Upland Software
Annual Report 2016

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KUpland Software, Inc. - UPLDFiled: March 30, 2017 (period: December 31, 2016)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-Kx ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2016OR¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934Commission File Number 001-36720 Upland Software, Inc.(Exact name of registrant as specified in its charter)Delaware27-2992077(State or other jurisdiction ofincorporation or organization)(I.R.S. EmployerIdentification Number)401 Congress Ave., Suite 1850Austin, Texas 78701(512) 960-1010(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:Title of each class Name of each exchange on which registeredCommon Stock, par value $0.0001 per share The NASDAQ Global MarketSecurities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate 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 periodthat the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨Indicate by check mark 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’sknowledge, 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. xIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer”and “smaller reporting company” in Rule 12b-2 of the Exchange Act.Large accelerated filer¨Accelerated filer¨ Non-accelerated filerx (Do not check if a smaller reporting company)Smaller reporting company¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No xThe aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $41.1 million based upon the closing price of $7.62 of suchcommon stock on The NASDAQ Global Market on June 30, 2016 (the last business day of the registrant’s most recently completed second fiscal quarter). Shares of common stockSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.held as of June 30, 2016 by each director and executive officer of the registrant, as well as shares held by each holder of 10% of the common stock known to the registrant, have beenexcluded for purposes of the foregoing calculation. This determination of affiliate status is not a conclusive determination for other purposes.As of March 22, 2017, 17,817,672 shares of the registrant’s Common Stock were outstanding. Documents incorporated by reference:Certain portions, as expressly described in this Annual Report on Form 10-K, of the registrant’s Proxy Statement for the 2016 Annual Meeting of the Stockholders, to be filed not laterthan 120 days after the end of the year covered by this Annual Report, are incorporated by reference into Part III of this Annual Report where indicated.TABLE OF CONTENTS PART I Item 1.Business4Item 1A.Risk Factors14Item 1B.Unresolved Staff Comments34Item 2.Properties34Item 3.Legal Proceedings34Item 4.Mine Safety Disclosures34 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities35Item 6.Selected Financial Data36Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations40Item 7A.Quantitative and Qualitative Disclosures about Market Risk70Item 8.Financial Statements and Supplementary Data71 Report of Independent Registered Public Accounting Firm72 Consolidated Financial Statements73 Consolidated Balance Sheets73 Consolidated Statements of Operations74 Consolidated Statements of Comprehensive Loss75 Consolidated Statements of Common Stockholders' Equity (Deficit)76 Consolidated Statements of Cash Flows77 Notes to the Consolidated Financial Statements78Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure108Item 9A.Controls and Procedures108Item 9B.Other Information108 PART III Item 10.Directors, Executive Officers and Corporate Governance109Item 11.Executive Compensation109Item 12.Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters109Item 13.Certain Relationships and Related Transactions and Director Independence Item 14.Principal Accountant Fees and Services109 PART IV Item 15.Exhibits and Financial Statement Schedules109SIGNATURES1111Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.PART ISpecial Note Regarding Forward Looking StatementsThis Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E ofthe Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements generally relate to future events or our future financialor operating performance. Forward-looking statements may be identified by the use of forward-looking words such as “anticipate,” “believe,” “may,” “will,”“continue,” “seek,” “estimate,” “intend,” “hope,” “predict,” “could,” “should,” “would,” “project,” “plan,” “expect” or the negative or plural of these wordsor similar expressions, although not all forward-looking statements contain these words. These forward-looking statements include, but are not limited to,statements concerning the following:•our financial performance and our ability to achieve or sustain profitability or predict future results;•our ability to attract and retain customers;•our ability to deliver high-quality customer service;•the growth of demand for enterprise work management applications;•our plans regarding, and our ability to effectively manage, our growth;•our plans regarding future acquisitions and our ability to consummate and integrate acquisitions;•maintaining our senior management team and key personnel;•our ability to maintain and expand our direct sales organization;•the performance of our resellers;•our ability to obtain financing in the future on acceptable terms or at all;•our ability to adapt to changing market conditions and competition;•our ability to successfully enter new markets and manage our international expansion;•the operation and reliability of our third-party data centers;•our ability to adapt to technological change and continue to innovate;•economic and financial conditions;•our ability to integrate our applications with other software applications;•maintaining and expanding our relationships with third parties;•costs associated with defending intellectual property infringement and other claims;•our ability to maintain, protect and enhance our brand and intellectual property;•our ability to comply with privacy laws and regulations;•our expectations with respect to revenue, cost of revenue and operating expenses in future periods;•our expectations with regard to trends, such as seasonality, which affect our business;•our expectations as to the payment of dividends;•our expectations with regard to revenue from perpetual licenses and professional services;•our beliefs regarding the sufficient duration of our patents;•our plans with respect to foreign currency exchange risk and inflation;•our beliefs regarding how our applications benefit customers and what our competitive strengths are; and•other risk factors included under “Risk Factors” in this Annual Report on Form 10-K.2Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in thisAnnual Report on Form 10-K primarily on our current expectations and projections about future events and trends that we believe may affect our business,financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks,uncertainties, and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Moreover,we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us topredict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report on Form 10-K. We cannotassure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, orcircumstances could differ materially from those described in the forward-looking statements.The forward-looking statements made in this Annual Report on Form 10-K relate only to events as of the date on which the statements are made. Weundertake no obligation to update any forward-looking statements made in this Annual Report on Form 10-K to reflect events or circumstances after the dateof this Annual Report on Form 10-K or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actuallyachieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-lookingstatements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investmentswe may make.All references to “Upland,” “we,” “us” or “our” mean Upland Software, Inc.3Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 1. BusinessWe provide cloud-based enterprise work management software. We define enterprise work management software as software that enables organizationsto effectively plan, manage, and execute projects and work. Our software applications address enterprise work challenges in the following categories:•Project & Information Technology (IT) Management. Enables users to manage their organization’s projects, professional workforce, and IT costs.•Workflow Automation. Enables users to automate document-intensive workflow business processes across their enterprise and supply chain.•Digital Engagement. Enables users to more effectively engage with their customers, prospects, and community via the web and mobile technologies.We sell our software applications primarily through a direct sales organization comprised of inside sales and field sales personnel. In addition to ourdirect sales organization, we have an indirect sales organization that sells to distributors and value-added resellers. We employ a land-and-expand go-to-market strategy. After we demonstrate the value of an initial application to a customer, our sales and account management teams work to expand the adoptionof that initial application across the customer, and cross-sell additional applications to address other enterprise work management needs of the customer. Ourcustomer success organization supports our direct sales efforts by managing the post-sale customer lifecycle.Our subscription agreements are typically sold either on a per-seat basis or on a minimum contracted volume basis with overage fees billed in arrears,depending on the application being sold. Contract terms typically range from one to three years and are prepaid annually in advance. We service customersranging from large global corporations and government agencies to small- and medium-sized businesses. We have more than 2,500 customers with over250,000 users across a broad range of industries, including financial services, retail, technology, manufacturing, education, consumer goods, media,telecommunications, government, food and beverage, healthcare, and life sciences.Through a series of acquisitions and integrations, we have established a family of software applications under the Upland brand. For the twelve monthsended December 31, 2016, compared to the twelve months ended December 31, 2015, our total revenue grew from $69.9 million to $74.8 million,representing an 7% period-over-period growth rate. For the twelve months ended December 31, 2016, compared to the twelve months ended December 31,2015, our subscription and support revenue grew from $57.2 million to $65.6 million, representing a 15% period-over-period growth rate. On a constantcurrency basis, subscription and support revenue increased by $9.0 million, or 16%. See Note 15 of the Notes to Consolidated Financial Statements for moreinformation regarding our revenue as it relates to domestic and foreign operations.Our operating results in a given period can fluctuate based on the mix of subscription and support, perpetual license, and professional services revenue.For the twelve months ended December 31, 2016 and 2015, our subscription and support revenue accounted for 88% and 82% of total revenue, respectively.Historically, we have sold certain of our applications under perpetual licenses, which also are paid in advance. For the twelve months ended December 31,2016 and 2015, our perpetual license revenue accounted for 2% and 4% of total revenue, respectively. The support agreements related to our perpetuallicenses are typically one-year in duration and entitle the customer to support and unspecified upgrades. The revenue related to such support agreements isincluded as part of our subscription and support revenue. Professional services revenue consists of fees related to implementation, data extraction, integrationand configuration, and training on our applications. For the twelve months ended December 31, 2016 and 2015, our professional services revenue accountedfor 10% and 14% of total revenue, respectively.To support continued growth, we intend to pursue acquisitions of complementary technologies, products and businesses. This will expand our productfamilies, and customer base and market access resulting in increased benefits of scale. We will prioritize acquisitions within the product categories wecurrently serve, including Project & IT Management, Workflow Automation, and Digital Engagement. Consistent with our growth strategy, we have made atotal of twelve acquisitions in the five years ending December 31, 2016, and made one additional acquisition in January 2017.4Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.We completed our initial public offering in November 2014 and our common stock is listed on the NASDAQ Global Market under the symbol“UPLD.”Industry BackgroundThe continued growth of an information-based economy driven by technological innovation and globalization is changing the business environmentand the way work is done. These changes have given rise to a large and growing group of knowledge workers who operate in dynamic work settings as part ofgeographically dispersed and virtual teams. To be successful, these knowledge workers must quickly synthesize, analyze and act on large amounts ofinformation, and collaborate effectively at any time, from anywhere and on multiple devices.Many organizations continue to utilize manual processes and traditional tools, such as paper-based techniques, spreadsheets, and email, as well aslegacy on-premise enterprise systems, to manage knowledge work. The limitations of these processes and systems include siloed and disparate information,limited visibility and transparency, poor collaboration among teams, lost productivity, and misalignment of work efforts and overall business objectives. Inaddition, legacy on-premise enterprise systems can be expensive and time intensive to implement, inflexible and difficult to use, and costly to upgrade andmaintain. Today, legacy processes and systems are being disrupted and replaced by cloud-based enterprise software that combines improved visibility,collaboration, and productivity with rapid speed-to-value, low total cost of ownership, and reduced financial risk.The Upland ApproachOur family of cloud-based software applications deliver the functionality required to plan, manage and execute projects and work. Our cloud-basedenterprise software applications can increase work capacity and productivity by reducing manual processes and isolated silos of information, and byenhancing collaboration across organizations. Our applications allow our customers to effectively manage the rapid pace of change and complexity intoday’s work environment. Our customers currently use our applications in the following functional areas:•Information Technology. Information technology departments use our applications to manage a variety of information technology activities andresources, such as projects and application portfolios. Our applications help information technology departments ensure they are delivering againstthe objectives of the business by helping to select and prioritize the right investments, gain greater control of resource demand and allocation, andtrack and report benefit realization. Our applications enable executives to gain better insight into information technology spending to help preventcost overruns and understand the nature of consumption. By enabling information technology teams to make more informed decisions with real-time visibility across the complete information technology portfolio, our applications empower information technology departments to shift from acost center to a more strategic enterprise function.•Process Excellence and Operations. Process excellence, Lean Six Sigma, and similar functional groups within customers use our applications tofacilitate critical process improvement efforts. Our applications help provide high-level visibility and tracking of process excellence programs,automate processes and streamline workflows while improving process governance. Process improvement and similar business transformationinitiatives continue to be a key driver of corporate performance, especially among large global corporations.•Finance. Finance departments use our applications as a cost allocation tool to assess and validate proposed investments and initiatives of aparticular line-of-business, as well as increase the visibility and governance of capital expenditures and cost-cutting projects and deepen theunderstanding of actual resource utilization and costs. Our applications help improve collaboration between finance departments and particularlines of business, in addition to streamlining compliance and accounting workflows.•Professional Services. Professional services organizations, such as consulting or software development firms, employ our applications to streamlineservice delivery and optimize utilization of billable5Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.resources. In addition, service-oriented departments within customers, such as customer service and support teams, utilize our applications to moreeffectively budget, plan, and track provision of services and improve capacity planning and forecasting.•Marketing. Marketing teams employ our applications to enhance their overall marketing effectiveness. We offer applications that help customersbuild their online and mobile brand presence, engage their target audiences, collaborate on the creation and publication of content, and gainincreased control over marketing workflows, activities and budgets. Our applications empower marketing and communications organizations tomore effectively manage the influx of projects, information, processes, and systems necessary to meet today’s modern marketing requirements.We believe our applications benefit customers in the following ways:•Our applications enable our customers to more effectively align programs, initiatives, investments, and projects with overall business objectives,helping ensure the right work is done at the right time. This alignment drives increased productivity and optimizes the allocation and utilization ofpeople, time and money within organizations.•Our applications help customers to more effectively manage projects and tasks by enabling real-time visibility, collaboration, structured workflows,and access to the right content and information. This provides teams of distributed workers with clarity into priorities and expectations as well asthe tools to execute effectively, resulting in increased productivity, transparency, accountability, and the ability to respond rapidly to change.•Our applications collect and make available real-time data regarding the planning, management, and execution of projects and work processesacross teams and business units which enables a more complete view of teams, projects, and resources at anytime from anywhere.•Our applications provide analytics and reporting capabilities that transform disparate data in real-time into actionable intelligence, enabling usersto make better informed business decisions. Our applications enable customers to conduct dynamic and sophisticated “what-if” and scenarioanalyses that can improve their ability to respond effectively to changing business conditions.•Customers can easily access our cloud-based applications with an Internet browser. Our applications do not require large up-front softwareexpenditures or significant ongoing infrastructure or information technology support. In addition, our applications have a modern look and feelthat helps provide a consistent user experience across our platform.•Our applications are highly configurable, which provides us with flexibility to meet the unique business requirements of individual customers. Ourapplications are also scalable and are able to support large deployments while maintaining required performance levels. We provide tools to helpour customers manage the critical elements of application security, including authentication, authorization, and regulatory compliance.Our Competitive StrengthsWe believe the following competitive strengths are keys to our success:•Large, diversified customer base. Our customer base is highly diverse and spans a broad array of industries, including financial services, retail,technology, manufacturing, education, consumer goods, media, telecommunications, government, food and beverage, healthcare and life sciences.We service customers of varying size, ranging from large global corporations and government agencies to small- and medium-sized businesses. Wehave over 2,500 customers, with no customer accounting for more than 3% of our revenue.•Diversified family of software applications. We offer a family of software applications that addresses a broad range of enterprise needs. We believethis benefits our customers as compared to many of our cloud-based competitors who offer only a single point solution for a more limited anddiscrete need. Our current applications address the information technology, process excellence, finance, professional6Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.services, and marketing functions within organizations.•Recurring revenue model with high visibility. We believe we have a an attractive operating model due to the recurring nature of our subscriptionrevenue, which results in greater visibility and predictability of future revenue and enhances our ability to effectively manage our business. Inaddition, the cloud-based nature of our model accommodates significant additional business volume with limited incremental costs, providing uswith opportunities to improve our operating margins.•Proven M&A capability. We have a proven ability to successfully identify, acquire and integrate complementary businesses to grow our company,as evidenced by the twelve acquisitions we have completed since the beginning of 2012, which excludes one additional acquisition closed inJanuary 2017. We believe that our acquisition experience and strategy gives us a competitive advantage in identifying additional opportunities toexpand our family of software applications to better serve our customers.•Experienced, proven management team. Our management team has significant operating experience and previously occupied key leadership rolesat both private and public companies. In addition, our management’s extensive knowledge of the industry and experience in building businesseshas enabled us to quickly establish a leading position within the enterprise software market.•Cloud-based delivery. We deliver our software applications and functionality primarily through the cloud, with no hardware or software installationrequired by our customers. This delivery model allows us to provide reliable, cost-effective applications to our customers, add subscribers withminimal incremental expense and deploy new functionality and upgrades quickly and efficiently. We believe our cloud-based delivery modelprovides us with a competitive advantage over legacy processes and on-premise systems.