Exhibit 10.3

 

FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

THIS FIRST AMENDMENT to Loan and Security Agreement (this “Amendment”) is
entered into this 6th day of June, 2013 (the “First Amendment Effective Date”),
by and between Silicon Valley Bank (“Bank”) and Marketo, Inc., a Delaware
corporation (“Borrower”) whose address is 901 Mariner’s Blvd., Suite 200, San
Mateo, CA 94404.

 

RECITALS

 

A.                                    Bank and Borrower have entered into that
certain Loan and Security Agreement dated as May 21, 2012 (as the same may from
time to time be amended, modified, supplemented or restated, the “Loan
Agreement”).  Bank has extended credit to Borrower for the purposes permitted in
the Loan Agreement.

 

B.                                    Borrower has requested that Bank amend the
Loan Agreement to (i) extend an additional equipment loan facility, and
(ii) make certain other revisions to the Loan Agreement as more fully set forth
herein.

 

AGREEMENT

 

NOW, THEREFORE, 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 shall have the meanings given to them in the Loan
Agreement.

 

2.                                      Amendments to Loan Agreement.

 

2.1                               Section 2.1.2 (2013 Equipment Advances).  A
new Section 2.1.2 is added to the Loan Agreement which reads as follows:

 

2.1.2                     2013 Equipment Advance Facility.

 

(a)                                 Availability.  Subject to the terms and
conditions of this Agreement, during the 2013 Equipment Draw Period, Bank shall
make advances (each, a “2013 Equipment Advance” and, collectively, the “2013
Equipment Advances”) not exceeding the 2013 Equipment Line.  2013 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 date of each 2013 Equipment Advance.  No 2013 Equipment
Advance may exceed 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 25% of the proceeds of the 2013 Equipment Line shall be used
to finance Other Equipment.  Each 2013 Equipment Advance must be in an amount
equal to at least the lesser of Five Hundred Thousand Dollars ($500,000) or the
amount that has not yet been drawn under the 2013 Equipment Line.   After
repayment, no 2013 Equipment Advance may be reborrowed.

 

(b)                                 Repayment.  For each 2013 Equipment Advance:
(i) Borrower shall make monthly payments of interest only commencing on the
first day of the month following the month in which the Funding Date occurs with
respect to such 2013 Equipment Advance and continuing thereafter on the first
day of each successive calendar month through its 2013 Equipment Line Interest
Only Period, (ii) commencing on its 2013 Equipment Line Amortization Date and
continuing thereafter on the first day of each successive calendar month through
and including its 2013 Equipment Maturity Date (each a “2013 Equipment Payment
Date”), Borrower shall make thirty-six (36) equal monthly payments of principal
and accrued interest which would fully amortize such 2013

 

1

--------------------------------------------------------------------------------

 

Equipment Advance, and (iii) all unpaid principal and accrued and unpaid
interest is due and payable in full on the 2013 Equipment Maturity Date with
respect to such 2013 Equipment Advance.  2013 Equipment Advances may only be
prepaid in accordance with Sections 2.1.2(d) and 2.1.2(e).

 

(c)                            Interest Rate.  Subject to Section 2.3(b), the
principal amount outstanding under each 2013 Equipment Advance shall accrue
interest, which interest shall be payable monthly, at a fixed per annum rate
equal to the greater of (i) four percent (4.0%), or (ii) three-quarters
percentage points (0.75%) above the WSJ Prime Rate as determined on the Funding
Date.

 

(d)                                 Mandatory Prepayment Upon an Acceleration. 
If the 2013 Equipment Advances are 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 outstanding principal plus accrued
and unpaid 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 2013 Equipment
Advances.   Borrower shall have the option to prepay all, but not less than all,
of the 2013 Equipment Advances advanced by Bank under this Agreement, provided
Borrower (i) delivers written notice to Bank of its election to prepay such 2013
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 and unpaid interest of such 2013 Equipment Advances, plus (B) all other
sums, if any, that shall have become due and payable, including interest at the
Default Rate, if any, with respect to any past due amounts.

 

(f)                                   Procedures for Borrowing.  Subject to the
prior satisfaction of all other applicable conditions to the making of a 2013
Equipment Advance set forth in this Agreement, to obtain a 2013 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, 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, Bank shall have a first priority perfected
security interest in such Equipment.  If Borrower satisfies the conditions of
each 2013 Equipment Advance, Bank shall disburse such 2013 Equipment Advance by
transfer to the Designated Deposit Account.

