Table of Contents General and Administrative General and administrative expenses increased $4.2 million, or 25%, respectively, as compared to 2013. Compensation, benefits and other employee-related expenses exclusive of stock-based compensation increased by $2.3 million, as we added employees to support the growth of our business. Professional fees and insurance expenses increased $1.0 million to support our global expansion and the acquisition of Perfect Audience in June 2014. Bad debt expense increased $0.5 million, which was relatively in line with the corresponding increase in sales from 2013 to 2014. We also incurred $0.3 million in costs directly related to the acquisition of Perfect Audience in June 2014. Other Expenses, Net and Interest Expense, Net Other expenses, net primarily consists of foreign currency transaction gains and losses. The decrease of $0.4 million, or 37%, in other expenses, net, and interest expense, net, during 2014 was primarily due to a decrease of $0.3 million in interest expense as we continued to pay down our long-term debt, partially offset by an increase of $0.2 million in foreign exchange losses due to the growth of our international operations and fluctuations in foreign currency exchange rates. Other expenses, net, during 2014 also excluded $0.2 million in losses resulting from the change in the fair value of freestanding preferred stock warrants incurred during 2013. Upon the consummation of the Company’s initial public offering (“IPO”), those warrants converted into warrants to purchase common stock and were reclassified from liabilities to additional paid-in capital. As a result, changes in their fair value are no longer recorded on the consolidated statement of comprehensive loss. Benefit from (Provision for) Income Taxes Benefit from income taxes for 2014 increased $1.9 million primarily due to a decrease in our valuation allowances of $2.3 million as a result of deferred tax liabilities recorded as part of our acquisition of Perfect Audience in June 2014. This increased benefit was partially offset by additional provision for income taxes due to increased profits generated in foreign jurisdictions by our wholly-owned subsidiaries. Comparison of the Years Ended December 31, 2013 and 2012 Revenues 40 Years Ended December 31, Change 2014 2013 $ % (dollars in thousands) General and administrative $ 21,257 $ 17,028 $ 4,229 25 % Percent of revenues, net 21 % 22 % Years Ended December 31, Change 2014 2013 $ % (dollars in thousands) Other expenses, net and interest expense, net $ (643 ) $ (1,024 ) $ (381 ) (37 )% Years Ended December 31, Change 2014 2013 $ % (dollars in thousands) Benefit from (provision for) income taxes $ 1,456 $ (492 ) $ 1,948 (396 )% Years Ended December 31, Change 2013 2012 $ % (dollars in thousands) Revenues $ 77,315 $ 59,558 $ 17,757 30 % Table of Contents Revenues increased $17.8 million, or 30%, for 2013 as compared to 2012. This increase was driven by growth in revenues from both new and existing advertisers in all geographies as our ongoing investment in sales and marketing resources resulted in increased demand for our platform worldwide. During 2013, we generated $11.1 million of revenue from new advertisers and $6.7 million of additional revenue from our existing advertisers. We define a new advertiser as an advertiser from whom we earned revenue during the current fiscal period and from whom we did not earn any revenue during the previous corresponding period. There were no customers that accounted for greater than 10% of our revenues in 2013 or 2012. Revenues in 2013 from the United States and international locations represented 68% and 32%, respectively, of revenues, and in 2012, revenues from the United States and international locations represented 73% and 27%, respectively, of revenues. Cost of Revenues and Gross Margin Cost of revenues increased $6.3 million, or 26%, as compared to 2012. This reflected an increase in the average number of global services and platform infrastructure personnel from 118 employees during 2012 to 135 employees during 2013, resulting in an increase of $2.7 million in compensation and benefits expenses and $0.1 million of allocated overhead. During 2013, we also experienced increases of $2.2 million in depreciation and amortization expense, $0.9 million in hosting costs, $0.3 million of equipment-related expenses, and $0.2 million of professional fees to support the increased use of our hosted platform. Our gross margin increased to 60% during 2013 from 58% during 2012. This increase was due to the achievement of greater operational efficiency from personnel dedicated to our cloud infrastructure and global services precipitated by upgraded functionality and capabilities delivered by our engineering team. Compensation for these personnel was 23% of revenues during 2013, as compared to 25% during 2012. Sales and Marketing Sales and marketing expenses increased $10.2 million, or 31%, as compared to 2012. The increases were primarily due to an increase our average global sales and marketing headcount from 123 employees during 2012 to 161 employees during 2013, contributing to an increase of $8.2 million in personnel-related costs, consisting primarily of increased employee compensation, benefits and travel costs associated with our sales force. Stock-based compensation during 2013 did not include $0.4 million in stock-based compensation incurred in 2012 directly attributable to the redemption of common shares from an employee for an amount above the fair value at the time of the redemption. Allocated overhead increased $0.8 million and recruiting fees increased $0.1 million, also due to the growth in headcount relative to the rest of our company. Marketing event and technology costs increased $0.7 million due to our continued marketing efforts and professional fees also increased $0.3 million during 2013. 41 Years Ended December 31, Change 2013 2012 $ % (dollars in thousands) Cost of revenues $ 31,109 $ 24,764 $ 6,345 26 % Gross profit 46,206 34,794 11,412 33 Gross margin 60 % 58 % Years Ended December 31, Change 2013 2012 $ % (dollars in thousands) Sales and marketing $ 42,799 $ 32,633 $ 10,166 31 % Percent of revenues, net 55 % 55 % Table of Contents Research and Development Research and development expenses increased $6.7 million, or 48%, as compared to 2012. This reflected an increase in average research and development headcount from 88 employees during 2012 to 130 employees during 2013, resulting in an increase of $4.9 million in compensation expense. Stock-based compensation for 2013 did not include $0.3 million in stock-based compensation incurred in 2012 directly attributable to the redemption of common shares from two employees for an amount above the fair value at the time of the redemption. Allocated overhead also increased $1.1 million due to the increase in headcount. Professional fees increased $0.3 million to supplement our employees’ efforts to enhance our software architecture. Recruiting, equipment, and travel expenses increased $0.3 million in total to support the opening of our new office in Shanghai. General and Administrative General and administrative expenses increased $3.6 million, or 27%, respectively, as compared to 2012. Included in this balance during 2012 is $1.9 million in stock-based compensation directly associated with the redemption of common shares from two employees for an amount above the fair value at the time of the redemption. As a result, stock-based compensation for general and administrative employees decreased $1.0 million during 2013. Excluding stock-based compensation, general and administrative expenses increased $4.6 million. Compensation, benefits and other employee-related expenses exclusive of stock-based compensation increased by $2.3 million, as we added employees to support the growth of our business and as we became a public company. Professional fees and insurance expenses increased $0.6 million and $0.4 million, respectively, to support our global expansion and as we completed our IPO and became a public company during the March 2013. Allocated overhead and recruiting fees increased $0.4 million and $0.2 million, respectively, to support our growth in headcount. Expenses for non-income based taxes increased $0.2 million as we became a public company. Banking fees also increased $0.2 million as we continued our international expansion. Other Expenses, Net Other expenses, net primarily consists of foreign currency transaction gains and losses and interest expense. Interest expense decreased $0.1 million in 2013, as we paid off the balance on our revolving line of credit. Foreign currency transaction losses increased $0.1 million due to the growth of our international operations. 42 Years Ended December 31, Change 2013 2012 $ % (dollars in thousands) Research and development $ 20,715 $ 14,014 $ 6,701 48 % Percent of revenues, net 27 % 24 % Years Ended December 31, Change 2013 2012 $ % (dollars in thousands) General and administrative $ 17,028 $ 13,432 $ 3,596 27 % Percent of revenues 22 % 23 % Years Ended December 31, Change 2013 2012 $ % (dollars in thousands) Other expenses, net ($ 1,024 ) ($ 976 ) ($ 48 ) 5 % Table of Contents Provision for Income Taxes Provision for income increased $0.3 million as a result of increased profits generated in foreign jurisdictions by our wholly-owned subsidiaries. Quarterly Results of Operations The following table sets forth our unaudited quarterly consolidated statements of operations data for each of the eight quarters in the period ended December 31, 2014. We have prepared the quarterly data on a basis consistent with our audited annual financial statements, including, in the opinion of management, all normal recurring adjustments necessary for the fair statement of the financial information contained in these statements. The historical results are not necessarily indicative of future results and should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. 43 Years Ended December 31, Change 2013 2012 $ % (dollars in thousands) Provision for income taxes $ 492 $ 221 $ 271 123 % Three Months Ended December 31, 2014 September 30, 2014 June 30, 2014 March 31, 2014 December 31, 2013 September 30, 2013 June 30, 2013 March 31, 2013 (in thousands) Revenues, net $ 27,002 $ 25,684 $ 23,853 $ 22,815 $ 21,829 $ 20,113 $ 18,218 $ 17,155 Cost of revenues (1)(2) 9,323 9,145 8,763 8,383 8,097 7,944 7,696 7,372 Gross profit 17,679 16,539 15,090 14,432 13,732 12,169 10,522 9,783 Operating expenses Sales and marketing (1)(2) 11,563 12,186 11,978 11,989 11,709 10,281 10,350 10,459 Research and development (1)(2) 8,217 7,824 6,627 6,083 5,660 5,072 4,904 5,079 General and administrative (1)(2) 5,791 5,682 5,368 4,416 4,273 4,681 4,026 4,048 Total operating expenses 25,571 25,692 23,973 22,488 21,642 20,034 19,280 19,586 Loss from operations (7,892 ) (9,153 ) (8,883 ) (8,056 ) (7,910 ) (7,865 ) (8,758 ) (9,803 ) Interest expense, net (16 ) (33 ) (62 ) (66 ) (78 ) (82 ) (109 ) (184 ) Other (expenses) income, net (385 ) 201 (286 ) 4 (66 ) (16 ) (81 ) (408 ) Loss before (provision for) benefit from income taxes (8,293 ) (8,985 ) (9,231 ) (8,118 ) (8,054 ) (7,963 ) (8,948 ) (10,395 ) (Provision for) benefit from income taxes (537 ) (259 ) 2,440 (188 ) (7 ) (230 ) (149 ) (106 ) Net loss $ (8,830 ) $ (9,244 ) $ (6,791 ) $ (8,306 ) $ (8,061 ) $ (8,193 ) $ (9,097 ) $ (10,501 ) Net loss per share available to common stockholders, basic and diluted $ (0.25 ) $ (0.27 ) $ (0.20 ) $ (0.25 ) $ (0.25 ) $ (0.25 ) $ (0.28 ) $ (1.43 ) (1) Stock-based compensation included in the consolidated statements of operations data above was as follows: Three Months Ended December 31, 2014 September 30, 2014 June 30, 2014 March 31, 2014 December 31, 2013 September 30, 2013 June 30, 2013 March 31, 2013 (in thousands) Cost of revenues $ 189 $ 173 $ 192 $ 211 $ 198 $ 239 $ 245 $ 205 Sales and marketing 513 530 449 403 301 349 361 293 Research and development 1,337 1,362 649 437 356 379 303 308 General and administrative 849 851 651 446 411 451 400 419 Total stock-based compensation $ 2,888 $ 2,916 $ 1,941 $ 1,497 $ 1,266 $ 1,418 $ 1,309 $ 1,225 Table of Contents The following table sets forth our consolidated results of operations for the specified periods as a percentage of our revenues for those periods. Percent of revenue figures are rounded and therefore may not subtotal exactly. Liquidity and Capital Resources Since our incorporation in March 2006, we have relied primarily on sales of our capital stock to fund our operating activities. From incorporation until our IPO, we raised $105.7 million, net of related issuance costs, in funding through private placements of our preferred stock. In March and April 2013, we raised net proceeds of $109.3 million in our IPO. From time to time, we have also utilized equipment lines to fund capital purchases. As of December 31, 2014, our principal sources of liquidity were our cash and cash equivalents of $68.3 million, access to borrowing under our fully available $15.0 million revolving credit facility and our capital lease arrangement. The approximate weighted average interest rate on our outstanding borrowings as of December 31, 2014, was 3.2%. Our primary operating cash requirements include the payment of compensation and related costs, as well as costs for our facilities and information technology infrastructure. We also have an outstanding irrevocable letter of credit for $1.3 million related to the non-cancelable lease for our corporate headquarters in San Francisco, California. We presently maintain minimal cash balances in our foreign subsidiaries. As of December 31, 2014, we had $68.3 million of cash and cash equivalents, of which only $7.4 million was held by our foreign subsidiaries. In 44 (2) Amortization of intangible assets included in the consolidated statements of operations data above was as follows: Three Months Ended December 31, 2014 September 30, 2014 June 30, 2014 March 31, 2014 December 31, 2013 September 30, 2013 June 30, 2013 March 31, 2013 (in thousands) Cost of revenues $ 171 $ 171 $ 57 $ — $ — $ — $ — $ — Sales and marketing 112 112 37 — — — — — Research and development 170 170 57 — — — — — General and administrative 32 32 10 — — — — — Total amortization of intangible assets $ 485 $ 485 $ 161 $ — $ — $ — $ — $ — Three Months Ended December 31, 2014 September 30, 2014 June 30, 2014 March 31, 2014 December 31, 2013 September 30, 2013 June 30, 2013 March 31, 2013 (as a % of revenues, net) Revenues, net 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % Cost of revenues 35 36 37 37 37 39 42 43 Gross profit 65 64 63 63 63 61 58 57 Operating expenses Sales and marketing 43 48 50 53 54 51 57 61 Research and development 30 30 28 27 26 25 27 30 General and administrative 21 22 23 19 20 23 22 24 Total operating expenses 95 100 101 99 100 99 106 115 Loss from operations (29 ) (36 ) (38 ) (36 ) (36 ) (38 ) (48 ) (58 ) Interest expense, net — — — — — — (1 ) (1 ) Other (expenses) income, net (1 ) 1 (1 ) — — — — (2 ) Loss before (provision for) benefit from income taxes (31 ) (35 ) (39 ) (36 ) (37 ) (38 ) (49 ) (61 ) (Provision for) benefit from income taxes (2 ) (1 ) 10 (1 ) — (1 ) (1 ) (1 ) Net loss (33 )% (36 )% (29 )% (37 )% (37 )% (39 )% (50 )% (62 )% Table of Contents the future, we plan to increase the invoicing and remittance of proceeds from our international operations in our foreign subsidiaries’ bank accounts. We plan to re-invest the cash earned by our foreign subsidiaries to finance the growth of our foreign operations. Based on our current level of operations and anticipated growth, we believe that our existing cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months. Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities, and the timing and extent of spending to support product development efforts and expansion into new territories and the timing of introductions of new features and enhancements to our platform. Although we are not currently a party to any agreement or letter of intent with respect to potential investments in, or acquisitions of complementary businesses, services or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity financing or use our cash resources. We have no present understandings, commitments or agreements to enter into any such acquisitions. To the extent that existing cash and cash equivalents are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing. Summary of Cash Flows The following table sets forth a summary of our cash flows for the periods indicated: Operating Activities Cash used in operating activities is primarily influenced by the amount of cash we invest in personnel and infrastructure to support the anticipated growth of our business and the increase in the number of advertisers using our platform. Cash used in operating activities has typically been affected by net losses and further increased by changes in our operating assets and liabilities, particularly in the areas of accounts receivable, prepaid expenses and other current assets, deferred revenue, accounts payable and accrued expenses and other current liabilities, adjusted for non-cash expense items such as depreciation, amortization, stock-based compensation expense and deferred income tax benefits. Cash used in operating activities in 2014 of $24.4 million was primarily the result of a net loss of $33.2 million; a $7.7 million net change in working capital items (exclusive of changes due to net liabilities assumed from the acquisition of Perfect Audience in June 2014), most notably an increase in accounts receivable of $4.6 million due to the increase in sales and the timing of related collections; an increase in prepaid expenses and other current assets, and other (noncurrent) assets, of $2.5 million related to the growth of our operations and timing of related disbursements; a decrease in deferred revenues of $0.5 million related to the timing of the collection of minimum fees at the start of our subscription agreements; and a net decrease in accounts payable and accrued expenses and other current and noncurrent liabilities of $0.1 million due to the timing of related disbursements and customer advances. This was partially offset by non-cash expenses of $16.5 million, which included depreciation, amortization, stock-based compensation expense and deferred income tax benefits, which increased primarily due to capital expenses and headcount growth, primarily related to continued investment in our business, as well as the acquisition of Perfect Audience. 45 Years Ended December 31, 2014 2013 2012 (in thousands) Net cash used in operating activities $ (24,390 ) $ (23,397 ) $ (19,095 ) Net cash used in investing activities (12,614 ) (8,239 ) (7,250 ) Net cash provided by financing activities 850 104,503 56,166 Net (decrease) increase in cash and cash equivalents $ (36,154 ) $ 72,867 $ 29,821 Table of Contents Cash used in operating activities in 2013 of $23.4 million was the result of a net loss of $35.9 million, partially offset by non-cash expenses of $12.0 million, which included depreciation, amortization and stock-based compensation expense. These non-cash expenses increased due to capital expenses and headcount growth, primarily related to continued investment in our business. These uses of funds were offset by a $0.5 million net change in working capital items, most notably an increase in deferred revenue of $1.9 million due to our efforts to invoice the total minimum fees due under the term of our subscription agreements at the start of the agreement, and an increase in accrued liabilities of $2.2 million, related to the growth of our operations and timing of related disbursements. These working capital changes were partially offset by a $0.9 million increase in prepaid expenses and other current assets and a $2.4 million increase in accounts receivable, also related to the growth of our operations and timing of related disbursements. Cash used in operating activities in 2012 of $19.1 million was the result of a net loss of $26.5 million, offset by non-cash expenses of $9.1 million, which included depreciation, amortization and stock-based compensation expense. These non-cash expenses increased due to capital expenses and headcount growth, primarily related to continued investment in our business. The remaining use of funds of $1.7 million was from the net change in working capital items, most notably an increase in accounts receivable of $3.7 million resulting from our revenue growth and an increase in prepaid expenses and other current assets of $0.6 million primarily related to the timing of payments for insurance premiums and software subscriptions. These were partially offset by an increase in accounts payable and accrued liabilities of $2.6 million, related to the growth of our operations and timing of related disbursements. Investing Activities During 2014, 2013 and 2012, investing activities consisted of purchases of property and equipment, including technology hardware and software to support our growth as well as capitalized internally developed software costs. Purchases of property and equipment may vary from period-to-period due to the timing of the expansion of our operations and the development cycles of our internally developed hosted software platform. We expect to continue to invest in property and equipment and developing our software platform for the foreseeable future. Investing activities during 2014 are also inclusive of cash paid for the acquisition of Perfect Audience of $5.3 million, net of cash acquired of $1.1 million. Financing Activities Cash provided by financing activities in 2014 was $0.9 million. This was primarily related to $3.9 million of proceeds from the exercise of stock options and contributions to our employee stock purchase plan, partially offset by $3.1 million in net repayments under our credit facility and capital lease arrangement. Cash provided by financing activities in 2013 was $104.5 million. This consisted of proceeds from our IPO, net of paid offering costs, of $109.4 million as well as $3.0 million of proceeds from the exercise of stock options and contributions to our employee stock purchase plan. These amounts were partially offset by $8.0 million in net repayments under our credit facility and capital lease arrangement. Cash provided by financing activities in 2012 was $56.2 million. This consisted of $54.2 million of net proceeds from the issuance of our Series F and F-1 preferred stock, net borrowings under our credit facility of $4.3 million during this period, and $2.1 million of proceeds from the exercise of stock options and issuance of common stock. These inflows were partially offset by $4.5 million paid to redeem common stock during the period and $0.1 million paid for direct costs associated with our IPO. 46 Table of Contents Contractual Obligations and Commitments Our principal commitments consist of obligations under operating leases for office space and our data center as well as debt obligations under our credit facilities with Silicon Valley Bank. As of December 31, 2014, the future minimum payments under these commitments, as well as obligations under our credit facilities, were as follows: The amounts in the table above are associated with agreements that are enforceable and legally binding, which specify significant terms including payment terms, related services and the approximate timing of the transaction. Purchase obligations under contracts that we can cancel without a significant penalty are not included in the table. During the ordinary course of business, we include indemnification provisions within certain of our contracts. Pursuant to these arrangements, we may be obligated to indemnify, hold harmless and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally parties with which we have commercial relations, in connection with certain intellectual property infringement claims by any third party with respect to our software. To date, there have not been any costs incurred in connection with such indemnification arrangements and therefore, there is no accrual for such amounts as of December 31, 2014. In addition to the obligations in the table above, we have approximately $0.1 million of unrecognized tax benefits that have been recorded as liabilities as of December 31, 2014. It is uncertain as to if or when such amounts may be settled. Off-Balance Sheet Arrangements During the periods presented, we did not have, nor do we currently 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. We are therefore not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships. We have no obligations that meet the definition of an off-balance sheet arrangement as of December 31, 2014, other than operating leases and a standby letter of credit, as described in the Notes to the Consolidated Financial Statements. Critical Accounting Policies and Significant Judgments and Estimates Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. 47 Payments Due By Period Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years (in thousands) Debt obligations $ 3,239 $ 2,587 $ 652 $ — $ — Interest expense payments 34 33 1 — — Operating leases 35,796 6,278 17,824 9,862 1,832 Total $ 39,033 $ 8,898 $ 18,478 $ 9,862 $ 1,832 Table of Contents We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations for future periods could be materially affected. See “Risk Factors” for certain matters that may affect these estimates or our future financial condition or results of operations. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if the changes in estimate that are reasonably likely to occur could materially impact the financial statements. Our significant accounting policies are described in Note 2 to the Consolidated Financial Statements included in this Annual Report on Form 10-K, and we believe that the accounting policies discussed below involve the greatest degree of complexity and exercise of judgment by our management. The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on our results of operations and, accordingly, we believe the policies described below are the most critical for understanding and evaluating our financial condition and results of operations. Revenue Recognition We generate revenues principally from subscriptions either directly with advertisers or with advertising agencies to our platform for the management of search, display and social advertising. Our subscription agreements are generally one year or longer in length. The subscription fee under most contracts is variable based on the value of the advertising spend that our advertisers manage through our platform and is generally invoiced on a monthly basis. Contracts with direct advertisers and certain contracts with advertising agencies also include a minimum monthly fee that is payable over the duration of the contract. Our customers do not have the right to take possession of the software supporting the application service at any time, nor do the arrangements contain general rights of return. We commence revenue recognition for both direct advertisers and advertising agencies when all of the following conditions are met: We recognize the total minimum fee for both direct advertisers and advertising agencies, where applicable, over the duration of the contract, commencing on the date that our platform is made available to the customer, provided revenues recognized do not exceed amounts that are invoiced and due. The variable fee, which is based on a percentage of the value of the advertising spend managed through our platform, is recognized once the amount is fixed or determinable, which is generally on a monthly basis concurrent with the issuance of the customer invoice. Signed contracts are used as evidence of an arrangement. We assess collectability based on a number of factors such as past collection history with the customer and creditworthiness of the customer. Certain agreements with advertising agencies also contain sequential liability provisions, which provide that the agency has no obligation to pay us until the agency receives payment from its customers. In these circumstances, we evaluate the credit worthiness of the agency’s customers, in addition to the agency itself, to conclude whether or not collectability is reasonably assured. If we determine collectability is not reasonably assured, we defer the revenue recognition until collectability becomes reasonably assured. In October 2009, the Financial Accounting Standards Board (“FASB”) ratified authoritative accounting guidance regarding revenue recognition for arrangements with multiple deliverables effective for fiscal periods beginning on or after June 15, 2010. We adopted the new guidance on a prospective basis for fiscal 2011. 48 • persuasive evidence of an arrangement exists; • our platform is made available to the customer; • the fee is fixed or determinable, and; • collection is reasonably assured. Table of Contents Professional services and training, when sold with our platform subscription services, are accounted for separately when those services have standalone value. In determining whether professional services and training services can be accounted for separately from subscription services, we consider the following factors: availability of the services from other vendors; the nature of the services; the dependence of the subscription services on the customer’s decision to buy the professional services; and whether we sell the subscription services without professional services. If the deliverables have stand-alone value, we account for each deliverable separately and revenues are recognized for the respective deliverables as they are delivered. If one or more of the deliverables do not have stand-alone value, the deliverables that do not have stand-alone value are combined with the final deliverables within the arrangement and treated as a single unit of accounting. Revenues for arrangements treated as a single unit of accounting are recognized over the period of the contract commencing upon delivery of the final deliverable. As of December 31, 2014, we did not have stand-alone value for the professional services and training services. This is because we include professional services and training services with our subscription services and those services are not available from other vendors. Stock-Based Compensation We measure and recognize expense for stock-based compensation based on the grant date fair value of the award and generally recognize the expense, net of estimated forfeitures, on a straight-line basis over the requisite service period. Prior to our IPO, we estimated the fair value of our common stock for purposes of determining the fair value of our option awards. Subsequent to the IPO, we use the closing stock price on the date of grant. Determining the fair value of stock-based awards at the grant date requires judgment. We use the Black-Scholes option pricing model to determine the fair value of our stock option awards. The determination of the grant date fair value of our stock option awards using an option pricing model is affected by the estimated fair value per share of the common stock underlying those options as well as assumptions regarding a number of other complex and subjective variables. These variables include our expected stock price volatility over the expected term of the options, stock option exercise and cancellation behaviors, risk-free interest rates and expected dividends, which are estimated as follows: 49 • Expected Volatility . As our common stock has been publicly traded less than two years, there is a lack of Company-specific historical and implied volatility data. Accordingly, we have estimated the expected stock price volatility for our common stock by taking the average historic price volatility for industry peers based on daily price observations over a period equivalent to the expected term of the stock option grants. Industry peers consist of public companies in the technology industry, primarily in the subscription software business. We intend to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own common stock share price becomes available, or unless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation. • Risk-Free Interest Rate . The risk-free interest rate assumption used is based on observed market interest rates appropriate for the expected term of employee options. • Expected Term . We estimated the expected term for a “plain vanilla” option using the simplified method allowed under current guidance, which uses the midpoint between the graded vesting period and the contractual termination date since we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. • Dividend Yield . We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero. Table of Contents We used the following assumptions in our application of the Black-Scholes option pricing model for the periods presented in the table below: In addition, stock-based compensation guidance requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We apply an estimated forfeiture rate based on our historical forfeiture experience. Future expense amounts for any particular period could be affected by changes in our assumptions or changes in market conditions. Stock-based compensation expense included in the consolidated financial statement line items is as follows: Costs for equity instruments issued in exchange for the receipt of goods or services from non-employees are measured at the fair market value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of the date on which there first exists a firm commitment for performance by the provider of goods or services or on the date performance is complete, using the Black-Scholes option pricing model. Prior to our IPO, we were required to estimate the fair value of the common stock underlying our share-based awards when performing the fair value calculations with the Black-Scholes option-pricing model. The fair value of the common stock underlying our share-based awards was determined by our board of directors, with input from management and contemporaneous third-party valuations. Our board of directors determined the fair value of our common stock on the date of grant based on a number of factors including: 50 Years Ended December 31, 2014 2013 2012 Dividend yield 0 % 0 % 0 % Expected volatility 51 % 55 % 57 % Risk-free interest rate 1.89 % 1.27 % 0.95 % Expected term (in years) 6.25 6.25 6.25 Years Ended December 31, 2014 2013 2012 (in thousands) Cost of revenues $ 765 $ 887 $ 439 Sales and marketing 1,895 1,304 1,005 Research and development 3,785 1,346 831 General and administrative 2,797 1,681 2,673 $ 9,242 $ 5,218 $ 4,948 • our performance, growth rate and financial condition at the approximate time of the option grant; • the value of companies that we consider peers based on a number of factors including, but not limited to, similarity to us with respect to industry, business model, stage of growth, financial risk or other factors; • changes in our business and our prospects since the last time the board approved option grants and made a determination of fair value; • amounts recently paid by investors for our convertible preferred stock in arm’s-length transactions; • the rights, preferences and privileges of preferred stock relative to those of our common stock; Table of Contents In valuing our common stock, our board of directors determined the equity value of our business generally using the income approach and market comparable approach valuation methods. When applicable, due to a recent preferred stock offering, the prior sale of company stock method was also utilized. The income approach estimates value based on the expectation of future cash flows that a company will generate, such as cash earnings, cost savings, tax deductions and the proceeds from a disposition. These future cash flows are discounted to their present values using a discount rate derived from an analysis of the cost of capital of comparable publicly traded companies in our industry or similar lines of business as of each valuation date and is adjusted to reflect the risks inherent in our cash flows. In addition, we also considered an appropriate discount adjustment to recognize the lack of marketability due to being a closely held entity. The market comparable approach estimates value based on a comparison of the subject company to comparable public companies in a similar line of business. From the comparable companies, a representative market value multiple is determined and then applied to the subject company’s operating results to estimate the value of the subject company. In our valuations, the multiple of the comparable companies was determined using a ratio of the market value of invested capital less cash to each of the last twelve month revenues and the forecasted future twelve month revenues. The estimated value was then discounted by a non-marketability factor due to the fact that stockholders of private companies do not have access to trading markets similar to those enjoyed by stockholders of public companies which impacts liquidity. To determine our peer group of companies, we considered public enterprise cloud-based application providers and selected those that are similar to us in size, stage of life cycle and financial leverage. The prior sales of company stock method estimates value by considering any prior arm’s length sales of the subject company’s equity. When considering prior sales of the company’s equity, the valuation considers the size of the equity sale, the relationship of the parties involved in the transaction, the timing of the equity sale, and the financial condition of the company at the time of the sale. Income Taxes As a result of our current net operating loss position in the United States, income tax expense consists primarily of corporate income taxes resulting from profits generated in foreign jurisdictions by wholly-owned subsidiaries, along with state income taxes payable in the United States. As we have incurred operating losses in all periods to date and recorded a full valuation allowance against our deferred tax assets (except for deferred tax assets associated with our subsidiary in the United Kingdom), we have not historically recorded a provision for federal income taxes. Realization of any of our deferred tax assets depends upon future earnings, the timing and amount of which are uncertain. We consider all available evidence, both positive and negative, in assessing the extent to which a valuation allowance should be applied against our deferred tax assets. Utilization of our net operating losses may be subject to substantial annual limitation due to the ownership change limitations provided by the Code and similar state provisions. An analysis was conducted through December 31, 2014, to determine whether an ownership change had occurred since inception. The analysis indicated that because an ownership change occurred in a prior year, $0.2 million of each of our federal and state net operating losses were significantly limited pursuant to IRC Section 382. In the event we have subsequent changes in ownership or profitability is delayed, net operating losses and research and development credit carryovers could be further limited and may expire unutilized. Allowance for Doubtful Accounts We assess collectability based on a number of factors, including credit worthiness of the customer along with past transaction history; in addition, we perform periodic evaluations of our customers’ financial condition. 51 • future financial projections; and • valuation analyses. Table of Contents Certain contracts with advertising agencies contain sequential liability provisions, where the agency does not have an obligation to pay until payment is received from the agency’s customers. In these circumstances, we evaluate the credit worthiness of the agency’s customers, in addition to the agency itself. Credit losses historically have not been material, which is directly attributable to our subscription-based services model, enabling us to immediately discontinue the availability of the services in question in the event of non-payment. Through December 31, 2014, we have not experienced any significant credit losses. Business Combinations In accordance with authoritative business combination accounting guidance, we allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets acquired and liabilities assumed is recorded as goodwill. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of comprehensive loss. Accounting for business combinations requires our management to make significant estimates and assumptions, especially at the acquisition date, particularly our estimates for intangible assets, contractual obligations assumed, restructuring liabilities, pre-acquisition contingencies and contingent consideration, where applicable. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired company and are inherently uncertain. Examples of critical estimates in valuing certain of the intangible assets we have acquired include but are not limited to: Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. For a given acquisition, we may identify certain pre-acquisition contingencies as of the acquisition date and may extend our review and evaluation of these pre-acquisition contingencies throughout the measurement period in order to obtain sufficient information to assess whether we include these contingencies as a part of the fair value estimates of assets acquired and liabilities assumed and, if so, to determine their estimated amounts. If we cannot reasonably determine the fair value of a pre-acquisition contingency (non-income tax related) by the end of the measurement period, which is generally the case given the nature of such matters, we will recognize an asset or a liability for such pre-acquisition contingency if: (i) it is probable that an asset existed or a liability had been incurred at the acquisition date and (ii) the amount of the asset or liability can be reasonably estimated. Subsequent to the measurement period, changes in our estimates of such contingencies will affect earnings and could have a material effect on our results of operations and financial position. In addition, uncertain tax positions and tax related valuation allowances assumed in connection with a business combination are initially estimated as of the acquisition date. We reevaluate these items quarterly based 52 • future expected cash flows from customer relationships and developed technology; • the acquired company’s brand and competitive position, as well as assumptions about the period of time the acquired brand will continue to be used in the combined company’s product portfolio; and • discount rates; Table of Contents upon facts and circumstances that existed as of the acquisition date with any adjustments to our preliminary estimates being recorded to goodwill if identified within the measurement period. Subsequent to the measurement period or our final determination of the tax allowance’s or contingency’s estimated value, whichever comes first, changes to these uncertain tax positions and tax related valuation allowances will affect our provision for income taxes in our consolidated statements of comprehensive loss and could have a material impact on our results of operations and financial position. Goodwill, Intangible Assets and Other Long-Lived Assets – Impairment Assessments We review goodwill for impairment annually and whenever events or changes in circumstances indicate its carrying value may not be recoverable in accordance with authoritative accounting guidance. For the purposes of impairment testing, we have determined that we have one reporting unit. We perform the two-step impairment test, whereby we compare the fair value of each reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not considered impaired and we are not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference. No impairment has been noted to date. We periodically review the carrying amounts of intangible assets and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. We measure the recoverability of these assets by comparing the carrying amount of such assets (or asset group) to the future undiscounted cash flow we expect the assets (or asset group) to generate. If we consider any of these assets to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair value. We make judgments about the recoverability of purchased intangible assets whenever events or changes in circumstances indicate that an impairment may exist. Each period we evaluate the estimated remaining useful lives of intangible assets and other long-lived assets to assess whether a revision to the remaining periods of amortization is required. Assumptions and estimates about remaining useful lives of our intangible and other long-lived assets are subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends and internal factors such as changes in our business strategy. Although we believe the historical assumptions and estimates we have made are reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results. We did not recognize any intangible asset impairment charges to date. Recent Accounting Pronouncements See “Note 2 – Summary of Significant Accounting Policies” to the consolidated financial statements included in this Annual Report on Form 10-K, regarding the impact of certain recent accounting pronouncements on our consolidated financial statements. We have operations both within the United States and internationally and we are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate, foreign exchange and inflation risks, as well as risks relating to changes in the general economic conditions in the countries where we conduct business. To reduce certain of these risks, we monitor the financial condition of our large customers and limit credit exposure by setting credit limits as we deem appropriate. In addition, our investment strategy has been to invest in financial instruments that are highly liquid and readily convertible into cash, with maturity dates within three months from the date of purchase. To date, we have not used derivative instruments to mitigate the impact of our market risk exposures. We have also not used, nor do we intend to use, derivatives for trading or speculative purposes. 