•Commitment to customer success. We have a dedicated customer success organization whose mission is to drive adoption, value realization,retention, and loyalty across our customer base. Our focus on enabling our customers’ success is a key reason our annual net dollar retention ratewas 95% as of December 31, 2016. Our commitment to customer success has enabled us to expand our footprint within customers and facilitate theongoing adoption of our enterprise software applications. We utilize Net Promoter Score (NPS) methodology to track our progress and drivecontinuous improvement.Our Strategy for GrowthWe believe the key elements of our strategy for growth are as follows:•Increase sales to existing customers. We believe there is a significant opportunity to expand the adoption of our applications within existingcustomers, particularly within divisions or departments that have not previously used our applications. We also intend to cross-sell additionalapplications to our existing customers, as very few of our customers currently use more than one of our applications. In addition, we intend to addnew applications to our family of applications that will address additional functions within the enterprise spectrum. We believe these initiativeswill significantly increase the value of our platform to our customers, further strengthen our competitive position, and drive increased adoption ofmultiple applications by our customers.•Add new customers. We maintain direct sales and marketing capabilities in order to further grow our customer base. We also maintain indirect saleschannels through alliances with strategic partners that can leverage our applications with complementary services and technologies they provide.In addition, we continue to expand the range of integrations between our software and third-party applications and platforms, which we believemake our applications more attractive to a broader audience of potential customers.•Acquire complementary software businesses. We intend to pursue acquisitions of complementary technologies, products, and businesses to expandour product families and customer base and provide access to new markets and increased benefits of scale. Our dedicated and experienced corporate7Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.development team continually monitors a pipeline of potential acquisition candidates, many of which are smaller in scale or address only limitedenterprise challenges, which often operate outside the scope of some of our larger competitors. We believe that our acquisition experience andstrategy gives us a competitive advantage in identifying additional opportunities to expand our family of cloud-based applications to better serveour customers. We intend to prioritize acquisitions within the product families we currently offer, including Project & IT Management, WorkflowAutomation and Digital Engagement.•Expand globally. We believe there is an opportunity to grow sales of our applications globally. In fiscal 2016, 2015, and 2014, approximately16%, 19%, and 22%, respectively, of our revenue was derived from sales outside the United States. Over the next several years, we plan to continueto evaluate growth opportunities outside the United States through selective acquisitions, the hiring of additional sales personnel, and entering intostrategic partnerships.•Improve and enhance applications. We intend to continue to invest in research and development and work closely with our customers to identifyand improve new applications, features and functionalities that address customer requirements across the enterprise spectrum. We also intend tocontinue to expand the breadth of our applications with additional analytics, third-party integrations, and social and mobile capabilities to meetthe evolving needs of today’s knowledge workers.Our ProductsWe provide a family of cloud-based enterprise software applications under the Upland brand. Our applications are easy-to-deploy, highly configurable,scalable, flexible, and secure. We provide applications in three product families: Project & IT Management, Workflow Automation, and Digital Engagement.Our Project & IT Management product family enables users to manage their projects, professional workforce, and IT costs. Our Workflow Automation productfamily enables users to automate document-intensive organizational workflows. Our Digital Engagement product family enables users to effectively engagewith their customers, prospects, and community via the web and mobile technologies.Project & IT ManagementProject and Portfolio Management. Our program and portfolio management applications are used by our customers to gain high-level visibility acrosstheir organizations and improve their top-down and bottom-up governance of programs, initiatives, investments, and projects. Our customers use thesecapabilities to:•gather, develop, and assess ideas and proposed investments;•prioritize and select projects and investments according to business value and strategic fit;•more effectively allocate resources in alignment with business objectives;•respond quickly to change with real-time visibility into status and the ability to evaluate the impact of potential changes; and•gauge performance against strategic objectives, execution-level indicators, and financial metrics.Our program and portfolio management applications are currently used within the information technology, finance and process excellence functions ofcustomers and in the healthcare and education industries.Professional Services Automation. Our professional services automation applications are used by customers to more effectively manage their projectand service-based knowledge workers to better manage employee-related expenses and client billing while improving scheduling, utilization, and alignmentof human capital. Our customers use these capabilities to:•create resource capacity plans;•align available skills, expertise and capacity with project requirements;•more efficiently plan and schedule projects;8Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.•track resource and expense allocation for specific projects, activity types or budget categories;•analyze workforce performance;•streamline timesheet review, approval, and reporting processes;•manage time, travel, and entertainment expenses; and•streamline project cost reporting, billing, and revenue recognition processes.Our professional services automation applications currently are used within the information technology, marketing, finance, and professional servicesfunctions of customers.IT Financial Management. Our financial management application is used by our customers to gain visibility into the cost, quality, and value ofservices the information technology and finance functions deliver to organizations. This increased transparency helps our customers improve alignmentduring planning and budgeting processes, and validate proposed investments and initiatives of a particular line of business. Our customers use thesecapabilities to:•quantify and understand the total cost of ownership of information technology applications and services;•establish product and unit-costing metrics for benchmarking and/or chargeback;•provide information technology and finance departments with the ability to chargeback business units for applications and services, includingcloud services, based on metered consumption;•provide business managers with insights into their consumption of information technology services to better utilize information technologyservices with business goals and objectives;•leverage utilization and capacity metrics for “what-if” analysis and modeling;•analyze fixed versus variable information technology-related costs to identify opportunities for savings; and•support demand-based budgeting and forecasting processes.Our financial management application is currently used within the information technology and finance functions of customers.Workflow AutomationEnterprise Secure Document Capture and Fax. Our secure document capture and fax application is used by our customers to enable secure documentprocess automation through an all-in-one platform that accelerates paper and electronic document-intensive workflows and communications. Our customersuse these capabilities to:•empower organizations with one extensible, easy-to-use platform that takes documents and puts them into a single, highly-accessible archive;•increase customer satisfaction and save time through automated processes, go digital with increased accessibility, allowing for better management ofcustomer interactions and improve overall service response times;•lower total costs by consolidating fax infrastructure by relying on Fax over IP technology that enables least cost routing;•reduce risk though highly-scalable, reliable infrastructure that seamlessly supports a wide range of industries;•streamline mission-critical document workflows such as, e-filing, scanning to document management systems (DMS), and managing sensitiveintellectual property, while maintaining high levels of document integrity and security; and•protect sensitive data thanks to the ability to set custom business rules, such as holding documents until authorized users can access them.9Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Our enterprise secure document capture and fax applications are currently used in healthcare as well as legal, financial, and other document-centricfunctions of customers.Workflow Automation and Enterprise Content Management. Our workflow automation and enterprise content management applications are used byour customers to automate document-based workflows by capturing, storing and routing content, assigning work tasks and creating audit trails for operationssuch as healthcare records, loan processing, human resource processes, and accounts receivable and payable processing. Our customers use these capabilitiesto:•empower collaboration by providing a way for employees, suppliers, and partners to access, share, and update content from anywhere;•streamline workflows by creating custom rules to process and route content for approval;•automatically capture, index, classify, and organize enterprise content in a secure, central repository with document retention policies to meetbusiness and compliance requirements; and•apply and enforce document retention policies to meet business and compliance requirements.Our workflow automation and enterprise content management applications are currently used within the information technology, finance, marketing,and process excellence functions of customers.Supply Chain Visibility and Collaboration. Our supply chain collaboration application provides our customers with a single source for supply-chaincommunication, providing a basis for multi-enterprise, multi-tier, end-to-end supply chain collaboration. Our customers use these capabilities to:•acquire actionable business intelligence, collaboration, and execution for all aspects of supply chain operations;•implement a seamless migration to pull-based replenishment resulting in reductions in stock-outs and expensive expediting costs, higher orderfulfillment rates, and improved customer service levels; and•enable a closed-loop manufacturing and supply chain management processes resulting in reductions in raw material, work-in-process and finishedgoods inventory and reductions to inventory carrying costs.Our supply chain visibility and collaboration applications are currently used in industrial and diversified manufacturing, healthcare, aerospace anddefense, energy, automotive, electronics, sporting goods, and consumer package goods organizations.Digital EngagementDigital Engagement Management. Our digital engagement applications are used by customers to connect and communicate with their target marketsin order to build brand relationships or drive a particular program outcome via website and mobile devices, providing a timely and highly relevant customerexperience. Additionally, our digital engagement management applications are used by enterprise marketers and media companies to create, maintain, anddeliver websites that enhance and influence customer engagement. These applications empower non-technical staff to create, manage, publish, analyze, andrefine content and social media assets without information technology intervention. Our customers use these capabilities to:•streamline the process for creating and managing website content;•deliver more relevant, personalized content to website visitors based on the tracking of individual visitor behavior;•convert website visits to actionable sales leads;•integrate user-generated content, such as polls, surveys, blogs, ratings, and comments, into their websites;•engage entire target audiences with one-on-one text message conversations to achieve optimal results;•reach the correct person at exactly the right moment through list segmentation and scheduling;•provide timely alerts and reminders on important events based on user preferences;10Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.•respond to users instantly, answering questions via text message;•manage all mobile communications from a single place, keeping track of all users and actions;•analyze campaign performance at all levels and every action;•run surveys, polls, and quizzes to gather information and engage users; and•ensure security and privacy of information through comprehensive policies, procedures, and technical controls.Our Digital Engagement applications currently are used within the marking function of our customers.CustomersWe have more than 2,500 customers with over 250,000 users. Our customers operate in a wide variety of industries, including financial services, retail,technology, manufacturing, education, consumer goods, media, and telecommunications, government, food and beverage, healthcare and life sciences,chemicals, and travel and hospitality. No customer represented more than 3% of our revenue as of December 31, 2016.SalesWe sell our software applications primarily through a direct sales organization comprised of inside sales and field sales personnel. We employ a land-and-expand go-to-market strategy. After we demonstrate the value of an initial application to a customer, our sales and account management teams work toexpand the adoption of that initial application across the customer, as well as cross-sell additional applications to address other enterprise needs of thecustomer.MarketingOur marketing activities are designed to build awareness of the Upland brand and the individual product brands, generate thought leadership andcreate demand, resulting in leads and opportunities for our sales organizations. We focus a significant portion of our marketing activities on our existinginstalled base of customers in order to drive expansion and cross-sell opportunities. Our marketing programs target decision makers and influencersparticipating in a buying cycle, including the chief information officer, the chief marketing officer, the chief financial officer, the director of processexcellence and other key technology and business managers. Our principal marketing programs include:•use of our website to provide information about us and our software applications, as well as educational opportunities for potential customers;•field marketing events for customers and prospective customers;•participation in, and sponsorship of, executive events, trade shows, and industry events;•our online virtual user conferences;•integrated digital marketing campaigns, including email, online advertising, blogs, and webinars;•public relations, analyst relations, and social media initiatives; and•sales representatives who respond to incoming leads to convert them into new sales opportunities.Customer SuccessOur customer success organization is structured to manage all aspects of our post-sale customer lifecycle. This organization consists of dedicated teamswith a mission to drive adoption of our applications, value realization, retention, and loyalty across our customer base. Our customer success organization hasfour core functional areas with strategic focus on customer relationship management:•Customer Care. Our customer care team assists customers throughout their lifecycle with the Upland family of applications by making serviceofferings available to all customers as part of their standard customer agreements, including webinars, virtual user conferences, and onlinecommunity engagement.11Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.•Professional Services. Our professional services team is responsible for coordinating all activities relating to the implementation, transition, andon-boarding of new customers and assisting new customers with the addition of new applications to their accounts. Typical professional servicesengagements vary in length from a few weeks to several months depending on the size and scope of the engagement and are in addition to servicesprovided under our standard customer agreement and are fee-based. In addition, our project managers and consultants work closely with ourcustomers to provide services that help customers maximize the utility of our applications.•Account Management. We assign each customer an account team with a relationship manager who functions as the customer’s single point ofcontact and advocate within Upland. Our account management teams are trained on all of our applications and work closely with the relationshipmanager to ensure that our customers receive high-quality consultative service.•Customer Support. We offer support from all of our office locations to help our customers maximize the return on their investment in ourapplications. We provide 24/7 customer support around the world through our online customer support portal. In addition, our customer supportteam manages and administers the Upland customer community forum and knowledge base repository.Our customer success organization manages programs to reinforce the ongoing business value of our applications and promote the Upland “customerfor life” program. These service offerings include:•Health Checks and Program Reviews: Engages core users and business buyer sponsors to deliver a detailed scorecard and recommendation report.•Advisory and Retained Services: Provides access to a specific customer success contact with priority scheduling and periodic checkpoints.•System Deployment and Adoption Analysis: Analyzes system configuration and usage patterns, resulting in best practice recommendations onimproving user adoption and compliance.•Consumption Review and Recommendations: Delivers best practice recommendations for implementation strategy and a roadmap proposal foraligning the system with customers’ evolving process maturity to increase application usage.•Premier Success Plans: Provides a bundled services, support, and product experience offering with three tiers (standard, gold and platinum)designed to provide maximum customer value.Technology and OperationsOur cloud-based family of applications utilizes a multi-tenant architecture and our customers access our applications using a secure Internetconnection through a standard web browser. Our applications are easy to deploy, highly configurable, scalable, flexible, and secure and provide ourcustomers with a modern and intuitive user experience.We presently use storage area network hardware at our data center locations that has been designed for high performance and data-loss prevention, buthave commenced an initiative to migrate our data centers to Amazon Web Services or an equivalent hosting facility. We believe this transition will lead tooperational efficiencies for our business that will enable us to better serve our customers.With our data that is stored at our data center locations, we employ a modular application architecture to balance customer workloads across multipleservers and to provide a flexible method for scaling customers without impacting other parts of the server environment. This architecture is designed to allowus to provide the high levels of uptime required by our customers. We employ capacity planning techniques to ensure we have required capacity for ourforecasted growth. We believe that our move to a single, full-service hosting facility will enable us to more easily ensure the balance of customer workloads,scalability, and high levels of uptime.Our applications offer high levels of security by segregating each customer’s data from the data of other customers and by limiting access to ourplatform to only those individuals authorized by our customers after they have been authenticated and validated. We maintain a formal and comprehensivesecurity program designed to12Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ensure the security and integrity of customer data, protect against security threats or data breaches, and prevent unauthorized access to the data of ourcustomers. At our data centers, we strictly regulate and limit all access to servers and networks at our production and remote backup facilities, and we engagea third party to conduct periodic security audits on our data and access security, including firewall penetration testing and vulnerability scans. In addition,sensitive customer data is encrypted and encrypted backup files are transmitted over secure connections to a redundant server storage device in a secondarydata center. Our data center facilities employ advanced measures to ensure physical integrity, including redundant power and cooling systems, and advancedfire and flood prevention.Our applications that are presently hosted at data centers are secure, third-party, American National Standards Institute Tier 3 data center facilities,located in the United States and other countries. Our data centers are designed to host computer systems with fully redundant subsystems andcompartmentalized security zones. While we procure and operate all infrastructure equipment delivering our applications, third parties operate the datacenters that we use. These facilities provide 24/7 security, biometric access controls, systems security, redundant networking, N+1 power and environmentalcontrols. We expect that our initiative to consolidate our data centers to Amazon Web Services or equivalent hosting facilities for higher efficiency will becomplete in 2018.Research and DevelopmentWe focus our research and development efforts on customer-driven innovation, third-party integrations and continually enhancing the performance,reliability, security, usability, and scalability of our applications.In addition to internal resources, we utilize partners, contractors, and offshore resources to improve efficiencies and our ability to deliver. Our researchand development expenses were $14.9 million, $15.8 million, $26.2 million in fiscal years 2016, 2015, and 2014, respectively. See audited financialstatement Note 16 Related Party Transactions regarding an $11.2 million