 

2.2                               Sections  6.2(a), (b), (c) and (d) (Financial
Reporting).  Sections 6.2(a), (b), (c) and (d)of the Loan Agreement are hereby
amended in their  entirety and replaced with the following:

 

(a)                                 Quarterly Reporting.  Within five (5) days
of filing, but no later than forty-five (45) days after the end of each fiscal
quarter for the first three quarters of each fiscal year, Borrower’s 10-Q for
such fiscal quarter (the “Quarterly Financial Statements”);

 

(b)                                 Annual Reporting.  Within five (5) days of
filing, but no later than ninety (90) days after the end of each fiscal year,
Borrower’s 10-K for such fiscal year (the “Annual Financial Statements”);

 

(c)                                  Compliance Certificate.  Concurrently with
the delivery of each of the Quarterly Financial Statements and each of the
Annual Financial Statements, a duly completed Compliance Certificate signed by a
Responsible Officer, certifying that as of the end of such period, 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 may reasonably
request;

 

2

--------------------------------------------------------------------------------

 

(d)                                 Bookings Report.  Concurrently with the
delivery of each of the Quarterly Financial Statements and each of the Annual
Financial Statements, a company prepared bookings report detailing new and
renewal annually recurring revenue and subscription bookings and service
bookings for each month within such period and certified by a Responsible
Officer and in a form acceptable to Bank (the “Bookings Report”);

 

2.3                               Section 6.6 (Operating Accounts). 
Section 6.6(b), which reads “Borrower shall maintain at least Two Million
Dollars ($2,000,000) at all times in deposit accounts and securities accounts
maintained with Bank and Bank’s Affiliates” is hereby amended in its entirety to
read “intentionally omitted.”

 

2.4                               Section 6.11 (Financial Covenant)  A new
Section 6.11 is added to the Loan Agreement which reads as follows:

 

6.11                        Financial Covenants.  Borrower shall maintain as of
the last day of each quarter on a cumulative basis with respect to Borrower:

 

(a)                                 Performance to Bookings Plan.  As of the
last day of each quarter, Borrower’ s cumulative subscription bookings shall be
at least eighty-six percent (86%) of Borrower’s projected performance as
outlined in Borrower’s Board approved bookings plan submitted to Bank on
1/23/2013, file named “Marketo 2013 Forecast.pptx”) on  cumulative basis.  For
periods beyond December 31, 2013, covenant levels shall be set by Bank with
receipt of Borrower’s Board approved bookings forecast (due within 60 days of
prior fiscal year end)

 

2.5                               Section 8.1 (Payment Default).  Section 8.1 of
the Loan Agreement is hereby amended in its entirety and replaced with the
following:

 

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) Business Day cure period shall not apply to payments
due on the Equipment Maturity Date or the 2013 Equipment Maturity Date).  During
the cure period, the failure to make or pay any payment specified under clause
(b) hereunder is not an Event of Default (but no Credit Extension will be made
during the cure period);

 

2.6                               Section 8.2(a) (Covenant Default). 
Section 8.2(a) of the Loan Agreement is hereby amended in its entirety and
replaced with the following:

 

(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.4,
6.5, 6.6, 6.11 or violates any covenant in Section 7; or

 

2.7                               Section 13 (Definitions).  The following terms
and their definitions are added in proper alphabetical order to Section 13.1 of
the Loan Agreement:

 

“2013 Equipment Advance” or “2013 Equipment Advances” is defined in
Section 2.1.2.

 

“2013 Equipment Line Amortization Date” means, for 2013 Equipment Advance, the
earlier of: (a) the day nine (9) months after its Funding Date, or if such date
is not the first day of the month, then the first day of the calendar month
immediately following such date, and (b) October 1, 2014

 

“2013 Equipment Draw Period” is the period of time from the First Amendment
Effective Date through the earlier to occur of (a) December 31, 2013 or (b) an
Event of Default.

 

“2013 Equipment Line Interest Only Period” means, for each 2013 Equipment
Advance, the period of time commencing on its Funding Date through the day
before its 2013 Equipment Amortization Date.

 

3

--------------------------------------------------------------------------------

 

“2013 Equipment Line” is Four Million Five Hundred Thousand Dollars
($4,500,000).

 

“2013 Equipment Maturity Date” is, for each 2013 Equipment Advance, its
36th 2013 Equipment Payment Date but no later than September 1, 2017.

 

“2013 Equipment Payment Date” is defined in Section 2.1.2(b).

 

“Annual Financial Statements” is defined in Section 6.2(b).

 

“Bookings Report” is defined in Section 6.2(d).

 

“First Amendment” is the First Amendment to Loan and Security Agreement by and
between Bank and Borrower.

 

“First Amendment Effective Date” is defined in the First Amendment.

 

“Quarterly Financial Statements” is defined in Section 6.2(a).

 

2.8                               Section 13 (Definitions).  The following terms
and their respective definitions set forth in Section 13.1 of the Loan Agreement
are amended in their entirety and replaced with the following:

 

“Credit Extension” is any Equipment Advance, 2013 Equipment Advance, or any
other extension of credit by Bank for Borrower’s benefit.