53 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk. Table of Contents Interest Rate Risk We are exposed to market risk related to changes in interest rates. Our investments are considered cash equivalents and primarily consist of money market funds. As of December 31, 2014, we had cash and cash equivalents of $68.3 million. The carrying amount of our cash and cash equivalents reasonably approximates fair value, due to the short maturities of these investments. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs and the fiduciary control of cash and investments. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair market value of our investments. Due to the short-term nature of our investment portfolio, we believe only dramatic fluctuations in interest rates would have a material effect on our investments. As such we do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates. As of December 31, 2014 we had borrowings outstanding in the aggregate of $3.2 million. Our outstanding long-term borrowings consist of fixed and variable interest rate financial instruments. The interest rates of our borrowings range from 3.0% to 6.0%. A hypothetical 10% increase or decrease in interest rates relative to our current interest rates would not have a material impact on the fair values of all of our outstanding borrowings. Changes in interest rates would, however, affect operating results and cash flows, because of the variable rate nature of our borrowings. A hypothetical 10% increase or decrease in interest rates relative to interest rates as of December 31, 2014 would result in an insignificant impact to interest expense for 2015. Foreign Currency Exchange Risk We have foreign currency risks related to our revenues and operating expenses denominated in currencies other than the U.S. dollar, primarily the euro, British pound sterling, Canadian dollar, Singapore dollar, Japanese yen, Chinese yuan, and Australian dollar. Revenues outside of the United States as a percentage of consolidated revenues were 34%, 32% and 27% during 2014, 2013 and 2012, respectively. Changes in exchange rates may negatively affect our revenues and other operating results as expressed in U.S. dollars. Aggregate foreign currency losses included in determining net loss were $0.5 million, $0.3 million and $0.1 million during 2014, 2013 and 2012, respectively. Transaction gains and losses are included in other expenses, net. As our international operations grow, our risks associated with fluctuation in currency rates will become greater, and we will continue to reassess our approach to managing this risk. In addition, currency fluctuations or a weakening U.S. dollar can increase the costs of our international expansion, while a strengthening U.S. dollar can negatively impact our international revenues. To date, we have not entered into any foreign currency hedging contracts, since exchange rate fluctuations have not had a material impact on our operating results and cash flows. Based on our current international structure, we do not plan on engaging in hedging activities in the near future. Inflation Risk We do not believe that inflation has had a material effect on our business, financial condition or results of operations. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations. The information in response to this item is included in our consolidated financial statements, together with the report thereon of PricewaterhouseCoopers LLP, beginning on page F-1 of this Annual Report on Form 10-K, and in Item 7 under the heading Management’s Discussion and Analysis of Financial Condition and Results of Operations. 54 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Table of Contents None. Evaluation of Disclosure Controls and Procedures Regulations under the Securities Exchange Act of 1934 (“Exchange Act”) require public companies, including us, to maintain “disclosure controls and procedures,” which are defined in Rule 13a-15(e) and Rule 15d-15(e) to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required or necessary disclosures. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. Our principal executive officer and principal financial officer have concluded, based on the evaluation of the effectiveness of the disclosure controls and procedures by our management as of December 31, 2014, that our disclosure controls and procedures were effective at the reasonable assurance level for this purpose. Management’s Annual Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management, with the participation of our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework , management concluded that our internal control over financial reporting was effective as of December 31, 2014. 55 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ITEM 9A. CONTROLS AND PROCEDURES Table of Contents Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarterly period ended December 31, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. None. PART III The information required by this item concerning our directors, executive officers, Section 16 compliance and corporate governance matters will be set forth under the headings “Directors and Executive Officers” and “Section 16(a) Beneficial Ownership Compliance” in the Proxy Statement and is incorporated into this report by reference. The information required by this item regarding executive compensation will be set forth under the headings “Executive Compensation” in the Proxy Statement and is incorporated into this report by reference. The information required by this item regarding security ownership of certain beneficial owners and management and related stockholder matters will be set forth under the headings “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement and is incorporated into this report by reference. The information required by this item regarding related party transactions and director independence will be set forth under the headings “Board of Directors and Committees of the Board,” “Related Party Transactions” in the Proxy Statement and is incorporated into this report by reference. The information required by this item regarding principal accounting fees and services will be set forth under the headings “Ratification of Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement and is incorporated into this report by reference. PART IV (a) (1) Financial Statements The list of consolidated financial statements and schedules set forth in the accompanying Index to the Consolidated Financial Statements at page F-1 of this annual report is incorporated herein by reference. Such consolidated financial statements and schedules are filed as part of this annual report. 56 ITEM 9B. OTHER INFORMATION ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ITEM 11. EXECUTIVE COMPENSATION ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES Table of Contents (2) Financial Statement Schedules The schedule required by this item is included in Note 2 to the Consolidated Financial Statements. All other financial statement schedules are not required or are inapplicable and therefore have been omitted. (b) (3) Exhibits The exhibits listed on the accompanying Index to Exhibits in Item 15(b) below are filed or incorporated by reference as part of this Annual Report on Form 10-K. See Exhibit Index immediately following the Signature Pages. 57 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1 Page Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Comprehensive Loss F-4 Consolidated Statements of Convertible Preferred Stock and Stockholders’ (Deficit) Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Marin Software Incorporated In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of comprehensive loss, convertible preferred stock and stockholders’ (deficit) equity and cash flows present fairly, in all material respects, the financial position of Marin Software Incorporated at December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. 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 of these statements 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. An audit 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, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP San Jose, California February 20, 2015 F-2 Table of Contents Marin Software Incorporated Consolidated Balance Sheets (dollars and share numbers in thousands, except per share data) The accompanying notes are an integral part of these consolidated financial statements. F-3 December 31, 2014 2013 Assets Current assets Cash and cash equivalents $ 68,253 $ 104,407 Accounts receivable, net 18,726 14,921 Prepaid expenses and other current assets 4,751 2,695 Total current assets 91,730 122,023 Property and equipment, net 16,274 14,417 Goodwill 11,527 — Intangible assets, net 7,399 — Other noncurrent assets 1,287 937 Total assets $ 128,217 $ 137,377 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 3,737 $ 1,018 Accrued expenses and other current liabilities 12,053 10,950 Deferred revenues 2,052 2,566 Current portion of long-term debt 2,587 3,253 Total current liabilities 20,429 17,787 Long-term debt, less current portion 621 2,962 Other long-term liabilities 1,050 1,284 Total liabilities 22,100 22,033 Commitments and contingencies (Note 15) Stockholders’ equity Common stock, $0.001 par value – 500,000 and 36,000 shares authorized, 35,846 and 33,133 shares issued, 35,181, and 32,953 outstanding at December 31, 2014 and December 31, 2013, respectively 35 33 Additional paid-in capital 253,221 228,512 Accumulated deficit (146,392 ) (113,201 ) Accumulated other comprehensive loss (747 ) — Total stockholders’ equity 106,117 115,344 Total liabilities and stockholders’ equity $ 128,217 $ 137,377 Table of Contents Marin Software Incorporated Consolidated Statements of Comprehensive Loss (dollars and share numbers in thousands, except per share data) The accompanying notes are an integral part of these consolidated financial statements. F-4 Years Ended December 31, 2014 2013 2012 Revenues, net $ 99,354 $ 77,315 $ 59,558 Cost of revenues 35,614 31,109 24,764 Gross profit 63,740 46,206 34,794 Operating expenses Sales and marketing 47,716 42,799 32,633 Research and development 28,751 20,715 14,014 General and administrative 21,257 17,028 13,432 Total operating expenses 97,724 80,542 60,079 Loss from operations (33,984 ) (34,336 ) (25,285 ) Interest expense, net (177 ) (453 ) (520 ) Other expenses, net (466 ) (571 ) (456 ) Loss before benefit from (provision for) income taxes (34,627 ) (35,360 ) (26,261 ) Benefit from (provision for) income taxes 1,456 (492 ) (221 ) Net loss (33,171 ) (35,852 ) (26,482 ) Foreign currency translation adjustments (747 ) — — Comprehensive loss $ (33,918 ) $ (35,852 ) $ (26,482 ) Net loss per share available to common stockholders, basic and diluted $ (0.97 ) $ (1.36 ) $ (6.00 ) Weighted-average shares used to compute net loss per share available to common stockholders, basic and diluted 34,210 26,312 4,417 Stock-based compensation is allocated as follows (Note 11): Cost of revenues $ 765 $ 887 $ 439 Sales and marketing 1,895 1,304 1,005 Research and development 3,785 1,346 831 General and administrative 2,797 1,681 2,673 Amortization of intangible assets is allocated as follows (Note 5): Cost of revenues $ 399 $ — $ — Sales and marketing 261 — — Research and development 397 — — General and administrative 74 — — Table of Contents Marin Software Incorporated Consolidated Statements of Convertible Preferred Stock and Stockholders’ (Deficit) Equity (dollars and share numbers in thousands, except per share data) The accompanying notes are an integral part of these consolidated financial statements. F-5 Convertible Preferred Stock Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Compre- hensive Loss Total Stockholders’ (Deficit) Equity Shares Amount Shares Amount Balances at December 31, 2011 14,470 $ 51,514 4,439 $ 5 $ 2,454 $ (50,867 ) $ — $ (48,408 ) Issuance of Series F preferred stock for cash, net of issuance costs of $194 2,805 34,294 — — — — — — Issuance of Series F-1 preferred stock for cash, net of issuance costs of $98 1,478 19,902 — — — — — — Issuance of common stock from exercise of vested stock options and vesting of options subject to repurchase — — 500 — 759 — — 759 Issuance of common stock from stock purchase agreements — — 84 — 500 — — 500 Redemption of common stock — — (365 ) — (4,488 ) — — (4,488 ) Stock-based compensation expense — — — — 4,948 — — 4,948 Compensation expense from issuance of warrants — — — — 60 — — 60 Issuance of warrants in connection with debt agreement — — — — 213 — — 213 Stock-based compensation tax benefits — — — — 192 — — 192 Net loss — — — — — (26,482 ) — (26,482 ) Balances at December 31, 2012 18,753 105,710 4,658 5 4,638 (77,349 ) — (72,706 ) Issuance of common stock in connection with initial public offering, net of issuance costs of $11,451 — — 8,625 8 109,299 — — 109,307 Conversion of convertible preferred stock into common stock (18,753 ) (105,710 ) 18,753 19 105,691 — — 105,710 Conversion of warrant to purchase convertible preferred stock into warrant to purchase common stock — — — — 745 — — 745 Issuance of common stock from exercise of vested stock options and vesting of options subject to repurchase — — 725 1 1,648 — — 1,649 Issuance of common stock from cashless exercise of warrants — — 68 — — — — — Issuance of common stock under employee stock purchase plan — — 146 — 1,231 — — 1,231 Stock-based compensation expense — — — — 5,218 — — 5,218 Repurchase of unvested shares — — (22 ) — (77 ) — — (77 ) Stock-based compensation tax benefits — — — — 119 — — 119 Net loss — — — — — (35,852 ) — (35,852 ) Balances at December 31, 2013 — — 32,953 33 228,512 (113,201 ) — 115,344 Issuance of common stock from exercise of vested stock options and vesting of options and shares subject to repurchase — — 938 — 2,841 — — 2,841 Issuance of common stock under employee stock purchase plan — — 178 — 1,402 — — 1,402 Issuance of unrestricted common stock in connection with acquisition of NowSpots Inc. — — 1,119 2 11,193 — — 11,195 Transaction costs incurred in connection with acquisition of NowSpots Inc. — — — — (52 ) — — (52 ) Stock-based compensation expense — — — — 9,242 — — 9,242 Repurchase of unvested shares — — (7 ) — (20 ) — — (20 ) Stock-based compensation tax benefits — — — — 126 — — 126 Net loss — — — — — (33,171 ) — (33,171 ) Foreign currency translation adjustments and other, net — — — — (23 ) (20 ) (747 ) (790 ) Balances at December 31, 2014 — $ — 35,181 $ 35 $ 253,221 $ (146,392 ) $ (747 ) $ 106,117 Table of Contents Marin Software Incorporated Consolidated Statements of Cash Flows (dollars in thousands) The accompanying notes are an integral part of these consolidated financial statements. F-6 Years Ended December 31, 2014 2013 2012 Operating activities Net loss $ (33,171 ) $ (35,852 ) $ (26,482 ) Adjustments to reconcile net loss to net cash used in operating activities Depreciation 5,669 4,722 2,642 Amortization of internally developed software 1,905 1,156 525 Amortization of intangible assets 1,131 — — Loss (gain) on disposal of property and equipment 16 10 (7 ) Noncash interest expense related to warrants issued in connection with debt 124 251 159 Noncash expense related to warrants issued in connection with service agreement — — 60 Change in the valuation of outstanding preferred stock warrants — 238 362 Stock-based compensation related to equity awards and restricted stock 9,242 5,218 2,358 Stock-based compensation related to preferred stock financing — — 2,590 Provision for bad debt 821 359 296 Deferred income tax benefits (2,258 ) (91 ) (108 ) Excess tax benefits from stock-based award activities (126 ) (119 ) (192 ) Changes in operating assets and liabilities, net of effect of acquisition Accounts receivable (4,561 ) (2,147 ) (3,382 ) Prepaid expenses and other current assets (2,009 ) (881 ) (550 ) Other assets (497 ) (524 ) (55 ) Accounts payable 1,387 75 (208 ) Deferred revenues (540 ) 1,948 445 Accrued expenses and other current liabilities (1,523 ) 2,240 2,452 Net cash used in operating activities (24,390 ) (23,397 ) (19,095 ) Investing activities Purchases of property and equipment (5,317 ) (5,023 ) (5,507 ) Capitalization of internally developed software (3,146 ) (3,216 ) (1,743 ) Acquisition of business, net of cash acquired (4,151 ) — — Net cash used in investing activities (12,614 ) (8,239 ) (7,250 ) Financing activities Proceeds from issuance of common stock in initial public offering, net of issuance costs — 109,414 (107 ) Proceeds from issuance of note payable, net of issuance costs — 1,667 8,631 Repayment of note payable (3,130 ) (9,660 ) (4,334 ) Redemption of common stock — — (4,488 ) Repurchase of unvested shares (20 ) (77 ) (48 ) Proceeds from issuance of convertible, preferred stock, net of issuance costs — — 54,196 Proceeds from common stock purchase agreements — — 500 Proceeds from exercise of common stock options 2,472 1,541 1,624 Proceeds from employee stock purchase plan 1,402 1,499 — Excess tax benefits from stock-based award activities 126 119 192 Net cash provided by financing activities 850 104,503 56,166 Net (decrease) increase in cash and cash equivalents (36,154 ) 72,867 29,821 Cash and cash equivalents Beginning of year 104,407 31,540 1,719 End of year $ 68,253 $ 104,407 $ 31,540 Supplemental disclosures of other cash flow information Cash paid for interest $ 106 $ 201 $ 453 Cash paid for income taxes 221 276 176 Supplemental disclosure of noncash investing and financing activities Conversion of convertible preferred stock to common stock $ — $ 105,710 $ — Acquisition of equipment through capital lease — 3,167 — Conversion of warrant to purchase convertible preferred stock to common stock warrant — 745 — Purchases of property and equipment recorded in accounts payable and accrued expenses 1,364 208 533 Issuance of common stock under employee stock purchase plan 1,402 1,231 — Issuance of common stock in connection with business acquisition 11,195 — — Accrued but unpaid debt issuance costs — 38 57 Unpaid deferred initial public offering costs — — 944 Other receivables for stock option exercises — — 49 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) 1. Background Marin Software Incorporated (the “Company”) was incorporated in Delaware in March 2006. The Company provides a leading cross-channel performance advertising cloud, offering an integrated software-as-a-service, or SaaS, platform for search, display, and social advertising channels. The Company’s platform enables digital marketers to improve financial performance, realize efficiencies and time savings, and make better business decisions. The Company’s corporate headquarters are located in San Francisco, California, and the Company has additional offices in the following locations: New York, Chicago, Austin, Portland, London, Dublin, Hamburg, Paris, Tokyo, Singapore, Sydney and Shanghai. On March 27, 2013, the Company closed its initial public offering (“IPO”) of 7,500 shares of its common stock sold by the Company. The public offering price of the shares sold in the IPO was $14.00 per share. The total gross proceeds from the IPO to the Company were $105,000. After deducting underwriting discounts and commissions and IPO expenses payable by the Company, the aggregate net proceeds totaled $94,659. On April 11, 2013, the underwriters of the IPO fully exercised the over-allotment option granted to them. As a result, the Company issued an additional 1,125 shares for net proceeds of $14,648. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation. Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company is subject to uncertainties such as the impact of future events, economic and political factors and changes in the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Company’s financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in reported results of operations and if material, the effects of changes in estimates are disclosed in the notes to the consolidated financial statements. Significant estimates and assumptions by management affect the allowances for doubtful accounts and customer credits, the carrying value of long-lived assets (including goodwill and intangible assets), the useful lives of long-lived assets, the provision for income taxes and related deferred taxes, and stock-based compensation. Certain Significant Risks and Uncertainties The Company operates in a rapidly changing environment that involves a number of risks, some of which are beyond the Company’s control that could have a material adverse effect on the Company’s business, operating results, and financial condition. These risks include, among others, the Company’s: history of losses F-7 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) and ability to achieve profitability in the future; highly competitive environment; ability to maintain and increase usage rate of the Company’s platform; and ability to increase demand for its solutions. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents and accounts receivable. The Company’s cash and cash equivalents are placed with high-credit-quality financial institutions and issuers, and at times exceed federally insured limits. The Company limits its concentration of risk in cash equivalents and short-term investments by diversifying its investments among a variety of industries and issuers and by limiting the average maturity to one year or less. The Company has not experienced any loss relating to cash and cash equivalents in these accounts. The Company performs periodic credit evaluations of its customers and generally does not require collateral. As of December 31, 2014 and 2013, no single customer accounted for greater than 10% of net accounts receivable. No single customer accounted for greater than 10% of consolidated revenues during the years ended December 31, 2014, 2013 and 2012. Cash and Cash Equivalents The Company considers all highly liquid investments with an original or remaining maturity from the Company’s date of purchase of 90 days or less to be cash equivalents. Deposits held with financial institutions are likely to exceed the amount of insurance on these deposits. Cash equivalents consist of money market funds, which are readily convertible into cash and are stated at cost, which approximates fair market value. Cash equivalents were $58,027 and $98,987 as of December 31, 2014 and 2013, respectively. Fair Value of Financial Instruments The Company’s financial instruments, including cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at cost, which approximates fair value because of the short-term nature of those instruments. Based on borrowing rates available to the Company for loans with similar terms and maturities, and in consideration of the Company’s credit risk profile, the carrying value of borrowings (Note 7) approximates fair value (Level 2 within the fair value hierarchy). The Company measures and reports certain financial assets at fair value on a recurring basis, including its investments in money market funds. The fair value hierarchy prioritizes the inputs into three broad levels: A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Allowance for Doubtful Accounts and Revenue Credits The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the Company’s receivables portfolio determined on the basis of historical experience, specific allowances for known F-8 Level 1 Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 Inputs are unobservable inputs based on the Company’s assumptions. Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) troubled accounts and other currently available evidence. The Company has not experienced significant credit losses from its accounts receivable. The Company performs a regular review of its customers’ payment histories and associated credit risks and it does not require collateral from its customers. Certain contracts with advertising agencies contain sequential liability provisions, whereby the agency does not have an obligation to pay the Company until payment is received from the agency’s customers. In these circumstances, the Company evaluates the credit worthiness of the agency’s customers, in addition to the agency itself. The following are changes in the allowance for doubtful accounts during 2014, 2013 and 2012, respectively. From time to time, the Company provides credits to customers and an allowance is made based on historical credit activity. As of December 31, 2014 and 2013, the Company recorded an allowance for potential customer credits in the amount of $508 and $389, respectively. Property and Equipment Property and equipment are stated at historical cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets. The useful lives of the property and equipment are as follows: Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations. Major additions and improvements are capitalized while repairs and maintenance that do not extend the life of the asset are charged to operations as incurred. Depreciation and amortization expense is allocated to both cost of revenues and operating expenses. Internally Developed Software Costs incurred in the development phase are capitalized and amortized over the product’s estimated useful life, which is three years. The Company expenses all costs incurred that relate to planning and post implementation phases of development. Capitalized costs related to internally developed software under development are treated as construction in progress until the program, feature or functionality is ready for its intended use, at which time amortization commences. For 2014, 2013 and 2012, the Company capitalized $3,146, $3,216, and $1,743 of costs related to internally developed software, respectively. Amortization of capitalized costs related to internally developed software was $1,905, $1,156, and $525 for 2014, 2013 and 2012, respectively. As of December 31, 2014 and 2013, unamortized internally developed software costs totaled $5,476 and $4,236, respectively. Amortization of internally developed software is reflected in cost of revenues. Costs associated with minor enhancements and maintenance are expensed as incurred. F-9 Years Ended December 31, 2014 2013 2012 Balances at beginning of period $ 417 $ 277 $ 196 Additions 821 359 296 Write-offs (249 ) (219 ) (215 ) Balances at end of period $ 989 $ 417 $ 277 Computer equipment 3 to 5 years Office equipment, furniture and fixtures 3 to 5 years Software 3 years Leasehold improvements Shorter of useful life or lease term Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) Goodwill, Intangible Assets and Impairment Assessments Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. Intangible assets that are not considered to have an indefinite useful life are amortized over their useful lives, which generally range from two to six years. Estimated remaining useful lives of purchased intangible assets are evaluated to assess whether events or changes in circumstances warrant a revision to the remaining periods of amortization. In addition, we evaluate our goodwill for impairment at least annually or more frequently if events or changes in circumstances indicate that these assets may be impaired. No goodwill impairment has been identified in any of the years presented. Impairment of Long-Lived Assets The Company evaluates long-lived assets, excluding goodwill, for potential impairment whenever adverse events or changes in circumstances or business climate indicate that expected undiscounted future cash flows related to such long-lived assets may not be sufficient to support the net book value of such assets. An impairment exists when the carrying value of a long-lived asset exceeds its fair value. An impairment loss is recognized only if the carrying value of a long-lived asset is not recoverable and exceeds its fair value. The carrying value of a long-lived 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. There were no such impairment losses during 2014, 2013 or 2012. Operating Leases The Company’s operating lease agreements include provisions for tenant improvement allowances, certain rent holidays and escalations in the base price of the rent payment. The Company defers tenant improvement allowances and amortizes the balance as a reduction to rent expense over the lease term. The Company records rent holidays and rent escalations on a straight-line basis over the lease term. Deferred rent is included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets. Freestanding Preferred Stock Warrants Upon the consummation of the Company’s IPO, freestanding warrants related to the Company’s convertible preferred stock converted into warrants to purchase common stock. The preferred stock warrants were classified as liabilities on the Company’s December 31, 2012 consolidated balance sheet. Upon conversion, the liability recorded for the preferred stock warrants was reclassified to additional paid-in capital. When classified as liabilities, the preferred stock warrants were subject to reassessment at each balance sheet date, and any change in fair value was recognized as a component of other income (expenses), net. The Company adjusted the liability for changes in fair value until the preferred stock warrants were converted into warrants to purchase common stock. F-10 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) Revenue Recognition The Company generates revenues principally from subscriptions either directly with advertisers or with advertising agencies to its platform for the management of search, display and social advertising. The Company’s subscription agreements are generally one year or longer in length. The Company’s subscription fee under most contracts is variable based on the value of the advertising spend that the Company’s advertisers manage through the Company’s platform and is generally invoiced on a monthly basis. Contracts with direct advertisers and certain contracts with advertising agencies also include a minimum monthly fee that is payable over the duration of the contract. The Company’s customers do not have the right to take possession of the software supporting the application service at any time, nor do the arrangements contain general rights of return. The Company commences revenue recognition for both direct advertisers and advertising agencies when all of the following conditions are met: The Company recognizes the total minimum fee for both direct advertisers and advertising agencies, where applicable, over the duration of the contract, commencing on the date that the Company’s platform is made available to the customer, provided revenues recognized do not exceed amounts that are invoiced and due. The variable fee, which is based on a percentage of the value of the advertising spend managed through the Company’s platform, is recognized once the amount is fixed or determinable, which is generally on a monthly basis concurrent with the issuance of the customer invoice. Signed contracts are used as evidence of an arrangement. The Company assesses collectability based on a number of factors such as past collection history with the customer and creditworthiness of the customer. Certain agreements with advertising agencies also contain sequential liability provisions, which provide that the agency has no obligation to pay the Company until the agency receives payment from its customers. In these circumstances, the Company evaluates the credit worthiness of the agency’s customers, in addition to the agency itself, to conclude whether or not collectability is reasonably assured. If the Company determines collectability is not reasonably assured, the Company defers the revenue recognition until collectability becomes reasonably assured. In October 2009, the Financial Accounting Standards Board (“FASB”) ratified authoritative accounting guidance regarding revenue recognition for arrangements with multiple deliverables effective for fiscal periods beginning on or after June 15, 2010. The Company adopted the new guidance on a prospective basis for fiscal 2011. Professional services and training, when sold with the Company’s platform subscription services, are accounted for separately when those services have standalone value. In determining whether professional services and training services can be accounted for separately from subscription services, the Company considers the following factors: availability of the services from other vendors; the nature of the services; the dependence of the subscription services on the customer’s decision to buy the professional services; and whether the Company sells the Company’s subscription services without professional services. If the deliverables have stand-alone value, the Company accounts for each deliverable separately and revenues are recognized for the respective deliverables as they are delivered. If one or more of the deliverables do not have stand-alone value, the deliverables that do not have stand-alone value are combined with the final deliverables within the arrangement and treated as a single unit of accounting. Revenues for arrangements treated as a single unit of accounting are recognized over the period of the contract commencing upon delivery of the final deliverable. As of December 31, 2014, the Company did not have stand-alone value for the professional services and training F-11 • persuasive evidence of an arrangement exists; • the Company’s platform is made available to the customer; • the fee is fixed or determinable, and; • collection is reasonably assured. Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) services. This is because the Company includes professional services and training services with the Company’s subscription services and those services are not available from other vendors. Cost of Revenues Cost of revenues primarily consists of costs related to hosting the Company’s cloud-based platform, providing implementation and ongoing customer support, data communications expenses, salaries and benefits of operations and support personnel, software license fees, costs associated with website development activities, allocated overhead, amortization expense associated with capitalized internally developed software and intangible assets and property and equipment depreciation. Stock-Based Compensation Stock-based compensation is measured at grant date based on the fair value of the award and is expensed on a straight-line basis over the requisite service period. Fair values of stock option awards are determined on the date of grant using an option-pricing model. The Company has selected the Black-Scholes option pricing model to estimate the fair value of its stock option awards to employees and non-employees. In applying the Black-Scholes option pricing model, the Company’s determination of the fair value of the stock option award on the date of grant is affected by the Company’s fair value of its common stock, as well as assumptions regarding a number of subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility and the optionholders’ actual and projected stock option exercise and employment termination behaviors. For stock option awards with time-based vesting, the Company recognizes stock-based compensation expense over the requisite service period using the straight-line method, based on awards ultimately expected to vest. The Company estimates future forfeitures at the date of grant and revises the estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Restricted stock units (“RSUs”) are measured based on the fair market values of the underlying common stock on the dates of grant. Shares of common stock are issued on the vesting dates. For awards with time-based vesting, the Company recognizes stock-based compensation expense over the requisite service period using the straight-line method, based on awards ultimately expected to vest. The Company estimates future forfeitures at the date of grant and revises the estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Stock options issued to non-employees such as consultants are recorded at their fair value on the measurement date. The measurement of stock-based compensation is subject to periodic adjustment as the underlying equity instruments vest. The fair value of options granted to consultants is expensed when vested, and such vested outstanding options are recognized as liabilities on the accompanying consolidated balance sheets. Non-employee stock-based compensation expense was not material for all periods presented. See Note 11 for further information. Research and Development Research and development costs are expensed as incurred, except for certain internal software development costs, which may be capitalized as noted above. Research and development costs include salaries, stock-based compensation expense, benefits and other operating costs such as outside services, supplies and allocated overhead costs. F-12 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) Advertising and Promotion Advertising and promotional costs are expensed as incurred and included in sales and marketing expense in the accompanying consolidated statements of operations. Advertising and promotion expense totaled $1,475, $785, and $632 for 2014, 2013 and 2012, respectively. Foreign Currency For international subsidiaries whose functional currency is not the U.S. dollar, we translate the monetary assets and liabilities of these subsidiaries to U.S. dollars using rates of exchange in effect at the balance sheet date. Nonmonetary assets and liabilities are re-measured to U.S. dollars using historical exchange rates, and other accounts are re-measured using average exchange rates in effect during each period presented. The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive loss on the accompanying consolidated balance sheets, and related periodic movements are summarized as a line item in the consolidated statements of operations. The Company records net gains and losses resulting from foreign exchange transactions as a component of other expenses, net. Aggregate foreign currency losses included in determining net loss were $490, $332 and $88 during 2014, 2013 and 2012, respectively. Income Taxes The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial statement and tax basis of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. The Company accounts for unrecognized tax benefits using 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. The Company establishes a liability for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. The Company records an income tax liability, if any, for the difference between the benefit recognized and measured and the tax position taken or expected to be taken on the Company’s tax returns. 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. The liability is 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 liability provisions and changes to the liabilities that are considered appropriate. The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. As the Company maintained a full valuation allowance against its deferred tax assets in the United States, the adjustments resulted in no additional tax expense in 2014. Based on the Company’s assessment of many factors, the Company does not expect that changes in the liability for unrecognized tax benefits for the next twelve months will have a significant impact on the Company’s consolidated financial position or results of operations. Recent Accounting Pronouncements In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-15, Disclosures of Uncertainties About an Entity’s Ability to Continue as a Going Concern . The new standard provides guidance around management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The F-13 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not expect that this guidance will have a material impact on its consolidated results of operations or financial condition. In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period . The guidance requires that a performance target that affects vesting and could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance as it relates to such awards. This guidance is effective for us in our first quarter of fiscal year ending December 31, 2017. We are currently evaluating the impact of our pending adoption of this ASU on the Company’s consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates when compared with the current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. This guidance will be effective for the Company in the first quarter of its fiscal year ending December 31, 2017. The Company is currently in the process of evaluating the impact of pending adoption of this ASU on the Company’s consolidated financial statements. In July 2013, the FASB issued a new accounting standard update on the financial statement presentation of unrecognized tax benefits. The new guidance provides that a liability related to an unrecognized tax benefit would be presented as a reduction of a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. The Company adopted the standard update in the first quarter of 2014, and its adoption had no impact on the Company’s consolidated results of operations or financial condition. 3. Business Combination On June 2, 2014, pursuant to the terms of an Agreement and Plan of Reorganization, a wholly-owned subsidiary of the Company merged with and into NowSpots, Inc., which conducted business as Perfect Audience (“Perfect Audience”), with Perfect Audience surviving as a wholly-owned subsidiary of the Company. Perfect Audience specializes in display and social network advertisement re-targeting, and its programmatic display and social advertising functions will expand the Company’s cross-channel capabilities. The acquisition was accounted for under the acquisition method of accounting in which the tangible and identifiable intangible assets and liabilities of Perfect Audience were recorded at their respective fair values as of the acquisition date, including an amount for goodwill representing the difference between the respective acquisition consideration and fair values of identifiable net assets. The fair value of assets acquired and liabilities assumed was recorded based on a preliminary valuation and the Company’s estimates and assumptions are subject to change within the measurement period. The primary areas of the purchase price allocation that are not yet finalized are related to the fair values of liabilities assumed and residual goodwill. The total purchase price for the acquisition was $16,470, which consisted of 1,119 shares of the Company’s common stock valued at $11,195 upon the closing date using the Company’s closing date stock price, and $5,275 in cash. Of the total purchase price, $4,711 was attributed to fair value of net liabilities assumed, $1,124 was cash F-14 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) acquired, and $8,530 was the fair value of intangible assets acquired with $11,527 as residual goodwill. The goodwill is primarily attributable to the synergies expected to arise after the acquisition and is not expected to be deductible for tax purposes. In addition, the Company issued 630 shares of common stock (with a closing date fair value of $6,301) to existing Perfect Audience employees in connection with the acquisition, which vest over a range of two to three years upon such employees’ continuous employment with the Company. These shares have been excluded from the purchase consideration and will be recognized as post-acquisition stock-based compensation expense. The Company recognizes compensation expense equal to the grant date fair value of the common stock on a straight-line basis over the employee’s requisite service period. The following table summarizes the fair values of tangible assets acquired, liabilities assumed, intangible assets and goodwill: The revenues, net and earnings attributable to Perfect Audience included in our consolidated financial statements since the acquisition date are not material. Actual and pro forma results of the operations have not been presented because the effects are not material to the consolidated financial statements. 