charge to research and development costs in fiscal 2014.CompetitionThe overall markets we serve are rapidly evolving and subject to changing technology, shifting customer needs, and frequent introductions of newapplications. The intensity and nature of our competition varies significantly across our range of enterprise applications. We face competition both frompoint solution providers, including legacy on-premise enterprise systems, and other cloud-based software vendors that may address one or more of thefunctional elements of our applications. In addition, we face competition from manual processes and traditional tools, such as paper-based techniques,spreadsheets, and email.We believe the principal competitive factors in our market include the following:•breadth and depth of application functionality;•ease of deployment and use of applications;•total cost of ownership;•levels of customer support satisfaction;•brand awareness and reputation;•capability for configurability, integration, scalability, and reliability of applications;•ability to innovate and respond to customer needs rapidly; and•level of integration among applications and with other enterprise systems.We believe that we compete favorably on the basis of these factors. Our ability to remain competitive will largely depend on the strength of ourapplications, the effectiveness of our sales and marketing efforts, the quality of our customer success organization, and our ability to acquire complementarytechnologies, products, and businesses to enhance the features and functionality of our applications.13Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Intellectual Property and Proprietary RightsWe rely on a combination of trademark, copyright, trade secret, and patent laws in the United States and other jurisdictions as well as confidentialityprocedures and contractual provisions to protect our intellectual property.EmployeesAs of December 31, 2016, we had 251 employees, with the majority of our employees located in the United States or Canada. None of our employeesare covered by a collective bargaining agreement. We have never experienced a strike or similar work stoppage, and we consider our relations with ouremployees to be good.Legal ProceedingsFrom 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 anylegal proceedings that we believe would, individually or taken together, have a material adverse effect on our business, operating results, financial conditionor cash flows.Information about Segment and Geographic RevenueWe operate and manage our business as a single operating segment. See our consolidated financial statements for a discussion of revenues, operatingloss, net loss, and total assets. Our revenues are principally generated in the United States, which accounted for 84%, 81%, and 78% of consolidated revenuesfor the years ended December 31, 2016, 2015, and 2014, respectively. Revenues from international business accounted for 16%, 19%, and 22% ofconsolidated revenues for the years ended December 31, 2016, 2015, and 2014, respectively. See Note 15 of the Notes to Condensed Consolidated FinancialStatements for more information regarding our revenue as it relates to domestic and foreign operations.Available InformationWe were incorporated in Delaware in 2010. Our principal executive offices are located at 401 Congress Avenue, Suite 1850, Austin, TX 78701. Ourtelephone number at that location is (855) 944-7526. Our website address is www.uplandsoftware.com. Information on our website is not part of this reportand should not be relied upon in determining whether to make an investment decision. The inclusion of our website address in this report does not include orincorporate by reference into this report any information on our website.Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnishedpursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through our website as soon as reasonablypracticable after they are electronically filed with or furnished to the SEC. The public may read and copy the materials we file with the SEC at the SEC’sPublic Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room bycalling the SEC at 1-800-SEC-0330. Additionally the SEC maintains an internet site that contains reports, proxy and information statements and otherinformation. The address of the SEC’s website is www.sec.gov.Item 1A.Risk FactorsRisks Related to Our BusinessWe have a limited operating history and may be unable to achieve or sustain profitability or accurately predict our future results.We were formed in July 2010 and acquired our first business and commenced operations in September 2011. Prior to September 2011, our businessactivity was devoted to raising capital, building infrastructure and reviewing potential acquisitions. As such, we have a very limited operating history ofselling our products and professional14Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.services to third parties. Our limited operating history makes it difficult to evaluate our current business and future prospects and may increase the risk ofyour investment. We incurred net losses of $13.5 million, $13.7 million and $20.1 million in fiscal 2016, 2015, and 2014, respectively. As of December 31,2016, we had an accumulated deficit of $62.4 million. Our losses in prior periods and accumulated deficit reflect the investments we have made to date togrow our business. We expect to have significant operating expenses in the future to further support and grow our business, including expanding the range ofintegrations between our software and third-party applications and platform, expanding our direct and indirect sales capabilities, pursuing acquisitions ofcomplementary businesses, investing in our data center infrastructure and research and development and increasing our international presence, and as aresult, we may be unable to achieve or sustain profitability or accurately predict our future results. You should not consider our recent growth in revenue asindicative of our future performance, and we cannot assure you that we will achieve profitability in the future, nor that if we do become profitable, we willsustain profitability.Our growth depends on our ability to retain existing customers and secure additional subscriptions and cross-sell opportunities from existing customers,and nonrenewals and downgrades could harm our future operating results.In order for us to improve our operating results, it is important that our customers renew or upgrade their agreements with us when the applicablecontract term expires, which is typically one to three years for subscription agreements and one year for perpetual license agreements, and also purchaseadditional applications from us. Upon expiration, customers can renew their existing subscriptions, upgrade their subscriptions to add more seats oradditional minimum contracted volume, downgrade their subscriptions to fewer seats or lower minimum contracted volume or not renew. A renewalconstitutes renewing an existing contract for an application under the same terms and an upgrade includes purchasing additional seats or volume under anexisting contract. We may also cross-sell additional applications to existing customers. Our ability to grow revenue and achieve profitability depends, in part,on customer renewals, upgrades and cross-sales to existing customers exceeding downgrades and nonrenewals. However, we may not be able to increase ourpenetration within our existing customer base as anticipated and we may not otherwise retain subscriptions from existing customers. Our customers maychoose to not renew or upgrade their subscriptions, or may downgrade, because of several factors, including dissatisfaction with our prices, features orperformance relative to competitive offerings, reductions in our customers’ spending levels, unused seats or volume or limited adoption or use of ourapplications. In addition, we may not be successful in cross-selling new applications to our existing customers. If our customers do not upgrade or renew theirsubscriptions or purchase additional applications from us, or if they downgrade their subscriptions, our revenue may grow more slowly than expected or maydecline, and our financial performance may be adversely affected.Any failure to offer high-quality customer service may adversely affect our relationships with our customers and our financial results.Our customers depend on our customer success organization to manage the post-sale customer lifecycle, including to implement new applications forour customers, provide training and ongoing education services and resolve technical issues relating to our applications. We may be unable to respondquickly enough to accommodate short-term increases in demand for our customer success services. We also may be unable to modify the format of ourcustomer success services to compete with changes in similar services provided by our competitors. Increased customer demand for these services, withoutcorresponding revenue, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on the reliablefunctional operation of our applications, our business reputation and positive recommendations from our existing customers. Any failure to maintain high-quality customer service, or a market perception that we do not maintain high-quality customer service, could adversely affect our reputation, our ability tosell our applications to existing and prospective customers and our business, operating results and financial position.If the market for cloud-based enterprise work management applications develops more slowly than we expect, or declines, our business could be adverselyaffected.The market for cloud-based enterprise work management applications is not as mature as the market for legacy on-premise enterprise systems, and it isuncertain whether cloud-based applications will achieve and sustain high levels of customer demand and market acceptance. Our success will depend to asubstantial extent on increased adoption of cloud-based applications, and of our enterprise work management software applications in particular. Many largeorganizations have invested substantial personnel and financial resources to integrate legacy on-premise15Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.enterprise systems into their businesses, and therefore may be reluctant or unwilling to migrate to cloud-based applications or away from their traditionalvendors or to new practices because of the organizational changes often required to successfully implement new enterprise work management systems. Inaddition, we do not know whether the adoption of enterprise work management software will continue to grow and displace manual processes and traditionaltools, such as paper-based techniques, spreadsheets and email. It is difficult to predict customer adoption rates and demand for our applications, the futuregrowth rate and size of the cloud-based software application market or the entry of competitive products. The expansion of the cloud-based softwareapplication market depends on a number of factors, including the cost, performance and perceived value associated with cloud-based applications, as well asthe ability of cloud-based application companies to address security and privacy concerns. If other cloud-based software application providers experiencesecurity incidents, loss of customer data, disruptions in delivery or other problems, the market for cloud-based applications as a whole, including ourenterprise work management applications, may be negatively affected. If cloud-based applications do not achieve widespread adoption, or there is areduction in demand for cloud-based applications 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, our revenues may decrease and ourbusiness could be adversely affected.If we fail to manage our growth effectively, we may be unable to execute our business plan and maintain high levels of customer satisfaction.We have recently experienced a period of rapid growth in our personnel and operations. In particular, we increased our number of full-time employeesfrom three as of December 31, 2011 to 251 as of December 31, 2016, and have also increased the size of our customer base. In addition, our revenue grew from$712,000 in fiscal 2011 to $74.8 million in fiscal 2016. Acquisitions are a primary component of our growth strategy and, as a result, we anticipate that wewill continue to experience further rapid growth in our personnel and operations in the future. Our growth has placed, and future growth will place, asignificant strain on our managerial, administrative, operational, financial and other resources. To manage the expected growth of our personnel andoperations, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. Failure toeffectively manage our growth could result in difficulty or delays in deploying our applications, declines in quality or customer satisfaction, increases incosts, difficulties in introducing new features or other operational difficulties, and any of these difficulties could adversely impact our business performanceand results of operations.We have made and expect to continue to make acquisitions as a primary component of our growth strategy. We may not be able to identify suitableacquisition candidates or consummate acquisitions on acceptable terms, or we may be unable to successfully integrate acquisitions, which could disruptour operations and adversely impact our business and operating results.A primary component of our growth strategy has been to acquire complementary businesses to grow our company. For example, we acquired thebusinesses of PowerSteering Software, Inc., Tenrox Inc. and LMR Solutions, LLC, dba EPM Live, in fiscal 2012 and the businesses of FileBound Solutions,Inc. and Marex Group Inc., ComSci, LLC, and Clickability Inc., in fiscal 2013, the businesses of Solution Q Inc. and Mobile Commons, Inc., in fiscal 2014,Ultriva Inc., in fiscal 2015, and LeadLander, Inc., HipCricket, Inc. and Advanced Processing and Imaging, Inc. in fiscal 2016. Subsequent to 2016, weacquired the business of Omtool, Inc. in January 2017. We intend to continue to pursue acquisitions of complementary technologies, products and businessesas a primary component of our growth strategy to enhance the features and functionality of our applications, expand our customer base and provide access tonew markets and increase benefits of scale. Acquisitions involve certain known and unknown risks that could cause our actual growth or operating results todiffer from our expectations. For example:•we may not be able to identify suitable acquisition candidates or to consummate acquisitions on acceptable terms;•we may pursue international acquisitions, which inherently pose more risks than domestic acquisitions;•we compete with others to acquire complementary products, technologies and businesses, which may result in decreased availability of, orincreased price for, suitable acquisition candidates;•we may not be able to obtain the necessary financing, on favorable terms or at all, to finance any or all of our potential acquisitions;16Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.•we may ultimately fail to consummate an acquisition even if we announce that we plan to acquire a technology, product or business; and•acquired technologies, products or businesses may not perform as we expect and we may fail to realize anticipated revenue and profits.In addition, our acquisition strategy may divert management’s attention away from our existing business, resulting in the loss of key customers oremployees, and expose us to unanticipated problems or legal liabilities, including responsibility as a successor for undisclosed or contingent liabilities ofacquired businesses or assets.If we fail to conduct due diligence on our potential targets effectively, we may, for example, not identify problems at target companies or fail torecognize incompatibilities or other obstacles to successful integration. Our inability to successfully integrate future acquisitions could impede us fromrealizing all of the benefits of those acquisitions and could severely weaken our business operations. The integration process may disrupt our business and, ifnew technologies, products or businesses are not implemented effectively, may preclude the realization of the full benefits expected by us and could harmour results of operations. In addition, the overall integration of new technologies, products or businesses may result in unanticipated problems, expenses,liabilities and competitive responses. The difficulties integrating an acquisition include, among other things:•issues in integrating the target company’s technologies, products or businesses with ours;•incompatibility of marketing and administration methods;•maintaining employee morale and retaining key employees;•integrating the cultures of both companies;•preserving important strategic customer relationships;•consolidating corporate and administrative infrastructures and eliminating duplicative operations; and•coordinating and integrating geographically separate organizations.In addition, even if the operations of an acquisition are integrated successfully, we may not realize the full benefits of the acquisition, including thesynergies, cost savings or growth opportunities that we expect. These benefits may not be achieved within the anticipated time frame, or at all.Further, acquisitions may cause us to:•issue common stock that would dilute our current stockholders’ ownership percentage;•use a substantial portion of our cash resources;•increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition;•assume liabilities for which we do not have indemnification from the former owners; further, indemnification obligations may be subject todispute or concerns regarding the creditworthiness of the former owners;•record goodwill and non-amortizable intangible assets that are subject to impairment testing and potential impairment charges;•experience volatility in earnings due to changes in contingent consideration related to acquisition earn-out liability estimates;•incur amortization expenses related to certain intangible assets;•lose existing or potential contracts as a result of conflict of interest issues;•become subject to adverse tax consequences or deferred compensation charges;•incur large and immediate write-offs; or•become subject to litigation.17Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.We depend on our senior management team and the loss of one or more key personnel or an inability to attract and retain highly skilled personnel mayimpair our ability to grow our business.Our success depends in part upon the continued services of our key executive officers, including John T. McDonald, Michael D. Hill, and Timothy W.Mattox, as well as other key personnel. We do not have employment agreements with most of our executive officers or other key personnel that require themto continue to work for us for any specified period and, therefore, they may terminate employment with us at any time with no advance notice. Thereplacement of our senior management team or other key personnel likely would involve significant time and costs, and the loss of these employees maysignificantly delay or prevent the achievement of our business objectives.We face intense competition for qualified individuals from numerous technology and software companies. If we fail to attract and retain suitablyqualified individuals, including software engineers and sales personnel, our ability to implement our business plan and develop and maintain ourapplications could be adversely affected. As a result, our ability to compete would decrease, our operating results would suffer and our revenue woulddecrease.Failure to maintain and expand our sales organization may negatively impact our revenue growth.We sell our applications primarily through a direct sales organization comprised of inside sales and field sales personnel. In addition, we have anindirect sales organization, which sells to distributors and value-added resellers. Growing sales to both new and existing customers is in part dependent onour ability to maintain and expand our sales force. Identifying, recruiting and training additional sales personnel requires significant time, expense andattention. It can take several quarters or longer before our sales representatives are fully-trained and productive. Our business may be adversely affected if ourefforts to expand and train our sales organization do not generate a corresponding increase in revenue. In particular, if we are unable to hire, develop andretain sales personnel or if our new sales personnel are unable to achieve expected sales productivity levels in a reasonable period of time or at all, ourrevenue may grow more slowly than expected or decline and our business may be harmed.Because we generally recognize revenue from our customers over the terms of their agreements but incur most costs associated with generating suchagreements in advance, rapid growth in our customer base may increase our losses in the short-term.Expenses associated with acquiring customers, such as the expenses related to our sales organizations and related commissions, are generally expensedas incurred while most of our revenue is recognized ratably over the life of the applicable agreements. Therefore, increased sales will result in our recognitionof more costs than revenue during the early periods covered by such agreements, even in cases where the agreements are expected to be profitable for us overtheir full terms. As a result, even if we are successful in increasing our customer base, our short-term operating results may suffer.We recognize revenue from customers over the term of the related agreement; therefore, downturns or upturns in our business may not be immediatelyreflected in our operating results.We recognize revenue from customer agreements ratably over the terms of these agreements. As a result, a significant portion of the revenue we reportin each quarter is generated from customer agreements entered into during previous periods, which is reflected as deferred revenue on our balance sheet.Consequently, a decline in new or renewed agreements, or a downgrade of renewed agreements to fewer seats or less minimum contracted volume, in any onequarter may not be fully reflected in our revenue in that quarter. Such a decline, however, will negatively affect our revenue in future quarters. Accordingly,the effect of significant downturns in sales and market acceptance of our applications, and potential changes in our pricing policies or rates of renewals, maynot be fully reflected in our results of operations until future periods. Similarly, it would be difficult for us to rapidly increase our revenue through new sales,renewals and upgrades of existing customer agreements, or through additional cross-selling opportunities, in a given period due to the timing of revenuerecognition inherent in our subscription