 

“Financed Equipment” is all present and future Eligible Equipment in which
Borrower has any interest which is financed by an Equipment Advance or a 2013
Equipment Advance.

 

“WSJ 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).

 

2.9                               Compliance Certificate.  Exhibit D to the Loan
Agreement, the Compliance Certificate is replaced in its entirety with Exhibit A
to the First Amendment.

 

3.                                      Limitation of Amendments.

 

3.1                               The amendments set forth in Section 2 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.

 

3.2                               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

--------------------------------------------------------------------------------

 

4.                                      Representations and Warranties.  To
induce Bank to enter into this Amendment, Borrower hereby represents and
warrants to Bank as follows:

 

4.1                               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;

 

4.2                               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;

 

4.3                               The organizational documents of Borrower
delivered to Bank prior to the First Amendment 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;

 

4.4                               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;

 

4.5                               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;

 

4.6                               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 either Borrower, except as already has been
obtained or made; and

 

4.7                               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.

 

5.                                      Amendment Fee.  Borrower shall pay to
Bank a fully earned, non-refundable amendment fee of Fifteen Thousand Dollars
($15,000) on the First Amendment Effective Date.

 

6.                                      Bank Expenses. Borrower shall pay to
Bank all Bank Expenses (including reasonable attorneys’ fees and expenses)
incurred through and after the First Amendment Effective Date, when due.

 

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 as of the First Amendment Effective Date upon the occurrence of
all of the following:

 

(a)                                 the due execution and delivery to Bank of
this Amendment by each party hereto;

 

(b)                                 the due execution and delivery to Bank of
Corporate Borrowing Certificate by Borrower;

 

(c)                                  the delivery to Bank of Borrower’s:
(i) current certificate of incorporation certified by the Delaware Secretary of
State, and (ii) current signed bylaws and any amendments thereto; and

 

5

--------------------------------------------------------------------------------

 

(d)                                 the payment to Bank of the fee described in
Section 5 of this Amendment.

 

9.                                      Amendments in Writing; Integration. 
This Amendment is a Loan Document.  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 Agreement and the Loan Documents merge into this
Amendment and the Loan Documents.

 

10.                               Governing Law; Venue.  The provisions of
Section 11 of the Loan Agreement apply to this Amendment.

 

[Signature page follows.]

 

6

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Loan
and Security Agreement to be duly executed and delivered as of the date first
written above.

 

 

BORROWER:

 

 

 

MARKETO, INC.

 

 

 

 

 

 

By:

/s/ Frederick A. Ball

 

Name:

Frederick A. Ball

 

Title:

Senior Vice President and Chief Financial Officer

 

 

 

 

 

BANK:

 

 

 

SILICON VALLEY BANK

 

 

 

 

 

 

By:

/s/ Holly R. Dungan

 

Name:

Holly R. Dungan

 

Title:

Vice President

 

 

7

--------------------------------------------------------------------------------

 

EXHIBIT A

 

COMPLIANCE CERTIFICATE

 

TO:

SILICON VALLEY BANK

Date:

FROM: MARKETO, INC.

 

The undersigned authorized officer of Marketo, Inc.(“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.

 

Reporting Covenant

 

Required

 

Complies

 

 

 

 

 

Quarterly Financial Statements with Compliance Certificate

 

Quarterly [within 5 days of SEC filing but within 45 days of quarter end for
first 3 quarters of each fiscal year]

 

Yes  No

 

 

 

 

 

Annual Financial Statements with Compliance Certificate

 

Within 5 days of SEC filing but FYE within 90 days

 

 

 

 

 

 

 

Bookings Report with Compliance Certificate

 

Quarterly [concurrently with Quarterly Financial Statements and Annual Financial
Statements]

 

Yes  No

 

 

 

 

 

Annual projections

 

FYE within 60 days

 

Yes  No

 

 

 

 

 

10-Q, 10-K and 8-K

 

Within 5 days after filing with SEC

 

Yes  No

 

Section 6.11 Covenant

 

Required

 

Actual

 

Complies

 

 

 

 

 

 

 

 

 

Performance to Booking Plan [measured quarterly]

 

86

%

%

 

Yes  No

 

 

8

--------------------------------------------------------------------------------

 

The following are the exceptions with respect to the certification above:  (If
no exceptions exist, state “No exceptions to note.”)

 

 

Marketo, Inc.

 

BANK USE ONLY

 

 

 

 

 

 

 

Received by:

 

By:

 

 

 

AUTHORIZED SIGNER

Name:

 

 

Date:

 

Title:

 

 

 

 

 

 

Verified:

 

 

 

 

AUTHORIZED SIGNER

 

 

 

 

 

 

Date:

 

 

 

 

 

 

 

Compliance Status:

Yes                            No

 

9

--------------------------------------------------------------------------------