4. Balance Sheet Components The following table shows the components of property and equipment as of the dates presented: Depreciation and amortization of internally developed software for 2014, 2013 and 2012 was $7,574, $5,878, and $3,167, respectively. F-15 Estimated Fair Value Estimated Useful Life Tangible assets acquired $ 1,492 N/A Liabilities assumed (5,079 ) N/A Developed technology 6,110 6 years Customer relationships 1,290 4 years Non-compete agreements and tradename 1,130 2 - 3 years Goodwill 11,527 Indefinite Total purchase price $ 16,470 December 31, 2014 2013 Computer equipment $ 21,422 $ 16,314 Software 11,022 7,690 Office equipment 795 571 Furniture, fixtures and leasehold improvements 2,092 1,861 35,331 26,436 Less: Accumulated depreciation and amortization (19,057 ) (12,019 ) $ 16,274 $ 14,417 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) The following table shows the components of accrued expenses and other current liabilities as of the dates presented: 5. Goodwill and Intangible Assets The goodwill balance as of December 31, 2014 totaling $11,527 was the result of the business acquisition disclosed in Note 3 of these consolidated financial statements. Intangible assets consisted of the following as of the dates presented: Amortization expense of intangible assets was $1,131 for 2014, and zero for the comparative periods presented. Future estimated amortization of intangible assets as of December 31, 2014 is presented below: F-16 December 31, 2014 2013 Accrued salary and payroll related expenses $ 6,017 $ 6,675 Accrued accounts payable 3,709 2,773 Customer advances 1,366 — Income tax payable 377 434 Sales and use tax payable 263 466 Other 321 602 $ 12,053 $ 10,950 December 31, 2014 Estimated Useful Life Developed technology $ 6,110 6 years Customer relationships 1,290 4 years Non-compete agreements and tradename 1,130 2-3 years 8,530 Less: accumulated amortization (1,131 ) $ 7,399 Year ending December 31, 2015 $ 1,938 Year ending December 31, 2016 1,714 Year ending December 31, 2017 1,483 Year ending December 31, 2018 1,245 Year ending December 31, 2019 1,019 $ 7,399 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) 6. Fair Value Measurements Account balances measured at fair value on a recurring basis include the following as of December 31, 2014 and 2013: The following table presents the changes in the preferred stock warrant obligation measured and recorded at fair value on a recurring basis, using significant unobservable inputs (Level 3) during 2013 and 2012. There were no changes in the preferred stock warrant obligation during 2014, as the underlying warrants were no longer outstanding subsequent to the Company’s IPO. The Company’s cash equivalents as of December 31, 2014 and 2013 consisted of money market funds with original maturity dates of less than three months from the date of their respective purchase. Cash equivalents are classified as Level 1. The fair value of the Company’s money market funds approximated amortized cost and, as such, there were no unrealized gains or losses on money market funds as of December 31, 2014 and 2013. As of December 31, 2014 and 2013, amounts of $10,226 and $5,420, respectively, were held in bank deposits. 7. Debt Loan and Security Agreement and Warrant In connection with a Loan and Security Agreement entered into with Silicon Valley Bank in 2008, the Company issued a warrant to purchase 51 shares of Series B preferred stock at $2.7563 per share. This warrant was to expire on the later date of October 30, 2018, or five years from the closing of the Company’s IPO. The fair value of the warrant was estimated at an aggregate of $72 using the Black-Scholes valuation model with the following assumptions: expected volatility of 53%, risk free interest rate of 4.85%, expected life of 10 years and no dividends. The fair value of the warrant was recorded as a discount to the loan and was amortized to interest expense over the loan term. Revolving Credit Facility, Equipment Advance Facilities and Warrants In January 2010, the Company signed an amendment to the Loan and Security Agreement, which provided for a revolving credit facility (the “Revolving Credit Facility”). In January 2011, the Company entered into an amendment to the Revolving Credit Facility pursuant to which Silicon Valley Bank agreed to extend an equipment advance facility of $2,000 (the “Equipment Advance Facility”). The Equipment Advance Facility could only be used to finance the purchase of equipment, accrued interest at a fixed per annum rate of 5.5%, was repayable in 36 consecutive monthly installments of principal and interest and expired on December 1, 2014. The Equipment Advance Facility was fully off on that date. F-17 December 31, 2014 2013 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Cash equivalents Money market funds $ 58,027 $ — $ — $ 98,987 $ — $ — Years Ended December 31, 2013 2012 Balances at beginning of year $ 507 $ 145 Change in unrealized loss included in earnings 238 362 Conversion to common stock warrant (745 ) — Balances at end of year $ — $ 507 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) In December 2011, the Company entered into another amendment to its existing Revolving Credit Facility pursuant to which Silicon Valley Bank agreed to extend an additional equipment advance facility of $2,000 (the “Additional Equipment Advance Facility”). The Additional Equipment Advance Facility may only be used to finance the purchase of equipment. The Additional Equipment Advance Facility accrues interest at a fixed per annum rate of 5.5% and will be repayable in 36 consecutive monthly installments of principal and interest. The Additional Equipment Advance facility expires September 1, 2015. As of December 31, 2014, the Company had withdrawn the full amount available under the Additional Equipment Advance Facility. In connection with the Additional Equipment Advance Facility, the Company issued a warrant to Silicon Valley Bank to purchase 37 shares of common stock at $2.70 per share. This warrant would expire on November 30, 2021. The fair value of the warrant was estimated at an aggregate of $139 using the Black-Scholes valuation model with the following assumptions: expected volatility of 57%; risk-free interest rate of 2.1%; expected life of 10 years; and no dividends. The fair value of the warrant was recorded as a discount to the loan and was amortized to interest expense over the loan term. In December 2012, the Company entered into an amendment to its existing Revolving Credit Facility and Equipment Advance Facility pursuant to which Silicon Valley Bank agreed to extend an additional equipment advance facility of $3,000 (the “Supplemental Equipment Advance”). The Supplemental Equipment Advance may only be used to finance the purchase of equipment. The Supplemental Equipment Advance accrues interest at a fixed per annum rate of 3.0% and will be repayable in 33 consecutive monthly installments of principal and interest. The Supplemental Equipment Advance expires March 1, 2016. As of December 31, 2014, the Company had withdrawn the full amount available under the Supplemental Equipment Advance. In connection with the Supplemental Equipment Advance, the Company issued a warrant to Silicon Valley Bank to purchase 27 shares of common stock at $12.15 per share. This warrant was to expire in December 2022. The fair value of the warrant was estimated at an aggregate of $213 using the Black-Scholes valuation model with the following assumptions: expected volatility of 57%; risk-free interest rate of 1.65%; expected life of 10 years; and no dividends. The fair value of the warrant was recorded as a discount to the Revolving Credit Facility and will be amortized to interest expense over the facility term. Together with the Series B convertible preferred stock warrant and the common stock warrants issued, a total of $251 and $159 was recognized as interest expense for 2013 and 2012, respectively, as a result of the amortization of the loan discounts. In May 2013, Silicon Valley Bank exercised the preferred stock warrant and common stock warrants using the cashless exercise feature, resulting in the net issuance of 68 shares of common stock. As a result, no such interest expense was recognized in 2014. In September 2013, the Company entered into an amendment to the Revolving Credit Facility pursuant to which Silicon Valley Bank agreed to increase the Revolving Credit Facility to the lesser of $15,000 or 80% of the Company’s eligible accounts receivable. Also, the expiration date of the Revolving Credit Facility was extended to July 31, 2015 and the annual interest rate was amended to 0.25% over the Prime Rate, payable on a monthly basis. Additionally, the Company’s obligation to meet certain financial covenants will be waived when the Company’s unrestricted cash balance exceeds $50,000. As of December 31, 2014, approximately $13,900 was available for withdrawal under the Revolving Credit Facility. No amounts were outstanding pursuant to the Revolving Credit Facility as of December 31, 2014 and 2013. The Revolving Credit Facility, the Additional Equipment Advance Facility and the Supplemental Equipment Advance are all collateralized with all of the personal property of the Company, excluding shares of controlled foreign corporations, patents and copyrights. Capital Lease Arrangement In February 2013, the Company entered into a capital lease arrangement with an equipment manufacturer to finance the acquisition of computer equipment. The lease has an effective interest rate of 6.0% and is repayable F-18 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) in 36 consecutive equal monthly installments of principal and interest. At the end of the lease period, the Company has the option to purchase the equipment at the estimated fair market value. As of December 31, 2014, the net book value of the equipment under the capital lease was $1,439 and the remaining principal balance payable was $1,542. The capital lease is collateralized by the underlying computer equipment. The Company’s outstanding balances under the capital lease and Equipment Advance Facilities as of December 31, 2014 and 2013 are as follows: The maturities of debt as of December 31, 2014 are as follows: In December 2014, the Company entered into a standby letter of credit for $1,293 with Silicon Valley Bank in connection with the non-cancelable lease for the Company’s corporate headquarters in San Francisco. This standby letter of credit does not impact the balances available for withdrawal under the Revolving Credit Facility, the Additional Equipment Advance Facility and the Supplemental Equipment Advance. As of December 31, 2014, no amount was drawn on this standby letter of credit. Outstanding warrants to purchase the Company’s Series B preferred stock were classified as liabilities which were adjusted to fair value at each reporting period until the earlier of their exercise or expiration on the later date of October 30, 2018 or five years from the closing of the Company’s IPO, or the completion of a liquidation event, including the completion of an IPO, at which time the preferred stock warrant liability was automatically converted into a warrant to purchase shares of common stock and was reclassified to stockholders’ equity. The Company recorded a loss of $238 and $362 for 2013 and 2012, respectively, within other income (expenses), net to adjust the warrant liability to fair value. The fair values were determined using Level 3 inputs under the GAAP fair value hierarchy. No such fair value adjustment was recorded in 2014, as the as the underlying warrants were no longer outstanding subsequent to the Company’s IPO. F-19 December 31, 2014 2013 Capital lease $ 1,542 $ 2,598 Equipment Advance Facilities 1,697 3,771 3,239 6,369 Discount on long-term debt (31 ) (154 ) $ 3,208 $ 6,215 Years Ending 2015 $ 2,587 2016 652 3,239 Less: Current portion (2,587 ) Discount on long-term debt (31 ) Noncurrent portion of debt $ 621 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) 8. Convertible Preferred Stock Immediately prior to the close of the Company’s IPO, the Company’s outstanding convertible preferred stock (“Series A Stock,” “Series A-1 Stock,” “Series B Stock,” “Series C Stock,” “Series D Stock,” “Series E Stock,” “Series F Stock” and “Series F-1 Stock”) automatically converted at a rate of 1:1 into common stock. The following table summarizes information related to the Company’s convertible preferred stock prior to conversion into common stock: Dividends No dividends on the convertible preferred stock were declared by the Board of Directors from inception through their conversion into common stock. Issuance of Preferred Stock Concurrent with primary issuance of Series F Stock in January 2012, the Company also entered into an agreement with certain executives of the Company to repurchase certain common stock held by them, whereby the Company repurchased 365 shares of their common stock in the Company at the Series F preferred stock issuance price of $12.30 per share for an aggregate price of $4,488. At the date of the repurchase, the aggregate estimated fair value of the repurchased common stock was $1,898. As a result of this arrangement, the Company recorded stock-based compensation expense of $2,590 during 2012. Of this amount, $364, $317 and $1,909 were recorded as sales and marketing, research and development and general and administrative expenses, respectively, in the accompanying statements of comprehensive loss for the year ended December 31, 2012. 9. Common Stock On February 12, 2013, the Company’s Board of Directors approved a Restated Certificate of Incorporation, which became effective upon the consummation of the Company’s IPO. The Restated Certificate of Incorporation amends the authorized share capital to 500,000 shares of common stock ($0.001 par value per share) and 10,000 shares of blank-check preferred stock ($0.001 par value per share). F-20 Shares Authorized Shares Outstanding Liquidation Amount Proceeds Net of Issuance Cost Series A 2,009 2,009 $ 2,248 $ 2,208 Series A-1 1,400 1,400 2,329 2,273 Series B 2,673 2,622 7,227 7,146 Series C 4,673 4,673 12,999 12,915 Series D 2,022 2,022 11,192 11,038 Series E 1,744 1,744 16,036 15,934 Series F 2,805 2,805 34,488 34,294 Series F-1 1,478 1,478 20,000 19,902 18,804 18,753 $ 106,519 $ 105,710 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) As of December 31, 2014 and 2013, reserved shares of common stock are as follows: During 2012, the Company entered into common stock purchase agreements (“CSPAs”) with two members of the Board of Directors. In connection with the CSPAs, the Company sold 84 shares of common stock for a cumulative purchase price of $500. The underlying shares vested ratably on a monthly basis over 24 months. The CSPAs included a repurchase feature which provides the Company the option, but not the obligation, to repurchase any unvested shares upon termination at the original purchase price. As of December 31, 2014, all of the common shares issued under the CSPAs were vested. 10. Equity Award Plans In April 2006, the Company’s Board of Directors adopted and the stockholders approved the 2006 Stock Option Plan (“2006 Plan”). The 2006 Plan provides for the grant of incentive stock options under the federal tax laws and non-statutory stock options. Only employees may receive incentive stock options, but non-statutory stock options may be granted to employees, non-employee directors and consultants. The stock options are exercisable at a price equal to the market value of the underlying shares of common stock on the date of the grant as determined by the Company’s board of directors. The term of options granted under the 2006 Plan may not exceed ten years. Certain options are eligible for exercise prior to vesting. Exercised but unvested shares of common stock are subject to repurchase by the Company at the initial exercise price. The proceeds from the shares of common stock subject to repurchase are classified as a liability and reclassified to equity as the shares vest. Under the 2006 Plan’s early exercise feature, the Company had the right to repurchase 85 and 180 shares of common stock as of December 31, 2014 and 2013, respectively. The Company records cash received from the exercise of unvested stock options as a long-term liability, as well as the fair value of vested outstanding options to non-employee consultants. As of December 31, 2014 and 2013, $826 and $1,215, respectively, has been recorded as a long-term liability on the accompanying consolidated balance sheets. In February 2013, the Company’s Board of Directors and stockholders approved the 2013 Equity Incentive Plan (“2013 Plan”), under which 4,500 shares of common stock were originally reserved for issuance. Additionally, all reserved and unissued shares under the 2006 Plan at the time the 2013 Plan became effective are eligible for issuance under the 2013 Plan. The 2013 Plan became effective on March 21, 2013, at which time the Company ceased to grant equity awards under the 2006 Plan. The 2013 Equity Incentive Plan authorizes the award of stock options, restricted stock awards, stock appreciation rights, RSUs, performance awards and stock bonuses to the Company’s employees, directors, consultants, independent contractors and advisors. On January 1 of each of the first 10 calendar years through 2023, the number of shares of common stock reserved under the 2013 Equity Incentive Plan will automatically increase by an amount equal to 5% of the total outstanding shares as of immediately preceding December 31, or such lesser number of shares as determined by the Company’s Board of Directors. Pursuant to terms of the 2013 Plan, the shares available for issuance increased by approximately 1,648 shares of common stock on January 1, 2014. F-21 December 31, 2014 2013 Options available for future grant under stock option plans 3,154 4,585 Options outstanding under stock option plans 6,376 4,855 RSUs outstanding under stock option plans 769 — Shares available for future issuance under ESPP 1,005 854 11,304 10,294 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) Stock Options Under the 2006 Plan and the 2013 Plan, the term of options granted may not exceed ten years. Unless the terms of an optionee’s stock option agreement provide otherwise, if an optionee’s service relationship with the Company, or any of its affiliates, ceases for any reason other than disability or death, the optionee may exercise the vested portion of any options for three months after the date of such termination. If an optionee’s service relationship with the Company, or any of its affiliates, ceases due to disability or death (or an optionee dies within a certain period following cessation of service), the optionee or a beneficiary may exercise any vested options for a period of 12 months. In no event, however, may an option be exercised beyond the expiration of its term. A summary of activity under the 2006 Plan and the 2013 Plan is as follows: The intrinsic value of options exercised during 2014, 2013 and 2012 was $5,615, $5,693, and $2,266, respectively. The total estimated fair value of options vested during 2014, 2013 and 2012 was $5,447, $3,110, and $1,572, respectively. F-22 Options Outstanding Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in Years) Aggregate Intrinsic Value Balances at December 31, 2011 3,000 $ 1.71 6.23 $ 10,575 Options granted 2,046 7.48 8.34 Options exercised (518 ) 3.23 — Options forfeited and cancelled (214 ) 3.66 — Balances at December 31, 2012 4,314 1.71 7.11 $ 34,439 Options granted 1,594 11.98 9.26 Options exercised (618 ) 2.42 — Options forfeited and cancelled (435 ) 8.60 — Balances at December 31, 2013 4,855 6.56 7.85 $ 20,593 Options granted 3,558 9.39 8.35 Options exercised (791 ) 3.12 — Options forfeited and cancelled (1,246 ) 9.51 — Balances at December 31, 2014 6,376 $ 7.99 7.82 $ 9,697 Options exercisable as of December 31, 2014 2,887 $ 6.11 5.91 $ 9,501 Options vested as of December 31, 2014 2,331 $ 5.35 5.49 $ 8,987 Options vested and expected to vest as of December 31, 2014 5,985 $ 7.89 7.72 $ 9,660 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) The following table summarizes information about shares subject to stock options outstanding as of December 31, 2014: RSUs A summary of RSUs granted and unvested under the 2013 Plan as of December 31, 2014 is as follows: Employee Stock Purchase Plan In February 2013, the Company’s Board of Directors and stockholders approved the 2013 Employee Stock Purchase Plan (“2013 ESPP”), under which 1,000 shares of common stock were originally reserved for issuance. The 2013 ESPP became effective on March 22, 2013. The 2013 ESPP provides generally for six-month purchase periods and the purchase price for shares of common stock purchased under the 2013 Employee Stock Purchase Plan will be 85% of the lesser of the fair market value of the common stock on (i) the first trading day of the applicable offering period and (ii) the last trading day of each purchase period in the applicable offering period. On January 1 of each of the first 10 calendar years following the first offering date, the number of shares reserved under the 2013 Employee Stock Purchase Plan will automatically increase by an amount equal to 1% of the total outstanding shares as of immediately preceding December 31, but not to exceed 700 shares. Pursuant to terms of the 2013 ESPP, the shares available for issuance increased by approximately 329 shares on January 1, 2014. During 2014 and 2013, 178 and 146 shares, respectively, were issued under the 2013 ESPP. 11. Stock-Based Compensation For stock-based awards granted by the Company, stock-based compensation cost is measured at grant date based on the fair value of the award and is expensed over the requisite service period. The Company recorded stock-based compensation of $9,242, $5,218 and $4,948 for 2014, 2013 and 2012, respectively. F-23 Options Outstanding Range of Exercise Prices Number Outstanding Weighted Average Remaining Contractual Life (in years) $0.14 – $0.82 468 2.74 $2.39 – $2.70 770 5.47 $5.20 – $7.76 1,044 7.25 $8.17 – $9.87 2,858 9.49 $10.30 – $11.82 448 8.86 $12.12 – $14.18 788 7.43 6,376 RSUs Outstanding Number of RSUs Weighted Average Fair Value Per Unit Granted and unvested at December 31, 2013 — $ — RSUs granted 777 9.37 RSUs vested — — RSUs forfeited (8 ) 10.56 Granted and unvested at December 31, 2014 769 $ 9.36 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) Stock Options The Company uses the Black-Scholes option pricing model to estimate the fair value of options. This model requires the input of highly subjective assumptions including the expected volatility, risk-free interest rate, and the expected life of options. The Company used the following assumptions: As the Company has limited historical option exercise data, the expected term of the stock options granted to employees was calculated based on the simplified method. Under the simplified method, the expected term is equal to the average of an option’s weighted-average vesting period and its contractual term. Pursuant to the SEC Staff Accounting Bulletin (“SAB”) No. 110, the Company is permitted to continue using the simplified method until sufficient information regarding exercise behavior, such as historical exercise data or exercise information from external sources, becomes available. The Company estimates the expected volatility of its common stock on the date of grant based on the historical stock volatilities of similar publicly-traded entities over a period equal to the expected terms of the options, as the Company does not have sufficient trading history to use the volatility of its own common stock. The Company has no history or expectation of paying cash dividends on its common stock. The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the options in effect at the time of grant. Cash proceeds from the exercise of stock options were $2,472, $1,541, and $1,624 during 2014, 2013 and 2012, respectively. Compensation expense is recognized ratably over the requisite service period. As of December 31, 2014 and 2013, there was $16,112 and $11,597, respectively, of unrecognized compensation cost related to options, which is expected to be recognized over a weighted-average period of 3.0 and 2.7 years, respectively. Prior to the consummation of the IPO, given the lack of an active public market for the Company’s outstanding Common and preferred stock, the Company’s Board of Directors established an estimate of fair value for these securities as well as for options and warrants to purchase these securities. The fair value of the Company’s common stock as used in the determination of the exercise price of stock options was estimated by the Board of Directors based on factors such as the liquidation preference, dividends and other rights of the outstanding preferred stock; recent financial and operating performance; the status of the Company’s development and sales efforts, revenue growth and additional objectives; the likelihood and proximity of an initial IPO; and the valuation of comparable companies that are publicly traded. Subsequent to the closing of the Company’s IPO, the Company has used the closing price of the Company’s common stock on the date of the stock option grant as the fair value of the Company’s common stock and the exercise price of the stock options. For awards that are expected to result in a tax deduction, a deferred tax asset is established as the Company recognizes compensation expense. If the tax deduction exceeds the cumulative recorded compensation expense, F-24 Years Ended December 31, 2014 2013 2012 Dividend yield — — — Expected volatility 51.3 % 55.0 % 57.0 % Risk-free interest rate 1.89 % 1.27 % 0.95 % Expected life of options (in years) 6.25 6.25 6.25 Forfeiture rate 7.0 % 7.0 % 3.2% –7.0% Weighted-average grant-date fair value $ 4.77 $ 6.41 $ 4.37 Weighted-average grant-date exercise price $ 9.39 $ 11.98 $ 7.48 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) the tax benefit associated with the excess deduction is considered a windfall benefit. The excess tax benefit from share compensation plans is recorded in additional paid-in capital and classified as a financing cash flow on the consolidated statements of cash flows. The Company has elected to use the “with and without” approach as described in Accounting Standards Codification 740-20, “Intraperiod Tax Allocation,” in determining the order in which tax attributes are utilized. As a result, the Company will only recognize a tax benefit from stock-based awards in additional paid-in capital if an incremental tax benefit is realized after all other tax attributes currently available to the Company have been utilized. Restricted Stock and RSUs As of December 31, 2014, there was $9,459 of unrecognized compensation cost related to restricted stock and RSUs, which is expected to be recognized over a weighted-average period of 2.2 years. The Company uses the fair market value of the underlying common stock on the dates of grant to determine the fair value of restricted stock and RSUs. Stock-based compensation expense related to these awards is recognized on a straight-line basis over the service period of the award for the estimated number of shares that are ultimately expected to vest. Employee Stock Purchase Plan The Company estimates the fair value of purchase rights under the ESPP using the Black-Scholes valuation model. The fair value of each purchase right under the ESPP was estimated on the date of grant using the Black-Scholes option valuation model and the straight-line attribution approach with assumptions substantially similar to those used for the valuation of our stock option awards. 12. Income Taxes The components of the Company’s loss before (benefit from) provision for income taxes were as follows: The components of the (benefit from) provision for income taxes were as follows: F-25 Years Ended December 31, 2014 2013 2012 United States of America $ (26,427 ) $ (24,197 ) $ (27,423 ) International (8,200 ) (11,163 ) 1,162 $ (34,627 ) $ (35,360 ) $ (26,261 ) Years Ended December 31, 2014 2013 2012 Current income tax provision Federal $ — $ — $ — State 101 26 19 Foreign 700 557 310 Total current income tax provision 801 583 329 Deferred income tax (benefit) provision Federal (2,094 ) — — State (191 ) — — Foreign 28 (91 ) (108 ) Total deferred income tax (benefit) provision (2,257 ) (91 ) (108 ) (Benefit from) provision for income taxes $ (1,456 ) $ 492 $ 221 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) The Company has incurred operating losses and has recorded a full valuation allowance against its deferred tax assets (except for the deferred tax assets associated with the Company’s subsidiary in the United Kingdom) for all periods to date and, accordingly, has not recorded a provision for income taxes for any of the periods presented other than provisions for foreign and state income taxes. The differences in the total (benefit from) provision for income taxes that would result from applying the 34% federal statutory rate to loss before provision for income taxes and the reported provision for income taxes were as follows: Major components of the Company’s deferred tax assets as of December 31, 2014 and 2013 are as follows: F-26 Years Ended December 31, 2014 2013 2012 Tax benefit at U.S. statutory rate $ (11,773 ) $ (12,022 ) $ (8,929 ) State income taxes, net of federal benefit (105 ) 19 19 Foreign income and withholding taxes 3,593 4,382 (184 ) Stock-based compensation 984 863 458 Change in valuation allowance 5,982 4,437 9,082 Research and development credits (807 ) (776 ) (823 ) Uncertain tax positions 52 1,499 — Provision to return adjustments (53 ) 1,894 328 Other 671 196 270 $ (1,456 ) $ 492 $ 221 December 31, 2014 2013 Current Accruals and reserves $ 1,250 $ 1,816 Stock-based compensation 586 151 Other 118 (64 ) Current deferred tax assets 1,954 1,903 Valuation allowance (1,822 ) (1,853 ) Total current deferred tax asset, net of valuation allowance 132 50 Noncurrent Net operating loss 34,586 27,355 Accruals and reserves 128 149 Research and development credits 4,791 3,391 Stock-based compensation 1,757 452 Property and equipment and intangible assets 543 914 Other (235 ) 94 Noncurrent deferred tax assets 41,570 32,355 Valuation allowance (41,531 ) (32,205 ) Total non-current deferred tax asset, net of valuation allowance $ 39 $ 150 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) As a result of certain realization requirements of accounting guidance for stock compensation, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets at December 31, 2014, and 2013 that arose directly from tax deductions related to equity compensation in excess of compensation recognized for financial reporting. Additional paid-in capital will be increased by $1,109 if and when such benefits are ultimately realized and reduce taxes payable. The Code, as amended, imposes restrictions on the utilization of net operating losses in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use net operating losses may be limited as prescribed under Internal Revenue Code Section 382 (“IRC Section 382”). Events which may cause limitations in the amount of the net operating losses that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. Utilization of the federal and state net operating losses may be subject to substantial annual limitation due to the ownership change limitations provided by the IRC Section 382 and similar state provisions. An analysis was conducted through December 31, 2014 to determine whether an ownership change had occurred since inception. The analysis indicated that because an ownership change occurred in a prior year, federal and state net operating losses of $184 and $214, respectively, were significantly limited pursuant to IRC Section 382. In the event the Company has subsequent changes in ownership, net operating losses and research and development credit carryovers could be further limited and may expire unutilized. As of December 31, 2014, the Company had federal and state net operating loss carryforwards of approximately $99,779 and $85,288, respectively. The federal net operating loss carryforward will begin expiring in 2026 and the state net operating loss carryforward will begin expiring in 2016. As of December 31, 2014, the Company had federal and state research and development credits of approximately $3,938 and $3,497, respectively. The federal research and development credits will begin expiring in 2026. The state research and development credits are not currently subject to expiration. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law. As part of the act, the research and development credit was retroactively extended. Accordingly, the Company did not record a federal research and development credit for 2012. While the applicable credit for 2012 was considered in 2014 and 2013, no financial statement benefit was recorded as the Company applies a valuation allowance against the credit generated. The Company has recorded a full valuation allowance against its otherwise recognizable deferred income tax assets as of December 31, 2014 and 2013 (except for the deferred income tax assets associated with the Company’s subsidiary in the United Kingdom). The Company has determined, after evaluating all positive and negative historical and prospective evidence, that it is more likely than not that the deferred tax assets will not be realized. The valuation allowance increased by $9,295, $4,205 and $10,951 during the years ended December 31, 2014, 2013 and 2012, respectively. The Company files U.S. state and foreign income tax returns in jurisdictions with varying statutes of limitations. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. These audits include questioning the timing and amount of deduction, the nexus of income among various tax jurisdictions and compliance with state, local and foreign tax laws. The Company is not currently under any examination by the U.S. state or foreign tax authorities. Because of net operating loss and credit carry forwards, all of the Company’s tax years dating to inception in 2007 remain open to examination. As of December 31, 2014 and 2013, the Company did not have any unrecognized tax benefits that if recognized would impact the annual effective tax rate. During 2014, 2013 and 2012, the Company did not F-27 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) recognize any interest or penalties related to unrecognized tax benefits. The aggregate changes in the balance of gross unrecognized tax benefits were as follows: The Company does not anticipate that the amount of unrecognized tax benefits relating to tax positions existing at December 31, 2014 will significantly increase or decrease within the next twelve months. U.S. income taxes and foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries were not provided for on a cumulative total of $1,292 of undistributed earnings for certain foreign subsidiaries as of December 31, 2014. The Company intends to reinvest these earnings indefinitely in its foreign subsidiaries. If these earnings were distributed to the United States in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, the Company would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes. Determination of the amount of unrecognized deferred income tax liability related to these earnings is not practicable. 13. Net Loss Per Share Available to Common Stockholders Basic net loss per share available to common stockholders is calculated by dividing the net loss available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Net loss available to common stockholders is calculated using the two class method as net loss less the preferred stock dividend for the period less the amount of net loss, if any, allocated to the preferred stock based on weighted preferred stock outstanding during the period relative to total stock outstanding during the period. As the Company’s preferred stockholders did not have the contractual obligations to share in the losses of the Company, no loss was allocated to the convertible preferred stockholders in the determination of net loss available to common stockholders. The weighted-average number of shares of common stock used to calculate the Company’s basic net loss per share available to common stockholders excludes those shares subject to repurchase related to unvested common shares, stock options that were exercised prior to vesting, restricted stock issued and RSUs settled for shares of common stock as these shares are not deemed to be outstanding for accounting purposes until they vest. The diluted net loss per share of common stock is computed by dividing the net loss using the weighted-average number of shares of common stock, excluding common stock subject to repurchase, and, if dilutive, potential shares of common stock outstanding during the period. Potential shares of common stock consist of common stock subject to repurchase, stock options to purchase common stock, restricted common stock issued, RSUs settled for shares of common stock, warrants to purchase convertible preferred stock (using the treasury stock method) and the conversion of the Company’s convertible preferred stock (using the “if converted” method). F-28 Beginning balance as of January 1, 2014 $ 1,088 Increase in balances related to tax positions taken during the current period 394 Increase in balances related to tax positions taken during the prior period 99 Ending balance as of December 31, 2014 $ 1,581 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) The following table presents the calculation of basic and diluted net loss per share: The following table presents the potential common shares outstanding that were excluded from the computation of diluted net loss per share available to common stockholders for the periods presented because including them would have been anti-dilutive: 14. Segment Reporting The Company defines the term “chief operating decision maker” to be the Chief Executive Officer. The Chief Executive Officer reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluation of financial performance. Accordingly, the Company has determined that it operates as a single reportable and operating segment. Revenues by geographic area, based on the billing location of the customer, were as follows: F-29 Years Ended December 31, 2014 2013 2012 Numerator: Net loss available to common stockholders $ (33,171 ) $ (35,852 ) $ (26,482 ) Denominator: Weighted average number of shares, basic and diluted 34,210 26,312 4,417 Net loss per share available to common stockholders Basic and diluted net loss per common share available to common stockholders $ (0.97 ) $ (1.36 ) $ (6.00 ) Years Ended December 31, 2014 2013 2012 Convertible preferred stock — — 18,753 Options to purchase common stock 6,376 4,855 4,314 Restricted stock units 769 — — Restricted common stock 580 — — Common stock subject to repurchase 85 180 284 Convertible preferred stock warrants — — 51 Common stock warrants — — 63 7,810 5,035 23,465 Years Ended December 31, 2014 2013 2012 United States of America $ 65,745 $ 52,725 $ 43,429 International 33,609 24,590 16,129 Total revenues, net $ 99,354 $ 77,315 $ 59,558 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) Long-lived assets, excluding goodwill and intangible assets, by geographic area were as follows: 15. Commitments and Contingencies Operating Leases Rent expense for 2014, 2013 and 2012 was $7,478, $6,811, and $4,741, respectively. The Company has leased office space in San Francisco, London, Austin, Chicago, Dublin, Hamburg, New York, Paris, Portland, Singapore, Sydney, Tokyo and Shanghai under non-cancelable operating leases, which expire between 2015 and 2022. Additionally, the Company leases the space utilized for data center operations. Future minimum lease payments for significant operating leases as of December 31, 2014 were as follows: Legal Matters From time to time, the Company may be involved in lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employment and other matters, which arise in the ordinary course of business. In accordance with GAAP, the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, ruling, advice of legal counsel and other information and events pertaining to a particular case. Litigation is inherently unpredictable. If any unfavorable ruling were to occur in any specific period or if a loss becomes probable and estimable, there exists the possibility of a material adverse impact on the Company’s results of operations, financial position or cash flows. Indemnification The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the agreements, each party may indemnify, defend and hold the other party harmless with respect to such claim, suit or proceeding brought against it by a third party alleging that the indemnifying party’s intellectual property infringes upon the intellectual property of the third party, or results from a breach of the indemnifying F-30 December 31, 2014 2013 United States of America $ 15,701 $ 14,050 International 573 367 Total long-lived assets, net $ 16,274 $ 14,417 Years Ending 2015 $ 6,278 2016 7,108 2017 6,817 2018 3,900 2019 3,800 Thereafter 7,893 $ 35,796 Table of Contents Marin Software Incorporated Notes to Consolidated Financial Statements (dollars and share numbers in thousands, except per share data) party’s representations and warranties or covenants, or that results from any acts of negligence or willful misconduct. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. Historically, the Company has not been obligated to make significant payments for these obligations and no liabilities have been recorded for these obligations on the consolidated balance sheets as of December 31, 2014 and 2013. The Company also indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company has a Directors and Officers insurance policy that limits its exposure and enables the Company to recover a portion of any future amounts paid. Historically, the Company has not been obligated to make any payments for these obligations and no liabilities have been recorded for these obligations on the consolidated balance sheets as of December 31, 2014 and 2013. Other Contingencies The Company is subject to claims and assessments from time to time in the ordinary course of business. The Company’s management does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows. 16. Employee Benefit Plans The Company sponsors a 401(k) defined contribution plan covering all employees in the United States. The Board of Directors determines contributions made by the Company annually. The Company made no contributions under this plan for 2014, 2013 and 2012. 17. Related Party Transactions In October 2013, the Company appointed James Barrese to the Board of Directors. Mr. Barrese is the Chief Technology Officer of PayPal, Inc, which is a customer of the Company. During 2014 and 2013, the Company recorded total revenues of $390 and $163, respectively, through its subscription agreements with PayPal, Inc. and their affiliate eBay Inc. 18. Subsequent Events Acquisition On February 12, 2015, the Company acquired SocialMoov, a Paris-based social advertising platform for Facebook and Twitter advertising. Under the terms of the agreement, total consideration for the acquisition was $18,750, consisting of $8,000 of cash, and $10,750 in common stock. The Company also agreed to grant approximately $2,000 in stock-based awards with time-based vesting to employees of SocialMoov that continued employment with the Company. The results of SocialMoov’s operations will be included in the consolidated financial statements following the acquisition date. The Company is currently evaluating the purchase price allocation following the consummation of the transaction. It is not possible to disclose the preliminary purchase price allocation given the short period of time between the acquisition date and the filing of this report. F-31 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 20, 2015. MARIN SOFTWARE INCORPORATED By: /s/ JOHN A. KAELLE John A. Kaelle Chief Financial Officer Table of Contents POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David A. Yovanno and John A. Kaelle, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him or her and in his or her name, place or stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the date indicated: Name Title Date /s/ David A. Yovanno David A. Yovanno Chief Executive Officer and Director (principal executive officer) February 20, 2015 /s/ John A. Kaelle John A. Kaelle Chief Financial Officer (principal financial and accounting officer) February 20, 2015 /s/ Christopher A. Lien Christopher A. Lien Executive Chairman and Director February 20, 2015 /s/ Paul Auvil Paul Auvil Director February 20, 2015 /s/ James Barrese James Barrese Director February 20, 2015 /s/ L. Gordon Crovitz L. Gordon Crovitz Director February 20, 2015 /s/ Bruce Dunlevie Bruce Dunlevie Lead Independent Director February 20, 2015 /s/ Donald Hutchison Donald Hutchison Director February 20, 2015 /s/ Allan Leinwand Allan Leinwand Director February 20, 2015 /s/ Daina Middleton Daina Middleton Director February 20, 2015 Table of Contents EXHIBIT INDEX Exhibit Number Incorporated by Reference Filed Herewith Description of Document Form File No. Exhibit Filing Date 2.1 Amended and Restated Agreement and Plan of Reorganization by and among the Registrant, Infinity Acquisition Sub, Inc., Infinity Acquisition Sub II, L.L.C., NowSpots, Inc. and Fortis Advisors L.L.C. as Stockholders’ Agent as of May 30, 2014 8-K 001-35838 2.1 6/4/2014 3.1 Restated Certificate of Incorporation. 10-Q 001-35838 3.1 5/9/2013 3.2 Restated Bylaws. 10-Q 001-35838 3.2 5/9/2013 4.1 Form of Common Stock Certificate. S-1/A 333-186669 4.1 3/15/2013 4.2 Amended and Restated Investors Rights’ Agreement, dated as of January 25, 2012, by and among the Registrant and certain of its stockholders, as amended. S-1 333-186669 4.2 2/13/2013 10.1 Form of Indemnification Agreement. S-1/A 333-186669 10.1 3/4/2013 10.2# 2006 Equity Incentive Plan and forms of stock option agreement and stock option exercise agreement. S-1 333-186669 10.2 2/13/2013 10.3# 2013 Equity Incentive Plan and forms of stock option agreement, stock option exercise agreement, restricted stock agreement, and restricted stock unit award agreement. S-1/A 333-186669 10.3 3/4/2013 10.4# 2013 Employee Stock Purchase Plan and form of subscription agreement. S-1/A 333-186669 10.4 3/4/2013 10.5 Office Lease, dated as of January 7, 2011, by and between the Registrant and 123 Mission, LLC, as amended. S-1 333-186669 10.6 2/13/2013 10.6 Master Services Agreement, dated as of August 3, 2009, by and between the Registrant and Switch Communications Group L.L.C. S-1 333-186669 10.7 2/13/2013 10.7 Amended and Restated Loan and Security Agreement, dated as of December 9, 2011, by and among the Registrant, Marin Software Limited and Silicon Valley Bank, as amended. X 10.8# Form of Severance and Change in Control Agreement between the Registrant and each of the executive officers. S-1/A 333-186669 10.9 3/11/2013 10.9# Offer Letter, dated as of February 15, 2011, by and between the Registrant and John Kaelle. 10-K 001-35838 10.9 2/28/2014 Table of Contents Exhibit Number Incorporated by Reference Filed Herewith Description of Document Form File No. Exhibit Filing Date 10.10# Offer Letter, dated as of October 31, 2006, by and between the Registrant and Peter Wooster. 