model.Perpetual license revenue is unpredictable and a material increase or decrease in perpetual license revenue from period to period can produce substantialvariation in the total revenue and earnings we recognize in a given period.Perpetual license revenue reflects the revenue recognized from sales of perpetual licenses relating to our workflow automation and enterprise contentmanagement applications to new customers and additional licenses for such applications to existing customers. We generally recognize the license feeportion of the arrangement in18Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.advance. Perpetual licenses of our workflow automation and enterprise content management applications are sold through third-party resellers and, as such,the timing of sales of perpetual licenses is difficult to predict with the timing of recognition of associated revenue unpredictable. A material increase ordecrease in the sale of perpetual licenses from period to period could produce substantial variation in the revenue we recognize. Accordingly, comparing ourperpetual license revenue on a period to period basis may not be a meaningful indicator of a trend or future results.Our quarterly operating results may fluctuate in the future. As a result, we may fail to meet or exceed the expectations of research analysts or investors,which could cause our stock price to decline and you may lose part or all of your investment.Our quarterly operating results may fluctuate as a result of a variety of factors, many of which are outside of our control. Accordingly, the results of anyone quarter may not fully reflect the underlying performance of our business and should not be relied upon as an indication of future performance. If ourquarterly operating results or outlook fall below the expectations of research analysts or investors, the price of our common stock could decline substantially.Fluctuations in our quarterly operating results or outlook may be due to a number of factors, including, but not limited to:•the extent to which our existing customers purchase additional seats or volume for our applications and the timing and terms of those purchases;•the extent to which our existing customers renew their customer agreements for our applications and the timing and terms of those renewals;•the extent to which we cross-sell additional applications to our existing customers and the timing and terms of such cross-selling;•the addition or loss of customers, including through acquisitions or consolidations;•the extent to which new customers are attracted to our applications to satisfy their enterprise work management needs;•the rate of adoption and market acceptance of enterprise work management applications;•the mix of our revenue, particularly between product and professional services revenue, for which the timing of revenue recognition issubstantially different;•changes in the gross profit we realize on our applications and professional services due to our differing revenue recognition policies applicableto subscription and product and professional services revenue and other variables;•the extent to which we enter into multi-year contracts, in which the support fees are typically paid in advance;•the number and size of new customers and the number and size of renewals in a particular period;•changes in our pricing policies or those of our competitors;•the mix of applications sold during a period;•the timing and expenses related to the acquisition of technologies, products or businesses and potential future charges for impairment ofgoodwill from such acquisitions;•the amount and timing of operating expenses, including those related to the maintenance and expansion of our business, operations andinfrastructure;•the amount and timing of expenses related to the development of new products and technologies, including enhancements to our applications;•the amount and timing of commissions earned by our sales personnel;•the timing and success of new applications introduced by us or new offerings offered by our competitors;•the length of our sales cycles;•changes in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic collaborators;19Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.•our ability to manage our existing business and future growth, including increases in the number of customers using our applications;•the seasonality of our business or cyclical fluctuations in our industry;•the timing and expenses related to any international expansion efforts we may undertake and the success of such efforts;•various factors related to disruptions in access and delivery of our cloud-based applications, errors or defects in our applications, privacy anddata security and exchange rate fluctuations, each of which is described elsewhere in these risk factors; and•general economic, industry and market conditions.We may need financing in the future, and any additional financing may result in restrictions on our operations or substantial dilution to our stockholders.We may seek to renegotiate or refinance our loan facility, and we may be unable to do so on acceptable terms or at all.We have funded our operations since inception primarily through equity financings, cash from operations and cash available under our loan facility.We may need to raise funds in the future, for example, to expand our business, acquire complementary businesses, develop new technologies, respond tocompetitive pressures or react to unanticipated situations. We may try to raise additional funds through public or private financings, strategic relationships orother arrangements. Our ability to obtain debt or equity funding will depend on a number of factors, including market conditions, our operating performanceand investor interest. Additional funding may not be available to us on acceptable terms or at all. If adequate funds are not available, we may be required toreduce expenditures, including curtailing our growth strategies, reducing our product-development efforts or foregoing acquisitions. If we succeed in raisingadditional funds through the issuance of equity or convertible securities, it could result in substantial dilution to existing stockholders. If we raise additionalfunds through the issuance of debt securities or preferred stock, these new securities would have rights, preferences and privileges senior to those of theholders of our common stock. In addition, any debt financing obtained by us in the future or issuance of preferred stock could involve restrictive covenantsrelating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital andto pursue business opportunities, including potential acquisitions. Additionally, we may need to renegotiate the terms of our loan facility, and our lendermay be unwilling to do so, or may agree to such changes subject to additional restrictive covenants on our operations and ability to raise capital.Our loan facility contains operating and financial covenants that may restrict our business and financing activities.On November 15, 2016, we expanded into a $90 million loan facility with Wells Fargo Capital Finance. The facility is comprised of a $50 million termloan, a $10 million revolving credit facility and a $10 million delayed draw term loan for acquisitions. Additionally, the facility provides for an uncommitted$20 million accordion loan to further support future acquisitions and an allowance of $16.7 million of subordinated seller notes for acquisitions.Our obligations and the obligations of the co-borrowers and any guarantors under the Wells Fargo loan facility are secured by a security interest insubstantially all of our assets and assets of the co-borrowers’ and of any guarantors, including intellectual property. The terms of the credit facility limits,among other things, our ability to•sell, lease, license or otherwise dispose of assets;•undergo a change in control;•consolidate or merge with or into other entities;•make or own loans, investments and acquisitions;•create, incur or assume guarantees in respect of obligations of other persons;•create, incur or assume liens and other encumbrances; or•pay dividends or make distributions on, or purchase or redeem, our capital stock.20Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Furthermore, the Wells Fargo loan facility requires us and our subsidiaries to comply with certain financial covenants. The operating and otherrestrictions and covenants in the loan facility, and in any future financing arrangements that we may enter into, may restrict our ability to finance ouroperations, engage in certain business activities, or expand or fully pursue our business strategies, or otherwise limit our discretion to manage our business.Our ability to comply with these restrictions and covenants may be affected by events beyond our control, and we may not be able to meet those restrictionsand covenants. A breach of any of the restrictions and covenants could result in a default under the loan facility or any future financing arrangements, whichcould cause any outstanding indebtedness under the loan facility or under any future financing arrangements to become immediately due and payable, andresult in the termination of commitments to extend further credit.If we are unable to increase market awareness of our company and our applications, our revenue may not continue to grow, or may decline.Market awareness of our company and our applications is essential to our ability to generate new leads for expanding our business and our continuedgrowth. If we fail to sufficiently invest in our marketing programs or they are unsuccessful in creating market awareness of our company and our applications,our revenue may grow more slowly than expected or may decline and our financial performance may be adversely affected.The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected.The overall market for enterprise work management software is rapidly evolving and subject to changing technology, shifting customer needs andfrequent introductions of new applications. The intensity and nature of our competition varies significantly across our family of enterprise work managementsoftware applications. Many of our competitors and potential competitors are larger and have greater brand name recognition, longer operating histories,larger marketing budgets and significantly greater resources than we do. Some of our smaller competitors may offer applications on a stand-alone basis at alower price than us due to lower overhead or other factors, while some of our larger competitors may offer applications at a lower price in an attempt to cross-sell additional products in the future or retain a customer using a different application.We believe there are a limited number of direct competitors that provide a comprehensive enterprise work management software offering. However, weface competition both from point solution providers, including legacy on-premise enterprise systems, and other cloud-based work management softwarevendors that may address one or more of the functional elements of our applications, but are not designed to address a broad range of enterprise workmanagement needs. In addition, we face competition from manual processes and traditional tools, such as paper-based techniques, spreadsheets and email.If our competitors’ products, services or technologies become more accepted than our enterprise work management applications, if they are successfulin bringing their products or services to market earlier than ours, or if their products or services are more technologically capable than ours, our revenuescould be adversely affected.Mergers of, or other strategic transactions by, our competitors could weaken our competitive position or reduce our revenue.If one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adverselyaffect our ability to compete effectively. In order to take advantage of customer demand for cloud-based software applications, vendors of legacy systems areexpanding their cloud-based enterprise workplace management applications through acquisitions and internal development. A potential result of suchexpansion is that certain of our current or potential competitors may be acquired by third parties with greater available resources and the ability to furtherinvest in product improvements and initiate or withstand substantial price competition. Our competitors also may establish or strengthen cooperativerelationships with our current or future value-added resellers, third-party consulting firms or other parties with whom we have relationships, thereby limitingour ability to promote our applications. Disruptions in our business caused by these events could reduce our revenue.21Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Our growth and long-term success depends, in part, on our ability to expand our international sales and operations.As our operations have expanded, we have established and currently maintain offices in the United States, Canada, and the United Kingdom. We havelimited experience in operating in foreign jurisdictions and expect to continue to expand our relationship with international customers. Managing a globalorganization is difficult, time-consuming and expensive, and any international efforts that we may undertake may not be successful. In addition, conductinginternational operations subjects us to risks, including the following:•uncertain political and economic climates;•lack of familiarity and burdens of complying with foreign laws, accounting and legal standards, regulatory requirements, tariffs and otherbarriers;•unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions;•lack of experience in connection with the localization of our applications, including translation into foreign languages and adaptation for localpractices, and associated expenses and regulatory requirements;•difficulties in adapting to differing technology standards;•longer sales cycles and accounts receivable payment cycles and difficulties in collecting accounts receivable;•difficulties in managing and staffing international operations, including differing legal and cultural expectations for employee relationshipsand increased travel, infrastructure and legal compliance costs associated with international operations;•fluctuations in exchange rates that may increase the volatility of our foreign-based revenue and expenses;•potentially adverse tax consequences, including the complexities of foreign value-added tax, goods and services tax and other transactionaltaxes;•reduced or varied protection for intellectual property rights in some countries;•difficulties in managing and adapting to differing cultures and customs;•data privacy laws which require that customer data be stored and processed in a designated territory subject to laws different than the UnitedStates;•new and different sources of competition as well as laws and business practices favoring local competitors and local employees;•compliance with anti-bribery laws, including compliance with the Foreign Corrupt Practices Act;•increased financial accounting and reporting burdens and complexities; and•restrictions on the repatriation of earnings.Further, our international expansion efforts may be hindered by lower levels of cloud adoption and increased price sensitivity for our applications orother cloud-based offerings in international markets. As a result of these and other factors, international expansion may be more difficult, take longer and notgenerate the results we anticipate, which could negatively impact our growth and business.Fluctuations in the exchange rate of foreign currencies could result in losses on currency transactions.Our customers are generally invoiced in the currency of the country in which they are located. In addition, we incur a portion of our operatingexpenses in foreign currencies, including Canadian dollars, British pounds and Euros, and in the future, as we expand into other foreign countries, we expectto incur operating expenses in other foreign currencies. In addition, our customers are generally invoiced in the currency of the country in which they arelocated. We are exposed to foreign exchange rate fluctuations as the financial results of our international operations are translated from the local functionalcurrency into U.S. dollars upon consolidation. A decline in the U.S. dollar relative to foreign functional currencies would increase our non-U.S. revenue andimprove our operating results. Conversely, if the U.S. dollar strengthens relative to foreign functional currencies, our revenue and operating results22Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.would be adversely affected. We have not previously engaged in foreign currency hedging. If we decide to hedge our foreign currency exchange rateexposure, we may not be able to hedge effectively due to lack of experience, unreasonable costs or illiquid markets.Our sales cycles can be lengthy and variable, which may cause changes in our operating results.Our sales cycle can vary substantially from customer to customer. A number of factors influence the length and variability of our sales cycles,including, for example:•the need to educate potential customers about the uses and benefits of our applications;•the duration of the commitment customers make in their agreements with us, which are typically one to three years;•the discretionary nature of potential customers’ purchasing and budget cycles and decisions;•the competitive nature of potential customers’ evaluation and purchasing processes;•the functionality demands of potential customers;•fluctuations in the enterprise work management needs of potential customers;•the announcement or planned introduction of new products by us or our competitors; and•the purchasing approval processes of potential customers.Our sales cycles can make it difficult to predict the quarter in which revenue from a new customer may first be recognized. We may incur significantsales and marketing expenses and invest significant time and effort in anticipation of a sale that may never occur or only occur in a smaller amount or at alater date than anticipated. Delays inherent to our sales cycles could cause significant variability in our revenue and operating results for any particularperiod.We have a limited history with our pricing models and, as a result, we may be forced to change the prices we charge for our applications or the pricingmodels upon which they are based.We have limited experience with respect to determining the optimal prices and pricing models for certain of our applications and certain geographicmarkets. As the markets for our applications mature, or as competitors introduce products or services that compete with ours, including bundling competingofferings with additional products or services, we may be unable to attract new customers at the same price or based on the same pricing models as we haveused historically. As a result, in the future we may be required to reduce our prices, which could adversely affect our financial performance. In addition, wemay offer volume price discounts based on the number of seats purchased by a customer or the number of our applications purchased by a customer, whichwould effectively reduce the prices we charge for our applications. Also, we may be unable to renew existing customer agreements or enter into new customeragreements at the same prices or upon the same terms that we have historically, which could have a material adverse effect on our financial position.Any disruption of service at the data centers that house our equipment and deliver our applications or with our hosting service provider could harm ourbusiness.Our reputation and ability to attract, retain and serve our customer is dependent upon the reliable performance of our computer systems and those ofthird parties that we utilize in our operations. These systems may be subject to damage or interruption from earthquakes, adverse weather conditions, othernatural disasters, terrorist attacks, power loss, telecommunications failures, computer viruses, computer denial of service attacks, or other attempts to harmthese systems. Interruptions in these systems, or with the Internet in general, could make our service unavailable or degraded or otherwise hinder our abilityto deliver application data to our customers. Service interruptions, errors in our software or the unavailability of computer systems used in our operationscould diminish the overall attractiveness of our applications to existing and potential customers.Our servers and those of third parties we use in our operations are vulnerable to computer viruses, physical or electronic break-ins and similardisruptions. We have implemented security protocols within our applications, however this is no assurance that our systems are completely secure. Ourinsurance does not cover expenses related to disruptions to our service or unauthorized access to our applications. Any significant disruption to our service oraccess to our systems could result in a loss of customers and adversely affect our business and results of operation.23Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.We utilize our own communications and computer hardware systems located either in our facilities or in that of a third-party Web hosting provider. Inaddition, we utilize third-party hosting services in connection with our business operations and are undertaking an initiative to migrate our applications to athird-party hosting platform. Problems faced by us or our third-party hosting providers, including technological or business-related disruptions, couldadversely impact the experience of our customers.If we fail to adequately manage our data center or hosting infrastructure capacity, our existing customers may experience service outages and our newcustomers may experience delays in the deployment of our applications.We have experienced significant growth in the number of seats and volume of data that our hosting infrastructure supports. We seek to maintainsufficient excess capacity in our operations infrastructure to meet the needs of all of our customers. We also seek to maintain excess capacity to facilitate therapid provision of new customer deployments and the expansion of existing customer deployments. However, obtaining new data center infrastructurerequires lead time. If we do not accurately predict our infrastructure capacity requirements with sufficient lead time, our customers could experience serviceimpairment that may subject us to financial penalties and liabilities and cause us to lose customers. If our data center infrastructure capacity fails to keep pacewith increased subscriptions, customers may experience delays or reductions in the quality of our service as we seek to obtain additional capacity, whichcould harm our reputation and harm our business. As we add data center or hosting infrastructure capacity and support personnel in advance of anticipatedgrowth, our cost of product revenue will