10-Q 001-35838 10.10 5/8/2014 10.11# Executive Bonus Compensation Plan. X 10.12# Release Agreement, dated July 8, 2014, by and between the Registrant and Peter Wooster. 10-Q 001-35838 10.12 8/7/2014 10.13# Offer Letter, dated May 4, 2014, by and between the Registrant and David. A. Yovanno. 8-K 001-35838 10.1 5/8/2014 10.14# Description of Director Compensation Program X 21.1 Subsidiaries of the Registrant. X 23.1 Consent of independent registered public accounting firm. X 31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 32.1* Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 32.2* Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 101.INS XBRL Instance Document X 101.SCH XBRL Taxonomy Schema Linkbase Document X 101.CAL XBRL Taxonomy Calculation Linkbase Document X 101.DEF XBRL Taxonomy Definition Linkbase Document X 101.LAB XBRL Taxonomy Labels Linkbase Document X 101.PRE XBRL Taxonomy Presentation Linkbase Document X * As contemplated by SEC Release No. 33-8212, these exhibits are furnished with this Annual Report on Form 10-K and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in any filing of the Registrant under the Securities Act of 1933 or the Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in such filings. # Represents a management contract or compensatory plan. Exhibit 10.7 AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “ Agreement ”) dated as of December 9, 2011 (the “ Effective Date ”) by and among SILICON VALLEY BANK, a California corporation (“ Bank ”), MARIN SOFTWARE INCORPORATED, a Delaware corporation (“ Marin ”), and MARIN SOFTWARE LIMITED, a company registered under the laws of England and Wales (“ Marin Ltd ”; and together with Marin, individually and collectively, the “ Borrower ”), provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank. The parties agree as follows: RECITALS A. Bank and Marin have entered into that certain Loan and Security Agreement dated as of October 31, 2008 (as the same may from time to time be further amended, modified, supplemented or restated, the “ Prior Loan Agreement ”). Marin Ltd was added to the Loan Agreement as a Borrower pursuant to that certain Joinder Agreement, dated January 10, 2010, by and among Bank, Marin and Marin Ltd. Pursuant to the Prior Loan Agreement, Bank made certain loans and other credit accommodations available to Borrower, including a secured revolving loan in the principal amount of Four Million Dollars ($4,000,000) and a secured growth capital loan in the principal amount of Five Million Dollars ($5,000,000). B. Borrower has requested, and Bank has agreed to amend and restate the Prior Loan Agreement in its entirety. The parties hereby agree that the Prior Loan Agreement is hereby amended, restated and replaced in its entirety as follows: Accounting terms not defined in this Agreement shall be construed following GAAP. Calculations and determinations must be made following GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein. Borrower hereby unconditionally promises to pay Bank the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due in accordance with this Agreement. (a) Availability . Subject to the terms and conditions of this Agreement and to deduction of Reserves, Bank shall make Advances not exceeding the Availability Amount. Amounts borrowed hereunder may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein. 1 ACCOUNTING AND OTHER TERMS 2 LOAN AND TERMS OF PAYMENT 2.1 Promise to Pay. 2.1.1 Revolving Advances. (b) Termination; Repayment . The Revolving Line terminates on the Revolving Line Maturity Date, when the principal amount of all Advances, the unpaid interest thereon, and all other Obligations relating to the Revolving Line shall be immediately due and payable. (a) Prior Growth Capital Loan . Borrower hereby acknowledges that, as part of the Prior Loan Agreement, Bank made an advance to Borrower in an original principal amount of Three Million Five Hundred Thousand Dollars ($3,500,000) (the “ Prior Growth Capital Loan ”), a portion of which remains outstanding as of the Effective Date. Bank and Borrower hereby agree that there is no further availability under the Prior Growth Capital Loan. The Obligations owing with respect to the Prior Growth Capital Loan have not been extinguished or discharged hereby and the execution of this Agreement is not intended to and shall not cause or result in a novation with respect to the Prior Growth Capital Loan. The aggregate outstanding principal amount of the Prior Growth Capital Loan as of November 30, 2011 is Six Hundred Twenty-Eight Thousand Five Hundred Sixty-Eight Dollars and Sixteen Cents ($628,568.16). (b) Principal and Interest Payments . Borrower hereby agrees to continue to make equal monthly payments of principal and interest on the Prior Growth Capital Loan of One Hundred Six Thousand Six Hundred Twenty-Five Dollars Eighty-One Cents ($106,625.81) commencing on the first (1st) Business Day of the first (1st) month after the Effective Date. All unpaid principal and accrued and unpaid interest on the Prior Growth Capital Loan is due and payable in full on the Prior Growth Capital Maturity Date. The Prior Growth Capital Loan shall continue to accrue interest at a fixed per annum rate of six percent (6.0%). Interest shall be computed on the basis of a 360-day year for the actual number of days elapsed. Immediately upon the occurrence and during the continuance of an Event of Default, the outstanding amount under Prior Growth Capital Loan shall bear interest at the Default Rate unless the Bank otherwise elects from time to time in its sole discretion to impose a smaller increase. Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without limitation, Bank Expenses) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable to the Prior Growth Capital Loan. Payment or acceptance of the increased interest rate provided in Section 2.6(a) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank. (c) Prepayment . At Borrower’s option, so long as no Event of Default has occurred and is continuing, Borrower shall have the option to prepay all, but not less than all, of the Prior Growth Capital Loan made by Bank under this Agreement, provided Borrower (a) provides written notice to Bank of its election to exercise to prepay the Prior Growth Capital Loan at least ten (10) days prior to such prepayment, and (b) pays, on the date of the prepayment (i) all accrued and unpaid interest with respect to the Prior Growth Capital Loan through the date the prepayment is made; (ii) all unpaid principal with respect to the Prior Growth Capital Loan; (iii) the Prior Growth Capital Final Payment, and (iv) all other sums, if any, that shall have become due and payable hereunder as of the date of prepayment with respect to this Agreement. Borrower may condition such prepayment on the funding of another financing and provide that its prepayment election shall terminate if such funding does not occur by a specific date. 2 2.2 Prior Growth Capital Loan. (d) Mandatory Prepayment Upon an Acceleration . If the Prior Growth Capital Loan is accelerated following the occurrence and during the continuance of an Event of Default, Borrower shall immediately pay to Bank an amount equal to the sum of: (i) all accrued and unpaid interest with respect to the Prior Growth Capital Loan through the date the prepayment is made, (ii) all unpaid principal with respect to the Prior Growth Capital Loan; (iii) the Prior Growth Capital Final Payment; and (iv) all other sums, if any, that shall have become due and payable as of the date of repayment, including interest at the Default Rate with respect to any past due amounts. (a) Prior Equipment Advances . Borrower hereby acknowledges that, as part of the Prior Loan Agreement, Bank made advances (each, a “ Prior Equipment Advance ” and collectively, the “ Prior Equipment Advances ”) available to Borrower in an aggregate original principal amount of Two Million Dollars ($2,000,000) a portion of which remains outstanding as of the Effective Date (the “ Prior Equipment Loan ”). Bank and Borrower hereby agree that there is no further availability under the Prior Equipment Loan. The Obligations owing with respect to the Prior Equipment Loan have not been extinguished or discharged hereby and the execution of this Agreement is not intended to and shall not cause or result in a novation with respect to the Prior Equipment Loan. The aggregate outstanding principal amount of the Prior Equipment Loan as of November 30, 2011 is One Million Six Hundred Ninety Thousand Four Hundred Ninety-Four Dollars and Fifty-Four Cents ($1,690,494.54). (b) Principal and Interest Payments . Borrower hereby agrees to continue to make equal monthly payments of principal and interest on the Prior Equipment Loan of Sixty Thousand Four Hundred Seventy Dollars and Eight-Two Cents ($60,470.82) commencing on the first (1st) calendar day of the first (1st) month after the Effective Date and continuing thereafter on the first (1st) calendar day of each successive month (each, a “ Payment Date ”). All unpaid principal and accrued and unpaid interest on the Prior Equipment Loan is due and payable in full on the Prior Equipment Maturity Date. The Prior Equipment Loan shall continue to accrue interest at a fixed per annum rate of five and one half of one percent (5.50%). (c) Prepayment Upon an Event of Loss . Borrower shall bear the risk of any loss, theft, destruction, or damage of or to the Financed Equipment. If, during the term of this Agreement, any Event of Loss occurs with respect to Financed Equipment financed by a Prior Equipment Advance, then, within ten (10) days following such Event of Loss, Borrower shall (i) pay to Bank on account of the Obligations all accrued interest to the date of the prepayment, plus all outstanding principal owing with respect to the Financed Equipment subject to the Event of Loss; or (ii) if no Event of Default has occurred and is continuing, at Borrower’s option, repair or replace any Financed Equipment subject to an Event of Loss provided the repaired or replaced Financed Equipment is of equal or like value to the Financed Equipment subject to an Event of Loss and provided further that Bank has a first priority perfected security interest in such repaired or replaced Financed Equipment. Any partial prepayment of a Prior Equipment Advance paid by Borrower on account of an Event of Loss shall be applied to prepay amounts owing for such Prior Equipment Advance in inverse order of maturity. 3 2.3 Prior Equipment Loan. (d) Mandatory Prepayment Upon an Acceleration . If the Prior Equipment Advances are accelerated following the occurrence of an Event of Default or otherwise, Borrower shall immediately pay to Bank an amount equal to the sum of: (i) all outstanding principal plus accrued interest, plus (ii) an other sums, if any, that shall have become due and payable, including interest at the Default Rate with respect to any past due amounts. (e) Permitted Prepayment of Prior Equipment Advances . Borrower shall have the option to prepay all, but not less than all, of the Prior Equipment Advances advanced by Bank under this Agreement, provided Borrower (i) provides written notice to Bank of its election to prepay the Prior Equipment Advances at least ten (10) days prior to such prepayment, and (ii) pays, on the date of such prepayment (A) all outstanding principal plus accrued interest, plus (B) all other sums, if any, that shall have become due and payable, including interest at the Default Rate with respect to any past due amounts. Borrower may condition such prepayment on the funding of another financing and provide that its prepayment election shall terminate if such funding does not occur by a specific date. (a) Availability . Subject to the terms and conditions of this Agreement, during the Draw Period, Bank shall make advances (each, an “ Equipment Advance ” and, collectively, the “ Equipment Advances ”) not exceeding the Equipment Line. Equipment Advances may only be used to finance Eligible Equipment purchased within ninety (90) days (determined based upon the applicable invoice date of such Eligible Equipment) before the Funding Date of each Equipment Advance; provided, however, the first Equipment Advance may be used to finance Eligible Equipment purchased on or after June 1, 2011. No Equipment Advance may exceed one hundred percent (100%) of the total invoice for Eligible Equipment (excluding taxes, shipping, warranty charges, freight discounts and installation expenses relating to such Eligible Equipment except to the extent such are allowed to be financed pursuant hereto as Other Equipment). Unless otherwise agreed to by Bank, not more than twenty-five percent (25%) of the proceeds of the Equipment Line shall be used to finance Other Equipment. Each Equipment Advance must be in an amount equal to the lesser of One Hundred Thousand Dollars ($100,000) or the amount that has not yet been drawn under the Equipment Line. After repayment, no Equipment Advance may be reborrowed. (b) Repayment . For each Equipment Advance, Borrower shall make (i) monthly payments of interest only commencing on the first (1st) calendar day of the first (1st) month following the month in which the Funding Date occurs with respect to a Equipment Advance and continuing thereafter during the Equipment Interest Only Period on the first (1st) Business Day of each successive month and (ii) thirty six (36) consecutive equal monthly installments of principal and accrued interest commencing on the first (1st) calendar day of the first (1st) month after the Equipment Interest Only Period (the “ Equipment Conversion Date ”), which would fully amortize the outstanding Equipment Advances, as of the Equipment Conversion Date, over the Repayment Period. Notwithstanding the foregoing, all unpaid principal and interest on each Equipment Advance shall be due on the applicable Maturity Date. (c) Prepayment Upon an Event of Loss . Borrower shall bear the risk of any loss, theft, destruction, or damage of or to the Financed Equipment. If, during the term of this 4 2.4 Equipment Advances. Agreement, any Event of Loss occurs with respect to Financed Equipment financed by a Equipment Advance, then, within ten (10) days following such Event of Loss, Borrower shall (i) pay to Bank on account of the Obligations all accrued interest to the date of the prepayment, plus all outstanding principal owing with respect to the Financed Equipment subject to the Event of Loss; or (ii) if no Event of Default has occurred and is continuing, at Borrower’s option, repair or replace any Financed Equipment subject to an Event of Loss provided the repaired or replaced Financed Equipment is of equal or like value to the Financed Equipment subject to an Event of Loss and provided further that Bank has a first priority perfected security interest in such repaired or replaced Financed Equipment. Any partial prepayment of an Equipment Advance paid by Borrower on account of an Event of Loss shall be applied to prepay amounts owing for such Equipment Advance in inverse order of maturity. (d) Mandatory Prepayment Upon an Acceleration . If the Equipment Advances are accelerated following the occurrence of an Event of Default or otherwise, Borrower shall immediately pay to Bank an amount equal to the sum of: (i) all outstanding principal plus accrued interest, plus (ii) all other sums, if any, that shall have become due and payable, including interest at the Default Rate with respect to any past due amounts. (e) Permitted Prepayment of Equipment Advances . Borrower shall have the option to prepay all, but not less than all, of the Equipment Advances advanced by Bank under this Agreement, provided Borrower (i) provides written notice to Bank of its election to prepay the Equipment Advances at least thirty (30) days prior to such prepayment, and (ii) pays, on the date of such prepayment (A) all outstanding principal plus accrued interest, plus (B) all other sums, if any, that shall have become due and payable, including interest at the Default Rate with respect to any past due amounts. Borrower may condition such prepayment on the funding of another financing and provide that its prepayment election shall terminate if such funding does not occur by a specific date. It at any time, the outstanding principal amount of any Advances exceeds the lesser of either the Revolving Line or the Borrowing Base (such sum being an “ Overadvance ”), Borrower shall immediately pay to Bank in cash such excess. Without limiting Borrower’s obligation to repay Bank any amount of the Overadvance, Borrower agrees to pay Bank interest on the outstanding amount of any Overadvance, on demand, at the Default Rate. (a) Advances . Subject to Section 2.6(c), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to the Prime Rate, plus three quarters of one percent (0.75%), which interest shall be payable monthly in accordance with Section 2.6(f) below. (b) Equipment Advances . Subject to Section 2.6(c), the principal amount outstanding for each Equipment Advance shall accrue interest at a fixed per annum rate equal to five and one half of one percent (5.50%), which interest shall be payable monthly in accordance with Section 2.6(f) below. 5 2.5 Overadvances. 2.6 Payment of Interest on the Credit Extensions. (c) Default Rate . Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is five percentage points (5.00%) above the rate that is otherwise applicable thereto (the “ Default Rate ”) unless Bank otherwise elects from time to time in its sole discretion to impose a smaller increase. Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without limitation, Bank Expenses) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable to the Obligations. Payment or acceptance of the increased interest rate provided in this Section 2.6(c) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank. (d) Adjustment to Interest Rate . Changes to the interest rate of any Credit Extension based on changes to the Prime Rate shall be effective on the effective date of any change to the Prime Rate and to the extent of any such change. (e) Debit of Accounts . Bank may debit any of Borrower’s deposit accounts, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes Bank when due. These debits shall not constitute a set-off. (f) Payment; Interest Computation; Float Charge . Interest is payable monthly on the last calendar day of each month and shall be computed on the basis of a 360-day year for the actual number of days elapsed. In computing interest, (i) all Payments received after 12:00 p.m. Pacific time on any day shall be deemed received at the opening of business on the next Business Day, and (ii) the date of the making of any Credit Extension shall be included and the date of payment shall be excluded; provided, however , that if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension. Bank shall not, however, be required to credit Borrower’s account for the amount of any item of payment which is unsatisfactory to Bank in its good faith business judgment, and Bank may charge Borrower’s Designated Deposit Account for the amount of any item of payment which is returned to Bank unpaid. Borrower shall pay to Bank: (a) Commitment Fee . A fully earned, non-refundable commitment fee of Forty-Two Thousand Five Hundred Dollars ($42,500) (the “ Revolving Commitment Fee ”) of which, (i) Twenty Thousand Dollars ($20,000), shall be paid on the Effective Date, (ii) Ten Thousand Dollars ($10,000) shall be paid on January 11, 2012, and (ii) the balance (Twelve Thousand Five Hundred Dollars ($12,500)) shall be paid to Bank on January 10, 2013. (b) Equipment Commitment Fee . A fully earned, non-refundable commitment fee of Seven Thousand Dollars ($7,000) (the “ Equipment Commitment Fee ”) shall be paid on the Effective Date; (c) Termination Fee . Subject to the terms of Section 12.1, a termination fee; 6 2.7 Fees. (d) Prior Growth Capital Final Payment . A Prior Growth Capital Final Payment due on the Prior Growth Capital Maturity Date, or at the time of a prepayment pursuant to the terms of Sections 2.2(c) and 2.2(d); and (e) Bank Expenses . All Bank Expenses (including reasonable attorneys’ fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due. (a) All payments (including prepayments) to be made by Borrower under any Loan Document shall be made in immediately available funds in U.S. Dollars, without setoff or counterclaim, before 12:00 p.m. Pacific time on the date when due. Payments of principal and/or interest received after 12:00 p.m. Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment shall be due the next Business Day, and additional fees or interest, as applicable, shall continue to accrue until paid. (b) All payments with respect to the Obligations may be applied in such order and manner as Bank shall determine in its sole discretion. Borrower shall have no right to specify the order or the accounts to which Bank shall allocate or apply any payments required to be made by Borrower to Bank or otherwise received by Bank under this Agreement when any such allocation or application is not specified elsewhere in this Agreement. Bank’s obligation to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate, including, without limitation: (a) duly executed original signatures to the Loan Documents; (b) duly executed original signatures to the Warrant; (c) duly executed original signatures to the Control Agreements; (d) Borrower’s Operating Documents and a good standing certificate of Borrower certified by the Secretary of State of the State of Delaware as of a date no earlier than thirty (30) days prior to the Effective Date; (e) duly executed original signatures to the completed Borrowing Resolutions for Borrower; (f) certified copies, dated as of a recent date, of financing statement searches, as Bank shall request, accompanied by written evidence (including any UCC termination 7 2.8 Payments; Application of Payments. 3 CONDITIONS OF LOANS 3.1 Conditions Precedent to Initial Credit Extension. statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released; (g) the Perfection Certificates of Borrower, together with the duly executed original signatures thereto; (h) a copy of its Registration Rights Agreement, Investors’ Rights Agreement, and any amendments thereto; (i) evidence satisfactory to Bank that the insurance policies required by Section 6.7 hereof are in full force and effect, together with appropriate evidence showing lender loss payable and/or additional insured clauses and cancellation notice to Bank (or endorsements reflecting the same) in favor of Bank; and (j) payment of the fees and Bank Expenses then due as specified in Section 2.7 hereof. Bank’s obligations to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent: (a) except as otherwise provided in Section 3.4(a), timely receipt of an executed Transaction Report or Loan Supplement; (b) the representations and warranties in this Agreement shall be true, accurate, and complete in all material respects on the date of the Transaction Report or Loan Supplement and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension. Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in this Agreement remain true, accurate, and complete in all material respects; provided, however, that such materiality qualifier shall not -be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; and (c) in Bank’s sole discretion, any material impairment in the general affairs, management, results of operation, financial condition or the prospect of repayment of the Obligations, or any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank. If any event, condition, circumstance or other factor (collectively, “ Circumstances ”) exists or does not exist whose existence or non-existence serves as justification under this Section 3.2(c) for Bank’s refusal to make a requested Credit Extension, the existence or non-existence of such Circumstance shall not constitute an Event of 8 3.2 Conditions Precedent to all Credit Extensions. Default under Section 8 unless it independently constitutes an Event of Default pursuant to another provision of this Agreement. Borrower agrees to deliver to Bank each item required to be delivered to Bank under this Agreement as a condition precedent to any Credit Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt by Bank of any such item shall not constitute a waiver by Bank of Borrower’s obligation to deliver such item, and the making of any Credit Extension in the absence of a required item shall be in Bank’s sole discretion. (a) Revolving Line Advances . Subject to the prior satisfaction of all other applicable conditions to the making of an Advance set forth in this Agreement, to obtain an Advance, Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 p.m. Pacific time on the Funding Date of the Advance. Together with such notification, Borrower must promptly deliver to Bank by electronic mail or facsimile a completed Transaction Report executed by a Responsible Officer or his or her designee. Bank shall credit Advances to the Designated Deposit Account. Bank may make Advances under this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions if the Advances are necessary to meet Obligations which have become due. Bank may rely on any telephone notice given by a person whom Bank believes is a Responsible Officer or designee. (b) Equipment Advances . Subject to the prior satisfaction of all other applicable conditions to the making of an Equipment Advance set forth in this Agreement, to obtain an Equipment Advance, Borrower must notify Bank (which notice shall be irrevocable) by electronic mail or facsimile no later than 12:00 p.m. Pacific time one (1) Business Day before the proposed Funding Date. The notice shall be a Payment/Advance Form, must be signed by a Responsible Officer or designee, and shall include a copy of the invoice for the Equipment being financed. Borrower shall also deliver to Bank by electronic mail or facsimile a completed Loan Supplement, executed by a Responsible Officer or his or her designee, copies of invoices for the Financed Equipment and such additional information as Bank may reasonably request at least five (5) Business Days before the proposed Funding Date. At Bank’s discretion, Bank shall have the opportunity to confirm that, upon filing the UCC-1 financing statement covering the Equipment described on the Loan Supplement, Bank shall have a first priority perfected security interest in such Equipment. If Borrower satisfies the conditions of each Equipment Advance, Bank shall disburse such Equipment Advance by transfer to the Designated Deposit Account. Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. 9 3.3 Covenant to Deliver. 3.4 Procedures for Borrowing. 4 CREATION OF SECURITY INTEREST 4.1 Grant of Security Interest. Borrower acknowledges that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank. Regardless of the terms of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority perfected security interest in the Collateral granted herein (subject only to Permitted Liens that may have superior priority to Bank’s Lien in this Agreement). If this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are satisfied in full, and at such time, Bank shall, at Borrower’s sole cost and expense, terminate its security interest in the Collateral and all rights therein shall revert to Borrower. In the event (x) all Obligations (other than inchoate indemnity obligations), except for Bank Services, are satisfied in full, and (y) this Agreement is terminated, Bank shall terminate the security interest granted herein upon Borrower providing cash collateral acceptable to Bank in its good faith business judgment for Bank Services, if any. In the event such Bank Services consist of outstanding Letters of Credit, Borrower shall provide to Bank cash collateral in an amount equal to 105% of the Dollar Equivalent (or 110% if the Dollar Equivalent is denominated in Foreign Currency) of the face amount of all such Letters of Credit plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to such Letters of Credit. Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens that may have superior priority to Bank’s Lien under this Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank. Borrower hereby authorizes Bank to file financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Bank’s interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of Bank under the Code. Such financing statements may indicate the Collateral as “all assets of the Debtor” or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Bank’s discretion. Marin Ltd hereby covenants and agrees with Bank that (a) the UK Debenture, is and shall continue in full force and effect for the benefit of Bank with respect to the Secured Obligations (as such term is defined in the UK Debenture); (b) the Secured Obligations shall include, without limitation, the Obligations of Borrower as increased, amended, and restated by this Agreement 10 4.2 Priority of Security Interest. 4.3 Authorization to File Financing Statements. 4.4 Reaffirmation of UK Debenture. and the other Loan Documents; (c) there are no offsets, claims or defenses of Marin Ltd with respect to the UK Debenture or with respect to the Secured Obligations; and (d) the UK Debenture is hereby ratified and confirmed in all respects and shall continue in full force and effect, shall be valid and enforceable and shall not be impaired or otherwise affected by the execution of this Agreement or any other document or instrument delivered in connection herewith. All terms and provisions of the UK Debenture shall remain unchanged and in full force and effect and Marin Ltd hereby reaffirms its obligations under the UK Debenture. Borrower represents and warrants as follows: Borrower is duly existing and in good standing as a Registered Organization in its jurisdiction of formation and is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to have a material adverse effect on Borrower’s business. In connection with this Agreement, Borrower has delivered to Bank a completed certificate signed by Borrower, entitled “ Perfection Certificate ”. Borrower represents and warrants to Bank that (a) Borrower’s exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower is an organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s organizational identification number or accurately states that Borrower has none; (d) the Perfection Certificate accurately sets forth Borrower’s place of business, or, if more than one, its chief executive office as well as Borrower’s mailing address (if different than its chief executive office); (e) Borrower (and each of its predecessors) has not, in the past five (5) years, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete (it being understood and agreed that Borrower may from time to time update certain information in the Perfection Certificate after the Effective Date to the extent permitted by one or more specific provisions in this Agreement). If Borrower is not now a Registered Organization but later becomes one, Borrower shall promptly notify Bank of such occurrence and provide Bank with Borrower’s organizational identification number. The execution, delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or any of its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect) or (v) constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any 11 5 REPRESENTATIONS AND WARRANTIES 5.1 Due Organization, Authorization; Power and Authority. agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a material adverse effect on Borrower’s business. Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens. Borrower has no deposit accounts other than the deposit accounts with Bank, the deposit accounts, if any, described in the Perfection Certificate delivered to Bank in connection herewith, or of which Borrower has given Bank notice and taken such actions as are necessary to give Bank a perfected security interest therein. The Accounts are bona fide, existing obligations of the Account Debtors. The Collateral is not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection Certificate. None of the components of the Collateral shall be maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2. All Inventory is in all material respects of good and marketable quality, free from material defects. All Financed Equipment is new, except for such Financed Equipment that has been disclosed in writing to Bank by Borrower as “used” and that Bank, in its sole discretion, has agreed to finance. Borrower is the sole owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted to its customers in the ordinary course of business, (b) over-the-counter software that is commercially available to the public, and (c) non-material Intellectual Property licensed to Borrower and material Intellectual Property licensed to Borrower noted on the Perfection Certificate. Each Patent which it owns or purports to own and which is material to Borrower’s business is valid and enforceable, and no part of the Intellectual Property which Borrower owns or purports to own and which is material to Borrower’s business has been judged invalid or unenforceable, in whole or in part. To the best of Borrower’s knowledge, no claim has been made that any part of the Intellectual Property violates the rights of any third party except to the extent such claim would not reasonably be expected to have a material adverse effect on Borrower’s business. Except as noted on the Perfection Certificate, Borrower is not a party to, nor is it bound by, any Restricted License. (a) For each Account with respect to which Advances are requested, on the date each Advance is requested and made, such Account shall be an Eligible Account. (b) All statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing the Eligible Accounts are and shall be true and correct and all such invoices, instruments and other documents, and all of Borrower’s Books are genuine and in 12 5.2 Collateral. 5.3 Accounts Receivable. all respects what they purport to be. Whether or not an Event of Default has occurred and is continuing, Bank may notify any Account Debtor owing Borrower money of Bank’s security interest in such funds and verify the amount of such Eligible Account. 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 Eligible Accounts in any Transaction Report. 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. There are no actions or proceedings pending or, to the knowledge of the Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries involving more than Two Hundred Fifty Thousand Dollars ($250,000), except as disclosed on the Perfection Certificate delivered to the Bank on the Effective Date. All consolidated financial statements for Borrower and any of its Subsidiaries delivered to Bank fairly present in all material respects Borrower’s consolidated financial condition and Borrower’s consolidated results of operations. There has not been any material deterioration in Borrower’s consolidated financial condition since the date of the most recent financial statements submitted to Bank. The fair salable value of Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature. Borrower is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to have a material adverse effect on its business. None of Borrower’s or any of its Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or 13 5.4 Litigation. 5.5 Financial Statements; Financial Condition. 5.6 Solvency. 5.7 Regulatory Compliance. filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted. Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments. Borrower has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower, other than taxes which in the aggregate do not at any time exceed Ten Thousand Dollars ($10,000). Borrower may defer payment of any contested taxes, provided that Borrower (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Bank in writing of the commencement of, and any material development in, the proceedings, (c) posts bonds or takes any other steps required to prevent the governmental authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien”. Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years which could result in additional taxes becoming due and payable by Borrower. Borrower has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency. Borrower shall use the proceeds of the Credit Extensions solely as working capital, to purchase Eligible Equipment, and to fund its general business requirements and not for personal, family, household or agricultural purposes. No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Bank, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results). 14 5.8 Subsidiaries; Investments. 5.9 Tax Returns and Payments; Pension Contributions. 5.10 Use of Proceeds. 5.11 Full Disclosure. For purposes of the Loan Documents, whenever a representation or warranty is made to Borrower’s knowledge or awareness, to the “best of Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of the Responsible Officers. Borrower shall do all of the following: (a) Maintain its and all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on Borrower’s business or operations. Borrower shall comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which could have a material adverse effect on Borrower’s business. (b) Use commercially reasonable efforts to obtain all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents to which it is a party and the grant of a security interest to Bank in all of its property. Borrower shall promptly provide copies of any such obtained Governmental Approvals to Bank. Provide Bank with the following: (a) a Transaction Report (and any schedules related thereto), (i) in the event that Borrower is Streamline Eligible and provided no Event of Default has occurred and is continuing, no later than thirty (30) days after the end of each month and (ii) in all other cases, on a weekly basis; (b) within thirty (30) days after the end of each month, (A) monthly accounts receivable agings, aged by invoice date, (B) monthly accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, (C) monthly reconciliations of accounts receivable agings (aged by invoice date), transaction reports and general ledger, and (D) Borrower’s Deferred Revenue report in form satisfactory to Bank in its sole discretion, but reasonable discretion; (c) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and consolidating balance sheet and income statement covering Borrower’s consolidated and consolidating operations for such month certified by a Responsible Officer and in a form acceptable to Bank (the “ Monthly Financial Statements ”); (d) within thirty (30) days after the last day of each month and together with the Monthly Financial Statements, a duly completed Compliance Certificate signed by a Responsible 15 5.12 Definition of “Knowledge.” 6 AFFIRMATIVE COVENANTS 6.1 Government Compliance. 6.2 Financial Statements, Reports, Certificates. Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Bank shall reasonably request, including, without limitation, a statement that at the end of such month there were no held checks; (e) Within thirty (30) days after the last day of each month, deliver to Bank monthly recurring revenue roll forward reports, including new monthly revenues added and revenues lost for each month, and SaaS metrics (including Monthly Recurring Revenue and Churn Rate reports for both U.S. and UK operations) in form and substance reasonably satisfactory to Bank; (f) as soon as available, but no later than seven (7) days after approval by the Board of Directors, (A) annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the following fiscal year and (B) Board approved financial projections for the following fiscal year, commensurate in form and substance with those provided to Borrower’s venture capital investors (it being understood that the budgets and projections set forth in this Section for the 2012 fiscal year are expected to be received not later than January 31, 2012); (g) As soon as available, but no later than one hundred eighty (180) days after the last day of Borrower’s fiscal year, audited consolidated and consolidating financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to Bank in its reasonable discretion (it being understood that the audited financial statements for the 2010 fiscal year are expected to be received not later than January 31, 2012), provided, however, Borrower’s unqualified opinion on financial statements may contain a qualification as to going concern typical for venture backed companies similar to Borrower; (h) in the event that Borrower becomes subject to the reporting requirements under the Exchange Act within five (5) days of filing, copies of all periodic and other reports, proxy statements and other materials filed by Borrower with the SEC, any Governmental Authority succeeding to any or all of the functions of the SEC or with any national securities exchange, or distributed to its shareholders, as the case may be. Documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrower’s website on the Internet at Borrower’s website address; (i) within five (5) days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders or to any holders of Subordinated Debt; (j) prompt report of any legal actions pending or threatened in writing against Borrower or any of its Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, Two Hundred Fifty Thousand Dollars ($250,000) or more; and (k) other financial information reasonably requested by Bank. 16 (a) Schedules and Documents Relating to Accounts . Borrower shall deliver to Bank transaction reports and schedules of collections, as provided in Section 6.2, on Bank’s standard forms; provided, however, that Borrower’s failure to execute and deliver the same shall not affect or limit Bank’s Lien and other rights in all of Borrower’s Accounts, nor shall Bank’s failure to advance or lend against a specific Account affect or limit Bank’s Lien and other rights therein. If requested by Bank, Borrower shall furnish Bank with copies (or, at Bank’s request, originals) of all contracts, orders, invoices, and other similar documents, and all shipping instructions, delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or disposition of which gave rise to such Accounts. In addition, Borrower shall deliver to Bank, on its request, the originals of all instruments, chattel paper, security agreements, guarantees and other documents and property evidencing or securing any Accounts, in the same form as received, with all necessary indorsements, and copies of all credit memos. (b) Disputes . Borrower shall promptly notify Bank of all disputes or claims which in the aggregate exceeds One Hundred Thousand Dollars ($100,000) in any calendar month relating to Accounts. Borrower may forgive (completely or partially), compromise, or settle any Account for less than payment in full, or agree to do any of the foregoing so long as (i) Borrower does so in good faith, in a commercially reasonable manner, in the ordinary course of business, in arm’s-length transactions, and reports the same to Bank in the regular reports provided to Bank; (ii) no Event of Default has occurred and is continuing; and (iii) after taking into account all such discounts, settlements and forgiveness, the total outstanding Advances will not exceed the lesser of the Revolving Line or the Borrowing Base. (c) Collection of Accounts . Borrower shall have the right to collect all Accounts, unless and until an Event of Default has occurred and is continuing. Bank shall require that all proceeds of Accounts from Account Debtors which have their principal place of business in the United States be deposited by Borrower into a lockbox account, or such other “blocked account” as specified by Bank, pursuant to a blocked account agreement in such form as Bank may specify in its good faith business judgment. Whether or not an Event of Default has occurred and is continuing, Borrower shall immediately deliver all payments on and proceeds of such Accounts to an account maintained with Bank to be applied (i) prior to an Event of Default, pursuant to the terms of Section 2.8(b) hereof, and (ii) after the occurrence and during the continuance of an Event of Default, pursuant to the terms of Section 9.4 hereof. At all times when Borrower is Streamline Eligible, provided no Event of Default has occurred and is continuing, funds in the blocked account will be remitted to Borrower’s Designated Deposit Account, but at all other times, such collections shall be applied to reduce the Obligations on a daily basis, prior to being deposited into Borrower’s Designated Deposit Account. (d) Returns . Provided no Event of Default has occurred and is continuing, if any Account Debtor returns any Inventory to Borrower, Borrower shall promptly (i) determine the reason for such return, (ii) issue a credit memorandum to the Account Debtor in the appropriate amount, and (iii) provide a copy of such credit memorandum to Bank, upon request from Bank. In the event any attempted return occurs after the occurrence and during the continuance of any Event of Default, Borrower shall immediately promptly notify Bank of the return of the Inventory. 17 6.3 Accounts Receivable. (e) Verification . Bank may, from time to time, verify directly with the respective Account Debtors the validity, amount and other matters relating to the Accounts, either in the name of Borrower or Bank or such other name as Bank may choose. (f) No Liability . Bank shall not be responsible or liable for any shortage or discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of which gives rise to an Account, or for any error, act, omission, or delay of any kind occurring in the settlement, failure to settle, collection or failure to collect any Account, or for settling any Account in good faith for less than the full amount thereof, nor shall Bank be deemed to be responsible for any of Borrower’s obligations under any contract or agreement giving rise to an Account. Nothing herein shall, however, relieve Bank from liability for its own gross negligence or willful misconduct. Except as otherwise provided in Section 6.3(c), deliver, in kind, all proceeds arising from the disposition of any Collateral to Bank in the original form in which received by Borrower not later than the following Business Day after receipt by Borrower, to be applied to the Obligations (1) prior to an Event of Default, pursuant to the terms of Section 2.8(b) hereof, and (2) after the occurrence and during the continuance of an Event of Default, pursuant to the terms of Section 9.4 hereof; provided that, if no Event of Default has occurred and is continuing, Borrower shall not be obligated to remit to Bank the proceeds of the sale of surplus, worn out or obsolete Equipment disposed of by Borrower in good faith in an arm’s length transaction for an aggregate purchase price of Two Hundred Thousand Dollars ($200,000) or less (for all such transactions in any fiscal year). Borrower agrees that it will maintain all proceeds of Collateral in an account maintained with Bank. Nothing in this Section limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement. Timely file, and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower and each of its Subsidiaries, other than taxes which in the aggregate do not at any time exceed Ten Thousand Dollars ($10,000), and except for deferred payment of any taxes contested pursuant to the terms of Section 5.9 hereof, and shall deliver to Bank, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms. Allow Bank, or its agents, at reasonable times, on one (1) Business Day’s notice (provided no notice is required if an Event of Default has occurred and is continuing), to inspect the Collateral and audit and copy Borrower’s Books. Unless an Event of Default has occurred and is continuing, such inspections or audits shall be conducted no more often than once every six (6) months (or more frequently as Bank shall determine conditions warrant, in its sole discretion). The foregoing inspections and audits shall be at Borrower’s expense, and the charge 18 6.4 Remittance of Proceeds. 6.5 Taxes; Pensions. 6.6 Access to Collateral; Books and Records. therefore shall be $850 per person per day (or such higher amount as shall represent Bank’s then-current standard charge for the same), plus reasonable out-of-pocket expenses. In the event Borrower and Bank schedule an audit more than ten (10) days in advance, and Borrower cancels or seeks to reschedule the audit with less than ten (10) days written notice to Bank, then (without limiting any of Bank’s rights or remedies), Borrower shall pay Bank a fee of $1,000 plus any out-of-pocket expenses incurred by Bank to compensate Bank for the anticipated costs and expenses of the cancellation or rescheduling. Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrower’s industry and location and as Bank may reasonably request. Insurance policies shall be in a form, with companies, and in amounts that are satisfactory to Bank. All property policies shall have a lender’s loss payable endorsement showing Bank as a lender loss payee and waive subrogation against Bank. All liability policies shall show, or have endorsements showing, Bank as an additional insured. All policies (or their respective endorsements) shall provide that the insurer shall give Bank at least thirty (30) days notice before canceling, amending, or declining to renew its policy. At Bank’s request, Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy shall, at Bank’s option, be payable to Bank on account of the Obligations. If Borrower fails to obtain insurance as required under this Section 6.7 or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or part of such payment or obtain such insurance policies required in this Section 6.7, and take any action under the policies Bank deems prudent. (a) Maintain all of its domestic operating and other deposit accounts and securities accounts, including all excess cash, with Bank and Bank’s Affiliates. Borrower shall consider maintaining its foreign primary banking relationship with Bank and Bank’s Affiliates. (b) Provide Bank five (5) days prior written notice before establishing any Collateral Account at or with any bank or financial institution in the United States other than Bank or Bank’s Affiliates. For each Collateral Account that Borrower at any time maintains in the United States, Borrower shall cause the applicable bank or financial institution (other than Bank) at or with which any Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Bank’s Lien in such Collateral Account in accordance with the terms hereunder which Control Agreement may not be terminated without the prior written consent of Bank. The provisions of the previous sentence shall not apply to deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s employees and identified to Bank by Borrower as such. Maintain at all times, to be tested as of the last day of each month, unless otherwise noted, on a consolidating basis with respect to Borrower and its Subsidiaries: 19 6.7 Insurance. 6.8 Operating Accounts. 6.9 Financial Covenants. (a) Monthly Recurring Revenue . Commencing with the month ending August 31, 2011, and as of the last day of each month thereafter, and beginning with the month ending March 31, 2012 for the trailing three (3) month period then ended, Monthly Recurring Revenue of not less than the following amounts at the following times: For purposes of calculating the Monthly Recurring Revenue for February, such calculation will be prorated on the basis of twenty-nine (29) calendar days. Notwithstanding the foregoing, commencing with the month ending January 31, 2012, Borrower’s Monthly Recurring Revenue is subject to change based on Borrower’s annual financial projections approved by Borrower’s Board of Directors for the December 31, 2012 fiscal year, which shall be equal to or greater than seventy-five percent (75%) of Borrower’s projected performance for such month, as determined by Bank in its sole discretion (the “ 2012 MMR Covenant ”). Borrower’s failure to reach an agreement with Bank on the 2012 MMR Covenant and to execute and deliver to Bank an amendment to this Agreement, shall constitute an immediate Event of Default under this Agreement. 20 Month Ending Monthly Recurring Revenue August 31, 2011 $ 2,920,000 September 30, 2011 $ 2,940,000 October 31, 2011 $ 2,960,000 November 30, 2011 $ 2,980,000 December 31, 2011 $ 3,000,000 January 31, 2012 $ 3,135,000 February 29, 2012 $ 3,276,075 March 31, 2012 $ 9,835,000 April 30, 2012 $ 10,277,000 May 31, 2012 $ 10,740,000 June 30, 2012 $ 11,223,000 July 31, 2012 $ 11,728,000 August 31, 2012 $ 12,255,000 September 30, 2012 $ 12,807,000 October 31, 2012 $ 13,384,000 November 30, 2012 $ 13,986,000 December 31, 2012 $ 14,615,000 (b) Churn Rate . A Churn Rate, tested as of the last day of each month for the immediately preceding three (3) month period then ended, not to exceed three percent (3%) at any time averaged over such three (3) month period. (a) (i) Protect, defend and maintain the validity and enforceability of its Intellectual Property (other than intellectual property which Borrower licenses from one or more third parties); (ii) promptly advise Bank in writing of material infringements of its Intellectual Property (other than intellectual property which Borrower licenses from one or more third parties); and (iii) not allow any Intellectual Property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Bank’s written consent. (b) Provide written notice to Bank within thirty (30) days of entering or becoming bound by any Restricted License (other than over-the-counter software that is commercially available to the public). Borrower shall take such steps as Bank reasonably requests to attempt to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (i) any Restricted License to be deemed “Collateral” and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such Restricted License, whether now existing or entered into in the future, and (ii) Bank to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Bank’s rights and remedies under this Agreement and the other Loan Documents. From the date hereof and continuing through the termination of this Agreement, make available to Bank, without expense to Bank, Borrower and its officers, employees and agents and Borrower’s books and records, to the extent that Bank may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank with respect to any Collateral or relating to Borrower. Execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral or to effect the purposes of this Agreement. Borrower shall not do any of the following without Bank’s prior written consent: Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, “ Transfer ”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out or obsolete Equipment that does not constitute Financed Equipment; (c) in connection with Permitted Liens and Permitted Investments; and (d) consisting of cash payments to trade creditors and the use of 21 6.10 Protection of Intellectual Property Rights. 6.11 Litigation Cooperation. 6.12 Further Assurances. 7 NEGATIVE COVENANTS 7.1 Dispositions. cash, in each case, in the ordinary course of business in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents. (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower and such Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or dissolve; or (c) (i) have a change in the Key Person such that the Key Person ceases to hold such office with Borrower and a replacement satisfactory to Borrower’s Board of Directors are not made within ninety (90) days after the Key Person’s departure from Borrower; or (ii) enter into any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediately prior to the first such transaction own more than 40% of the voting stock of Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrower’s equity securities in a public offering or to venture capital investors so long as Borrower identifies to Bank the venture capital investors prior to the closing of the transaction and provides to Bank a description of the material terms of the transaction). Borrower shall not, without at least ten (10) days prior written notice to Bank: (1) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than Two Hundred Fifty Thousand Dollars ($250,000) in Borrower’s assets or property) or deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Fifty Thousand Dollars ($50,000) to a bailee at a location other than to a bailee and at a location already disclosed in the Perfection Certificate, (2) change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5) change any organizational number (if any) assigned by its jurisdiction of organization. If Borrower intends to deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Fifty Thousand Dollars ($50,000) to a bailee, and Bank and such bailee are not already parties to a bailee agreement governing both the Collateral and the location to which Borrower intends to deliver the Collateral, then Borrower will first receive the written consent of Bank, and such bailee shall execute and deliver a bailee agreement in form and substance satisfactory to Bank in its sole discretion. Notwithstanding the foregoing, bailee agreements shall not be required with collocation facilities. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person. A Subsidiary may merge or consolidate into another Subsidiary or into Borrower. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness. 22 7.2 Changes in Business, Management, Ownership, or Business Locations. 7.3 Mergers or Acquisitions. 7.4 Indebtedness. Create, incur, allow, or suffer any Lien on any of the Collateral, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority security interest granted herein, or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s or any Subsidiary’s Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted Liens” herein. Maintain any Collateral Account except pursuant to the terms of Section 6.8(b) hereof. (a) Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock provided, that Borrower may repurchase the stock of former employees or consultants pursuant to stock repurchase agreements so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, and further, provided, that such repurchases do not exceed in the aggregate of Two Hundred Fifty Thousand Dollars ($250,000) per fiscal year; or (b) directly or indirectly make any Investment other than Permitted Investments, or permit any of its Subsidiaries to do so. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower, except for transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof or adversely affect the subordination thereof to Obligations owed to Bank. Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a 23 7.5 Encumbrance. 7.6 Maintenance of Collateral Accounts. 7.7 Distributions; Investments. 7.8 Transactions with Affiliates. 7.9 Subordinated Debt. 7.10 Compliance. Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency. Any one of the following shall constitute an event of default (an “ Event of Default ”) under this Agreement: Borrower fails to (a) make any payment of principal or interest on any Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) day grace period shall not apply to payments due on the Revolving Line Maturity Date, the Growth Capital Maturity Date, the Equipment Maturity Date, or the Prior Equipment Maturity Date). During the cure period, the failure to cure the payment default is not an Event of Default (but no Credit Extension will be made during the cure period). (a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.5, 6.6, 6.7, 6.8, 6.9, or violates any covenant in Section 7; or (b) Borrower fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Cure periods provided under this section shall not apply, among other things, to financial covenants or any other covenants set forth in clause (a) above; If Bank determines in its good faith judgment that it is the clear intention of Borrower’s current and future investors to not continue to fund Borrower in the amounts and timeframe to the extent necessary to enable Borrower to satisfy the Obligations as they become due and payable, or there is a material impairment in the perfection or priority of the Bank’s security 24 8 EVENTS OF DEFAULT 8.1 Payment Default. 8.2 Covenant Default. 8.3 Investor Abandonment; Priority of Security Interest. interest in the Collateral; provided, however, any Transfer permitted under Section 7.1 shall not constitute an Event of Default under this Section 8.3; (a) (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under the control of Borrower (including a Subsidiary) on deposit or otherwise maintained with Bank or any Bank Affiliate, or (ii) a notice of lien or levy is filed against any of Borrower’s assets by any government agency, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; or (b) (i) any material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower from conducting any material part of its business; (a) Borrower is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within thirty (30) days (but no Credit Extensions shall be made while of any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed); There is, under any agreement to which Borrower is a party with a third party or parties, (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Two Hundred Fifty Thousand Dollars ($250,000); or (b) any default by Borrower, the result of which could have a material adverse effect on Borrower’s business; One or more final judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least Two Hundred Fifty Thousand Dollars ($250,000) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower and the same are not, within ten (10) days after the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay (provided that no Credit Extensions will be made prior to the discharge, stay, or bonding of such judgment, order, or decree); Borrower or any Person acting for Borrower makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to 25 8.4 Attachment; Levy; Restraint on Business. 8.5 Insolvency. 8.6 Other Agreements. 8.7 Judgments. 8.8 Misrepresentations. Bank or to induce Bank to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made; Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement; or A default shall occur under the UK Debenture and such default is not cured within any applicable grace period provided therein. While an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following: (a) declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank); (b) stop advancing money or extending credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Bank; (c) for any Letters of Credit, demand that Borrower (i) deposit cash with Bank in an amount equal to 105% of the Dollar Equivalent (or 110% if the Dollar Equivalent is denominated in Foreign Currency) of the aggregate face amount of all Letters of Credit remaining undrawn (plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment)), to secure all of the Obligations relating to such Letters of Credit, as collateral security for the repayment of any future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid or payable over the remaining term of any Letters of Credit; (d) terminate any FX Forward Contracts; (e) settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Bank considers advisable, notify any Person owing Borrower money of Bank’s security interest in such funds, and verify the amount of such account; (f) make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral. Borrower shall assemble the 26 8.9 Subordinated Debt. 8.10 Cross-Default with UK Debenture. 9 BANK’S RIGHTS AND REMEDIES 9.1 Rights and Remedies. Collateral if Bank requests and make it available as Bank designates. Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights or remedies; (g) apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of Borrower; (h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name, trade secrets, trade names, Trademarks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section, Borrower’s rights under all licenses and all franchise agreements inure to Bank’s benefit; (i) place a “hold” on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral; (j) demand and receive possession of Borrower’s Books; and (k) exercise all rights and remedies available to Bank under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof). Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s name on any checks or other forms of payment or security; (b) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Bank or a third party as the Code permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect or continue the perfection of Bank’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations have been satisfied in full and Bank is under no further obligation to make Credit Extensions hereunder. Bank’s foregoing appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Bank’s obligation to provide Credit Extensions terminates. 27 9.2 Power of Attorney. If Borrower fails to obtain the insurance called for by Section 6.7 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document, Bank may obtain such insurance or make such payment, and all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then highest rate applicable to the Obligations, and secured by the Collateral. Bank will make reasonable efforts to provide Borrower with notice of Bank obtaining such insurance at the time it is obtained or within a reasonable time thereafter. No payments by Bank are deemed an agreement to make similar payments in the future or Bank’s waiver of any Event of Default. If an Event of Default has occurred and is continuing, Bank may apply any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations in such order as Bank shall determine in its sole discretion. Any surplus shall be paid to Borrower by credit to the Designated Deposit Account or to other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If Bank, in its good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash therefor. So long as Bank complies with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Bank, Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the Collateral. Bank’s failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Bank thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by the party granting the waiver and then is only effective for the specific instance and purpose for which it is given. Bank’s rights and remedies under this Agreement and the other Loan Documents are cumulative. Bank has all rights and remedies provided under the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an election and shall not preclude Bank from exercising any other remedy under this Agreement or other remedy available at law or in equity, and Bank’s waiver of any Event of Default is not a continuing waiver. Bank’s delay in exercising any remedy is not a waiver, election, or acquiescence. 28 9.3 Protective Payments. 9.4 Application of Payments and Proceeds. 9.5 Bank’s Liability for Collateral. 9.6 No Waiver; Remedies Cumulative. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable. Either Borrower may, acting singly, request Advances hereunder. Each Borrower hereby appoints the other as agent for the other for all purposes hereunder, including with respect to requesting Advances hereunder. Each Borrower hereunder shall be jointly and severally obligated to repay all Advances made hereunder, regardless of which Borrower actually receives said Advance, as if each Borrower hereunder directly received all Advances. Each Borrower waives (a) any suretyship defenses available to it under the Code or any other applicable law, though referencing CA Civil Code sections may be duplicative, for Agreements governed by CA law, add the following - including, without limitation, the benefit of California Civil Code Section 2815 permitting revocation as to future transactions and the benefit of California Civil Code Sections 1432, 2809, 2810, 2819, 2839, 2845, 2847, 2848, 2849, 2850, and 2899 and 3433, and (b) any right to require Bank to: (i) proceed against any Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy. Bank may exercise or not exercise any right or remedy it has against any Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Borrower’s liability. Notwithstanding any other provision of this Agreement or other related document, each Borrower irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating Borrower to the rights of Bank under this Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section shall be null and void. If any payment is made to a Borrower in contravention of this Section, such Borrower shall hold such payment in trust for Bank and such payment shall be promptly delivered to Bank for application to the Obligations, whether matured or unmatured. Each Person included in the term “Borrower” hereby represents and warrants to Bank that each of them will derive benefits, directly and indirectly, from each Credit Extension, each in their separate capacity and as a member of the integrated group to which each such Person belongs and because the successful operation of the integrated group is dependent upon the continued successful performance of the functions of the integrated group as a whole, because each Borrower believes (i) the terms of the Credit Extensions provided under this Agreement are more favorable than would otherwise would be obtainable by such Persons individually, and (ii) the additional administrative and other costs and reduced flexibility associated with 29 9.7 Demand Waiver. 9.8 Borrower Liability. 9.9 Borrowers are Integrated Group. individual loan arrangements which would otherwise be required if obtainable would substantially reduce the value to such Persons of the Credit Extensions. Without implying any limitation on the joint and several nature of the Obligations, Bank agrees that, notwithstanding any other provision of this Agreement, the Persons included in the term “Borrower” may create reasonable inter-company indebtedness between or among the Persons included in the term “Borrower” with respect to the allocation of the benefits and proceeds of the Credit Extensions under this Agreement. All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail or facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below. Bank or Borrower may change its mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10. California law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank. Borrower expressly submits and consents in 30 9.10 Inter-Company Debt. 10 NOTICES If to Borrower: Marin Software Incorporated 123 Mission Street, 25th Floor San Francisco, California 94105 Attn: Mr. John Kaelle Fax: [personally identifiable information withheld] Email: [personally identifiable information withheld] If to Bank: Silicon Valley Bank 2400 Hanover Street Palo Alto, California 94304 Attn: Julia Bobrovich Fax: [personally identifiable information withheld] Email: [personally identifiable information withheld] 11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or 31 obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph. This Agreement may be terminated prior to the Revolving Line Maturity Date by Borrower, effective three (3) Business Days after written notice of termination is given to Bank. Notwithstanding any such termination, Bank’s lien and security interest in the Collateral shall continue until Borrower fully satisfies its Obligations. If such termination is at Borrower’s election or at Bank’s election due to the occurrence and continuance of an Event of Default, Borrower shall pay to Bank, in addition to the payment of any other expenses or fees then-owing, a termination fee in an amount equal to Fifty Thousand Dollars ($50,000), provided, that no termination fee shall be charged if the credit facility hereunder is replaced with a new facility from another division of Bank or upon the consummation of an initial public offering of Borrower’s common stock. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights or obligations under it without Bank’s prior written consent (which may be granted or withheld in Bank’s discretion). Bank has the right, without the consent of or notice to Borrower, to sell, transfer, assign, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights, and benefits under this Agreement and the other Loan Documents (other than the Warrant, as to which assignment, transfer and other such actions are governed by the terms of the Warrant). Borrower agrees to indemnify, defend and hold Bank and its directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank (each, an “ Indemnified Person ”) harmless against: (a) all obligations, demands, claims, and liabilities (collectively, “ Claims ”) claimed or asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or expenses (including Bank Expenses) in any way suffered, incurred, or paid by such Indemnified Person as a result of, following from, consequential to, or arising from transactions between Bank and Borrower contemplated by the Loan Documents (including reasonable attorneys’ fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct. Time is of the essence for the performance of all Obligations in this Agreement. 32 12 GENERAL PROVISIONS 12.1 Termination Prior to Revolving Line Maturity Date. 12.2 Successors and Assigns. 12.3 Indemnification. 12.4 Time of Essence. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision. Bank may correct patent errors and fill in any blanks in the Loan Documents consistent with the agreement of the parties. No purported amendment or modification of any Loan Document, or waiver, discharge or termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought. Without limiting the generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document. Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver. The Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of the Loan Documents merge into the Loan Documents. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement. All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been satisfied. Without limiting the foregoing, except as otherwise provided in Section 4.1, the grant of security interest by Borrower in Section 4.1 shall survive until the termination of all Bank Services Agreements. The obligation of Borrower in Section 12.3 to indemnify Bank shall survive until the statute of limitations with respect to such claim or cause of action shall have run. In handling any confidential information, Bank shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (a) to Bank’s Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with Bank, 33 12.5 Severability of Provisions. 12.6 Correction of Loan Documents. 12.7 Amendments in Writing; Waiver; Integration. 12.8 Counterparts. 12.9 Survival. 12.10 Confidentiality. collectively, “Bank Entities”); (b) to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, Bank shall use its best efforts to obtain any prospective transferee’s or purchaser’s agreement to the terms of this provision); (c) as required by law, regulation, subpoena, or other order; (d) to Bank’s regulators or as otherwise required in connection with Bank’s examination or audit; (e) as Bank considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party service providers of Bank so long as such service providers have executed a confidentiality agreement with Bank with terms no less restrictive than those contained herein. Confidential information does not include information that is either: (i) in the public domain or in Bank’s possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank; or (ii) disclosed to Bank by a third party if Bank does not know that the third party is prohibited from disclosing the information. Bank Entities may use the confidential information for reporting purposes and the development and distribution of databases and market analyses so long as such confidential information is aggregated and anonymized prior to distribution unless otherwise expressly prohibited by Borrower. The provisions of the immediately preceding sentence shall survive the termination of this Agreement. In any action or proceeding between Borrower and Bank arising out of or relating to the Loan Documents, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled. The words “execution,” “signed,” “signature” and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act. The headings used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement. The parties mutually acknowledge that they and their attorneys have participated in the preparation and negotiation of this Agreement. In cases of uncertainty this Agreement shall be construed without regard to which of the parties caused the uncertainty to exist. The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement. The parties do not intend to create any agency, partnership, joint venture, trust, 34 12.11 Attorneys’ Fees, Costs and Expenses. 12.12 Electronic Execution of Documents. 12.13 Captions. 12.14 Construction of Agreement. 12.15 Relationship. fiduciary or other relationship with duties or incidents different from those of parties to an arm’s-length contract. Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights or remedies under or by reason of this Agreement on any persons other than the express parties to it and their respective permitted successors and assigns; (b) relieve or discharge the obligation or liability of any person not an express party to this Agreement; or (c) give any person not an express party to this Agreement any right of subrogation or action against any party to this Agreement. On the Effective Date, this Agreement shall amend, restate and supersede the Prior Loan Agreement in its entirety, except as provided in this Section. On the Effective Date, the rights and obligations of the parties evidenced by the Prior Loan Agreement shall be evidenced by this Agreement and the other Loan Documents and the grant of security interest in the Collateral by the Borrower under the Prior Loan Agreement and the other “Loan Documents” (as defined in the Prior Loan Agreement) shall continue under this Agreement and the other Loan Documents, and shall not in any event be terminated, extinguished or annulled but shall hereafter be governed by this Agreement and the other Loans Documents. All references to the Prior Loan Agreement in any Loan Document or other document or instrument delivered in connection therewith shall be deemed to refer to this Agreement and the provisions hereof. Without limiting the generality of the foregoing and to the extent necessary, the Bank reserves all of its rights under the Prior Loan Agreement. As used in the Loan Documents, the word “shall” is mandatory, the word “may” is permissive, the word “or” is not exclusive, the words “includes” and “including” are not limiting, the singular includes the plural, and numbers denoting amounts that are set off in brackets are negative. As used in this Agreement, the following capitalized terms have the following meanings: “ 2008 Warrant ” is that certain Warrant to Purchase Stock dated the October 31, 2008 executed by Borrower in favor of Bank. “ Account ” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower. “ Account Debtor ” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made. 35 12.16 Third Parties. 12.17 Transitional Arrangements. 13 DEFINITIONS 13.1 Definitions. “ Additional Borrower ” means each Person that has executed and delivered a Joinder Agreement that has been accepted and approved by the Bank. “ Advance ” or “ Advances ” means an advance (or advances) under the Revolving Line. “ Affiliate ” is, with respect to any Person, each other Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members. “ Agreement ” is defined in the preamble hereof. “ Availability Amount ” is (a) the lesser of (i) the Revolving Line or (ii) the amount available under the Borrowing Base minus (b) the outstanding principal balance of any Advances. “ Bank ” is defined in the preamble hereof. “ Bank Expenses ” are all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower. “ Bank Services ” are any products, credit services, and/or financial accommodations previously, now, or hereafter provided to Borrower or any of its Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash management services (including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check cashing services), interest rate swap arrangements, and foreign exchange services as any such products or services may be identified in Bank’s various agreements related thereto (each, a “ Bank Services Agreement ”). “ Bankruptcy-Related Defaults ” is defined in Section 9.1. “ Borrower ” means the Borrower as set forth on the cover page of this Agreement and each Additional Borrower. “ Borrower’s Books ” are all Borrower’s books and records including ledgers, federal and state tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information. “ Borrowing Base ” is 80% of Eligible Accounts, as determined by Bank from Borrower’s most recent Transaction Report; provided, however, that Bank may decrease the foregoing percentage in its good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect Collateral. 36 “ Borrowing Resolutions ” are, with respect to any Person, those resolutions substantially in the form attached hereto as Exhibit D . “ Business Day ” is any day that is not a Saturday, Sunday or a day on which Bank is closed. “ Cash Equivalents ” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit issued maturing no more than one (1) year after issue; and (d) money market funds at least ninety-five percent (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition. “ Churn Rate ” means, for any period as at any date of determination, the sum of the Monthly Recurring Revenue lost as a result of Closed Accounts divided by the aggregate Monthly Recurring Revenue for such period. “ Closed Accounts ” are, during any calendar month, the number of customer Accounts that are closed, cancelled, or otherwise terminated. “ Code ” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, 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, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term “ Code ” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions. “ Collateral ” is any and all properties, rights and assets of Borrower described as Collateral on Exhibit A . “ Collateral Account ” is any Deposit Account, Securities Account, or Commodity Account. “ Commodity Account ” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made. “ Compliance Certificate ” is that certain certificate in the form attached hereto as Exhibit B . “ Contingent Obligation ” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of 37 another such as an obligation, in each case, directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement. “ Control Agreement ” is any control agreement entered into among the depository institution at which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit Account, Securities Account, or Commodity Account. “ Copyrights ” are any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret. “ Credit Extension ” is any Advance, Prior Growth Capital Loan, Prior Equipment Advance, Equipment Advance, or any other extension of credit by Bank for Borrower’s benefit. “ Default Rate ” is defined in Section 2.6(a). “ Deferred Revenue ” is all amounts received or invoiced in advance of performance under contracts and not yet recognized as revenue. “ Deposit Account ” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made. “ Designated Deposit Account ” is Borrower’s deposit account, account number , maintained with Bank. “ Dollars ,” “ dollars ” or use of the sign “$” means only lawful money of the United States and not any other currency, regardless of whether that currency uses the “$” sign to denote its currency or may be readily converted into lawful money of the United States. “ Dollar Equivalent ” is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the country issuing such Foreign Currency. “ Draw Period ” is the period of time from the Effective Date through the earlier to occur of (a) June 30, 2012, or (b) an Event of Default. 38 “ Effective Date ” is defined in the preamble hereof. “ Eligible Accounts ” means Accounts which arise in the ordinary course of Borrower’s business that meet all Borrower’s representations and warranties in Section 5.3. Bank reserves the right at any time after the Effective Date to adjust any of the criteria set forth below and to establish new criteria in its good faith business judgment. Unless Bank otherwise agrees in writing, Eligible Accounts shall not include: (a) Accounts for which the Account Debtor is Borrower’s Affiliate, officer, employee, or agent; (b) Accounts that the Account Debtor has not paid within ninety (90) days (or one hundred twenty (120) days for UK Accounts) of invoice date regardless of invoice payment period terms; (c) Accounts with credit balances over ninety (90) days from invoice date; (d) Accounts owing from an Account Debtor, in which fifty percent (50%) or more of the Accounts have not been paid within ninety (90) days (or one hundred twenty (120) days for UK Accounts) of invoice date; (e) Accounts owing from an Account Debtor which does not have its principal place of business in the United States unless such Accounts are otherwise Eligible Accounts and (i) such Accounts do not exceed Twenty Thousand Dollars ($20,000) or (ii) that Bank otherwise approves of in writing; provided, however that Accounts owing from Omnicon Media Group, Tradedoubler Software AB, Neo@Ogilvy, Marks and Spencer p.l.c., Razorfish, Philips Consumer, iProspect, MEC, Performics, Publicis, Starcom, Vivaki, and Zenith Optimedia are deemed “Eligible Accounts” as of the Effective Date, provided, further, that continuing eligibility and the determination of which Accounts are eligible hereunder is a matter of Bank discretion in each instance and may be changed at any time with notice to Borrower; (f) Accounts billed and/or payable outside of the United States, including, without limitation UK Accounts, unless Bank has a first priority, perfected security interest or other enforceable Lien in such Accounts under all applicable laws, including foreign laws; (g) Accounts owing from an Account Debtor to the extent that Borrower is indebted or obligated in any manner to the Account Debtor (as creditor, lessor, supplier or otherwise - sometimes called “contra” accounts, accounts payable, customer deposits or credit accounts). (h) Accounts owing from an Account Debtor which is a United States government entity or any department, agency, or instrumentality thereof unless Borrower has assigned its payment rights to Bank and the assignment has been acknowledged under the Federal Assignment of Claims Act of 1940, as amended; (i) Accounts for demonstration or promotional equipment, or in which goods are consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on approval”, or other terms if Account Debtor’s payment may be conditional; 39 (j) Accounts owing from an Account Debtor where goods or services have not yet been rendered to the Account Debtor (sometimes called memo billings or pre-billings); (k) Accounts subject to contractual arrangements between Borrower and an Account Debtor where payments shall be scheduled or due according to completion or fulfillment requirements where the Account Debtor has a right of offset for damages suffered as a result of Borrower’s failure to perform in accordance with the contract (sometimes called contracts accounts receivable, progress billings, milestone billings, or fulfillment contracts); (l) Accounts owing from an Account Debtor the amount of which may be subject to withholding based on the Account Debtor’s satisfaction of Borrower’s complete performance (but only to the extent of the amount withheld; sometimes called retainage billings); (m) Accounts subject to trust provisions, subrogation rights of a bonding company, or a statutory trust; (n) Accounts owing from an Account Debtor that has been invoiced for goods that have not been shipped to the Account Debtor unless Bank, Borrower, and the Account Debtor have entered into an agreement acceptable to Bank in its sole discretion wherein the Account Debtor acknowledges that (i) it has title to and has ownership of the goods wherever located, (ii) a bona fide sale of the goods has occurred, and (iii) it owes payment for such goods in accordance with invoices from Borrower (sometimes called “bill and hold” accounts); (o) Accounts for which the Account Debtor has not been invoiced; (p) Accounts that represent non-trade receivables or that are derived by means other than in the ordinary course of Borrower’s business; (q) Accounts for which Borrower has permitted Account Debtor’s payment to extend beyond 90 days; (r) Accounts arising from chargebacks, debit memos or others payment deductions taken by an Account Debtor; (s) Accounts arising from product returns and/or exchanges (sometimes called “warranty” or “RMA” accounts); (t) Accounts in which the Account Debtor disputes liability or makes any claim (but only up to the disputed or claimed amount), or if the Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business; (u) Accounts owing from an Account Debtor with respect to which Borrower has received Deferred Revenue (but only to the extent of such Deferred Revenue); (v) Accounts owing from an Account Debtor, whose total obligations to Borrower exceed thirty percent (30%) of all Accounts, for the amounts that exceed that percentage, unless Bank approves in writing; and 40 (w) Accounts for which Bank in its good faith business judgment determines collection to be doubtful, including, without limitation, accounts represented by “refreshed” or “recycled” invoices. “ Eligible Equipment ” is the following to the extent it complies with all of Borrower’s representations and warranties to Bank, is acceptable to Bank in all respects, (i) is located at 123 Mission Street, 25th Floor, San Francisco, California 94105 or in such other locations in the United States which Bank has received prior written notice of such location and, at Bank’s request, a bailee agreement executed by the bailee of such location in form and substance satisfactory to Bank, and (ii) is subject to a first priority Lien in favor of Bank: (a) general purpose equipment, computer equipment, manufacturing equipment, office equipment, test and laboratory equipment, telephone systems, furnishings, subject to the limitations set forth herein, and (b) Other Equipment. “ Equipment ” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing. “ Equipment Advance ” is defined in Section 2.4(a). “ Equipment Conversion Date ” is defined in Section 2.4(b). “ Equipment Interest Only Period ” means, for each Equipment Advance, a three (3) month period commencing on the first (1st) calendar day of the first (1st) month immediately following the Funding Date of an Equipment Advance. “ Equipment Line ” is an Equipment Advance in an aggregate amount of up to Two Million Dollars ($2,000,000). “ Equipment Maturity Date ” is, for each Equipment Advance, the thirty-ninth (39th) Payment Date for such Equipment Advance, but no later than September 1, 2015. “ ERISA ” is the Employee Retirement Income Security Act of 1974, and its regulations. “ Event of Default ” is defined in Section 8. “ Exchange Act ” is the Securities Exchange Act of 1934, as amended. “ Financed Equipment ” is all present and future Eligible Equipment in which Borrower has any interest which is financed by an Equipment Advance or a Prior Equipment Advance. “ Foreign Currency ” means lawful money of a country other than the United States. “ Funding Date ” is any date on which a Credit Extension is made to or for the account of Borrower which shall be a Business Day. 41 “ FX Forward Contract ” is any foreign exchange contract by and between Borrower and Bank under which Borrower commits to purchase from or sell to Bank a specific amount of Foreign Currency on a specified date. “ GAAP ” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination. “ General Intangibles ” is all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all Intellectual Property, claims, income and other tax refunds, security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind. “ Governmental Approval ” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority. “ Governmental Authority ” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization. “ Indebtedness ” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations. “ Indemnified Person ” is defined in Section 12.3. “ 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 right, title, and interest in and to the following: (a) its Copyrights, Trademarks and Patents; (b) any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how, operating manuals; 42 (c) any and all source code; (d) any and all design rights which may be available to a Borrower; (e) any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and. (f) all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents “ Inventory ” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above. “ Investment ” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance or capital contribution to any Person. “ Investor Support ” means it is the clear intention of Borrower’s investors to continue to fund the Borrower in the amounts and timeframe necessary to enable Borrower to satisfy the Obligations as they become due and payable. “ Joinder Agreement ” means an Additional Borrower Joinder Supplement in substantially the form attached hereto as Exhibit F , with the blanks appropriately completed and executed and delivered by the Additional Borrower to the Bank. “ Key Person ” means Borrower’s Chief Executive Officer, who is, as of the Effective Date, Christopher Lien. “ Letter of Credit ” is a standby or commercial letter of credit issued by Bank upon request of Borrower based upon an application, guarantee, indemnity, or similar agreement. “ Lien ” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property. “ Loan Documents ” are, collectively, this Agreement, the UK Debenture, the Warrant, 2008 Warrant, the Perfection Certificate, the Joinder Agreement, the Stock Pledge Agreements, any Bank Services Agreement, any subordination agreement, any note, or notes or guaranties executed by Borrower, and any other present or future agreement between Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended, restated, or otherwise modified. 