increase and if the anticipated revenue growth does not occur, our product gross profit will be adversely affectedboth in terms of absolute dollars and as a percentage of total revenues in any particular quarterly or annual period.Security breaches may harm our business.Our applications involve the storage and transmission of our customers’ proprietary and confidential information, including personal or identifyinginformation regarding their employees and customers. Any security breaches, unauthorized access, unauthorized usage, virus or similar breach or disruptioncould result in loss of confidential information, damage to our reputation, early termination of our contracts, litigation, regulatory investigations, indemnityobligations or other liabilities. If our security measures or those of our third-party data centers are breached as a result of third-party action, employee error,malfeasance or otherwise and, as a result, someone obtains unauthorized access to customer data, our reputation will be damaged, our business may suffer andwe could incur significant liability. Because the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are notidentified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any orall of these issues could negatively affect our ability to attract new customers, cause existing customers to elect not to renew or upgrade their subscriptions,result in reputational damage or subject us to third-party lawsuits, regulatory fines or other action or liability, which could adversely affect our operatingresults.Our success depends on our ability to adapt to technological change and continue to innovate.The overall market for enterprise work management software is rapidly evolving and subject to changing technology, shifting customer needs andfrequent introductions of new applications. Our ability to attract new customers and increase revenue from existing customers will depend in large part on ourability to develop or acquire new applications and enhance and improve existing applications. To achieve market acceptance for our applications, we musteffectively anticipate and offer applications that meet changing customer demands in a timely manner. Customers may require features and capabilities thatour current applications do not have. We may experience difficulties that could delay or prevent our development, acquisition or implementation of newapplications and enhancements.If we are unable to successfully develop or acquire new enterprise work management capabilities and functionality, enhance our existing applicationsto anticipate and meet customer preferences, sell our applications into new markets or adapt to changing industry standards in enterprise work management,our revenue and results of operations would be adversely affected.24Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Adverse economic conditions may reduce our customers’ ability to spend money on information technology or enterprise work management software, orour customers may otherwise choose to reduce their spending on information technology or enterprise work management software, which may adverselyimpact our business.Our business depends on the overall demand for information technology and enterprise work management software spend and on the economic healthof our current and prospective customers. If worldwide economic conditions become unstable, our existing customers and prospective customers may re-evaluate their decision to purchase our applications. Weak global economic conditions or a reduction in information technology or enterprise workmanagement software spending by our customers, could harm our business in a number of ways, including longer sales cycles and lower prices for ourapplications.We rely on third-party software that is required for the development and deployment of our applications, which may be difficult to obtain or which couldcause errors or failures of our applications.We rely on software licensed from or hosted by third parties to offer our applications. In addition, we may need to obtain licenses from third parties touse intellectual property associated with the development of our applications, which might not be available to us on acceptable terms, or at all. Any loss ofthe right to use any software required for the development, maintenance and delivery of our applications could result in delays in the provision of ourapplications until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated, which could harm our business.Any errors or defects in third-party software could result in errors or a failure of our applications, which could harm our business.If our applications contain serious errors or defects we may lose revenue and market acceptance and we may incur costs to defend or settle productliability claims.Complex software applications such as ours often contain errors or defects, particularly when first introduced or when new versions or enhancementsare released. Our current and future applications may contain serious defects.Since our customers use our applications for critical business purposes, defects or other performance problems could negatively impact our customersand could result in:•loss or delayed market acceptance and sales;•breach of warranty or product liability claims;•sales credits or refunds for prepaid amounts related to unused subscription services;•canceled contracts and loss of customers;•diversion of development and customer service resources; and•injury to our reputation.The costs incurred in correcting any material errors or defects might be substantial and could adversely affect our operating results. Although ourcustomer agreements typically contain provisions designed to limit our exposure to certain of the claims above, existing or future laws or unfavorablejudicial decisions could negate these limitations. Even if not successful, a product liability claim brought against us would likely be a distraction tomanagement, time-consuming and costly to resolve, and could seriously damage our reputation in the marketplace, making it harder for us to sell ourapplications. Additionally, our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all, and ourpolicy may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention.If we fail to integrate our applications with other software applications and competitive or adjacent offerings that are developed by others, or fail to makeour applications available on mobile and other handheld devices, our applications may become less marketable, less competitive or obsolete and ouroperating results could be harmed.Our applications integrate with a variety of other software applications, and also with competing and adjacent third-party offerings, and we need tocontinuously modify and enhance our platform to adapt to changes in cloud-enabled hardware, software, networking, browser and database technologies.Any failure of our applications to integrate effectively with other software applications and product offerings could reduce the demand for our applications orresult in customer dissatisfaction and harm to our business. If we are unable to respond to changes in25Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the applications and tools with which our applications integrate in a cost-effective manner, our applications may become less marketable, less competitive orobsolete. Competitors may also impede our attempts to create integration between our applications and competitive offerings, which may decrease demandfor our applications. In addition, an increasing number of individuals within organizations are utilizing devices other than personal computers, such asmobile phones, tablets and other handheld devices, to access the Internet and corporate resources and to conduct business. If we cannot effectively make ourapplications available on these devices, we may experience difficulty attracting and retaining customers.If we fail to develop and maintain relationships with third parties, our business may be harmed.Our business depends in part on the development and maintenance of technology integration, joint sales and reseller relationships. Maintainingrelationships with third parties requires significant time and resources, as does integrating third-party content and technology. Further, third parties may notperform as expected under any relationships that we may enter into, and we may have disagreements or disputes with third parties that could negatively affectour brands and reputation. If we are unsuccessful in establishing or maintaining relationships with third parties, our ability to compete in the marketplace orto grow our revenue could be impaired and our operating results could suffer.Our use of open source software could negatively affect our ability to sell our applications and subject us to possible litigation.A portion of our applications incorporate open source software, and we expect to continue to incorporate open source software in the future. Few of thelicenses applicable to open source software have been interpreted by courts, and their application to the open source software integrated into our proprietarysoftware may be uncertain. Moreover, we cannot provide any assurance that we have not incorporated additional open source software in our applications ina manner that is inconsistent with the terms of the license or our current policies and procedures. If we fail to comply with these licenses, we may be subject tocertain requirements, including requirements that we offer our applications that incorporate the open source software for no cost, that we make availablesource code for modifications or derivative works we create based upon, incorporating or using the open source software and that we license suchmodifications or derivative works under the terms of applicable open source licenses. If an author or other third party that distributes such open sourcesoftware were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expensesdefending against such allegations and could be subject to significant damages, enjoined from the sale of our applications that contained the open sourcesoftware and required to comply with the foregoing conditions, which could disrupt the distribution and sale of some of our applications. In addition, therehave been claims challenging the ownership of open source software against companies that incorporate open source software into their products. As a result,we could be subject to suits by parties claiming infringement due to the reliance by our applications on certain open source software. Litigation could becostly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional research and developmentresources to change our applications.Certain of our operating results and financial metrics are difficult to predict as a result of seasonality.We have historically experienced seasonality in terms of when we enter into customer agreements. We sign a significantly higher percentage ofagreements with new customers, and renew agreements with existing customers, in the fourth quarter of each calendar year as our customers tend to followbudgeting cycles at the end of the calendar year. Our cash flow from operations has historically been higher in the first quarter of each calendar year than inother quarters. This seasonality is reflected to a much lesser extent, and sometimes is not immediately apparent, in our revenue, due to the fact that we deferrevenue recognition. In addition, seasonality may be difficult to observe in our financial results during periods in which we acquire businesses as such resultstypically are most significantly impacted by such acquisitions. We expect this seasonality to continue, or possibly increase in the future, which may causefluctuations in our operating results and financial metrics. If our quarterly operating results or outlook fall below the expectations of research analysts orinvestors, the price of our common stock could decline substantially.26Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.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 involving patents and other intellectual property rights in our industry. Companies providingsoftware are increasingly bringing and becoming subject to suits alleging infringement of proprietary rights, particularly patent rights, and to the extent wegain greater market visibility, we face a higher risk of being the subject of intellectual property infringement claims. We do not have a significant patentportfolio, which could prevent us from deterring patent infringement claims through our own patent portfolio, and our competitors and others may now andin the future have significantly larger and more mature patent portfolios than we have. The risk of patent litigation has been amplified by the increase in thenumber of a type of patent holder, which we refer to as a non-practicing entity, whose sole business is to assert such claims and against whom our ownintellectual property portfolio may provide little deterrent value. We could incur substantial costs in prosecuting or defending any intellectual propertylitigation. If we sue to enforce our rights or are sued by a third-party that claims that our applications infringe its rights, the litigation could be expensive andcould divert our management resources.In addition, in most instances, we have agreed to indemnify our customers against claims that our applications infringe the intellectual property rightsof third parties. Our business could be adversely affected by any significant disputes between us and our customers as to the applicability or scope of ourindemnification obligations to them. Any intellectual property litigation to which we might become a party, or for which we are required to provideindemnification, may require us to do one or more of the following:•cease selling or using applications that incorporate the intellectual property that we allegedly infringe;•make substantial payments for legal fees, settlement payments or other costs or damages;•obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or•redesign the allegedly infringing applications to avoid infringement, which could be costly, time-consuming or impossible.If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringementclaims against us or any obligation to indemnify our customers for such claims, such payments or actions could harm our business.We could incur substantial costs in protecting our intellectual property from infringement, and any failure to protect our intellectual property couldimpair our business.Our success and ability to compete depend in part upon our intellectual property. We seek to protect the source code for our proprietary software andother proprietary technology and information under a combination of copyright, trade secrets and patent law, and we seek to protect our brands throughtrademark law. Our policy is to enter into confidentiality agreements, or agreements with confidentiality provisions, with our employees, consultants, vendorsand customers and to control access to our software, documentation and other proprietary information. Despite these precautions, it may be possible forunauthorized parties to copy our software or other proprietary technology or information, or to develop similar software independently.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our applications or to obtain and useinformation that we regard as proprietary. Policing unauthorized use of our applications is difficult, and we are unable to determine the extent to which piracyof our software exists or will occur in the future. Litigation may be necessary in the future to enforce our intellectual property rights, protect our trade secrets,determine the validity and scope of the proprietary rights of others or defend against claims of infringement or invalidity. Such litigation could be costly,time-consuming and distracting to management, result in a diversion of resources or the narrowing or invalidation of portions of our intellectual property andhave a material adverse effect on our business, operating results and financial condition. Furthermore, our efforts to enforce our intellectual property rightsmay be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights or alleging that weinfringe the counterclaimant’s own intellectual property. These steps may be inadequate to protect our intellectual property. Third parties may challenge thevalidity27Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.or ownership of our intellectual property, and these challenges could cause us to lose our rights, in whole or in part, to such intellectual property or narrow itsscope such that it no longer provides meaningful protection. We will not be able to protect our intellectual property if we are unable to enforce our rights or ifwe do not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized third parties to copy our productsand use information that we regard as proprietary to create products and services that compete with ours. Some license provisions protecting againstunauthorized use, copying, transfer and disclosure of our applications may be unenforceable under the laws of certain jurisdictions and foreign countries.Further, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States. To the extent we expand ourinternational activities, our exposure to unauthorized copying, transfer and use of our applications and proprietary technology or information may increase.There can be no assurance that our means of protecting our proprietary rights will be adequate or that our competitors will not independently developsimilar technology. If we fail to meaningfully protect our intellectual property, our business, brands, operating results and financial condition could bematerially harmed.Unanticipated changes in our effective tax rate or challenges by tax authorities could harm our future results.We are subject to income taxes in the United States and various non-U.S. jurisdictions. Our effective tax rate could be adversely affected by changes inthe allocation of our pre-tax earnings and losses among countries with differing statutory tax rates, in certain non-deductible expenses as a result ofacquisitions, in the valuation of our deferred tax assets and liabilities, or in federal, state, local or non-U.S. tax laws and accounting principles, includingincreased tax rates, new tax laws or revised interpretations of existing tax laws and precedents. In particular, the United States is currently considering variouschanges to the U.S. taxation of international business activities, which, if enacted, could impact the U.S. taxation of our non-U.S. earnings as well as our cashmaintained outside the United States. Increases in our effective tax rate would adversely affect our operating results.In addition, we may be subject to income tax audits by various tax jurisdictions throughout the world, many of which have not established clearguidance on the tax treatment of cloud-based companies. The application of tax laws in such jurisdictions may be subject to diverging and sometimesconflicting interpretations by tax authorities in these jurisdictions. Although we believe our income tax liabilities are reasonably estimated and accounted forin accordance with applicable laws and principles, an adverse resolution of one or more uncertain tax positions in any period could have a material impact onthe results of operations for that period.Taxing authorities may successfully assert that we should have collected or in the future should collect additional sales and use taxes, and we could besubject to liability with respect to past or future sales, which could adversely affect our results of operations.We have not historically filed sales and use tax returns or collected sales and use taxes in all jurisdictions in which we have sales, based on our beliefthat such taxes are not applicable. Taxing authorities may seek to impose such taxes on us, including for past sales, which could result in penalties andinterest. Any such tax assessments may adversely affect the results of our operations.Taxing authorities could reallocate our taxable income among our subsidiaries, which could increase our consolidated tax liability.We conduct integrated operations internationally through subsidiaries in various tax jurisdictions pursuant to transfer pricing arrangements betweenour subsidiaries and between our subsidiaries and us. If two or more affiliated companies are located in different countries, the tax laws or regulations of eachcountry generally require that transfer prices be the same as those between unrelated companies dealing at arms’ length and that contemporaneousdocumentation is maintained to support the transfer prices. While we believe that we operate in compliance with applicable transfer pricing laws and intendto continue to do so, our transfer pricing procedures are not binding on applicable tax authorities. If tax authorities in any of these countries were tosuccessfully challenge our transfer prices as not reflecting arms’ length transactions, they could require us to adjust our transfer prices and thereby reallocateour income to reflect these revised transfer prices, which could result in a higher tax liability to us. Such reallocations may subject us to interest and penaltiesthat would increase our consolidated tax liability and could adversely affect our financial condition, results of operations and cash flows.28Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.As of December 31, 2016, we had federal net operating loss carryforwards of approximately $83 million and research and development creditcarryforwards of approximately $1.3 million, which begin expiring in 2017. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended,or the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs ifthere is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules applyunder state tax laws. Based on analysis of acquired net operating losses, utilization of our net operating losses will be subject to annual limitations. Theannual limitation will result in the expiration of $16.2 million of federal net operating losses and $0.8 million of research and development creditcarryforwards before utilization. In the event that it is determined that we have in the past experienced additional ownership changes, or if we experience oneor more ownership changes as a result of future transactions in our stock, then we may be further limited in our ability to use our net operating losscarryforwards and other tax assets to reduce taxes owed on the net taxable income that we earn. Any such limitations on the ability to use our net operatingloss carryforwards and other tax assets could adversely impact our business, financial condition and operating results.Changes in laws or regulations related to the Internet may diminish the demand for our applications and any failure of the Internet infrastructure couldhave a negative impact on our business.We deliver our cloud-based applications through the Internet. Federal, state or foreign government bodies or agencies have in the past adopted, andmay in the future adopt, laws or regulations affecting data privacy and the use of the Internet. In addition, government agencies or private organizations maybegin to impose taxes, fees or other charges for accessing the Internet or on commerce conducted via the Internet. Increased enforcement of existing laws andregulations, as well as any laws, regulations or changes that may be adopted or implemented in the future, could limit the growth of the use of cloud-basedapplications or communications generally, result in a decline in the use of the Internet and the viability of cloud-based applications such as ours and reducethe demand for our applications.The success of our enterprise work management software applications depends on the development and maintenance of the Internet infrastructure. Thisincludes maintenance of a reliable network backbone with the necessary speed, data capacity and security, as well as the timely development ofcomplementary products for providing reliable Internet access and services. The Internet has experienced, and is likely to continue to experience, significantgrowth in the amount of traffic and may be unable to support such demands. In addition, problems caused by viruses, worms, malware and similar programsmay harm the performance of the Internet. Any outages and delays in the Internet could reduce the level of usage of our services, which could materiallyadversely affect our business, financial condition, results of operations and prospects.Privacy concerns and laws or other domestic or foreign regulations may reduce the effectiveness of our applications and adversely affect our business.Our customers can use our applications to collect, use and store personal or identifying information regarding their customers and employees. Federal,state and foreign government bodies and agencies have adopted, are considering adopting or may adopt laws and regulations regarding the collection, use,storage and disclosure of personal information obtained from individuals. The costs of compliance with, and other burdens imposed by, such laws andregulations that are applicable to the businesses of our customers may limit the use and adoption of our applications and reduce overall demand, or lead tosignificant fines, penalties or liabilities for any noncompliance with such privacy laws. For example, the European Union and many countries in Europe havestringent privacy laws and regulations that may impact our ability to profitably operate in certain European countries. Furthermore, privacy concerns maycause our customers to resist providing the personal data necessary to allow them to use our applications effectively. Even the perception of privacyconcerns, whether or not valid, may inhibit market adoption of our applications in certain industries. All of these domestic and international legislative andregulatory initiatives may adversely affect our customers’ ability to process, handle, store, use and transmit demographic and personal information from theircustomers and employees, which could reduce demand for our applications.29Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In addition to government activity, privacy advocacy groups and the technology and other industries are considering various new, additional ordifferent self-regulatory standards that may place additional burdens on us. If the processing of personal information were to be curtailed in this manner, ourapplications would be less effective, which may reduce demand for our applications and adversely affect our business.We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensingrequirements and subject us to liability if we are not in compliance with applicable laws.Our applications are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customsregulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. Exportsof our applications must be made in compliance with these laws and regulations. If we fail to comply with these laws and regulations, we and certain of ouremployees could be subject to substantial civil or criminal penalties, including: the possible loss of export or import privileges; fines, which may be imposedon us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers. Obtaining the necessaryauthorizations, including any required license, for a particular sale may be time-consuming, is not guaranteed and may result in the delay or loss of salesopportunities. In addition, changes in our applications or changes in applicable export or import regulations may create delays in the introduction and sale ofour applications in international markets, prevent our customers with international operations from deploying our applications or, in some cases, prevent theexport or import of our applications to certain countries, governments or persons altogether. Any change in export or import regulations, shift in theenforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could also resultin decreased use of our applications, or in our decreased ability to export or sell our applications to existing or potential customers with internationaloperations. Any decreased use of our applications or limitation on our ability to export or sell our applications would likely adversely affect our business.Furthermore, we incorporate encryption technology into certain of our applications. Various countries regulate the import of certain encryptiontechnology, including through import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our applicationsor could limit our customers’ ability to implement our applications in those countries. Encrypted applications and the underlying technology may also besubject to export control restrictions. Governmental regulation of encryption technology and regulation of imports or exports of encryption products, or ourfailure to obtain required import or export approval for our applications, when applicable, could harm our international sales and adversely affect ourrevenue. Compliance with applicable regulatory requirements regarding the export of our applications, including with respect to new releases of ourapplications, may create delays in the introduction of our applications in international markets, prevent our customers with international operations fromdeploying our applications throughout their globally-distributed systems or, in some cases, prevent the export of our applications to some countriesaltogether.Moreover, U.S. export control laws and economic sanctions programs prohibit the shipment of certain products and services to countries, governmentsand persons that are subject to U.S. economic embargoes and trade sanctions. Even though we take precautions to prevent our applications from beingshipped or provided to U.S. sanctions targets, our applications and services could be shipped to those targets or provided by third parties despite suchprecautions. Any such shipment could have negative consequences, including government investigations, penalties and reputational harm.If we are unable to implement and maintain effective internal controls over financial reporting in the future, investors may lose confidence in the accuracyand 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 controls over financial reporting and to report any material weaknesses in such internalcontrols. Section 404 of the Sarbanes-Oxley Act, requires that we evaluate and determine the effectiveness of our internal controls over financial reporting.Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reportinguntil the later of our second annual report or the first annual report required to be filed with the SEC following the date we are no longer an “emerging growthcompany” as defined in the JOBS Act. If we have a30Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materiallymisstated. We are in the process of designing and implementing the internal controls over financial reporting required to comply with this obligation, whichprocess will be time consuming, costly and complicated. We may need additional finance and accounting personnel with certain skill sets to assist us withthe reporting requirements we will encounter as a public company and to support our anticipated growth. In addition, implementing internal controls maydistract our officers and employees, entail substantial costs to modify our existing processes and take significant time to complete.In the future, if we identify material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements ofSection 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to assert that our internal controls over financial reporting are effective, or if ourindependent registered public accounting firm is not required to express an opinion due to the provisions of the JOBS Act or is unable to express an opinionas to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financialreports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange onwhich our securities are listed, the Securities and Exchange Commission, or the SEC, or other regulatory authorities, which could require additional financialand management resources.We incur significant costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which couldharm our operating results.As a public company, we will incur significant legal, accounting, investor relations and other expenses, including costs associated with publiccompany reporting requirements. We also have incurred and will incur costs associated with current corporate governance requirements, includingrequirements under Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the SEC and the exchange on which we listour common stock. These rules and regulations may substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. As a public company, it is more difficult and more expensive for us to obtain director and officer liability insurance, and we may berequired to incur substantially higher costs to obtain coverage or to accept reduced policy limits and coverage. As a result, it may be more difficult for us toattract and retain qualified individuals to serve on our board of directors or as our executive officers.We are an “emerging growth company,” and any decision on our part to comply with certain reduced disclosure requirements applicable to emerginggrowth companies could make our common stock less attractive to investors.We are an “emerging growth company,” as defined in the JOBS Act and, for as long as we continue to be an emerging growth company, we may chooseto take advantage of certain exemptions from various reporting requirements applicable to other public companies including, but not limited to: not beingrequired to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of theSarbanes-Oxley Act; reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and exemptions fromthe requirements to hold a nonbinding advisory vote on executive compensation and to obtain stockholder approval of any golden parachute payments notpreviously approved. We may take advantage of these provisions until such time that we are no longer an “emerging growth company.” We will cease to bean “emerging growth company” upon the earliest of the first fiscal year following the fifth anniversary of the consummation of our initial public offering; thefirst fiscal year after our annual gross revenue is $1 billion or more; the date on which we have, during the previous three-year period, issued more than$1 billion in non-convertible debt securities; or the date on which we are deemed to be a “large accelerated filer” as defined in the Securities Exchange Act of1934, or the Exchange Act. To the extent we take advantage of any of these reduced reporting burdens in this Annual Report or in future filings, theinformation that we provide our security holders may be different than you might get from other public companies in which you hold equity interests. Wecannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock lessattractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.Under Section 107(b) of the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as thosestandards apply to private companies. We are choosing to “opt out” of such extended transition period, however, and, as a result, we will comply with new orrevised accounting standards31Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that ourdecision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable. The requirements of being apublic company may strain our resources and divert management’s attention.Risks Related to Ownership of Our Common StockThe market price of our common stock may be volatile, which could result in substantial losses for investors.The market price of our common stock could be subject to significant fluctuations. Some of the factors that may cause the market price of our commonstock to fluctuate include:•actual or anticipated changes in the estimates of our operating results that we provide to the public, our failure to meet these projections orchanges in recommendations by securities analysts that elect to follow our common stock;•price and volume fluctuations in the overall equity markets from time to time;•significant volatility in the market price and trading volume of comparable companies;•changes in the market perception of enterprise work management software generally or in the effectiveness of our applications in particular;•disruptions in our services due to computer hardware, software or network problems;•announcements of technological innovations, new products, strategic alliances or significant agreements by us or by our competitors;•announcements of new customer agreements or upgrades and customer downgrades or cancellations or delays in customer purchases;•litigation involving us;•our ability to successfully consummate and integrate acquisitions;•investors’ general perception of us;•recruitment or departure of key personnel;•sales of our common stock by us or our stockholders;•fluctuations in the trading volume of our shares or the size of our public float; and•general economic, legal, industry and market conditions and trends unrelated to our performance.In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been broughtagainst that company. Because of the potential volatility of our stock price, we may become the target of securities litigation in the future. If we were tobecome involved in securities litigation, it could result in substantial costs, divert management’s attention and resources from our business and adverselyaffect our business.If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our market, if they publish negativeevaluations of our stock, or if we fail to meet the expectations of analysts, the price of our stock and trading volume could decline.The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, ourbusiness, our market or our competitors. If few analysts commence coverage of us, the trading price of our stock would likely decrease if one or more of theanalysts covering our business downgrade their evaluation of our stock, the price of our stock could decline. If one or more of these analysts cease to coverour stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline. Furthermore, if our operating results fail tomeet analysts’ expectations our stock price would likely decline.32Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Sales of a substantial number of shares of our common stock in the public market by our existing stockholders could cause our stock price to fall.The price of our common stock could decline if there are substantial sales of our common stock in the public stock market. Certain of our stockholdershave rights, subject to some conditions, to require us to file registration statements or to include such shares in registration statements that we may file forourselves or other stockholders. We also have registered shares of common stock that we may issue under our stock-based compensation plans, which can befreely sold in the public market upon issuance, subject to the lock-up agreements and the restrictions imposed on our affiliates under Rule 144 under theSecurities Act.Our existing directors, executive officers and principal stockholders have substantial control over us, which could limit your ability to influence theoutcome of key transactions, including a change of control.As of December 31, 2016, our directors, executive officers, principal stockholders and their affiliates beneficially owned or controlled, directly orindirectly, a majority of our outstanding common stock. As a result, these stockholders, acting together, could have significant influence over the outcome ofmatters submitted to our stockholders for approval, including the election or removal of directors, any amendments to our certificate of incorporation orbylaws and any merger, consolidation or sale of all or substantially all of our assets, and over the management and affairs of our company. This concentrationof ownership may also have the effect of delaying or preventing a change in control of our company or discouraging others from making tender offers for ourshares and might affect the market price of our common stock.Because we do not expect to pay any dividends on our common stock for the foreseeable future, our investors may never receive a return on theirinvestment.We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. Instead, we plan to retain anyearnings to maintain and expand our existing operations. In addition, our ability to pay cash dividends is currently limited by the terms of our existing loanfacility, which prohibits our payment of dividends on our capital stock without prior consent, and any future credit facility may contain terms prohibiting orlimiting the amount of dividends that may be declared or paid on our common stock. Accordingly, investors must rely on sales of their common stock afterprice appreciation, which may never occur, as the only way to realize any return on their investment.Anti-takeover provisions in our amended and restated certificate of incorporation and our amended and restated bylaws, as well as provisions of Delawarelaw, might discourage, delay or prevent a change in control of our company or changes in our board of directors or management and, therefore, depressthe trading price of our common stock.Provisions in our certificate of incorporation and bylaws, as amended and restated , will contain provisions that may depress the market price of ourcommon stock by acting to discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, includingtransactions in which you might otherwise receive a premium for your shares of our common stock. These provisions may also prevent or frustrate attempts byour stockholders to replace or remove members of our board of directors or our management. These provisions include the following:•our certificate of incorporation provides for a classified board of directors with staggered three-year terms so that not all members of our board ofdirectors are elected at one time;•directors may be removed by stockholders only for cause;•our board of directors has the right to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, deathor removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;•special meetings of our stockholders may be called only by our Chief Executive Officer, our board of directors or holders of not less than themajority of our issued and outstanding capital stock limiting the ability of minority stockholders to take certain actions without an annualmeeting of stockholders;•our stockholders may not act by written consent unless the action to be effected and the taking of such action by written consent are approvedin advance by our board of directors and, as a result, a holder,33Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.or holders, controlling a majority of our capital stock would generally not be able to take certain actions without holding a stockholders’meeting;•our certificate of incorporation prohibits cumulative voting in the election of directors. This limits the ability of minority stockholders to electdirector candidates;•stockholders must provide timely notice to nominate individuals for election to the board of directors or to propose matters that can be actedupon at an annual meeting of stockholders and, as a result, these provisions may discourage or deter a potential acquirer from conducting asolicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us; and•our board of directors may issue, without stockholder approval, shares of undesignated preferred stock, making it possible for our board ofdirectors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, whichlimits the ability of stockholders owning in excess of 15% of our outstanding voting stock from engaging in certain business combinations with us.Any provision of our certificate of incorporation and bylaws or Delaware law that has the effect of delaying or deterring a change in control could limitthe opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willingto pay for our common stock. The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing topay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you couldreceive a premium for your common stock in an acquisition.Item 1B.Unresolved Staff CommentsNone.Item 2.PropertiesOur principal corporate offices are located in Austin, Texas where we occupy approximately 9,896 square feet of space under a sublease that expires inMarch 2020. We occupy additional leased facilities for operations of approximately 16,987 square feet in Montreal, Quebec; approximately 22,950 squarefeet in Lincoln, Nebraska; approximately 7,740 square feet in San Francisco, California (which we have vacated and subsequently subleased through the endof the lease which terminates in 2017).Item 3. Legal ProceedingsFrom 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 anylegal proceedings that we believe would, individually or taken together, have a material adverse effect on our business, operating results, financial conditionor cash flows.Item 4.Mine Safety DisclosuresNot applicable.34Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket InformationOur common stock is traded on the NASDAQ Global Market, or NASDAQ, under the symbol “UPLD”.As of March 22, 2017, the last reported sales price of our common stock on the NASDAQ was $13.93 and there were 74 stockholders of record of ourcommon stock, including Computershare Limited, which holds shares of our common stock on behalf of an indeterminate number of beneficial owners.The table below sets forth the high and low sales prices per share of our common stock as reported on the NASDAQ for the periods indicated: Sales Price Per Share in 2016Year Ended December 31, 2016Low HighFourth quarter$7.85 $9.74Third Quarter$7.44 $9.90Second Quarter$6.80 $7.77First Quarter$6.00 $7.19 Sales Price Per Share in 2015Year Ended December 31, 2015Low HighFourth quarter$6.77 $8.12Third Quarter$7.59 $9.18Second Quarter$5.91 $9.22First Quarter$6.81 $10.05We have never declared or paid dividends on our common stock. We do not expect to pay dividends on our common stock for the foreseeable future.Instead, we anticipate that all of our earnings will be used for the operation and growth of our business. Any future determination to declare cash dividendswould be subject to the discretion of our board of directors and would depend upon various factors, including our results of operations, financial conditionand liquidity requirements, restrictions that may be imposed by applicable law and our contracts and other factors deemed relevant by our board of directors.In addition, the terms of our loan facility currently restrict our ability to pay dividends.Performance GraphNotwithstanding any statement to the contrary in any of our filings with the SEC, the following information shall not be deemed “filed” with the SEC or“soliciting material” under the Securities Exchange Act of 1934 and shall not be incorporated by reference into any such filings irrespective of any generalincorporation language contained in such filing.The following graph compares the total cumulative stockholder return on our common stock with the total cumulative return of the NASDAQComputer Technology Index and the S&P 500 Composite Index during the period commencing on November 6, 2014, the initial trading day of our commonstock, and ending on December 31, 2016. The graph assumes a $100 investment at the beginning of the period in our common stock, the stocks representedin the S&P 500 Composite Index and the stocks represented in NASDAQ Computer Technology Index, and reinvestment of any dividends. The ComputerTechnology Index is designed to represent a cross section of widely-held U.S. corporations involved in various phases of the computer industry. The Index ismarket-value (capitalization) weighted, based on the aggregate market value of its 27 component stocks. Historical stock price performance should not berelied upon as an indication of future stock price performance.35Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Recent Sales of Unregistered SecuritiesIn November 2016, the Company issued 24,587 shares of common stock valued at approximately $200,000 as a result of the escrow release inconnection with the acquisition of Ultriva, Inc.Issuer Purchases of Equity SecuritiesNone.Equity Compensation Plan InformationFor information regarding securities authorized for issuance under equity compensation plans, see Part III, Item 12 of this Annual Report on Form10-K.Item 6.Selected Financial DataThe following selected historical consolidated financial data below should be read in conjunction with Item 7: “Management’s Discussion andAnalysis of Financial Condition and Results of Operations,” our consolidated financial statements and the related notes appearing in Item 8: “FinancialStatements and Supplementary Data” of this Annual Report on Form 10-K to fully understand factors that may affect the comparability of the informationpresented below.The consolidated statements of operations data for the years ended December 31, 2016, 2015, and 2014 and the selected consolidated balance sheetdata as of December 31, 2016 and 2015 are derived from our audited consolidated financial statements appearing in Item 8: “Financial Statements andSupplementary Data” of this Annual Report on Form 10-K. The statement of operations data for the years ended December 31, 2013 and 2012 and theselected consolidated balance sheet data as of December 31, 2014, 2013, and 2012 are derived from our consolidated financial statements not included inthis Annual Report on Form 10-K. To obtain further information about our historical results, including our historical acquisitions, for which results ofoperations are included in our consolidated financial statements beginning on the dates of acquisition, you should read the following selected consolidatedfinancial data in conjunction with our consolidated financial statements and related notes, the information in the section of this filing titled “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” and the other financial information included elsewhere in this filing. Ourhistorical results are not necessarily indicative of the results to be expected in the future, and our interim results are not necessarily indicative of the results tobe expected in the future.36Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Year Ended December 31, 2016 2015 2014 2013 2012 (dollars in thousands, except share and per share data)Consolidated Statements of Operations Data: Revenue: Subscription and support$65,552 $57,193 $48,625 $30,887 $18,281Perpetual license1,650 2,805 2,787 2,003 641Total product revenue67,202 59,998 51,412 32,890 18,922Professional services7,565 9,913 13,162 8,303 3,841Total revenue74,767 69,911 64,574 41,193 22,763Cost of revenue: Subscription and support22,734 19,586 14,042 7,787 4,189Professional services4,831 7,085 9,079 5,680 3,121Total cost of revenue27,565 26,671 23,121 13,467 7,310Gross profit47,202 43,240 41,453 27,726 15,453Operating expenses: Sales and marketing12,160 12,965 14,670 10,625 6,331Research and development14,919 15,778 26,165 10,340 5,308Refundable Canadian tax credits(513) (470) (1,094) (583) (728)General and administrative18,286 18,201 13,561 6,832 4,574Depreciation and amortization5,291 4,534 4,310 3,670 1,812Acquisition-related expenses5,583 2,455 2,186 1,461 1,933Total operating expenses55,726 53,463 59,798 32,345 19,230Loss from operations(8,524) (10,223) (18,345) (4,619) (3,777)Other expense: Interest expense, net(2,781) (1,858) (1,951) (2,797) (528)Other income (expense), net(678) (544) 101 (431) (65)Total other expense(3,459) (2,402) (1,850) (3,228) (593)Loss before provision for income taxes(11,983) (12,625) (20,195) (7,847) (4,370)Provision for income taxes(1,530) (1,039) 78 (708) 72Loss from continuing operations(13,513) (13,664) (20,117) (8,555) (4,298)Income (loss) from discontinued operations— — — (642) 1,791Net loss$(13,513) $(13,664) $(20,117) $(9,197) $(2,507)Preferred stock dividends and accretion— — (1,524) (98) (44)Net loss attributable to common shareholders$(13,513) $(13,664) $(21,641) $(9,295) $(2,551)Net loss per common share: Loss from continuing operations per common share, basic and diluted$(0.82) $(0.91) $(4.43) $(7.23) $(5.78)Income (loss) from discontinued operations per common share, basicand diluted$— $— $— $(0.54) $2.39Net loss per common share, basic and diluted$(0.82) $(0.91) $(4.43) $(7.77) $(3.39)Weighted-average common shares outstanding, basic and diluted16,472,799 14,939,601 4,889,901 1,196,668 751,41637Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. December 31, 2016 2015 2014 2013 2012 (dollars in thousands)Consolidated Balance Sheet Data: Cash and cash equivalents$28,758 $18,473 $30,988 4,703 3,892Property and equipment, net4,356 6,001 3,930 3,942 1,407Intangible assets, net28,512 31,526 34,751 34,747 26,388Goodwill69,097 47,422 45,146 33,630 21,093Total assets150,588 122,414 135,686 94,847 67,808Deferred revenue23,799 19,939 21,376 17,036 16,502Total liabilities91,575 62,144 64,289 60,191 44,495Redeemable convertible preferred stock— — — 50,538 27,492Total stockholders’ equity (deficit)59,013 60,270 71,397 (15,882) (4,179) Year Ended December 31, 2016 2015 2014 2013 2012 (dollars in thousands, except %)Other Financial Data: Annualized recurring revenue value at year-end(1)$63,968 $58,918 $56,800 $49,061 $27,093Annual net dollar retention rate(2)95% 90% 96% 90% n/aAdjusted EBITDA(3)$12,616 $4,143 $4,213 $3,576 $3,998(1)Annualized recurring revenue value at year-end. The value as of December 31 equals the monthly value of our recurring revenue contracts measuredas of December 31 multiplied by 12. This measure excludes the revenue value of certain uncontracted overage fees and on-demand service fees. See“Management’s Discussion and Analysis of Financial Condition and Results of Operations-Key Metrics” for additional discussion of this keymetric.(2)Annual net dollar retention rate. We define annual net dollar retention rate as of December 31 as the aggregate annualized recurring revenue valueat December 31 from those customers that were also customers as of December 31 of the prior fiscal year, divided by the aggregate annualizedrecurring revenue value from all customers as of December 31 of the prior fiscal year. See “Management’s Discussion and Analysis of FinancialCondition and Results of Operations-Key Metrics” for additional discussion of this key metric.(3)Adjusted EBITDA. We monitor our Adjusted EBITDA to help us evaluate the effectiveness and efficiency of our operations. Adjusted EBITDA is anon-GAAP financial measure. We define Adjusted EBITDA as net income (loss), calculated in accordance with GAAP, plus net income (loss) fromdiscontinued operations, depreciation and amortization expense, interest expense, net, other expense (income), net, provision for income taxes,stock-based compensation expense, acquisition-related expenses, non-recurring litigation costs, and purchase accounting adjustments for deferredrevenue. Prior to the filing of this Annual Report on Form 10-K, we did not include purchase accounting adjustments for deferred revenue as acomponent of Adjusted EBITDA, and as such, the prior year Adjusted EBITDA amounts presented herein have been recast to reflect the inclusion ofpurchase accounting adjustments for deferred revenue. 38Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The following table presents a reconciliation of net loss to Adjusted EBITDA: Year Ended December 31, 2016 2015 2014 2013 2012 (dollars in thousands)Net Loss$(13,513) $(13,664) $(20,117) $(9,197) $(2,507)Net income (loss) from discontinued operations— — — 642 (1,791)Depreciation and amortization expense9,794 8,451 7,457 5,310 2,472Interest expense, net2,781 1,858 1,951 2,797 528Other expense (income), net678 544 (101) 431 65Provision for (benefit from) income taxes1,530 1,039 (78) 708 (72)Stock-based compensation expense4,333 2,741 1,077 498 92Acquisition-related expense5,583 2,455 2,186 1,461 1,933Stock-based compensation expense - related party vendor— — 11,220 — —Nonrecurring litigation expense25 406 256 — —Purchase accounting deferred revenue discount1,405 313 362 926 3,278Adjusted EBITDA$12,616 $4,143 $4,213 $3,576 $3,998We believe that Adjusted EBITDA provides useful information to management, investors and others in understanding and evaluating our operatingresults for the following reasons:•Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance without regard to items thatcan 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, in the preparation of our annualoperating budget, as a measure of our operating performance, to assess the effectiveness of our business strategies and to communicate with ourboard of directors concerning our financial performance because Adjusted EBITDA eliminates the impact of items that we do not considerindicative of our core operating performance; and•Adjusted EBITDA provides more consistency and comparability with our past financial performance, facilitates period-to-period comparisons ofour operations and also facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement theirGAAP results.Adjusted EBITDA should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented inaccordance with GAAP. The use of Adjusted EBITDA as an analytical tool has limitations such as:•depreciation and amortization are non-cash charges, and the assets being depreciated or amortized will often have to be replaced in the future andAdjusted EBITDA does not reflect cash requirements for such replacements; however, much of the depreciation and amortization currently reflectedrelates to amortization of acquired intangible assets as a result of business combination purchase accounting adjustments, which will not need to bereplaced in the future;•Adjusted EBITDA may not reflect changes in, or cash requirements for, our working capital needs or contractual commitments;•Adjusted EBITDA does not reflect the potentially dilutive impact of stock-based compensation;•Adjusted EBITDA does not reflect interest or tax payments that could reduce cash available for use; and39Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.•other companies, including companies in our industry, might calculate Adjusted EBITDA or similarly titled measures differently, which reducestheir usefulness as comparative measures.Because of these limitations, you should consider Adjusted EBITDA together with other financial performance measures, including various cash flowmetrics, net loss and our other GAAP results.The following tables present stock-based compensation, depreciation and amortization included in the respective line items in our Consolidated Statement ofOperations: Year Ended December 31, 2016 2015 2014 2013 2012 (dollars in thousands)Stock-based compensation: Cost of revenue$44 $42 $49 $16 $—Research and development204 203 61 12 —Sales and marketing105 65 39 15 —General and administrative3,980 2,431 928 455 92Total$4,333 $2,741 $1,077 $498 $92 Year Ended December 31, 2016 2015 2014 2013 2012 (dollars in thousands)Depreciation: Cost of Revenue$2,030 $1,800 $1,303 $455 $—General and administrative657 452 987 348 325Total$2,687 $2,252 $2,290 $803 $325 Year Ended December 31, 2016 2015 2014 2013 2012 (dollars in thousands)Amortization: Cost of Revenue$2,473 $2,116 $1,185 $1,185 $662General and administrative4,634 4,083 3,322 3,322 1,487Total$7,107 $6,199 $4,507 $4,507 $2,149Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsYou should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financialstatements and the notes thereto included elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statementsthat reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors thatcould cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in Item 1A:“Risk Factors.”This section and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties. Forward-looking statements may be identified by the use of forward-looking words such as “anticipate,” “believe,” “may,” “will,” “continue,” “seek,” “estimate,”“intend,” “hope,” “predict,” “could,” “should,” “would,” “project,” “plan,” “expect” or the negative or plural of these words or similar40Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.expressions, although not all forward-looking statements contain these words. Forward-looking statements are not guarantees of future performance andour actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include,but are not limited to, those discussed in the subsection entitled Item 1A: “Risk Factors” above, which are incorporated herein by reference. The followingdiscussion should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8: “Financial Statements andSupplementary Data” of this Annual Report on Form 10-K. All information presented herein is based on our fiscal calendar. Unless otherwise stated,references in this report to particular years or quarters refer to our fiscal years ended December 31 and the associated quarters of those fiscal years. Weassume no obligation to revise or update any forward-looking statements for any reason, except as required by law.OverviewWe provide cloud-based enterprise work management software. We define enterprise work management software as software applications that enableorganizations to plan, manage and execute projects and work. Our family of applications enables users to manage their projects, professional workforce andIT investments, automate document-intensive business processes and effectively engage with their customers, prospects and community via the web andmobile technologies.The continued growth of an information-based economy has given rise to a large and growing group of knowledge workers who operate in dynamicwork environments as part of geographically dispersed and virtual teams. We believe that manual processes and legacy on- premise enterprise systems areinsufficient to address the needs of the modern work environment. In order for knowledge workers to be successful, they need to interact with intuitiveenterprise work systems in a collaborative way, including real-time access. Today, legacy processes and systems are being disrupted and replaced by cloud-based enterprise work management software that improves visibility, collaboration and productivity.In response to these changes, we are providing organizations and their knowledge workers with software applications that better align resources withbusiness objectives and increase visibility, governance, collaboration, quality of customer experience and responsiveness to changes in the businessenvironment. This results in increased work capacity, higher productivity, better execution and greater levels of customer engagement. Our applications areeasy-to-use, scalable and offer real-time collaboration for knowledge workers distributed on a local or global scale. Our applications address enterprise workchallenges in the following categories:•Project & Information Technology (IT) Management. Enables users to manage their organization’s projects, professional workforce and IT costs.•Workflow Automation. Enables users to automate document-intensive workflow business processes across their enterprise and supply chain.•Digital Engagement. Enables users to effectively engage with their customers, prospects and community via the web and mobile technologies.We sell our software applications primarily through a direct sales organization comprised of inside sales and field sales personnel. In addition to ourdirect sales organization, we have an indirect sales organization, which sells to distributors and value-added resellers. We employ a land-and-expand go-to-market strategy. After we demonstrate the value of an initial application to a customer, our sales and account management teams work to expand the adoptionof that initial application across the customer, as well as cross-sell additional applications to address other enterprise work management needs of thecustomer. Our customer success organization supports our direct sales efforts by managing the post-sale customer lifecycle.Our subscription agreements are typically sold either on a per-seat basis or on a minimum contracted volume basis with overage fees billed in arrears,depending on the application being sold. We service customers ranging from large global corporations and government agencies to small- and medium-sizedbusinesses. We have more than 2,500 customers with over 250,000 users across a broad range of industries, including financial services, retail, technology,manufacturing, education, consumer goods, media, telecommunications, government, food and beverage, healthcare and life sciences.41Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Through a series of acquisitions and integrations, we have established a diverse family of software applications under the Upland brand, each of whichaddresses a specific enterprise work management need. Our revenue has grown from $22.8 million in fiscal 2012 to $74.8 million in fiscal 2016, representinga 228% period-over-period growth rate. See Note 15 of the Notes to Consolidated Financial Statements for more information regarding our revenue as itrelates to domestic and foreign operations.Our operating results in a given period can fluctuate based on the mix of subscription and support, perpetual license and professional services revenue.For the years ended December 31, 2016, 2015 and 2014, our subscription and support revenue accounted for 88%, 82%, and 75%, respectively of our totalrevenue in both periods. Historically, we have sold certain of our applications under perpetual licenses, which also are paid in advance. For the years endedDecember 31, 2016, 2015 and 2014, our perpetual license revenue accounted for 2%, 4%, and 4% of our total revenue, respectively. The support agreementsrelated to our perpetual licenses are one-year in duration and entitle the customer to support and unspecified upgrades. The revenue related to such supportagreements is included as part of our subscription and support revenue. Professional services revenue consists of fees related to implementation, dataextraction, integration and configuration and training on our applications. For the years ended December 31, 2016, 2015 and 2014, our professional servicesrevenue accounted for 10%, 14%, and 21%, respectively.To support continued growth, we intend to pursue acquisitions of complementary technologies, products and businesses. This will expand our productfamilies, customer base, and market access resulting in increased benefits of scale. We will prioritize acquisitions within the product categories we currentlyparticipate in, including Project & IT Management, Workflow Automation, and Digital Engagement. Consistent with our growth strategy, we have madetwelve acquisitions in the five years ending December 31, 2016, excluding an additional acquisition in January 2017. See Note 17 of the Notes toConsolidated Financial Statements for more information regarding events occurring after December 31, 2016.2012 AcquisitionsPowerSteering. In February 2012, we acquired the business of PowerSteering Software, Inc., or PowerSteering, a provider of cloud-based program andportfolio management software, for $13.0 million. The acquisition of PowerSteering enabled our customers to gain high-level visibility across theirorganizations and improve top-down governance in management of programs, initiatives, investments and projects.Tenrox. In February 2012, we acquired the business of Tenrox Inc., or Tenrox, a provider of cloud-based professional services automation software, for$15.3 million. The acquisition of Tenrox provided us with additional access to the professional services market and provided our customers with the abilityto more effectively manage their knowledge workers to better track work, expenses and client billing while improving scheduling, utilization and alignmentof human capital. In addition, following the Tenrox acquisition, we began selling Timesheet.com, a Tenrox product for professional services automation, as aseparate application.EPM Live. In November 2012, we acquired the business of LMR Solutions, LLC, dba EPM Live, or EPM Live, a provider of cloud-based and perpetuallicense-based project management and collaboration software, with a combination of cash, seller notes and equity, for total consideration of $7.7 million. Theacquisition of EPM Live added a software application focused on improving collaboration and the execution of both projects and unstructured work. EPMLive was sold in March, 2016 in conjunction with our acquisition of HipCricket, Inc. as described below.2013 AcquisitionsFileBound. In May 2013, we acquired the businesses of FileBound Solutions, Inc. and Marex Group, Inc., together FileBound, a provider of cloud-based and perpetual license-based workflow automation and enterprise content management software, with