43 “ Loan Supplement ” is that certain form attached hereto as Exhibit E with respect to each Prior Equipment Advance or Equipment Advance. “ Monthly Financial Statements ” is defined in Section 6.2(c). “ Monthly Recurring Revenue ” means, for any period as at any date of determination, the sum of the aggregate value of all (a) billed Accounts of Borrower for such period taken as a single accounting period under GAAP, plus (b) monthly services performed by the Borrower on all service contracts for billed Accounts, as reported by Borrower in its Monthly Financial Statements delivered to the Bank pursuant to Section 6.2(c), minus (c) Closed Accounts, minus (d) one-time credits applied to any of Borrower’s Accounts. “ Net Cash ” is the sum of all of Borrower’s unrestricted cash less outstanding Obligations with respect to any Advances. “ Net Cash Threshold ” is greater than One Dollar ($1.00). “ Net Income ” means, as calculated on a consolidated basis for Borrower and its Subsidiaries for any period as at any date of determination, the net profit (or loss), after provision for taxes, of Borrower and its Subsidiaries for such period taken as a single accounting period. “ Obligations ” are Borrower’s obligation to pay when due any debts, principal, interest, Bank Expenses, and other amounts Borrower owes Bank now or later, whether under this Agreement, the other Loan Documents, or otherwise, including, without limitation, any interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and the performance of Borrower’s duties under the Loan Documents. “ Operating Documents ” are, for any Person, such Person’s formation documents, as certified with the Secretary of State of such Person’s state of formation on a date that is no earlier than 30 days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto. “ Other Equipment ” is leasehold improvements, intangible property such as computer software and software licenses, equipment specifically designed or manufactured for Borrower, other intangible property, limited use property and other similar property and soft costs approved by Bank, including taxes, shipping, warranty charges, freight discounts and installation expenses. “ Overadvance ” is defined in Section 2.5. “ Patents ” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same. “ Payment ” means all checks, wire transfers and other items of payment received by Bank (including proceeds of Accounts and payment of the Obligations in full) for credit to 44 Borrower’s outstanding Credit Extensions or, if the balance of the Credit Extensions has been reduced to zero, for credit to its deposit accounts. “ Perfection Certificate ” is defined in Section 5.1. “ Permitted Indebtedness ” is: (a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan Documents; (b) Indebtedness existing on the Effective Date and shown on the Perfection Certificate; (c) Subordinated Debt; (d) unsecured Indebtedness to trade creditors incurred in the ordinary course of business; (e) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business; (f) Indebtedness secured by Liens permitted under clauses (a) and (c) of the definition of “Permitted Liens” hereunder; (g) guarantees of real property lease obligations of Subsidiaries in the ordinary course of business; and (h) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (f) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be. “ Permitted Investments ” are: (a) Investments (including, without limitation, Subsidiaries) existing on the Effective Date and shown on the Perfection Certificate; (b) Investments consisting of Cash Equivalents; (c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower; (d) Investments consisting of deposit accounts in which Bank has a perfected security interest; (e) Investments accepted in connection with Transfers permitted by Section 7.1; (f) Investments by Marin in Subsidiaries (other than Marin Ltd.) not to exceed (i) One Million Four Hundred Thousand Dollars ($1,400,000) in the aggregate for the 2011 fiscal 45 year and (ii) Five Million Five Hundred Thousand Dollars ($5,500,000) in the aggregate for the 2012 fiscal year; (g) Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors; (h) 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 business; and (i) 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 paragraph (i) shall not apply to Investments of Borrower in any Subsidiary. “ Permitted Liens ” are: (a) Liens existing on the Effective Date and shown on the Perfection Certificate or arising under this Agreement and the other Loan Documents; (b) Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder; (c) purchase money Liens (i) on Equipment (other than Financed Equipment) acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than Five Hundred Thousand Dollars ($500,000) in the aggregate amount outstanding, or (ii) existing on Equipment (other than Financed Equipment) when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment; (d) Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed Seventy-Five Thousand Dollars ($75,000) and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto; (e) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA); (f) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien 46 must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase; (g) leases or subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), if the leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest therein; (h) non-exclusive license of Intellectual Property granted to third parties in the ordinary course of business; (i) Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections 8.4 and 8.7; and (j) Liens in favor of other financial institutions arising in connection with Borrower’s deposit and/or securities accounts held at such institutions, provided that Bank has a perfected security interest in the amounts held in such deposit and/or securities accounts. “ Person ” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency. “ Prime Rate ” is the “prime rate” of interest, as published from time to time by The Wall Street Journal in the “Money Rates” section of its Western Edition newspaper. In the event The Wall Street Journal or such rate is no longer published or available, Bank shall select a comparable rate. “ Prior Equipment Advances ” is defined in Section 2.3(a). “ Prior Equipment Loan ” is defined in Section 2.3(a). “ Prior Equipment Maturity Date ” is, for each Prior Equipment Advance, the thirty-ninth (39th) Payment Date for such Equipment Advance, but no later than December 1, 2014. “ Prior Growth Capital Final Payment ” is a payment (in addition to and not a substitution for the regular monthly payments of principal and accrued interest) due on the earlier of (a) the final payment date for the Prior Growth Capital Loan or (b) the date set forth in Section 2.7(d), equal to one and three quarters of one percent (1.75%) of the aggregate amount of such Prior Growth Capital Loan made under the Prior Loan Agreement. “ Prior Growth Capital Loan ” is defined in Section 2.2(a). “ Prior Growth Capital Maturity Date ” is May 1, 2012. “ Registered Organization ” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made 47 “ Repayment Period ” is a period of time equal to thirty-six (36) consecutive months commencing on the first (1st) calendar day of the first (1st) month following the Conversion Date. “ Requirement of Law ” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. “ Reserves ” means, as of any date of determination, such amounts as Bank may from time to time establish and revise in its good faith business judgment, reducing the amount of Advances and other financial accommodations which would otherwise be available to Borrower (a) to reflect events, conditions, contingencies or risks which, as determined by Bank in its good faith business judgment, do or may adversely affect (i) the Collateral or any other property which is security for the Obligations or its value (including without limitation any increase in delinquencies of Accounts), (ii) the assets, business or prospects of Borrower, or (iii) the security interests and other rights of Bank in the Collateral (including the enforceability, perfection and priority thereof); or (b) to reflect Bank’s good faith belief that any collateral report or financial information furnished by or on behalf of Borrower to Bank is or may have been incomplete, inaccurate or misleading in any material respect; or (c) in respect of any state of facts which Bank determines in good faith constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default. “ Responsible Officer ” is any of the Chief Executive Officer, President, Chief Financial Officer, VP Finance, General Counsel, and Controller of Borrower. “ Restricted License ” is any material license or other agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with the Bank’s right to sell any Collateral. “ Revolving Line is an Advance or Advances in an amount equal to Ten Million Dollars ($10,000,000), provided, however, that Advances supported by Accounts which arise out of and are billed and collected by Marin Ltd, shall not exceed Three Million Dollars ($3,000,000) in the aggregate at any time outstanding. “ Revolving Line Maturity Date ” is July 10, 2013. “ SEC ” shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority. “ Securities Account ” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made. “ Stock Pledge Agreements ” are collectively those certain Stock Pledge Agreements, dated the Effective Date, from Marin for the benefit of Bank. 48 “ Streamline Eligible ” shall mean at all times that Borrower’s Net Cash for the immediately preceding month is greater than the Net Cash Threshold. Borrower will not be Streamline Eligible until such time as Bank confirms that the Net Cash is greater than the Net Cash Threshold at all times during the immediately preceding month. “ Subordinated Debt ” is indebtedness incurred by Borrower subordinated to all of Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank. “ Subsidiary ” is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of Borrower. “ Trademarks ” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks. “ Transaction Report ” is that certain report of transactions and schedule of collections in the form attached hereto as Exhibit C . “ Transfer ” is defined in Section 7.1. “ UK Accounts ” means Accounts that are billed and collected by the Borrower in the United Kingdom which contain selling terms and conditions acceptable to Bank in its sole but reasonable discretion. “ UK Debenture ” means that certain Mortgage Debenture by and between Marin Software Ltd and Bank dated as of the January 10, 2011, as amended, restated, or otherwise modified. “ Warrant ” is that certain Warrant to Purchase Stock dated the Effective Date executed by Borrower in favor of Bank. [Signature page follows.] 49 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date. BORROWER: MARIN SOFTWARE INCORPORATED By: /s/ Chris Lien Name: Chris Lien Title: CEO MARIN SOFTWARE LIMITED By: /s/ John Kaelle Name: John Kaelle Title: Director BANK: SILICON VALLEY BANK By: /s/ Julia Bobrovich Name: Julia Bobrovich Title: Relationship Manager EXHIBIT A The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property: All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (except as provided below), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and All Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing. Notwithstanding the foregoing, the Collateral does not include any of the following, whether now owned or hereafter acquired (a) more than sixty five percent (65%) of the presently existing and hereafter arising issued and outstanding shares of capital stock owned by Borrower of any “controlled foreign corporation” (as defined in the Internal Revenue code of 1986, as amended) which shares entitle the holder thereof to vote for directors or any other matter, (b) any copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, and the goodwill of the business of Borrower connected with and symbolized thereby, know-how, operating manuals, trade secret rights, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing; provided, however, the Collateral shall include all Accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of the foregoing, or (c) any interest of Borrower as a lessee or sublessee under a real property lease or as a licensee under an inbound license of intellectual property if Borrower is prohibited by the terms of such lease or license from granting a security interest in such lease or license or under which such an assignment or lien would cause a default to occur under such lease or license (other than to the extent that any such term would be rendered ineffective pursuant to or 9-408 of the Code or any other applicable law or principles of equity); provided, however, that upon termination of such prohibition, such interest shall immediately become Collateral without any action by Borrower or Bank. Borrower has agreed not to encumber any of its copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, and the goodwill of the business of Borrower connected with and symbolized thereby, know-how, operating manuals, trade secret rights, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing, without Bank’s prior written consent. 2 EXHIBIT B COMPLIANCE CERTIFICATE The undersigned authorized officers of MARIN SOFTWARE INCORPORATED AND MARIN SOFTWARE LIMITED (collectively, the “ Borrower ”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “ Agreement ”), (1) Borrower is in complete compliance for the period ending with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement. Please indicate compliance status by circling Yes/No under “Complies” column. TO: SILICON VALLEY BANK Date: FROM: MARIN SOFTWARE INCORPORATED MARIN SOFTWARE LIMITED Reporting Covenant Required Complies Monthly financial statements with Compliance Certificate Monthly within 30 days Yes No Annual financial statement (CPA Audited) + CC FYE within 180 days; 2010 FYE not later than January 31, 2012 Yes No Borrowing Base Certificate A/R & A/P Agings Monthly within 30 days Yes No Deferred Revenue Reports Monthly within 30 days Yes No Transaction Reports Weekly; or monthly within 30 days, if Streamline Eligible, Recurring monthly revenue roll forward reports and SaaS Monthly within 30 days Yes No  The following financial covenant analysis and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate. Metrics (incl. monthly recurring revenue and churn reports) Board Projections Within 7 days of Board approval Yes No Required Actual Complies Maintain on a Monthly Basis: Minimum Monthly Recurring Revenue (beginning with the month ending March 31, 2012 for the trailing three (3) month period then ended) August 31, 2011 $ 2,920,000 $ Yes No September 30, 2011 $ 2,940,000 $ Yes No October 31, 2011 $ 2,960,000 $ Yes No November 30, 2011 $ 2,980,000 $ Yes No December 31, 2011 $ 3,000,000 $ Yes No January 31, 2012 $ 3,135,000 $ Yes No February 29, 2012 $ 3,276,075 $ Yes No March 31, 2012 $ 9,835,000 $ Yes No April 30, 2012 $ 10,277,000 $ Yes No May 31, 2012 $ 10,740,000 $ Yes No June 30, 2012 $ 11,223,000 $ Yes No July 31, 2012 $ 11,728,000 $ Yes No August 31, 2012 $ 12,255,000 $ Yes No September 30, 2012 $ 12,807,000 $ Yes No October 31, 2012 $ 13,384,000 $ Yes No November 30, 2012 $ 13,986,000 $ Yes No December 31, 2012 $ 14,615,000 $ Yes No Churn Rate not to exceed 3% for the immediately preceding three (3) months then ended 3 % % Yes No The following are the exceptions with respect to the certification above and these exceptions also are intended to update the Perfection Certificate: (If no exceptions exist, state “No exceptions to note.”) MARIN SOFTWARE INCORPORATED By: Name: Title: MARIN SOFTWARE LIMITED By: Name: Title: BANK USE ONLY Received by: AUTHORIZED SIGNER Date: Verified: AUTHORIZED SIGNER Date: Compliance Status: Yes No Schedule 1 to Compliance Certificate Financial Covenants of Borrower In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern. Dated: Monthly Recurring Revenue (Section 6.9(a)) Required: Commencing with the month ending August 31, 2011, and as of the last day of each month thereafter, and beginning with the month ending March 31, 2012 for the trailing three (3) month period then ended, Monthly Recurring Revenue of not less than the following amounts at the following times: For purposes of calculating the Monthly Recurring Revenue for February, such calculation will be prorated on the basis of twenty-nine (29) calendar days. Month Ending Monthly Recurring Revenue August 31, 2011 $ 2,920,000 September 30, 2011 $ 2,940,000 October 31, 2011 $ 2,960,000 November 30, 2011 $ 2,980,000 December 31, 2011 $ 3,000,000 January 31, 2012 $ 3,135,000 February 29, 2012 $ 3,276,075 March 31, 2012 $ 9,835,000 April 30, 2012 $ 10,277,000 May 31, 2012 $ 10,740,000 June 30, 2012 $ 11,223,000 July 31, 2012 $ 11,728,000 August 31, 2012 $ 12,255,000 September 30, 2012 $ 12,807,000 October 31, 2012 $ 13,384,000 November 30, 2012 $ 13,986,000 December 31, 2012 $ 14,615,000 Actual: Is line H equal to or greater than the required amount? No, not in compliance Yes, in compliance Churn Rate (Section 6.9(b)) Required: A Churn Rate, tested as of the last day of each month for the immediately preceding three (3) month period then ended, not to exceed three percent (3%) at any time averaged over such three (3) month period Actual: Is line A in excess of 3%? No, not in compliance Yes, in compliance A. Aggregate value of all Billed Accounts of Borrower for such period taken as a single accounting period under GAAP $ B. Aggregate value of all monthly services performed by the on all service contracts for billed Accounts $ C. Aggregate value of the number of customer Accounts that are closed, cancelled, or otherwise terminated $ D. Aggregate value of all one-time credits applied to any of Borrower’s Accounts $ E. Monthly Recurring Revenue (sum of line A, plus line B, minus line C, minus line D) $ A. Churn Rate (Line B above divided by Line E above) % EXHIBIT C Transaction Report EXHIBIT D Form of Borrowing Resolution (See attached)  CORPORATE BORROWING CERTIFICATE I hereby certify as follows, as of the date set forth above: R ESOLVED , that any one of the following officers or employees of Borrower, whose names, titles and signatures are below, may act on behalf of Borrower: R ESOLVED F URTHER , that any one of the persons designated above with a checked box beside his or her name may, from time to time, add or remove any individuals to and from the above list of persons authorized to act on behalf of Borrower. B ORROWER : Marin Software Incorporated D ATE : , 20 B ANK : Silicon Valley Bank 1. I am the Secretary, Assistant Secretary or other officer of the Borrower. My title is as set forth below. 2. Borrower’s exact legal name is set forth above. Borrower is a corporation existing under the laws of the State of Delaware. 3. Attached hereto are true, correct and complete copies of Borrower’s Articles/Certificate of Incorporation (including amendments), as filed with the Secretary of State of the state in which Borrower is incorporated as set forth in paragraph 2 above. Such Articles/Certificate of Incorporation have not been amended, annulled, rescinded, revoked or supplemented, and remain in full force and effect as of the date hereof. 4. The following resolutions were duly and validly adopted by Borrower’s Board of Directors at a duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized corporate action). Such resolutions are in full force and effect as of the date hereof and have not been in any way modified, repealed, rescinded, amended or revoked, and Bank may rely on them until Bank receives written notice of revocation from Borrower. Name Title Signature Authorized to Add or Remove Signatories (cid:1) (cid:1) (cid:1) (cid:1) R ESOLVED F URTHER , that such individuals may, on behalf of Borrower: Borrow Money . Borrow money from Silicon Valley Bank (“Bank”). Execute Loan Documents . Execute any loan documents Bank requires . Grant Security . Grant Bank a security interest in any of Borrower’s assets, excluding Borrower’s intellectual property. Negotiate Items . Negotiate or discount all drafts, trade acceptances, promissory notes, or other indebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds. Letters of Credit . Apply for letters of credit from Bank. Foreign Exchange Contracts . Execute spot or forward foreign exchange contracts. Issue Warrants . Issue a warrant exercisable for up to 36,900 shares of Borrower’s common stock. Further Acts . Designate other individuals to request advances, pay fees and costs and execute other documents or agreements (including documents or agreement that waive Borrowers right to a jury trial) they believe to be necessary to effectuate such resolutions. R ESOLVED F URTHER , that all acts authorized by the above resolutions and any prior acts relating thereto are ratified. *** If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set forth in paragraph 4 as one of the authorized signing officers, this Certificate must also be signed by a second authorized officer or director of Borrower. I, the of Borrower, hereby certify as to paragraphs 1 through 5 above, as of the date set forth above. 2 5. The persons listed above are Borrower’s officers or employees with their titles and signatures shown next to their names. By: Name: Title: By: Name: Title: EXHIBIT E FORM OF LOAN AGREEMENT SUPPLEMENT LOAN AGREEMENT SUPPLEMENT No. [ ] LOAN AGREEMENT SUPPLEMENT No. [ ], dated , 20 (“ Loan Supplement ”), to the Amended and Restated Loan and Security Agreement dated as of November 2011 (as amended, restated, or otherwise modified from time to time, the “ Loan Agreement ) by and between the undersigned Marin Software Incorporated and Marin Software Limited (“ Borrower ”) and Silicon Valley Bank (“ Bank ”). Capitalized terms used herein but not otherwise defined herein are used with the respective meanings given to such terms in the Loan Agreement. To secure the prompt payment by Borrower of all amounts from time to time outstanding under the Loan Agreement, and the performance by Borrower of all the terms contained in the Loan Agreement, Borrower grants Bank, a first priority security interest in each item of equipment and other property described in Annex A hereto, which equipment and other property shall be deemed to be additional Financed Equipment and Collateral. The Loan Agreement is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. Annex A (Equipment Schedule) is attached hereto. The proceeds of the Equipment Advance should be transferred to Borrower’s account with Bank set forth below: Borrower hereby certifies that (a) the foregoing information is true and correct and authorizes Bank to endorse in its respective books and records, the interest rate applicable to the Funding Date of the Equipment Advance contemplated in connection with this Supplement and the principal amount set forth below; (b) the representations and warranties made by Borrower in the Loan Agreement are true and correct on the date hereof and shall be true and correct on such Funding Date. No Event of Default has occurred and is continuing under the Loan Agreement. This Supplement may be executed by Borrower and Bank in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Equipment Advance Funding Date : , 20 Equipment Advance Amount : $ Interest Rate : 5.5% Bank Name: Silicon Valley Bank Account No.: This Supplement is delivered as of this day and year first above written. Annex A - Description of Financed Equipment 2 SILICON VALLEY BANK MARIN SOFTWARE INCORPORATED By: By: Name: Name Title: Title: MARIN SOFTWARE LIMITED By: Name Title: Annex A to Supplement The Financed Equipment being financed with the Equipment Advance which this Supplement is being executed is listed below. Upon the funding of such Equipment Advance, this schedule and the property described below automatically shall be a part of the Collateral. 1 Description of Equipment Make Model Serial # Quantity PO # Invoice Date Invoice # Cost Tax/Freight/Install and Soft Costs Total Annex B to Supplement LOAN TERMS SCHEDULE NO. Equipment Advance Funding Date : , 20 Equipment Advance Amount : $ Basic Rate: % Scheduled Payment Dates and Amounts*: One (1) payment of $ due payment of $ due monthly in advance from through . One (1) payment of $ due Final Payment Date: * - The amount of each Scheduled Payment shall change as the amount outstanding changes. Payment No. Payment Date 1 2 3 4 … 35 [36] … EXHIBIT F Form of Additional Borrower Joinder Supplement (See attached) ADDITIONAL BORROWER JOINDER SUPPLEMENT THIS ADDITIONAL BORROWER JOINDER SUPPLEMENT (this “ Agreement ”) is made this day of , 2011, by and among MARIN SOFTWARE INCORPORATED, a Delaware corporation (“Company”), , a corporation (the “ Additional Borrower ” and together with Company, each a “ Borrower ” and collectively, the “ Borrowers ”), and SILICON VALLEY BANK, a California corporation (the “ Bank ”). R ECITALS A. Bank and Borrower have entered into that certain Amended and Restated Loan and Security Agreement dated as of November 30, 2011 (as the same may from time to time be further amended, modified, supplemented or restated, the “ Loan Agreement ”) Capitalized terms not otherwise defined in this Agreement shall have the meanings given to them in the Loan Agreement. B. Bank has extended credit to Company for the purposes permitted in the Loan Agreement. C. Borrower has requested that Bank amend the Loan Agreement to add the Additional Borrower as a co-borrower under the Loan Agreement. D. Additional Borrower agrees to become a “Borrower” under the Loan Documents in accordance with the terms and conditions contained herein. NOW, THEREFORE, for value received the undersigned agree as follows: 1. (a) The Additional Borrower and the Company hereby acknowledge, confirm and agree that on and as of the date of this Agreement the Additional Borrower has become a “Borrower” (as that term is defined in the Loan Agreement), and, along with the Company, is included in the definition of “Borrower” under the Loan Agreement and the other Loan Documents for all purposes thereof, and as such shall be jointly and severally liable, as provided in the Loan Documents, for all Obligations thereunder (whether incurred or arising prior to, on, or subsequent to the date hereof) and otherwise bound by all of the terms, provisions and conditions thereof. (b) Without in any way implying any limitation on any of the provisions of his Agreement, the Additional Borrower agrees to execute such financing statements, instruments, and other documents as the Bank may require. (c) Without in any way implying any limitation on any of the provisions of this Agreement, the Additional Borrower hereby represents and warrants that all of the representations and warranties contained in the Loan Documents are true and correct on and as of the date hereof as if made on and as of such date, both before and after giving effect to this Agreement, and that no Event of Default or Default has occurred and is continuing or exists or would occur or exist after giving effect to this Agreement. 2. Each Person included in the term “Borrower” hereby covenants and agrees with the Bank as follows: (a) The Obligations include all present and future indebtedness, duties, obligations, and liabilities, whether now existing or contemplated or hereafter arising, of any one or more of the Additional Borrower or the Company. (b) Reference in this Agreement to the Loan Agreement and the other Loan Documents to the “Borrower” or otherwise with respect to any one or more of the Persons now or hereafter included in the definition of “Borrower” shall mean each and every such Borrower, jointly and severally, unless the context requires otherwise (by way of example, and not limitation, if only one such Borrower is the owner of the real property which is the subject of a mortgage or if only one such Borrower files reports with the Securities and Exchange Commission). (c) Each Borrower, in the discretion of its respective management, is to agree among themselves as to the allocation of the benefits of the proceeds of the Credit Extensions, provided, however, that each such Borrower be deemed to have represented and warranted to the Bank at the time of allocation that each benefit and use of proceeds is permitted under the terms of the Loan Agreement and Loan Documents. (d) For administrative convenience, each Borrower hereby irrevocably appoints Company as each Borrower’s attorney-in-fact, with power of substitution (with the prior written consent of the Bank in the exercise of its sole and absolute discretion), in the name of Company or in the name of such Borrower or otherwise to take any and all actions with respect to the this Agreement, the other Loan Documents, the Obligations and/or the Collateral (including, without limitation, the proceeds thereof) as Company may so elect from time to time, including, without limitation, actions to (i) request Credit Extensions, and direct the Bank to disburse or credit the proceeds of any Credit Extensions directly to an account of the applicable Borrower, any one or more of such Persons or otherwise, which direction shall evidence the making of such Credit Extension and shall constitute the acknowledgement by each such Person of the receipt of the proceeds of such Credit Extension, (ii) enter into, execute, deliver, amend, modify, restate, substitute, extend and/or renew this Agreement or the Loan Agreement, any additional borrower joinder supplement, any other Loan Documents, security agreements, mortgages, deposit account agreements, instruments, certificates, waivers, letter of credit applications, releases, documents and agreements from time to time, and (iii) endorse any check or other item of payment in the name of such Borrower or in the name of Company. The foregoing appointment is coupled with an interest, cannot be revoked without the prior written consent of the Bank, and may be exercised from time to time through Company’s duly authorized officer, officers or other Person or Persons designated by Company to act from time to time on behalf of Company. (e) Each Person included in the term “Borrower” hereby irrevocably authorizes the Bank to make Credit Extensions to any one or more of such Persons, pursuant to the provisions of this Agreement upon the written, oral or telephone request any one or more of the Persons who is from time to time authorized to do so under the provisions of the most recent 2 certificate of corporate resolutions and/or incumbency of the Person included in the term “Borrower” on file with the Bank. (f) Absent gross negligence or willful misconduct by the Bank, the Bank assumes no responsibility or liability for any errors, mistakes, and/or discrepancies in the oral, telephonic, written or other transmissions of any instructions, orders, requests and confirmations between the Bank and any Borrower in connection with the Credit Extensions or any other transaction in connection with the provisions of this Agreement. 3. Without implying any limitation on the joint and several nature of the Obligations, the Bank agrees that, notwithstanding any other provision of this Agreement, each Borrower may create reasonable inter-company indebtedness between or among the Borrowers with respect to the allocation of the benefits and proceeds of the Credit Extensions under this Agreement. The Borrowers agree among themselves, and the Bank consents to that agreement, that each Borrower shall have rights of contribution from all of the other Borrowers to the extent such Borrower incurs Obligations in excess of the proceeds of the Credit Extensions received by, or allocated to purposes for the direct benefit of, such Borrower. All such indebtedness and rights shall be, and are hereby agreed by the Borrowers to be, subordinate in priority and payment to the indefeasible repayment in full in cash of the Obligations, and, unless the Bank agrees in writing otherwise, shall not be exercised or repaid in whole or in part until all of the Obligations have been indefeasibly paid in full in cash. The Borrowers agree that all of such inter-company indebtedness and rights of contribution are part of the Collateral and secure the Obligations. Each Borrower hereby agrees not to claim or assert any right of counterclaim, recoupment and offset between or among themselves arising on account of that indebtedness and otherwise until all of the Obligations have been indefeasibly paid in full in cash. Each Borrower shall not evidence the inter-company indebtedness or rights of contribution by note or other instrument, and shall not secure such indebtedness or rights of contribution with any Lien or security. Notwithstanding anything contained in this Agreement to the contrary, the amount covered by each Borrower under the Obligations shall be limited to an aggregate amount (after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Borrower in respect of the Obligations) which, together with other amounts owing by such Borrowers to the Bank under the Obligations, is equal to the largest amount that would not be subject to avoidance under any Insolvency Proceeding or any applicable provisions of any applicable, comparable state or other laws. As used in this Agreement, “Insolvency Proceeding” shall mean proceedings by or against any Borrower 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. 4. (a) Each Borrower hereby represents and warrants to the Bank that each of them will derive benefits, directly and indirectly, from each Credit Extension, both in their separate capacity and as a member of the integrated group to which each such Borrower belongs and because the successful operation of the integrated group is dependent upon the continued successful performance of the functions of the integrated group as a whole, because (i) the terms of the consolidated financing provided under this Agreement are more favorable than would otherwise would be obtainable by such Borrower individually, and (ii) the additional administrative and other costs and reduced flexibility associated with individual financing 3 arrangements which would otherwise be required if obtainable would substantially reduce the value to such Borrower of the financing. (b) Each Borrower hereby represents and warrants that all of the representations and warranties contained in the Loan Documents are true and correct on and as of the date hereof as if made on and as of such date, provided, however, that the representation and warranty here with respect to any representation or warranty that refers to an earlier specific date shall be that such representation or warranty was true and correct on and as of such earlier date, both before and after giving effect to this Agreement, and that no Event of Default or Default has occurred and is continuing or exists or would occur or exist after giving effect to this Agreement. 5. (a) Each Borrower hereby unconditionally and irrevocably, guarantees to the Bank: (i) the due and punctual payment in full (and not merely the collectibility) by any other Borrower of the Obligations, including unpaid and accrued interest thereon, in each case when due and payable, all according to the terms of this Agreement and the other Loan Documents; (ii) the due and punctual payment in full (and not merely the collectibility) by any other Borrower of all other sums and charges which may at any time be due and payable in accordance with this Agreement or any of the other Loan Documents; (iii) the due and punctual performance by any other Borrower of all of the other terms, covenants and conditions contained in the Loan Documents; and (iv) the due and punctual performance by any other Borrower of all the other Obligations of the other Borrowers. (b) The obligations and liabilities of each Borrower as a guarantor under this paragraph 5 shall be absolute and unconditional and joint and several, irrespective of the genuineness, validity, priority, regularity or enforceability of this Agreement or any of the Loan Documents or any other circumstance which might otherwise constitute a legal or equitable discharge of a surety or guarantor. Each Borrower in its capacity as a guarantor expressly agrees that the Bank may, in its sole and absolute discretion, without notice to or further assent of such Borrower and without in any way releasing, affecting or in any way impairing the joint and several obligations and liabilities of such Borrower as a guarantor hereunder except to the extent the Obligations have been finally and indefeasibly paid in full in cash: (i) waive compliance with, or any defaults under, or grant any other indulgences under or with respect to any of the Loan Documents; (ii) modify, amend, change or terminate any provisions of any of the Loan Documents (provided Bank obtains the consent of the other parties to any such 4 Loan Document if such consent is required by the terms of the applicable Loan Documents); (iii) grant extensions or renewals of or with respect to the Credit Extensions or any of the Loan Documents; (iv) effect any release, subordination, compromise or settlement in connection with this Agreement or any of the other Loan Documents; (v) agree to the substitution, exchange, release or other disposition of the Collateral or any part thereof, or any other collateral for the Credit Extensions or to the subordination of any lien or security interest therein; (vi) make any Credit Extension for the purpose of performing any term, provision or covenant contained in this Agreement or any of the other Loan Documents with respect to which the Borrowers shall then be in default; (vii) make future Credit Extensions pursuant to the Loan Agreement or any of the other Loan Documents; (viii) assign, pledge, hypothecate or otherwise transfer the Obligations, any of the other Loan Documents or any interest therein, all as and to the extent permitted by the provisions of this Agreement; (ix) deal in all respects with any other Borrower as if this paragraph 5 were not in effect; (x) effect any release, compromise or settlement with any of the other Borrowers, whether in its capacity as a Borrower or as a guarantor under this paragraph 5 or any other guarantor; and (xi) provide debtor-in-possession financing or allow use of cash collateral in proceedings under any Insolvency Proceeding, it being expressly agreed by all Borrowers that any such financing and/or use would be part of the Obligations. (c) The obligations and liabilities of each Borrower, as guarantor under this paragraph 5 shall be primary, direct and immediate, shall not be subject to any counterclaim, recoupment, set off, reduction or defense based upon any claim that such Borrower may have against any other Borrower and/or any other guarantor and shall not be conditional or contingent upon pursuit or enforcement by the Bank of any remedies it may have against any Borrower with respect to this Agreement, or any of the other Loan Documents, whether pursuant to the terms thereof or by operation of law. Without limiting the generality of the foregoing, the Bank shall not be required to make any demand upon any Borrower, or to sell the Collateral or otherwise pursue, enforce or exhaust its or their remedies against any Borrower or the Collateral either before, concurrently with or after pursuing or enforcing its rights and remedies hereunder. Any one or more successive or concurrent actions or proceedings may be brought against each 5 Borrower under this paragraph 5, either in the same action, if any, brought against any Borrower or in separate actions or proceedings, as often as the Bank may deem expedient or advisable. Without limiting the foregoing, it is specifically understood that any modification, limitation or discharge of any of the liabilities or obligations of any Borrower, any other guarantor or any obligor under any of the Loan Documents, arising out of, or by virtue of, any bankruptcy, arrangement, reorganization or similar proceeding for relief of debtors under federal or state law initiated by or against any Borrower, in their respective capacities as Borrowers and guarantors under this paragraph 5, or under any of the Loan Documents shall not modify, limit, lessen, reduce, impair, discharge, or otherwise affect the liability of each Borrower under this paragraph 5 in any manner whatsoever, and this paragraph 5 shall remain and continue in full force and effect. It is the intent and purpose of this paragraph 5 that each Borrower shall and does hereby waive all rights and benefits which might accrue to any other guarantor by reason of any such proceeding, and the Borrowers agree that they shall be liable for the full amount of the obligations and liabilities under this paragraph 5 regardless of, and irrespective to, any modification, limitation or discharge of the liability of any Borrower, any other guarantor or any obligor under any of the Loan Documents, that may result from any such proceedings. (d) Each Borrower, as guarantor under this paragraph 5, hereby unconditionally, jointly and severally, irrevocably and expressly waives: (i) presentment and demand for payment of the Obligations and protest of non-payment; (ii) notice of acceptance of this paragraph 5 and of presentment, demand and protest thereof; (iii) notice of any default hereunder or under or any of the Loan Documents and notice of all indulgences; (iv) notice of any increase in the amount of any portion of or all of the indebtedness guaranteed by this paragraph 5; (v) demand for observance, performance or enforcement of any of the terms or provisions of this paragraph 5 or any of the other Loan Documents; (vi) all errors and omissions (absent those caused by Bank’s gross negligence or willful misconduct) in connection with the Bank’s administration of all indebtedness guaranteed by this paragraph 5; (vii) any right or claim of right to cause a marshalling of the assets of any Borrower; (viii) any act or omission of the Bank which changes the scope of the risk as guarantor hereunder; and (ix) all other notices and demands otherwise required by law which such Borrower may lawfully waive. 6 (e) Within ten (10) days following any request of the Bank so to do, each Borrower will furnish the Bank and such other Persons as the Bank may direct with a written certificate, duly acknowledged stating in detail whether or not any credits, offsets or defenses exist with respect to this paragraph 5. 6. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to principles of choice of law. 7. This Agreement shall be deemed effective upon (a) the due execution and delivery to Bank of this Agreement by each party hereto, (b) Bank’s receipt of the original signatures to the completed Borrowing Resolutions duly executed by the Additional Borrower, (c) Bank’s receipt of the original signatures to a completed Perfection Certificate duly executed by the Additional Borrower, (d) Bank’s receipt of the original signatures to the SVB Securities Account Control Agreement duly executed by the Additional Borrower, (e) certified copies, dated as of a recent date, of UCC lien searches, as Bank shall request, (f) evidence satisfactory to Bank that the insurance policies required by Section 6.4 of the Loan Agreement are in full force and effect, together with appropriate evidence showing lender loss payable and/or additional insured clauses or endorsements in favor of Bank, (g) Bank’s filing of a UCC Financing Statement with the to reflect a Lien on all of Additional Borrower’s assets, and (h) payment of Bank’s legal fees and expenses in connection with the negotiation and preparation of this Agreement. [Signatures Appear on Following Page] 7 I N W ITNESS W HEREOF , the parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above. MARIN SOFTWARE INCORPORATED By: Name: Title: By: Name: Title: SILICON VALLEY BANK By: Name: Title: FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “ Amendment ”) is entered into this 11th day of December, 2012 (the “ Supplemental Effective Date ”), by and between SILICON VALLEY BANK (“ Bank ”), MARIN SOFTWARE INCORPORATED, a Delaware corporation (“ Marin’ ) whose address is 123 Mission Street, 25th Floor, San Francisco, California 94105, and MARIN SOFTWARE LIMITED, a company registered under the laws of England and Wales (“ Marin Ltd ”, and together with Marin, individually and collectively, the “ Borrower ”). R ECITALS A. Bank and Borrower have entered into that certain Amended and Restated Loan and Security Agreement dated as of December 9, 2011 (as the same may from time to time be further amended, modified, supplemented or restated, the “ Loan Agreement ”). B. Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement. C. Borrower has requested that Bank amend the Loan Agreement to (i) extend the Revolving Line Maturity Date, (ii) increase the principal amount of the Revolving Line, (iii) make a secured equipment loan available to Borrower, and (iv) make certain other revisions to the Loan Agreement as more fully set forth herein. D. Although Bank is under no obligation to do so, Bank is willing to (i) extend the Revolving Line Maturity Date, (ii) increase the principal amount of the Revolving Line, (iii) make a secured equipment loan available to Borrower, and (iv) amend certain provisions of the Loan Agreement, all on the terms and conditions set forth in this Agreement, so long as Borrower complies with the terms, covenants and conditions set forth in this Agreement in a timely manner. A GREEMENT N OW , T HEREFORE , in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: 1. Definitions . Capitalized terms used but not defined in this Amendment, including its preamble and recitals, shall have the meanings given to them in the Loan Agreement. 2. Amendments to Loan Agreement . 2.1. Section 2.1 (Promise to Pay) . Section 2.1 of the Loan Agreement is hereby amended by adding Section 2.1.2 in its entirety immediately after Section 2.1.1 of the Loan Agreement as follows: 2.1.2 Supplemental Equipment Advances. (a) Availability . Subject to the terms and conditions of this Agreement and the closing of the Next Equity Round, during the Supplemental Equipment Draw Period, Bank shall make advances (each, a “ Supplemental Equipment Advance ” and, collectively, the “ Supplemental Equipment Advances ”) not exceeding the Supplemental Equipment Line. Supplemental Equipment Advances may only be used to finance Eligible Equipment purchased within ninety (90) days (determined based upon the applicable invoice date of such Eligible Equipment) before the Funding Date of each Supplemental Equipment Advance; provided, however, the first Supplemental Equipment Advance may be used to finance Eligible Equipment purchased on or after July 1, 2012. No Supplemental Equipment Advance may exceed one hundred percent (100%) of the total invoice for Eligible Equipment (excluding taxes, shipping, warranty charges, freight discounts and installation expenses relating to such Eligible Equipment except to the extent such are allowed to be financed pursuant hereto as Other Equipment). Unless otherwise agreed to by Bank, not more than twenty-five percent (25%) of the proceeds of the Supplemental Equipment Line shall be used to finance Other Equipment. Each Supplemental Equipment Advance must be in a minimum amount of greater than or equal to Two Hundred Thousand Dollars ($200,000), or, if less, the amount that has not yet been drawn under the Equipment Line. After repayment, no Supplemental Equipment Advance may be reborrowed (b) Repayment . For each Supplemental Equipment Advance, Borrower shall make (i) monthly payments of interest only commencing on the first (1st) calendar day of the first (1st) month following the month in which the Funding Date occurs with respect to a Supplemental Equipment Advance and continuing thereafter during the Supplemental Equipment Interest Only Period on the first (1st) Business Day of each successive month and (ii) thirty-three (33) consecutive equal monthly installments of principal and accrued interest commencing on the first (1st) calendar day of the first (1st) month after the Supplemental Equipment Interest Only Period (the “ Supplemental Equipment Conversion Date ”), which would fully amortize the outstanding Supplemental Equipment Advances, as of the Supplemental Equipment Conversion Date, over the Supplemental Repayment Period. Notwithstanding the foregoing, all unpaid principal and interest on each Supplemental Equipment Advance shall be due on the applicable Supplemental Equipment Maturity Date. (c) Prepayment Upon an Event of Loss . Borrower shall bear the risk of any loss, theft, destruction, or damage of or to the Financed Equipment. If, during the term of this Agreement, any Event of Loss occurs with respect to Financed Equipment financed by a Supplemental Equipment Advance, then, within ten (10) days following such Event of Loss, Borrower shall (i) pay to Bank on account of the Obligations all accrued interest to the date of the prepayment, plus all outstanding principal owing with respect to the Financed Equipment subject to the Event of Loss, plus the Supplemental Equipment Loan Final Payment or (ii) if no Event of Default has occurred and is continuing, at Borrower’s option, repair or replace any Financed Equipment subject to an Event of Loss provided the repaired or replaced Financed Equipment is of equal or like value to the Financed Equipment subject to an Event of Loss and provided further that Bank has a first priority perfected security interest in such repaired or replaced Financed Equipment. Any partial prepayment of a Supplemental Equipment Advance paid by Borrower on account of an Event of Loss shall be applied to prepay amounts owing for such Equipment Advance in inverse order of maturity. 2 (d) Mandatory Prepayment Upon an Acceleration . If the Supplemental Equipment Advances are accelerated following the occurrence of an Event of Default or otherwise, Borrower shall immediately pay to Bank an amount equal to the sum of (i) all outstanding principal plus accrued interest, plus (ii) the Supplemental Equipment Loan Final Payment, plus (iii) all other sums, if any, that shall have become due and payable, including interest at the Default Rate with respect to any past due amounts. (e) Permitted Prepayment of Supplemental Equipment Advances . Borrower shall have the option to prepay all, but not less than all, of the Supplemental Equipment Advances advanced by Bank under this Agreement, provided Borrower (i) provides written notice to Bank of its election to prepay the Supplemental Equipment Advances at least thirty (30) days prior to such prepayment, and (ii) pays, on the date of such prepayment (A) all outstanding principal plus accrued interest with respect to the Supplemental Equipment Advances only, plus (B) the Supplemental Equipment Loan Final Payment, plus (C) all other sums, if any, that shall have become due and payable, including interest at the Default Rate with respect to any past due amounts. Borrower may condition such prepayment on the funding of another financing and provide that its prepayment election shall terminate if such funding does not occur by a specific date. 2.2. Section 2.6 (Payment of Interest on the Credit Extensions) . Section 2.6(b) of the Loan Agreement is hereby amended by deleting it in its entirety and replacing it with the following: (b) Equipment Advances . Subject to Section 2.6(c), the principal amount outstanding for each (i) Equipment Advance shall accrue interest at a fixed per annum rate equal to five and one half of one percent (5.50%) and (ii) Supplemental Equipment Advance shall accrue interest at a fixed per annum rate equal to three percent (3.00%), which interest shall be payable monthly in accordance with Section 2.6(f) below. 2.3. Section 2.7 (Fees) . Section 2.7 of the Loan Agreement is hereby amended by adding Sections 2.7(f) and 2.7(g) each in its entirety immediately after Section 2.7(e) of the Loan Agreement as follows: (f) Increased Revolving Commitment Fee . A fully earned, non-refundable commitment fee of Sixty-One Thousand Seven Hundred Fifty Dollars ($61,750) (the “ Increased Revolving Commitment Fee ”) of which, (i) Five Thousand Five Hundred Dollars ($5,500), shall be paid on December , 2012, (ii) Thirty-Seven Thousand Five Hundred Dollars ($37,500) shall be paid on April 30, 2013, and (iii) the balance (Eighteen Thousand Seven Hundred Fifty Dollars ($18,750)) shall be paid to Bank on January 31, 2014. It being understood the Increased Revolving Commitment Fee is in lieu of the final payment of the Revolving Commitment Fee which was scheduled to be due on January 10, 2013; and (g) Supplemental Equipment Loan Final Payment . A Supplemental Equipment Loan Final Payment due on the Supplemental Equipment Maturity Date, or at the time of a prepayment pursuant to the terms of Sections 2.1.2(c), 2.1.2(d), and 2.1.2(e). 3 2.4. Section 3.4 (Procedures for Borrowing) . Section 3.4 of the Loan Agreement is hereby amended by adding Section 3.4(c) in its entirety immediately after Section 3.4(b) of the Loan Agreement as follows: (c) Supplemental Equipment Advances . Subject to the prior satisfaction of all other applicable conditions to the making of a Supplemental Equipment Advance set forth in this Agreement, to obtain a Supplemental Equipment Advance, Borrower must notify Bank (which notice shall be irrevocable) by electronic mail or facsimile no later than 12:00 p.m. Pacific time one (1) Business Day before the proposed Funding Date. The notice shall be a Payment/Advance Form, must be signed by a Responsible Officer or designee, and shall include a copy of the invoice for the Equipment being financed. Borrower shall also deliver to Bank by electronic mail or facsimile a completed Loan Supplement, executed by a Responsible Officer or his or her designee, copies of invoices for the Financed Equipment and such additional information as Bank may reasonably request at least five (5) Business Days before the proposed Funding Date, At Bank’s discretion, Bank shall have the opportunity to confirm that, upon filing the UCC-1 financing statement covering the Equipment described on the Loan Supplement, Bank shall have a first priority perfected security interest in such Equipment If Borrower satisfies the conditions of each Supplemental Equipment Advance, Bank shall disburse such Supplemental Equipment Advance by transfer to the Designated Deposit Account. 2.5. Section 6.9 (Financial Covenants) . Section 6.9 of the Loan Agreement is hereby amended by deleting it in its entirety and replacing it with the following: 6.9 Financial Covenants . Maintain at all times, to be tested as of the last day of each month, unless otherwise noted, on a consolidating basis with respect to Borrower and its Subsidiaries: (a) Minimum Monthly Recurring Revenue . Commencing with the month ending September 30, 2012, and as of the last day of each month thereafter, for the trailing three (3) month period then ended, minimum Monthly Recurring Revenue of at least the following amounts at the following times: 4 Month Ending Minimum Monthly Recurring Revenue September 30, 2012 $ 12,807,000 October 31, 2012 $ 13,384,000 November 30, 2012 $ 13,986,000 December 31, 2012 $ 14,615,000 January 31, 2013 $ 15,300,000 For purposes of calculating the minimum Monthly Recurring Revenue for February, such calculation will be prorated on the basis of twenty-eight (28) calendar days. Notwithstanding the foregoing, commencing with the month ending January 31, 2013, Borrower’s minimum Monthly Recurring Revenue is subject to change based on Borrower’s annual financial projections approved by Borrower’s Board of Directors for the December 31, 2013 and December 31, 2014 fiscal years, which shall be equal to or greater than seventy-five percent (75%) of Borrower’s projected performance for each such month, as determined by Bank in its sole discretion (the “ 2013/2014 MRR Covenant ”). Borrower’s failure to reach an agreement with Bank on the 2013/2014 MRR Covenant and to execute and deliver to Bank an amendment to this Agreement on or by March 15, 2013 and March 15, 2014, for the years ended December 31, 2013 and December 31, 2014, respectively, shall constitute an immediate Event of Default under this Agreement. (b) Liquidity Ratio . A Liquidity Ratio of at least 1.50 to 1.00. 2.6. Section 8.1 ( Payment Default ). Section 8.1 of the Loan Agreement is hereby amended by deleting it in its entirety and replacing it with the following: 8.1 Payment Default . Borrower fails to (a) make any payment of principal or interest on any Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) day grace period shall not apply to payments due on the Revolving Line Maturity Date, the Growth Capital Maturity Date, the Equipment Maturity Date, the Prior Equipment Maturity Date, or the Supplemental Equipment Maturity Date). During the cure period, the failure to cure the payment default is not an Event of Default (but no Credit Extension will be made during the cure period). 2.7. Section 8.11 (Cross-Default with Ireland Debenture) . Section 8 of the Loan Agreement is hereby amended by adding Section 8.11 in its entirety immediately after Section 8.10 of the Loan Agreement as follows: 8.11 Cross-Default with Ireland Debenture. A default shall occur under the Ireland Debenture and such default is not cured within any applicable grace period provided therein. 5 Subject to the terms set forth below, February 28, 2013 and as of the last day of each month thereafter for the immediately preceding three (3) month period then ended An amount equal to not less than the sum of the minimum Monthly Recurring Revenue as of the end of the last day of the month immediately preceding the three (3) month period then ended, plus four percent (4%) 2.8. Section 12 (Termination Prior to Revolving Line Maturity Date) . Section 12.1 of the Loan Agreement is hereby amended by deleting it in its entirety and replacing it with the following: 12.1 Termination Prior to Revolving Line Maturity Date. This Agreement may be terminated prior to the Revolving Line Maturity Date by Borrower, effective three (3) Business Days after written notice of termination is given to Bank. Notwithstanding any such termination, Bank’s lien and security interest in the Collateral shall continue until Borrower fully satisfies its Obligations. If such termination is at Borrower’s election or at Bank’s election due to the occurrence and continuance of an Event of Default, Borrower shall pay to Bank, in addition to the payment of any other expenses or fees then-owing, a termination fee in an amount equal to One Hundred Fifty Thousand Dollars ($150,000), provided, that no termination fee shall be charged if (a) the credit facility hereunder is replaced with a new facility from another division of Bank or (b) within ninety (90) days of the consummation of an initial public offering of Borrower’s common stock, (i) the Obligations have been fully paid in cash, (ii) Bank has no commitment or binding obligation to lend any further funds to Borrower, and (iii) all financing agreements between Bank and Borrower are terminated. 2.9. Section 13 (Definitions) . (a) The following terms and their respective definitions set forth in Section 13.1 of the Loan Agreement are hereby amended by deleting them in their entirety and replacing them with the following: “ Borrowing Base ” is (a) 80% of Eligible Accounts, plus (b) eighty percent (80%) of Eligible Accounts with respect to UK Accounts and Ireland Accounts, as determined by Bank from Borrower’s most recent Transaction Report; provided, however, that Bank may decrease the foregoing percentage in its good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect Collateral. “ Credit Extension ” is any Advance, Prior Growth Capital Loan, Prior Equipment Advance, Equipment Advance, Supplemental Equipment Advance, or any other extension of credit by Bank for Borrower’s benefit. “ Eligible Equipment ” is the following to the extent it complies with all of Borrower’s representations and warranties to Bank, is acceptable to Bank in all respects, (i) is located at 123 Mission Street, 25th Floor, San Francisco, California 94105 or in such other locations in the United States which Bank has received prior written notice of such location and, at Bank’s request, a bailee agreement executed by the bailee of such location in form and substance satisfactory to Bank, and (ii) is subject to a first priority Lien in favor of Bank: (a) new and used general purpose equipment, computer equipment, manufacturing equipment, office equipment, test and laboratory equipment, telephone systems, furnishings, subject to the limitations set forth herein, and (b) Other Equipment. 6 “ Financed Equipment ” is all present and future Eligible Equipment in which Borrower has any interest which is financed by an Equipment Advance, a Prior Equipment Advance, or a Supplemental Equipment Advance. “ Loan Documents ” are, collectively, this Agreement, the UK Debenture, the Ireland Debenture, the Warrant, the Perfection Certificate, the Joinder Agreement, the Stock Pledge Agreements, any Bank Services Agreement, any subordination agreement, any note, or notes or guaranties executed by Borrower, and any other present or future agreement between Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended, restated, or otherwise modified. “ Loan Supplement ” is that certain form attached hereto as Exhibit E with respect to each Prior Equipment Advance, Equipment Advance, or Supplemental Equipment Advance. “ Net Cash Threshold ” is greater than Zero Dollars ($0.00). “ Revolving Line ” is an Advance or Advances in an amount equal to Fifteen Million Dollars ($15,000,000), provided, however, that Advances supported by Accounts which (a) are either (i) UK Accounts or (ii) Ireland Accounts shall not exceed Seven Million Five Hundred Thousand Dollars ($7,500,000) in the aggregate at any time outstanding and (b) are Eligible Foreign Accounts shall not exceed Three Million Dollars ($3,000,000) in the aggregate at any time outstanding. “ Revolving Line Maturity Date ” is July 31, 2014. “ UK Accounts ” means Accounts that are billed and collected by the Borrower in the United Kingdom and which (a) otherwise satisfy the definition of Eligible Accounts and (b) contain selling terms and conditions acceptable to Bank in its sole but reasonable discretion. “ Warrant ” means, collectively, (a) that certain Warrant to Purchase Stock dated December 9, 2011 executed by Borrower in favor of Bank, (b) the 2008 Warrant, and (c) the 2012 Warrant. (b) Clauses (b), (d), (e), (f), and (o) of the definition of “Eligible Accounts” set forth in Section 13.1 of the Loan Agreement are amended in their entirety and replaced with the following: (b) Accounts that the Account Debtor has not paid within ninety (90) days (or one hundred twenty (120) days for UK Accounts and Ireland Accounts) of invoice date regardless of invoice payment period terms; (d) Accounts owing from an Account Debtor, in which fifty percent (50%) or more of the Accounts have not been paid within ninety (90) days (or one hundred twenty (120) days for UK Accounts and Ireland Accounts) of invoice date; 7 (e) Accounts owing from an Account Debtor which does not have its principal place of business in the United. States unless such Accounts are otherwise Eligible Foreign Accounts; (f) Accounts billed and/or payable outside of the United States, including, without limitation UK Accounts and Ireland Accounts, unless Bank has a first priority, perfected security interest or other enforceable Lien in such Accounts under all applicable laws, including foreign laws; (o) Accounts for which the Account Debtor has not been invoiced, unless such Accounts are earned and will be invoiced to the Account Debtor within ten (10) Business Days after the last day of each month; (c) The following terms and their respective definitions are hereby added in alphabetical order to Section 13.1 of the Loan Agreement: “ 2012 Warrant ” is that certain Warrant to Purchase Stock dated the December 11, 2012 executed by Borrower in favor of Bank. “ Eligible Foreign Accounts ” are Accounts for which the Account Debtor does not have its principal place of business in the United States and which (a) otherwise satisfy the definition of Eligible Accounts, (b) billed from the United States, and (c) at no time will total Advances made against such Accounts exceed Three Million Dollars ($3,000,000). “ Ireland Accounts ” means Accounts that are billed and collected by Marin Ireland in Ireland and which (a) otherwise satisfy the definition of Eligible Accounts and (b) contain selling terms and conditions acceptable to Bank in its sole but reasonable discretion. “ Ireland Debenture ” means that certain Mortgage Debenture by and between Marin Ireland and Bank, as amended, restated, or otherwise modified. “ Liquidity Ratio ” means (a) the sum of (i) Borrower’s unrestricted cash, plus (ii) net billed accounts receivable (including earned but unbilled accounts receivable that is expected to be billed within ten (10) Business Days of month end), divided by (b) all outstanding Obligations under the Revolving Line. “ Marin Ireland ” means that certain wholly owned Subsidiary of Mann to be organized by Marin under the laws of the Republic of Ireland. “ Next Equity Round ” means the Borrower’s next bona fide round of preferred equity financing with Borrower’s existing investors which results in Borrower receiving net cash proceeds of at least Nineteen Million Five Hundred Thousand Dollars ($19,500,000), and upon Bank confirming the receipt of the same. “ Supplemental Equipment Advance ” is defined in Section 2.1.2(a). 8 “ Supplemental Equipment Conversion Date ” is defined in Section 2.1.2(b). “ Supplemental Equipment Draw Period ” is the period of time from the Supplemental Effective Date through the earlier to occur of (a) March 31, 2013, or (b) an Event of Default. “ Supplemental Equipment Interest Only Period ” means, for each Supplemental Equipment Advance, the period commencing on the first (1st) calendar day of the first (1st) month immediately following the Funding Date of a Supplemental Equipment Advance through June 30, 2013. “ Supplemental Equipment Line ” is a Supplemental Equipment Advance or Supplemental Equipment Advances in an aggregate amount of up to Three Million Dollars ($3,000,000). “ Supplemental Equipment Loan Final Payment ” is a fully earned, nonrefundable payment (in addition to and not a substitution for the regular monthly payments of principal and accrued interest) due on the earlier of (a) the final payment date for the Supplemental Equipment Advances or (b) the date set forth in Section 2.7(g), equal to One Hundred Fifty Thousand Dollars ($150,000), provided, however, no Supplemental Equipment Loan Final Payment shall be charged if the Borrower does not close the Next Equity Round. “ Supplemental Equipment Maturity Date ” is, for each Supplemental Equipment Advance, the thirty-ninth (39th) Payment Date for such Supplemental Equipment Advance, but no later than March 1, 2016. “ Supplemental Repayment Period ” is a period of time equal to thirty-three (33) consecutive months commencing on the first (1st) calendar day of the first (1st) month following the Supplemental Equipment Conversion Date. 3. Compliance Certificate . The Compliance Certificate attached to the Loan Agreement as Exhibit B is replaced in its entirety with the Compliance Certificate attached hereto as Exhibit B. From and after the Supplemental Effective Date, all references in the Loan Agreement to the Compliance Certificate shall mean the Compliance Certificate in the form attached hereto as Exhibit B . 4. Loan Supplement . From and after the Supplemental Effective Date, Schedule 1 (Form of Loan Supplement) is hereby added to the Loan Agreement in its entirety in the form attached hereto as Schedule 1 . From and after the Supplemental Effective Date, all references in the Loan Agreement to the Loan Supplement shall mean the Loan Supplement in the form attached hereto as Schedule 1 . 5. Additional Borrower; Irish Subsidiary . To secure the payment and performance of the Obligations under the Loan Agreement and in consideration of the Bank agreeing to make Advances on Accounts billed and collected out of Ireland (the “ Ireland Accounts ”), Borrower shall deliver to Bank prior to the initial Advance with respect to any Ireland Accounts the following agreements (or their Irish equivalents, as applicable) and due 9 diligence matters: (a) a Joinder Agreement duly executed by Borrower and that certain wholly owned Subsidiary of Mann to be organized by Marin under the laws of the Republic of Ireland (“ Marin Ireland ”), (b) a Stock Pledge Agreement duly executed by Mann for the benefit of Bank, pursuant to which Borrower will grant, pledge, and assign to Bank shares representing up to sixty-five percent (65%) of the ownership interests of Marin Ireland, together with a Notice of Pledge and Initial Transaction Statement pursuant to the Stock Pledge Agreement, (c) a Mortgage Debenture duly executed by Marin Ireland for the benefit of Bank and any other instruments, agreements, securities, control agreements and other documents requested by Bank to create and perfect Bank’s first priority Lien in the Collateral and to establish control of deposit accounts and securities accounts of Marin Ireland, (d) Borrowing Resolutions duly executed by Marin Ireland, (e) Perfection Certificate duly executed by Marin Ireland, (f) evidence that the insurance required to be maintained pursuant to Section 6.7 of the Loan Agreement is in full force and effect and that Bank has been named as lender loss payee or additional insured, as appropriate, under the applicable insurance policies, (g) Memorandum and Articles of Association with regard to Marin Ireland certified by the Secretary or an officer of Marin Ireland and all amendments thereto, (h) Certificate of Registration/Qualification to do business certified by the appropriate Governmental Authority and each jurisdiction in which Marin Ireland is authorized to do business, and (i) results of a UCC, tax and judgment lien search in the District of Columbia and the jurisdictions where assets of Marin Ireland are located, and such searches shall reveal no Liens on any of the assets of Marin Ireland except for Permitted Liens or Liens discharged on or prior to Marin being joined to the Loan Agreement pursuant to documentation satisfactory to the Bank. 6. Limitation of Amendments. 6.1. The amendments set forth in Sections 2, 3, and 4 above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document. 6.2. This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect. 6.3. In addition to those Events of Default specifically enumerated in the Loan Documents, the failure to comply with the terms of any covenant or agreement contained herein shall constitute an Event of Default and shall entitle the Bank to exercise all rights and remedies provided to the Bank under the terms of any of the other Loan Documents as a result of the occurrence of the same. 7. Representations and Warranties . To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows: 7.1. Immediately after giving effect to this Amendment (a) 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 (b) no Event of Default has occurred and is continuing; 10 7.2. Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment; 7.3. The organizational documents of Borrower delivered to Bank on the Supplemental Effective 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; 7.4. 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; 7.5. 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, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower; 7.6. 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, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and 7.7. This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower 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. 8. Integration . This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge into this Amendment and the Loan Documents. 9. Counterparts . This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 10. Effectiveness . This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto, (b) Borrower’s payment of the Increased Revolving Commitment Fee due on the Supplemental Effective Date in the amount of Five Thousand Five Hundred Dollars ($5,500), (c) the due execution and delivery to Bank of the 2012 Warrant, and (d) payment of Bank’s legal fees and expenses in connection with the negotiation and preparation of this Amendment. [Signatures Appear on the Following Page] 11 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above. [Signature Page to First Amendment to Amended and Restated Loan and Security Agreement] BANK: SILICON VALLEY BANK By: /s/ Julia Bobrovich Name: Julia Bobrovich Title: Relationship Manager BORROWER: MARIN SOFTWARE INCORPORATED By: /s/ John Kaelle Name: John Kaelle Title: Chief Financial Officer MARIN SOFTWARE LIMITED By: /s/ John Kaelle Name: John Kaelle Title: Director SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “ Amendment ”) is entered into this 27th day of February, 2013 (the “ Supplemental Effective Date ”), by and between SILICON VALLEY BANK (“ Bank ”), MARIN SOFTWARE INCORPORATED, a Delaware corporation (“ Marin ”) whose address is 123 Mission Street, 25th Floor, San Francisco, California 94105, and MARIN SOFTWARE LIMITED, a company registered under the laws of England and Wales (“ Marin Ltd ”, and together with Marin, individually and collectively, the “ Borrower ”). R ECITALS A. Bank and Borrower have entered into that certain Amended and Restated Loan and Security Agreement dated as of December 9, 2011 (as the same may from time to time be further amended, modified, supplemented or restated, the “ Loan Agreement ”). B. Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement. C. Borrower has requested that Bank amend the Loan Agreement to make certain other revisions to the Loan Agreement as more fully set forth herein. D. Although Bank is under no obligation to do so, Bank is willing to amend certain provisions of the Loan Agreement, all on the terms and conditions set forth in this Agreement, so long as Borrower complies with the terms, covenants and conditions set forth in this Agreement in a timely manner. A GREEMENT N OW , T HEREFORE , in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: 1. Definitions . Capitalized terms used but not defined in this Amendment, including its preamble and recitals, shall have the meanings given to them in the Loan Agreement. 2. Amendments to Loan Agreement . 2.1 Section 6.9 (Financial Covenants) . Section 6.9(a) of the Loan Agreement is hereby amended by deleting it in its entirety and replacing it with the following: (a) Minimum Monthly Recurring Revenue . Commencing with the month ending January 31, 2013, and as of the last day of each month thereafter, for the trailing three (3) month period then ended, minimum Monthly Recurring Revenue of at least the following amounts at the following times: For purposes of calculating the minimum Monthly Recurring Revenue for February, such calculation will be prorated on the basis of twenty-eight (28) calendar days. Commencing with the month ending April 30, 2014, Borrower’s minimum Monthly Recurring Revenue is subject to change based on Borrower’s annual financial projections approved by Borrower’s Board of Directors for the December 31, 2014 fiscal year, which shall be equal to or greater than seventy-five percent (75%) of Borrower’s projected performance for each such month, as determined by Bank in its sole discretion (the “ 2014 MRR Covenant ”). Borrower’s failure to reach an agreement with Bank on the 2014 MRR Covenant and to execute and deliver to Bank an amendment to this Agreement on or by May 15, 2014 shall constitute an immediate Event of Default under this Agreement. 3. Compliance Certificate. The Compliance Certificate attached to the Loan Agreement as Exhibit B is replaced in its entirety with the Compliance Certificate attached hereto as Exhibit B . From and after the Supplemental Effective Date, all references in the Loan Agreement to the Compliance Certificate shall mean the Compliance Certificate in the form attached hereto as Exhibit B . 1 Month Ending Minimum Monthly Recurring Revenue January 31, 2013 $ 14,000,000 February 28, 2013 $ 14,000,000 March 31, 2013 $ 14,000,000 April 30, 2013 $ 15,500,000 May 31, 2013 $ 15,500,000 June 30, 2013 $ 15,500,000 July 31, 2013 $ 17,500,000 August 31, 2013 $ 17,500,000 September 30, 2013 $ 17,500,000 October 31, 2013 $ 20,000,000 November 30, 2013 $ 20,000,000 December 31, 2013 $ 20,000,000 January 31, 2014 $ 20,000,000 February 28, 2014 $ 20,000,000 March 31, 2014 $ 20,000,000 4. Limitation of Amendments. 4.1 The amendments set forth in Sections 2 and 3, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document. 4.2 This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect. 4.3 In addition to those Events of Default specifically enumerated in the Loan Documents, the failure to comply with the terms of any covenant or agreement contained herein shall constitute an Event of Default and shall entitle the Bank to exercise all rights and remedies provided to the Bank under the terms of any of the other Loan Documents as a result of the occurrence of the same. 5. Representations and Warranties . To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows: 5.1 Immediately after giving effect to this Amendment (a) 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 (b) no Event of Default has occurred and is continuing; 5.2 Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment; 5.3 The organizational documents of Borrower delivered to Bank on the Supplemental Effective 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; 5.4 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; 5.5 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, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower; 2 5.6 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, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and 5.7 This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower 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. 6. Integration. This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge into this Amendment and the Loan Documents. 7. Counterparts . This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 8. Effectiveness . This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto and (b) payment of Bank’s legal fees and expenses in connection with the negotiation and preparation of this Amendment. [Signatures Appear on the Following Page] 3 I N W ITNESS W HEREOF , the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above. [Signature Page to Second Amendment to Amended and Restated Loan and Security Agreement] BANK SILICON VALLEY BANK By: /s/ Ryan Edwards Name: Ryan Edwards Title: VP BORROWER MARIN SOFTWARE INCORPORATED By: /s/ John Kaelle Name: John Kaelle Title: Chief Financial Officer MARIN SOFTWARE LIMITED By: /s/ John Kaelle Name: John Kaelle Title: Director EXHIBIT B COMPLIANCE CERTIFICATE The undersigned authorized officers of MARIN SOFTWARE INCORPORATED AND MARIN SOFTWARE LIMITED (collectively, the “ Borrower ”) certifies that under the terms and conditions of the Amended and Restated Loan and Security Agreement between Borrower and Bank (the “ Agreement ”), (1) Borrower is in complete compliance for the period ending with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement. Please indicate compliance status by circling Yes/No under “Complies” column. TO: SILICON VALLEY BANK Date: FROM: MARIN SOFTWARE INCORPORATED MARIN SOFTWARE LIMITED Reporting Covenant Required Complies Monthly financial statements with Compliance Certificate Monthly within 30 days Yes No Annual financial statement (CPA Audited) + CC FYE within 180 days Yes No Borrowing Base Certificate A/R & A/P Agings Monthly within 30 days Yes No Deferred Revenue Reports Monthly within 30 days Yes No Transaction Reports Weekly; or monthly within 30 days, if Streamline Eligible, Recurring monthly revenue roll forward reports and SaaS Metrics (incl. monthly recurring revenue and churn reports) Monthly within 30 days Yes No Board Projections Within 7 days of Board approval Yes No Required Actual Complies Maintain on a Monthly Basis: Minimum Monthly Recurring Revenue for the trailing three (3) month period then ended of at least the following amounts: January 31, 2013 $14,000,000 $ Yes No February 28, 2013 $14,000,000 $ Yes No March 31, 2013 $14,000,000 $ Yes No April 30, 2013 $15,500,000 $ Yes No The following financial covenant analysis and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate. The following are the exceptions with respect to the certification above and these exceptions also are intended to update the Perfection Certificate: (If no exceptions exist, state “No exceptions to note.”) May 31, 2013 $ 15,500,000 $ Yes No June 30, 2013 $ 15,500,000 $ Yes No July 31, 2013 $ 17,500,000 $ Yes No August 31, 2013 $ 17,500,000 $ Yes No September 30, 2013 $ 17,500,000 $ Yes No October 31, 2013 $ 20,000,000 $ Yes No November 30, 2013 $ 20,000,000 $ Yes No December 31, 2013 $ 20,000,000 $ Yes No January 31, 2014 $ 20,000,000 $ Yes No February 28, 2014 $ 20,000,000 $ Yes No March 31, 2014 $ 20,000,000 $ Yes No A Liquidity Ratio of at least: 1.50 to 1.00 : Yes No MARIN SOFTWARE INCORPORATED BANK USE ONLY By: Received by: Name: Title: AUTHORIZED SIGNER Date: MARIN SOFTWARE LIMITED Verified: AUTHORIZED SIGNER By: Date: Name: Compliance Status: Yes No Title: Schedule 1 to Compliance Certificate Financial Covenants of Borrower In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern. Dated: Required: Commencing with the month ending January 31, 2013, and as of the last day of each month thereafter, for the trailing three (3) month period then ended, minimum Monthly Recurring Revenue of at least the following amounts at the following times: For purposes of calculating the minimum Monthly Recurring Revenue for February, such calculation will be prorated on the basis of twenty-eight (28) calendar days. Actual: I Minimum Monthly Recurring Revenue (Section 6.9(a)) Month Ending Minimum Monthly Recurring Revenue January 31, 2013 $ 14,000,000 February 28, 2013 $ 14,000,000 March 31, 2013 $ 14,000,000 April 30, 2013 $ 15,500,000 May 31, 2013 $ 15,500,000 June 30, 2013 $ 15,500,000 July 31, 2013 $ 17,500,000 August 31, 2013 $ 17,500,000 September 30, 2013 $ 17,500,000 October 31, 2013 $ 20,000,000 November 30, 2013 $ 20,000,000 December 31, 2013 $ 20,000,000 January 31, 2014 $ 20,000,000 February 28, 2014 $ 20,000,000 March 31, 2014 $ 20,000,000 A. Aggregate value of all Billed Accounts of Borrower for such period taken as a single accounting period under GAAP $ B. Aggregate value of all monthly services performed by the on all service contracts for billed Accounts $ C. Aggregate value of the number of customer Accounts that are closed, cancelled, or otherwise terminated $ Is line E equal to or greater than the required amount? Required: A Liquidity Ratio of at least 1.50 to 1.00 Actual: Is line E equal to or greater than 1.25:1:00? D. Aggregate value of all one-time credits applied to any of Borrower’s Accounts $ E. Monthly Recurring Revenue (sum of line A, plus line B, minus line C, minus line D) $ No, not in compliance Yes, in compliance II Liquidity Ratio (Section 6.9(b)) A. Aggregate value of Borrower’s unrestricted cash $ B. Aggregate value of net billed accounts receivable (including earned but unbilled accounts receivable that is expected to be billed within five (5) days of month end) $ C. Line A plus Line B $ D. Aggregate value of Obligations under the Revolving Line $ E. Liquidity Ratio (line C divided by line D) No, not in compliance Yes, in compliance THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT THIS THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “ Amendment ”) is entered into this 30th day of September 2013 (the “ Supplemental Effective Date ”), by and between SILICON VALLEY BANK ( “Bank ” ), MARIN SOFTWARE INCORPORATED, a Delaware corporation ( “Marin ” ) whose address is 123 Mission Street, 25th Floor, San Francisco, California 94105, MARIN SOFTWARE LIMITED, a company registered under the laws of England and Wales (“ Marin Ltd ”), and MARIN SOFTWARE LIMITED, a company incorporated in Ireland ( “Marin Ireland ” ; and together with Marin and Marin Ltd, individually and collectively, the “ Borrower ”). R ECITALS A. Bank and Borrower have entered into that certain Amended and Restated Loan and Security Agreement dated as of December 9, 2011 (as the same may from time to time be further amended, modified, supplemented or restated, the “Loan Agreement ” ). B. Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement. C. Borrower has requested that Bank amend the Loan Agreement to extend the Revolving Line Maturity Date and make certain other revisions to the Loan Agreement as more fully set forth herein. D. Although Bank is under no obligation to do so, Bank is willing to extend the Revolving Line Maturity Date and amend certain provisions of the Loan Agreement, all on the terms and conditions set forth in this Agreement, so long as Borrower complies with the terms, covenants and conditions set forth in this Agreement in a timely manner. A GREEMENT N OW , T HEREFORE , in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: 1. Definitions . Capitalized terms used but not defined in this Amendment, including its preamble and recitals, shall have the meanings given to them in the Loan Agreement. 2. Amendments to Loan Agreement . 2.1 Section 2.1.1 (Revolving Advances) . Section 2.1.1(a) of the Loan Agreement is hereby amended by deleting it in its entirety and replacing it with the following: (a) Availability . Subject to the terms and conditions of this Agreement and to deduction of Reserves, Bank shall make Advances not exceeding the Availability Amount. Each LIBOR Advance, if any, must be in an aggregate principal amount of not less than One Million Dollars ($1,000,000) or a whole multiple of One Million Dollars ($1,000,000) in excess thereof. Amounts borrowed hereunder may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein. 2.2 Section 2.6 (Payment of Interest on the Credit Extensions) . Section 2.6 of the Loan Agreement is hereby amended by deleting it in its entirety and replacing it with the following: 2.6 Payment of Interest on the Credit Extensions . (a) Interest; Payment . Subject to Section 2.6(f), each Advance shall bear interest on the outstanding principal amount thereof from the date when made, continued or converted until paid in full at a rate per annum equal to (i) for Prime Rate Advances, the Prime Rate plus the applicable Prime Rate Margin, and (ii) for LIBOR Advances, the LIBOR Rate plus the applicable LIBOR Rate Margin. On and after the expiration of any Interest Period applicable to any LIBOR Advance outstanding on the date of occurrence of an Event of Default or acceleration of the Obligations, the amount of such LIBOR Advance shall, during the continuance of such Event of Default or after acceleration, bear interest at a rate per annum equal to the Prime Rate plus five percent (5.00%). Pursuant to the terms hereof, interest on each Advance shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of any Advance pursuant to this Agreement for the portion of any Advance so prepaid and upon payment (including prepayment) in full thereof. All accrued but unpaid interest on the Advances shall be due and payable on the Revolving Line Maturity Date. (b) Equipment Advances . Subject to Section 2.6(f), the principal amount outstanding for each (i) Equipment Advance shall accrue interest at a fixed per annum rate equal to five and one half of one percent (5.50%) and (ii) Supplemental Equipment Advance shall accrue interest at a fixed per annum rate equal to three percent (3.00%), which interest shall be payable monthly in accordance with Section 2.6(g) below. (c) Prime Rate Advances . Each change in the interest rate of the Prime Rate Advances based on changes in the Prime Rate shall be effective on the effective date of such change and to the extent of such change. (d) LIBOR Advances . The interest rate applicable to each LIBOR Advance shall be determined in accordance with Section 3.5(a) hereunder. Subject to Sections 3.6 and 3.7, such rate shall apply during the entire Interest Period applicable to such LIBOR Advance, and interest calculated thereon shall be payable on the Interest Payment Date applicable to such LIBOR Advance. (e) Computation of Interest . Any interest hereunder will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days in the case of any Credit Extension outstanding in any Currency other than 2 Pounds Sterling, and a year of 365 days in respect of any Credit Extension outstanding in Pounds Sterling. In computing interest on any Credit Extension, the date of the making of such Credit Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension. (f) Default Rate . Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is five percentage points (5.0%) above the rate that is otherwise applicable thereto (the “ Default Rate ”). Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without limitation, Bank Expenses) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable to the Obligations. Payment or acceptance of the increased interest rate provided in this Section 2.6(f) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank. (g) Payment; Interest Computation . Interest with respect to Equipment Advances is payable monthly on the last calendar day of each month and shall be computed on the basis of a 360-day year for the actual number of days elapsed. In computing interest, (i) all payments received after 12:00 p.m. Pacific time on any day shall be deemed received at the opening of business on the next Business Day, and (ii) the date of the making of any Credit Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension. 2.3 Section 2.7 (Fees). Section 2.7 of the Loan Agreement is hereby amended by adding Sections 2.7(h) in its entirety immediately after Section 2.7(g) of the Loan Agreement as follows: (h) 2013 Revolving Commitment Fee . A fully earned, non-refundable commitment fee of Thirty-Seven Thousand Seven Hundred Fifty Dollars ($37,500) (the “ 2013 Revolving Commitment Fee ”) shall be paid to Bank on July 31, 2014. 2.4 Section 3.4 (Procedures for Borrowing) . Section 3.4(a) of the Loan Agreement is hereby amended by deleting it in its entirety and replacing it with the following: 3.4 Procedures for Borrowing . (a) Advances . (i) Subject to the prior satisfaction of all other applicable conditions to the making of an Advance set forth in this Agreement, an Advance shall be made upon Borrower’s irrevocable written notice delivered to Bank by electronic mail in the form of a Notice of Borrowing executed by an Authorized Signer or without instructions if any Advances is necessary to meet Obligations which have become due. Such Notice of 3 Borrowing must be received by Bank prior to 12:00 p.m. Pacific time, (i) at least three (3) Business Days prior to the requested Funding Date, in the case of any LIBOR Advance, and (ii) on the requested Funding Date, in the case of a Prime Rate Advance, specifying: (1) the amount of the Advance; (2) the Currency in which such Advance shall be denominated; (3) the requested Funding Date; (4) whether the Advance is to be comprised of LIBOR Advances or Prime Rate Advances; and (5) the duration of the Interest Period applicable to any such LIBOR Advances included in such notice; provided that if the Notice of Borrowing shall fail to specify the duration of the Interest Period for any Advance comprised of LIBOR Advances, such Interest Period shall be one (1) month. In addition to such Notice of Borrowing, Borrower must promptly deliver to Bank by electronic mail a completed Transaction Report executed by an Authorized Signer together with such other reports and information, including without limitation, sales journals, cash receipts journals, accounts receivable aging reports, as Bank may request in its sole discretion. (ii) On the Funding Date, Bank shall credit proceeds of an Advance to the Designated Deposit Account denominated in the same Currency as the Currency requested with respect to the Advance and, subsequently, shall transfer such proceeds by wire transfer to such other account as Borrower may instruct in the Notice of Borrowing. No Advances shall be deemed made to Borrower, and no interest shall accrue on any such Advance, until the related funds have been deposited in the applicable Designated Deposit Account. 2.5 Section 3 (Conditions of Loans) . Section 3 of the Loan Agreement is hereby amended by adding Sections 3.5, 3.6 and 3.7 in their entirety immediately after Section 3.4 of the Loan Agreement as follows: 3.5 Conversion and Continuation Elections . (a) So long as (i) no Event of Default exists; (ii) Borrower shall not have sent any notice of termination of this Agreement; and (iii) Borrower shall have complied with such customary procedures as Bank has established from time to time for Borrower’s requests for LIBOR Advances, Borrower may, upon irrevocable written notice to Bank: (1) elect to convert on any Business Day, Prime Rate Advances into LIBOR Advances; (2) elect to continue on any Interest Payment Date any LIBOR Advances maturing on such Interest Payment Date; or (3) elect to convert on any Interest Payment Date any LIBOR Advances maturing on such Interest Payment Date into Prime Rate Advances. (b) Borrower shall deliver a Notice of Conversion/Continuation by electronic mail to be received by Bank prior to 12:00 p.m. Pacific time (i) at least three (3) Business Days in advance of the Conversion Date or Continuation Date, if any Advances are to be converted into or continued as LIBOR Advances; and (ii) on the Conversion Date, if any Advances are to be converted into Prime Rate Advances, in each case specifying the: 4 (1) proposed Conversion Date or Continuation Date; (2) aggregate amount of the Advances to be converted or continued; (3) nature of the proposed conversion or continuation; and (4) if the resulting Advance is to be a LIBOR Advance, the duration of the requested Interest Period. (c) If upon the expiration of any Interest Period applicable to any LIBOR Advances, Borrower shall have timely failed to select a new Interest Period to be applicable to such LIBOR Advances or request to convert a LIBOR Advance into a Prime Rate Advance, Borrower shall be deemed to have elected for any such Dollar Advances, to convert such LIBOR Advances into Prime Rate Advances. (d) Any LIBOR Advances shall, at Bank’s option, convert into Prime Rate Advances in the event that (i) an Event of Default exists, or (ii) the aggregate principal amount of the Prime Rate Advances which have been previously converted to LIBOR Advances, or the aggregate principal amount of existing LIBOR Advances continued, as the case may be, at the beginning of an Interest Period shall at any time during such Interest Period exceeds the lesser of the Revolving Line or the Borrowing Base. Borrower agrees to pay Bank, upon demand by Bank (or Bank may, at its option, debit the Designated Deposit Account or any other account Borrower maintains with Bank) any amounts required to compensate Bank for any loss (including loss of anticipated profits), cost, or expense to the extent actually incurred by Bank, as a result of the conversion of LIBOR Advances to Prime Rate Advances pursuant to this Section 3.5(d). (e) Notwithstanding anything to the contrary contained herein, Bank shall not be required to purchase Dollar deposits in the London interbank market or other applicable LIBOR market to fund any LIBOR Advances, but the provisions hereof shall be deemed to apply as if Bank had purchased such deposits to fund the LIBOR Advances. 3.6 Special Provisions Governing LIBOR Advances . Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to LIBOR Advances as to the matters covered: (a) Determination of Applicable Interest Rate . As soon as practicable on each Interest Rate Determination Date, Bank shall determine (which determination shall, absent manifest error in calculation, be final, conclusive and binding upon all parties) the interest rate that shall apply to the LIBOR Advances for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Borrower. (b) Inability to Determine Applicable Interest Rate . In the event that Bank shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any LIBOR Advance, that by reason of circumstances affecting the London interbank market adequate and fair means do not exist for ascertaining the interest rate applicable to such 5 LIBOR Advance on the basis provided for in the definition of LIBOR, Bank shall on such date give notice (by facsimile or by telephone confirmed in writing) to Borrower of such determination, whereupon (i) no Advances may be made as, or converted to, LIBOR Advances until such time as Bank notifies Borrower that the circumstances giving rise to such notice no longer exist, and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by Borrower with respect to LIBOR Advances in respect of which such determination was made shall be deemed to be rescinded by Borrower. (c) Compensation for Breakage or Non-Commencement of Interest Periods . If (i) for any reason, other than a default by Bank or any failure of Bank to fund LIBOR Advances due to impracticability or illegality under Sections 3.7(c) and 3.7(d) of this Agreement, a borrowing or a conversion to or continuation of any LIBOR Advance does not occur on a date specified in a Notice of Borrowing or a Notice of Conversion/Continuation, as the case may be, or (ii) any complete or partial principal payment or reduction of a LIBOR Advance, or any conversion of any LIBOR Advance, occurs on a date prior to the last day of an Interest Period applicable to that LIBOR Advance, including due to voluntary or mandatory prepayment or acceleration, then, in each case, Borrower shall compensate Bank, upon written request by Bank, for all losses and expenses to the extent actually incurred by Bank in an amount equal to the excess, if any, of: (A) the amount of interest that would have accrued on the amount (1) not borrowed, converted or continued as provided in clause (i) above, or (2) paid, reduced or converted as provided in clause (ii) above, for the period from (y) the date of such failure to borrow, convert or continue as provided in clause (i) above, or the date of such payment, reduction or conversion as provided in clause (ii) above, as the case may be, to (z) in the case of a failure to borrow, convert or continue as provided in clause (i) above, the last day of the Interest Period that would have commenced on the date of such borrowing, conversion or continuing but for such failure, and in the case of a payment, reduction or conversion prior to the last day of an Interest Period applicable to a LIBOR Advance as provided in clause (ii) above, the last day of such Interest Period, in each case at the applicable rate of interest or other return for such LIBOR Advance(s) provided for herein (excluding, however, the LIBOR Rate Margin included therein, if any), over (B) the interest which would have accrued to Bank on the applicable amount provided in clause (A) above through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to the definition of LIBOR Rate on the date of such failure to borrow, convert or continue as provided in clause (i) above, or the date of such payment, reduction or conversion as provided in clause (ii) above, as the case may be, for a period equal to the remaining period of such applicable Interest Period provided in clause (A) above. Bank’s request shall set forth the manner and method of computing such compensation and such determination as to such compensation shall be conclusive absent manifest error. 6 (d) Assumptions Concerning Funding of LIBOR Advances . Calculation of all amounts payable to Bank under this Section 3.6 and under Section 3.7 shall be made as though Bank had actually funded each relevant LIBOR Advance through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to the definition of LIBOR Rate in an amount equal to the amount of such LIBOR Advance and having a maturity comparable to the relevant Interest Period; provided, however, that Bank may fund each of its LIBOR Advances in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this Section 3.6 and under Section 3.7. (e) LIBOR Advances After Default . After the occurrence and during the continuance of an Event of Default, (i) Borrower may not elect to have an Advance be made or continued as, or converted to, a LIBOR Advance after the expiration of any Interest Period then in effect for such Advance and (ii) subject to the provisions of Section 3.6(c), any Notice of Conversion/Continuation given by Borrower with respect to a requested conversion/continuation that has not yet occurred shall, at Bank’s option, be deemed to be rescinded by Borrower and be deemed a request to convert or continue Advances referred to therein as Prime Rate Advances. 3.7 Additional Requirements/Provisions Regarding LIBOR Advances . (a) Borrower shall pay Bank, upon demand by Bank, from time to time such amounts as Bank may determine to be necessary to compensate it for any costs incurred by Bank that Bank determines are attributable to its making or maintaining of any amount receivable by Bank hereunder in respect of any LIBOR Advances relating thereto (such increases in costs and reductions in amounts receivable being herein called “ Additional Costs ”), in each case resulting from any Regulatory Change which: (i) changes the basis of taxation of any amounts payable to Bank under this Agreement in respect of any LIBOR Advances (other than changes which affect taxes measured by or imposed on the overall net income of Bank by the jurisdiction in which Bank has its principal office); (ii) imposes or modifies any reserve, special deposit or similar requirements relating to any extensions of credit or other assets of, or any deposits with, or other liabilities of Bank (including any LIBOR Advances or any deposits referred to in the definition of LIBOR); or (iii) imposes any other condition affecting this Agreement (or any of such extensions of credit or liabilities). Bank will notify Borrower of any event occurring after the Effective Date which will entitle Bank to compensation pursuant to this Section 3.7(a) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation. Bank will furnish Borrower with a statement setting forth the basis and amount of each request by Bank for compensation under this Section 3.7(a). Determinations and allocations by Bank for purposes of this Section 3.7(a) of the effect 7 of any Regulatory Change on its costs of maintaining its obligations to make LIBOR Advances, of making or maintaining LIBOR Advances, or on amounts receivable by it in respect of LIBOR Advances, and of the additional amounts required to compensate Bank in respect of any Additional Costs, shall be conclusive absent manifest error. (b) If Bank shall determine that the adoption or implementation of any applicable law, rule, regulation, or treaty regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by Bank (or its applicable lending office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank, or comparable agency, has or would have the effect of reducing the rate of return on capital of Bank or any person or entity controlling Bank (a “ Parent ”) as a consequence of its obligations hereunder to a level below that which Bank (or its Parent) could have achieved but for such adoption, change, or compliance (taking into consideration policies with respect to capital adequacy) by an amount deemed by Bank to be material, then from time to time, within five (5) days after demand by Bank, Borrower shall pay to Bank such additional amount or amounts as will compensate Bank for such reduction. A statement of Bank claiming compensation under this Section 3.7(b) and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive absent manifest error. Notwithstanding anything to the contrary in this Section 3.7, Borrower shall not be required to compensate Bank pursuant to this Section 3.7(b) for any amounts incurred more than sixth (6) months prior to the date that Bank notifies Borrower of Bank’s intention to claim compensation therefor; provided that if the circumstances giving rise to such claim have a retroactive effect, then such sixth-month period shall be extended to include the period of such retroactive effect. The obligations of the Borrower arising pursuant to this Section 3.7(b) shall survive the Revolving Line Maturity Date, the termination of this Agreement and the repayment of all Obligations. (c) If, at any time, Bank, in its sole and absolute discretion, determines that (i) the amount of LIBOR Advances for periods equal to the corresponding Interest Periods are not available to Bank in the offshore currency interbank markets, or (ii) LIBOR does not accurately reflect the cost to Bank of lending the LIBOR Advances, then Bank shall promptly give notice thereof to Borrower. Upon the giving of such notice, Bank’s obligation to make the LIBOR Advances shall terminate; provided, however, LIBOR Advances shall not terminate if Bank and Borrower agree in writing to a different interest rate applicable to LIBOR Advances. (d) If it shall become unlawful for Bank to continue to fund or maintain any LIBOR Advances, or to perform its obligations hereunder, upon demand by Bank, Borrower shall prepay the LIBOR Advances in full with accrued interest thereon and all other amounts payable by Borrower hereunder (including, without limitation, any amount payable in connection with such prepayment pursuant to Section 3.6(c)(ii)). Notwithstanding the foregoing, to the extent a determination by Bank as described above relates to a LIBOR Advance then being requested by Borrower pursuant to a Notice of 8 Borrowing or a Notice of Conversion/Continuation, Borrower shall have the option, subject to the provisions of Section 3.6(c)(ii), to (i) rescind such Notice of Borrowing or Notice of Conversion/Continuation by giving notice (by facsimile or by telephone confirmed in writing) to Bank of such rescission on the date on which Bank gives notice of its determination as described above, or (ii) modify such Notice of Borrowing or Notice of Conversion/Continuation to obtain a Prime Rate Advance or to have outstanding Advances converted into or continued as Prime Rate Advances by giving notice (by facsimile or by telephone confirmed in writing) to Bank of such modification on the date on which Bank gives notice of its determination as described above. 2.6 Section 6.2 (Financial Statements, Reports, Certificates) . Section 6.2 of the Loan Agreement is hereby amended by deleting it in its entirety and replacing it with the following: 6.2 Financial Statements, Reports, Certificates . Provide Bank with the following: (a) a Transaction Report (and any schedules related thereto), in the event that Borrower’s Net Cash is less than Fifty Million Dollars (the “ Net Cash Threshold ”) and provided no Event of Default has occurred and is continuing, no later than thirty (30) days after the end of each month; (b) in the event that Borrower’s Net Cash is (i) greater than the Net Cash Threshold and there are outstanding Obligations, within five (5) days of filing its Form 10-Q with the SEC, but no later than fifty (50) days after the end of each fiscal quarter, and (ii) less than the Net Cash Threshold and there are outstanding Obligations, no later than thirty (30) days after the end of each month, (A) accounts receivable agings, aged by invoice date, for the applicable period, (B) accounts payable agings for the applicable period, aged by invoice date, and outstanding or held check registers, if any, (C) reconciliations of accounts receivable agings for the applicable period (aged by invoice date), transaction reports and general ledger, and (D) Borrower’s Deferred Revenue report in form satisfactory to Bank in its sole discretion, but reasonable discretion; provided , however , notwithstanding the foregoing requirements of this Section 6.2(b), in the event Borrower’s Net Cash is (i) greater than the Net Cash Threshold and there are no outstanding Obligations, and (ii) less than the Net Cash Threshold and there are no outstanding Obligations, Borrower will not be required to provide the reports in clauses (A) through (D) of this Section and no Advances shall be made under this Agreement until such time as Borrower shall provide to Bank the reports in clauses (A) through (D) not less than thirty (30) days prior to the request for an Advance; (c) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and consolidating balance sheet and income statement covering Borrower’s consolidated and consolidating operations for such month certified by a Responsible Officer and in a form acceptable to Bank (the “ Monthly Financial Statements ”); 9 (d) within thirty (30) days after the last day of each month and together with the Monthly Financial Statements, a duly completed Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Bank shall reasonably request, including, without limitation, a statement that at the end of such month there were no held checks; (e) [Reserved]; (f) as soon as available, but no later than forty-five (45) days after the end of each fiscal year approval by the Board of Directors, (A) a business forecast for the following fiscal year (including quarterly projected balance sheets, income statements, and cash flow statements) for the following fiscal year and (B) Board approved financial projections for the following fiscal year, commensurate in form and substance with those provided to Borrower’s venture capital investors; (g) As soon as available, within five (5) days of filing its Form 10-K with the SEC, but no later than ninety (90) days after the last day of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to Bank in its reasonable discretion; (h) as soon as available, within five (5) days of filing its Form 10-Q with the SEC, and in any event within fifty (50) days after the end of each fiscal quarter of Borrower, company prepared consolidated balance sheet and income statement covering Borrower’s and each of its Subsidiary’s operations for such quarter certified by a Responsible Officer and in a form acceptable to Bank (the “ Quarterly Financial Statements ”); (i) within five (5) days of filing, copies of all periodic and other reports, proxy statements and other materials filed by Borrower with the SEC, any Governmental Authority succeeding to any or all of the functions of the SEC or with any national securities exchange, or distributed to its shareholders, as the case may be. Documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrower’s website on the Internet at Borrower’s website address; (j) within five (5) days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders or to any holders of Subordinated Debt; 10 (k) prompt report of any legal actions pending or threatened in writing against Borrower or any of its Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, Two Hundred Fifty Thousand Dollars ($250,000) or more; and (l) other financial information reasonably requested by Bank. 2.7 Section 6.3 (Accounts Receivable) . Section 6.3(c) of the Loan Agreement is hereby amended by deleting it in its entirety and replacing it with the following: (c) Collection of Accounts . Borrower shall have the right to collect all Accounts, unless and until an Event of Default has occurred and is continuing. Bank shall require that all proceeds of Accounts from Account Debtors which have their principal place of business in the United States be deposited by Borrower into a lockbox account, or such other “blocked account” as specified by Bank, pursuant to a blocked account agreement in such form as Bank may specify in its good faith business judgment. Whether or not an Event of Default has occurred and is continuing, Borrower shall immediately deliver all payments on and proceeds of such Accounts to an account maintained with Bank to be applied (i) prior to an Event of Default, pursuant to the terms of Section 2.8(b) hereof, and (ii) after the occurrence and during the continuance of an Event of Default, pursuant to the terms of Section 9.4 hereof. Provided no Event of Default has occurred and is continuing and Borrower maintains a static loan balance under the Revolving Line, funds in the blocked account will be remitted to Borrower’s Designated Deposit Account. 2.8 Section 6.9 (Financial Covenants) . Section 6.9 of the Loan Agreement is hereby amended by deleting it in its entirety and replacing it with the following: 6.9 Financial Covenants . Maintain at all times, to be tested as of the last day of each quarter, unless otherwise noted, on a consolidating basis with respect to Borrower and its Subsidiaries (a) Minimum Quarterly Recurring Revenue . Commencing with the quarter ending June 30, 2013, and as of the last day of each quarter thereafter, for the trailing three (3) month period then ended, minimum Quarterly Recurring Revenue of at least (i) Fifteen Million Dollars ($15,000,000) at all times that Borrower’s unrestricted cash on balance sheet exceeds Fifty Million Dollars ($50,000,000) or (ii) the following amounts at the following times at all times that Borrower’s unrestricted cash on balance sheet is less than Fifty Million Dollars ($50,000,000): 11 Quarter Ending Minimum Quarterly Recurring Revenue June 30, 2013 $ 15,500,000 September 30, 2013 $ 17,500,000 December 31, 2013 $ 19,500,000 March 31, 2014 $ 19,500,000 Commencing with the quarter ending June 30, 2014, Borrower’s minimum Quarterly Recurring Revenue is subject to change based on Borrower’s annual financial projections approved by Borrower’s Board of Directors for the December 31, 2014 fiscal year and delivered to Bank no later than February 14, 2014, which shall be equal to or greater than seventy-five percent (75%) of Borrower’s projected performance for each such quarter, as determined by Bank in its sole discretion (the “ 2014 MRR Covenant ”). Borrower’s failure to reach an agreement with Bank on the 2014 MRR Covenant and to execute and deliver to Bank an amendment to this Agreement on or by May 15, 2014 shall constitute an immediate Event of Default under this Agreement. (b) Adjusted Quick Ratio . Maintain at all times, to be tested as of the last day of each month on a consolidating basis with respect to Borrower and its Subsidiaries an Adjusted Quick Ratio of at least 1.50 to 1.00 at all times that Borrower’s unrestricted cash on balance sheet is less than Fifty Million Dollars ($50,000,000). 2.1 Section 12 (Termination Prior to Revolving Line Maturity Date). Section 12.1 of the Loan Agreement is hereby amended by deleting it in its entirety and replacing it with the following: 12.1 Termination Prior to Revolving Line Maturity Date. This Agreement may be terminated prior to the Revolving Line Maturity Date by Borrower, effective three (3) Business Days after written notice of termination is given to Bank. Notwithstanding any such termination, Bank’s lien and security interest in the Collateral shall continue until Borrower fully satisfies its Obligations. If such termination is at Borrower’s election or at Bank’s election due to the occurrence and continuance of an Event of Default, Borrower shall pay to Bank, in addition to the payment of any other expenses or fees then-owing, a termination fee in an amount equal to (i) One Hundred Fifty Thousand Dollars ($150,000) if such termination occurs prior to July 31, 2014 and (ii) Seventy-Five Thousand Dollars ($75,000) if such termination occurs on or after July 31, 2014, provided, that no termination fee shall be charged if the credit facility hereunder is replaced with a new facility from another division of Bank. 2.2 Section 13 (Definitions). (a) The following terms and their respective definitions set forth in Section 13.1 of the Loan Agreement are hereby amended by deleting them in their entirety and replacing them with the following: “ Authorized Signer ” is any individual listed in Borrower’s Borrowing Resolution who is authorized to execute the Loan Documents, including any Notice of Borrowing or other Advance request, on behalf of Borrower. 12 “ Business Day ” is any day that is not a Saturday, Sunday or other day on which banking institutions in the State of California are authorized or required by law or other governmental action to close, except that if any determination of a “Business Day” shall relate to a LIBOR Advance, the term “Business Day” shall also mean a day on which dealings are carried on in the London interbank market. “ Closed Accounts ” are, during any calendar quarter, the number of customer Accounts that are closed, cancelled, or otherwise terminated. “ Prime Rate ” is the rate of interest per annum from time to time published in the money rates section of The Wall Street Journal or any successor publication thereto as the “prime rate” then in effect; provided that if such rate of interest, as set forth from time to time in the money rates section of The Wall Street Journal, becomes unavailable for any reason as determined by Bank, the “Prime Rate” shall mean the rate of interest per annum announced by Bank as its prime rate in effect at its principal office in the State of California (such Bank announced Prime Rate not being intended to be the lowest rate of interest charged by Bank in connection with extensions of credit to debtors). “ Revolving Line ” is an Advance or Advances in an amount equal to Fifteen Million Dollars ($15,000,000). “ Revolving Line Maturity Date ” is July 31, 2015. (b) The following terms and their respective definitions are hereby added in alphabetical order to Section 13.1 of the Loan Agreement: “ Adjusted Quick Ratio ” means, as of the date of determination, a ratio of Quick Assets to Current Liabilities. “ Continuation Date ” means any date on which Borrower continues a LIBOR Advance into another Interest Period. “ Conversion Date ” means any date on which Borrower converts a Prime Rate Advance to a LIBOR Advance or a LIBOR Advance to a Prime Rate Advance. “ Currency ” is coined money and such other banknotes or other paper money as are authorized by law and circulate as a medium of exchange. “ Current Liabilities ” are all obligations and liabilities of Borrower to Bank, plus, without duplication, the aggregate amount of Borrower’s Total Liabilities that mature within one (1) year (excluding all Deferred Revenue). “ Interest Payment Date ” means, with respect to any LIBOR Advance, the last day of each Interest Period applicable to such LIBOR Advance and, with respect to Prime Rate Advances, the last day of each month (or, if that day of the month does not fall on a Business Day, then on the first Business Day following such date), and each date a Prime Rate Advance is converted into a LIBOR Advance to the extent of the amount converted to a LIBOR Advance. 13 “ Interest Period ” means, as to any LIBOR Advance, the period commencing on the date of such LIBOR Advance, or on the conversion/continuation date on which the LIBOR Advance is converted into or continued as a LIBOR Advance, and ending on the date that is one, two, or three months thereafter, in each case as Borrower may elect in the applicable Notice of Borrowing or Notice of Conversion/Continuation; provided, however, that (a) no Interest Period with respect to any LIBOR Advance shall end later than the Revolving Line Maturity Date, (b) the last day of an Interest Period shall be determined in accordance with the practices of the LIBOR interbank market as from time to time in effect, (c) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of a LIBOR Advance, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day, (d) any Interest Period pertaining to a LIBOR Advance that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period, and (e) interest shall accrue from and include the first Business Day of an Interest Period but exclude the last Business Day of such Interest Period. “ Interest Rate Determination Date ” means each date for calculating the LIBOR for purposes of determining the interest rate in respect of an Interest Period. The Interest Rate Determination Date shall be the second Business Day prior to the first day of the related Interest Period for a LIBOR Advance. “ LIBOR ” means, for any Interest Rate Determination Date with respect to an Interest Period for any Advance to be made, continued as or converted into a LIBOR Advance, the rate of interest per annum determined by Bank to be the per annum rate of interest at which deposits in Dollars are offered to Bank in the London interbank market (rounded upward, if necessary, to the nearest 0.0001%) in which Bank customarily participates at 11:00 a.m. (local time in such interbank market) two (2) Business Days prior to the first day of such Interest Period for a period approximately equal to such Interest Period and in an amount approximately equal to the amount of such Advance. “ LIBOR Advance ” means an Advance that bears interest based at the LIBOR Rate. “ LIBOR Rate ” means, for each Interest Period in respect of LIBOR Advances comprising part of the same Advances, an interest rate per annum (rounded upward, if necessary, to the nearest 0.0001%) equal to LIBOR for such Interest Period divided by one (1) minus the Reserve Requirement for such Interest Period. “ LIBOR Rate Margin ” is three hundred (300) basis points. “ Net Cash Threshold ” is defined in Section 6.2(a). 14 “ Notice of Borrowing ” means a notice given by Borrower to Bank in accordance with Section 3.4(a), substantially in the form of Exhibit G , with appropriate insertions. “ Notice of Conversion/Continuation ” means a notice given by Borrower to Bank in accordance with Section 3.5, substantially in the form of Exhibit H , with appropriate insertions. “ Prime Rate Advance ” means an Advance that bears interest based at the Prime Rate. “ Prime Rate Margin ” is one quarter of one percent (.25%). “ Quarterly Recurring Revenue ” means, for any period as at any date of determination, the sum of the aggregate value of all (a) billed Accounts of Borrower for such period taken as a single accounting period under GAAP, plus (b) quarterly services performed by the Borrower on all service contracts for billed Accounts, as reported by Borrower in its Quarterly Financial Statements delivered to the Bank pursuant to Section 6.2(h), minus (c) Closed Accounts, minus (d) one-time credits applied to any of Borrower’s Accounts. “ Quick Assets ” is, on any date, Borrower’s and its Subsidiaries’ consolidated, unrestricted cash and Cash Equivalents, net billed accounts receivable (including earned but unbilled accounts that are expected to be billed within five (5) days of month-end) and short and long-term investments determined according to GAAP. “ Regulatory Change ” means, with respect to Bank, any change on or after the date of this Agreement in United States federal, state, or foreign laws or regulations, including Regulation D, or the adoption or making on or after such date of any interpretations, directives, or requests applying to a class of lenders including Bank, of or under any United States federal or state, or any foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. “ Reserve Requirement ” means, for any Interest Period, the average maximum rate at which reserves (including any marginal, supplemental, or emergency reserves) are required to be maintained during such Interest Period under Regulation D against “Eurocurrency liabilities” (as such term is used in Regulation D) by member banks of the Federal Reserve System. Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by Bank by reason of any Regulatory Change against (a) any category of liabilities which includes deposits by reference to which the LIBOR Rate is to be determined as provided in the definition of LIBOR or (b) any category of extensions of credit or other assets which include Advances. “ Total Liabilities ” is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower’s and its Subsidiaries’ consolidated balance sheets, including all Indebtedness and all Subordinated Debt, but excluding all Deferred Revenue. 15 3. Compliance Certificate. The Compliance Certificate attached to the Loan Agreement as Exhibit B is replaced in its entirety with the Compliance Certificate attached hereto as Exhibit B . From and after the Supplemental Effective Date, all references in the Loan Agreement to the Compliance Certificate shall mean the Compliance Certificate in the form attached hereto as Exhibit B . 4. Notice of Borrowing. From and after the Supplemental Effective Date, Exhibit G (Form of Notice of Borrowing) is hereby added to the Loan Agreement in its entirety in the form attached hereto as Exhibit G . From and after the Supplemental Effective Date, all references in the Loan Agreement to the Notice of Borrowing shall mean the Loan Supplement in the form attached hereto as Exhibit G . 5. Notice of Conversion/Continuation. From and after the Supplemental Effective Date, Exhibit H (Form of Notice of Conversion/Continuation) is hereby added to the Loan Agreement in its entirety in the form attached hereto as Exhibit H . From and after the Supplemental Effective Date, all references in the Loan Agreement to the Notice of Conversion/Continuation shall mean the Loan Supplement in the form attached hereto as Exhibit H . 6. Limitation of Amendments. 6.1 The amendments set forth in Sections 2, 3, 4, and 5 above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document. 6.2 This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect. 6.3 In addition to those Events of Default specifically enumerated in the Loan Documents, the failure to comply with the terms of any covenant or agreement contained herein shall constitute an Event of Default and shall entitle the Bank to exercise all rights and remedies provided to the Bank under the terms of any of the other Loan Documents as a result of the occurrence of the same. 7. Representations and Warranties. To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows: 7.1 Immediately after giving effect to this Amendment (a) 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 (b) no Event of Default has occurred and is continuing; 16 7.2 Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment; 7.3 The organizational documents of Borrower delivered to Bank on the Supplemental Effective 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; 7.4 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; 7.5 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, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower; 7.6 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, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and 7.7 This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower 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. 8. Integration. This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge into this Amendment and the Loan Documents. 9. Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 17 10. Effectiveness. This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto and (b) payment of Bank’s legal fees and expenses in connection with the negotiation and preparation of this Amendment. [Signatures Appear on the Following Page] 18 I N W ITNESS W HEREOF , the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above. BANK SILICON VALLEY BANK By: /s/ Ryan Edwards Title: Vice President BORROWER MARIN SOFTWARE INCORPORATED By: /s/ Christopher Lien Title: CEO MARIN SOFTWARE LIMITED By: /s/ Christopher Lien Title: Director MARIN SOFTWARE LIMITED By: /s/ John Kaelle Title: Director Exhibit 10.11 Marin Software Incorporated Executive Bonus Plan The purpose of the Marin Executive Bonus Plan (the “plan”) is to incentivize certain executives of Marin Software Incorporated (the “Company”) to achieve key company objectives over an established period of time. Certain employees of the Company (“participants”) designated by the Compensation Committee of the Board of Directors (“the committee”), including the Company’s named executive officers, are eligible to receive cash awards following the end of a calendar year, based upon the attainment of performance objectives for that year, the performance objectives of which consist of corporate objectives established by the Committee for the calendar year in question. Unless determined otherwise by the Committee, bonus amounts are generally targeted as a percentage of the participant’s annual base salary as in effect at the commencement of the calendar year to which the bonus relates. Corporate objectives for each participant and their bonus for a fiscal year will be determined by the committee in consultation with the Chief Executive Officer. The weighting of the target bonus for a fiscal year among bonus objectives will be set by the Committee. In order to be eligible to receive a bonus, the participant must be employed and in good standing by the Company at the time the bonus is paid, unless otherwise approved by the committee. Eligible employees who are hired by the Company during a fiscal year will have their bonus amounts pro rated to reflect the number of months they worked at the Company during the year. The amount of any bonus may be adjusted based on the level of achievement of targets, with the Company retaining the discretion to further adjust bonus amounts. Participants on a leave of absence, extend vacation or sabbatical longer than one month will be considered by the committee for a pro-rated bonus, calculated on the percentage of the year worked, while taking into account corporate and individual objectives while actively employed. Other Provisions Participation in this plan is not an agreement (express or implied) between the participant and the Company that the participant will be employed for any specific period of time, employment remains at-will. The participant and the Company each may terminate the employment relationship at any time and for any or no reason. The Committee administers the plan in accordance with the plan’s provisions. The committee will have all powers and discretion necessary or appropriate to administer the plan and to control its operation, including, but not limited to, the power to (i) determine which employees will be eligible, (ii) prescribe the terms and conditions of awards, (iii) interpret the plan and the awards, (iv) adopt such procedures as are necessary or appropriate to permit participation in the Plan by employees who may be employed outside of the United States, (v) adopt rules for the administration, interpretation and application of the plan as are consistent therewith, and (vi) interpret, amend or revoke any such rules. Any determination of performance, payment or other matter under this plan by the Committee is final and binding. All bonus payments are subject to applicable withholding taxes. Bonus payments, if any, under the plan represent unfunded and unsecured obligations of the Company. No payments hereunder are intended to be deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the “code”), and will be interpreted accordingly. Bonus payments are intended to constitute short-term deferral payments under Section 409A of the code. This summary highlights the principle features of the Marin Executive Bonus Plan, but does not describe every situation that can occur. The Compensation Committee and the Board of Directors retain the right to interpret, revise, modify or delete the plan at its sole discretion at any time. Exhibit 10.14 Description of Director Compensation Arrangements The compensation arrangements for the non-employee members of the Board of Directors of Marin Software Incorporated are as follows: New Board Members Option to purchase 30,000 shares, vesting annually over three years Annual Grant for Non-employee Directors Option to purchase a number of shares equal to $150,000 divided by Black Scholes Value of an option on the date of grant, vesting on the first anniversary of the date of grant Lead Independent Director Option to purchase 1,200 shares, vesting on the first anniversary of the date of grant Audit Committee Chair Option to purchase 1,200 shares, vesting on the first anniversary of the date of grant Compensation Committee Chair Option to purchase 700 shares, vesting on the first anniversary of the date of grant Nom/Gov Committee Chair Option to purchase 400 shares, vesting on the first anniversary of the date of grant Cash Retainer / per meeting fees None Exhibit 21.1 List of Subsidiaries of Marin Software Incorporated as of December 31, 2014 Wholly-Owned Subsidiary Jurisdiction Marin Software Irish Holding Limited Ireland Marin Software Limited Ireland Marin Software Limited (United Kingdom) United Kingdom Marin Software GmbH Germany Marin Software SARL France Marin Software K.K. Japan Marin Software Pte. Ltd. Singapore Marin Software Pty Ltd. Australia Marin Software (Shanghai) Co., Ltd. People’s Republic of China NowSpots, Inc. United States of America Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-196818) and Form S-8 (No. 333-194250) of Marin Software Incorporated of our report dated February 20, 2015 relating to the financial statements, which appears in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP San Jose, California February 20, 2015 Exhibit 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, David A. Yovanno, certify that: Date: February 20, 2015 1. I have reviewed this Annual Report on Form 10-K of Marin Software Incorporated; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. /s/ David A. Yovanno David A. Yovanno Chief Executive Officer (Principal Executive Officer) Exhibit 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, John A. Kaelle, certify that: Date: February 20, 2015 1. I have reviewed this Annual Report on Form 10-K of Marin Software Incorporated; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. /s/ John A. Kaelle John A. Kaelle Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) Exhibit 32.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, David A. Yovanno, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: Date: February 20, 2015 (1) the Annual Report of Marin Software Incorporated on Form 10-K for the fiscal year ended December 31, 2014 (the “ Report ”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Marin Software Incorporated for the periods presented therein. By: /s/ David A. Yovanno David A. Yovanno Chief Executive Officer (Principal Executive Officer) Exhibit 32.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, John A. Kaelle, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: Date: February 20, 2015 (1) the Annual Report of Marin Software Incorporated on Form 10-K for the fiscal year ended December 31, 2014 (the “ Report ”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Marin Software Incorporated for the periods presented therein. By: /s/ John A. Kaelle John A. Kaelle Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 

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