a combination of cash, seller notes and equity, fortotal consideration of $14.7 million. The acquisition of FileBound provided our customers the ability to automate document-based workflows and controlaccess and distribution of their content to boost productivity, encourage collaboration and improve compliance.ComSci. In November 2013, we acquired the business of ComSci LLC, or ComSci, a provider of cloud-based financial management software, with acombination of cash and equity, for total consideration of $7.6 million, with42Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.additional contingent consideration payable if certain performance targets are achieved. The acquisition of ComSci enabled our customers to have visibilityinto the cost, quality and value of internal services delivered within their organizations.Clickability. In December 2013, we acquired the business of Clickability, Inc., or Clickability, a cloud-based platform for web content management,for $12.3 million. The acquisition of Clickability provided an enterprise content management software application that is used by enterprise marketers andmedia companies to create, maintain and deliver websites that shape visitor experiences and empower non-technical staff to create, management, publish,analyze and refine content and social media assets without information technology intervention. For accounting purposes, the acquisition of Clickability wasrecorded as of December 31, 2013 and, accordingly, the operations of Clickability had no impact on our statement of operations.2014 AcquisitionsSolution Q. In November 2014, the Company acquired 100% of the outstanding capital of Solution Q Inc. for total purchase consideration of $6.1million, which includes cash of $4.5 million, net of $0.4 million of cash acquired, and 150,977 shares of the Company’s common stock with a fair value of$1.6 million. Solution Q provides mid-market organizations an easy-to-use, turnkey solution for their project management and portfolio visibility needs.Mobile Commons. In December 2014, the Company acquired 100% of the outstanding capital of Mobile Commons, Inc. (Mobile Commons) for totalpurchase consideration of $10.2 million including cash of $5.7 million, net of $0.3 million of cash acquired, 386,253 shares of common stock valued at $4.5million and excluding potential additional consideration for incremental additional revenue described below. The Company agreed to pay additionalconsideration of up to $1.5 million in both cash and common stock to the selling shareholders of Mobile Commons based on the achievement of certainincremental revenue targets during fiscal 2015. The acquisition-date fair value of the contingent payment was measured based on the probability-adjustedpresent value of the consideration expected to be transferred, which amounted to $0.5 million. Mobile Commons’ enterprise-class application drives andmanages digital engagement through two-way SMS programs and campaigns.2015 AcquisitionsUltriva. On November 13, 2015, the Company acquired 100% of the outstanding capital of Ultriva, Inc. (Ultriva) for total purchase consideration of$7.2 million, which included cash of $5.6 million, net of $0.4 million of cash acquired, 179,298 shares of the Company’s common stock with a fair value of$1.4 million, and an additional $200,000 in shares of common stock held in escrow, subject to indemnification claims, one year from the date of theacquisition. In November 2016, the Company issued 24,587 shares of common stock valued at approximately $200,000 as a result of the escrow release.Ultriva provides cloud-based supply chain collaboration software.2016 AcquisitionsLeadLander. On January 7, 2016, Upland completed its purchase of substantially all of the assets of LeadLander, Inc. (LeadLander), a websiteanalytics provider. The purchase price consideration paid was approximately $8.0 million in cash payable at closing (net of $0.4 million of cash acquired)and a $1.2 million cash holdback payable in 12 months (subject to indemnification claims). The foregoing excludes additional potential earnout paymentstied to performance-based conditions. In addition to the cash consideration described above, the Asset Purchase Agreement included a contingent shareconsideration component pursuant to which Upland issued an aggregate of $2.4 million common stock in July 2016.HipCricket. On March 14, 2016, Upland completed its purchase of substantially all of the assets of HipCricket, Inc., a cloud-based mobile messagingsoftware provider. The consideration paid to the seller consisted of our issuance of one million shares of our common stock and the transfer of our EPM Liveproduct business. The value of the shares on the closing date of the transaction was approximately $5.7 million and the fair value of our EPM Live productbusiness was approximately $5.9 million. Prior to the transaction, HipCricket was owned by an affiliate of ESW Capital, LLC, which is a shareholder ofUpland. Raymond James & Co. provided a fairness opinion to Upland in connection with the transaction.43Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Advanced Processing & Imaging, Inc. On April 27, 2016, Upland acquired Advanced Processing & Imaging, Inc., a content management platformdriving workflow in governments and schools. The purchase price consideration consisted of $4.0 million in cash payable at closing (net of $0.2 million ofcash acquired), and a $0.8 million cash holdback payable in 12 months (subject to indemnification claims). 2017 AcquisitionsOmtool. On January 11, 2017, Upland completed its acquisition of Omtool, Ltd., an enterprise document capture, fax, and workflow solutioncompany. The purchase price paid for Omtool was $19.2 million (net of cash acquired).Our acquisitions may have a material adverse impact on our results of operations, including a potential material adverse impact on our cost ofrevenue in the short term, as we seek to integrate our acquired businesses over the following six to twelve months in order to achieve additional operatingefficiencies. In addition, as we grow our business, we continue to face many challenges and risks. We might encounter difficulties identifying, acquiring andintegrating complementary products, technologies and businesses. Over time, as competition increases we may experience pricing pressure. We also mayexperience seat downgrades or a reduction in minimum contracted volume that could negatively impact our business. Seat downgrades or reductions inminimum contracted volume could occur for several reasons, including dissatisfaction with our prices or features relative to competitive offerings, reductionsin our customers’ spending levels, unused seats or minimum contracted volume or limited adoption by our customers of our applications. Our strategicinitiatives will require expenditure of capital and the attention of management, and we may not succeed in executing on our growth plan.Key MetricsIn addition to the GAAP financial measures described below in “—Components of Operating Results,” we regularly review the following key metricsto evaluate and identify trends in our business, measure our performance, prepare financial projections and make strategic decisions: Year Ended December 31, 2016 2015 2014 2013 2012 (dollars in thousands, except %)Other Financial Data: Annualized recurring revenue value at year-end(1)$63,968 $58,918 $56,800 $49,061 $27,093Annual net dollar retention rate(2)95% 90% 96% 90% n/aAdjusted EBITDA(3)$12,616 $4,143 $4,213 $3,576 $3,998(1)Annualized recurring revenue value at year-end. The value as of December 31 equals the monthly value of our recurring revenue contracts measuredas of December 31 multiplied by 12. This measure excludes the revenue value of certain uncontracted overage fees and on-demand service fees. See“Management’s Discussion and Analysis of Financial Condition and Results of Operations-Key Metrics” for additional discussion of this keymetric.(2)Annual net dollar retention rate. We define annual net dollar retention rate as of December 31 as the aggregate annualized recurring revenue valueat December 31 from those customers that were also customers as of December 31 of the prior fiscal year, divided by the aggregate annualizedrecurring revenue value from all customers as of December 31 of the prior fiscal year. See “Management’s Discussion and Analysis of FinancialCondition and Results of Operations-Key Metrics” for additional discussion of this key metric.44Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(3)Adjusted EBITDA. We monitor our Adjusted EBITDA to help us evaluate the effectiveness and efficiency of our operations. Adjusted EBITDA is anon-GAAP financial measure. We define Adjusted EBITDA as net income (loss), calculated in accordance with GAAP, plus net income (loss) fromdiscontinued operations, depreciation and amortization expense, interest expense, net, other expense (income), net, provision for income taxes,stock-based compensation expense, acquisition-related expenses, non-recurring litigation costs, and purchase accounting adjustments for deferredrevenue. Prior to the filing of this Annual Report on Form 10-K, we did not include purchase accounting adjustments for deferred revenue as acomponent of Adjusted EBITDA, and as such, the prior year Adjusted EBITDA amounts presented herein have been recast to reflect the inclusion ofpurchase accounting adjustments for deferred revenue.45Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The following table presents a reconciliation of net loss from continuing operations, the most comparable GAAP measure, to Adjusted EBITDA foreach of the periods indicated. Year Ended December 31, 2016 2015 2014 2013 2012 (dollars in thousands) Net loss$(13,513) $(13,664) $(20,117) $(9,197) $(2,507)Income (loss) from discontinued operations— — — 642 (1,791)Depreciation and amortization expense9,794 8,452 7,457 5,310 2,472Interest expense, net2,781 1,858 1,951 2,797 528Other expense (income), net678 544 (101) 431 65Provision for income taxes1,530 1,039 (78) 708 (72)Stock-based compensation expense4,333 2,741 1,077 498 92Acquisition-related expenses5,583 2,455 2,186 1,461 1,933Stock-based compensation expense --- related party vendor— — 11,220 — —Non-recurring litigation costs25 406 256 — —Purchase accounting deferred revenue discount1,405 313 362 926 3,278Adjusted EBITDA$12,616 $4,144 $4,213 $3,576 $3,998We believe that Adjusted EBITDA provides useful information to management, investors and others in understanding and evaluating our operatingresults for the following reasons:•Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance without regard to itemsthat can vary substantially from company to company depending upon their financing, capital structures and the method by which assets wereacquired;•our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, in the preparation of our annualoperating budget, as a measure of our operating performance, to assess the effectiveness of our business strategies and to communicate withour board of directors concerning our financial performance because Adjusted EBITDA eliminates the impact of items that we do not considerindicative of our core operating performance;•Adjusted EBITDA provides more consistency and comparability with our past financial performance, facilitates period-to-period comparisonsof our operations and also facilitates comparisons with other companies, many of which use similar non-GAAP financial measures tosupplement their GAAP results; and•Adjusted EBITDA should not be considered as an alternative to net loss or any other measure of financial performance calculated andpresented in accordance with GAAP. The use of Adjusted EBITDA as an analytical tool has limitations such as:•depreciation and amortization are non-cash charges, and the assets being depreciated or amortized will often have to be replaced in the futureand Adjusted EBITDA does not reflect cash requirements for such replacements; however, much of the depreciation and amortization currentlyreflected relates to amortization of acquired intangible assets as a result of business combination purchase accounting adjustments, which willnot need to be replaced in the future;•Adjusted EBITDA may not reflect changes in, or cash requirements for, our working capital needs or contractual commitments;•Adjusted EBITDA does not reflect the potentially dilutive impact of stock-based compensation;•Adjusted EBITDA does not reflect interest or tax payments that could reduce cash available for use; and,46Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.•other companies, including companies in our industry, might calculate Adjusted EBITDA or similarly titled measures differently, whichreduces their usefulness as comparative measures.Because of these limitations, you should consider Adjusted EBITDA together with other financial performance measures, including various cash flowmetrics, net loss and our other GAAP results.Components of Operating ResultsRevenueSubscription and support revenue. We derive our subscription revenue from fees paid to us by our customers for use of our cloud-based applications.We recognize the revenue associated with subscription agreements ratably over the term of the agreement, provided all criteria required for revenuerecognition have been met. Our subscription agreements are typically one to three years.Our support revenue consists of maintenance fees associated with our perpetual licenses and hosting fees paid to us by our customers. Typically, whenpurchasing a perpetual license, a customer also purchases maintenance for which we charge a fee, priced as a percentage of the perpetual license fee.Maintenance agreements include the right to support and unspecified upgrades. We recognize the revenue associated with maintenance ratably over the termof the contract. In limited instances, at the customer’s option, we may host the software purchased by a customer under a perpetual license on systems at ourthird-party data centers.Perpetual license revenue. Perpetual license revenue reflects the revenue recognized from sales of perpetual licenses to new customers and additionalperpetual licenses to existing customers. We generally recognize the license fee portion of the arrangement up-front, provided all revenue recognition criteriaare satisfied.Professional services revenue. Professional services revenue consists of fees related to implementation, data extraction, integration and configurationand training on our applications. We generally recognize the revenue associated with these professional services on a time and materials basis as we deliverthe services or provide training to our customers.Cost of RevenueCost of product revenue. Cost of product revenue consists primarily of personnel and related costs of our customer success and cloud operations teams,including salaries, benefits, bonuses, payroll taxes, stock-based compensation and allocated overhead, as well as software license fees, hosting costs, Internetconnectivity and depreciation expenses directly related to delivering our applications. We expect that cost of revenues may increase in the future dependingon the growth rate of our new customers and billings and our need to support the implementation, hosting and support of those new customers. We intend tocontinue to invest additional resources in expanding the delivery capability of our applications. As we add hosting infrastructure capacity and supportpersonnel in advance of anticipated growth, our cost of product revenue will increase and if such anticipated revenue growth does not occur, our productgross profit will be adversely affected both in terms of absolute dollars and as a percentage of total revenues in any particular quarterly or annual period. Ourcost of product revenue is generally expensed as the costs are incurred.Cost of professional services revenue. Cost of professional services revenue consists primarily of personnel and related costs, including salaries,benefits, bonuses, payroll taxes, stock-based compensation and allocated overhead, as well as the costs of contracted third-party vendors and reimbursableexpenses. As most of our personnel are employed on a full-time basis, our cost of professional services revenue is largely fixed in the short-term, while ourprofessional services revenue may fluctuate, leading to fluctuations in professional services gross profit. We expect that cost of professional services as apercentage of total revenues could fluctuate from period to period depending on the growth of our professional services business, the timing of sales ofapplications, and any associated costs relating to the delivery of services. Our cost of professional services revenue is generally expensed as costs areincurred.47Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Operating ExpensesOur operating expenses are classified into six categories: sales and marketing, research and development, refundable Canadian tax credits, general andadministrative, depreciation and amortization and acquisition-related expenses. For each category, other than refundable Canadian tax credits anddepreciation and amortization, the largest expense component is personnel and related costs, which includes salaries, employee benefit costs, bonuses,commissions, stock-based compensation and payroll taxes. Operating expenses also include allocated overhead costs for facilities, which are allocated toeach department based on relative department headcount. Operating expenses are generally recognized as incurred.Sales and marketing. Sales and marketing expenses primarily consist of personnel and related costs for our sales and marketing staff, includingsalaries, benefits, commissions, bonuses, payroll taxes, stock-based compensation and allocated overhead, as well as costs of promotional events, corporatecommunications, online marketing, product marketing and other brand-building activities. We expense sales commissions when the initial customer contractis signed and upon any renewal as our obligation to pay a sales commission arises at these times. Sales and marketing expenses may fluctuate as a percentageof total revenues for a variety of reasons including due to the timing of such expenses, in any particular quarterly or annual period.Research and development. Research and development expenses primarily consist of personnel and related costs of our research and developmentstaff, including salaries, benefits, bonuses, payroll taxes, stock-based compensation, allocated overhead and costs of certain third-party contractors. Researchand development costs related to the development of our software applications are generally recognized as incurred. For example, we are parties to atechnology services agreement pursuant to which we generally recognize expenses for services as they are received. See Note 16 of the Notes to ConsolidatedFinancial Statements for more information regarding how expenses under such agreement are recognized. We have devoted our product development effortsprimarily to enhancing the functionality, and expanding the capabilities, of our applications.Refundable Canadian tax credits. Investment tax credits are accounted for as a reduction of research and development costs. Credits are accrued in theyear in which the research and development costs of the capital expenditures are incurred, provided that we are reasonably certain that the credits will bereceived. The investment tax credit must be examined and approved by the tax authorities, and it is possible that the amounts granted will differ from theamounts recorded.General and administrative. General and administrative expenses primarily consist of personnel and related costs for our executive, administrative,finance, information technology, legal, accounting and human resource staff, including salaries, benefits, bonuses, payroll taxes, stock-based compensation,allocated overhead, professional fees and other corporate expenses. We have recently incurred, and expect to continue to incur, additional expenses as wegrow our operations, including potentially higher legal, corporate insurance, accounting and auditing expenses, and the additional costs of enhancing andmaintaining our internal control environment. General and administrative expenses may fluctuate as a percentage of revenue, and overtime we expect thatgeneral and administrative expenses will decrease as a percent of revenue due to operational efficiencies.Depreciation and amortization. Depreciation and amortization expenses primarily consist of depreciation and amortization of acquired intangibleassets as a result of business combination purchase accounting adjustments. The valuation of identifiable intangible assets reflects management’s estimatesbased on, among other factors, use of established valuation methods. Customer relationships are valued using an income approach, which estimates fair valuebased on the earnings and cash flow capacity of the subject asset and are amortized over a seven to ten-year period. The value of the trade name intangiblesare determined using a relief from royalty method, which estimates fair value based on the value the owner of the asset receives from not having to pay aroyalty to use the asset and are amortized over mostly a three-year period. Developed technology is valued using a cost-to-recreate approach and is amortizedover a four- to seven-year period.Acquisition-related expenses. Acquisition-related expenses consist of one-time costs in connection with each of our acquisitions, including legal fees,accounting fees, financing fees, restructuring costs, integration costs and other transactional fees and bonuses. We intend to continue executing our focusedstrategy of acquisitions to48Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.enhance the features and functionality of our applications, expand our customer base and provide access to new markets and increased benefits of scale.Total Other ExpenseTotal other expense consists primarily of changes in the estimated fair value of our preferred stock warrant liabilities, amortization of deferredfinancing costs over the term of the related loan facility, revaluation of contingent consideration, and interest expense on outstanding debt, includingamortization of debt discount and effect of beneficial conversion features in our convertible promissory notes payable.Income TaxesBecause we have not generated domestic net income in any period to date, we have recorded a full valuation allowance against our domestic netdeferred tax assets, exclusive of tax deductible goodwill. We have historically not recorded any material provision for federal or state income taxes, otherthan deferred taxes related to tax deductible goodwill and current taxes in certain separate company filing states. The balance of the tax provision for fiscalyears ended December 31, 2016, 2015, and 2014, outside of tax deductible goodwill and current taxes in separate filing states, is related to foreign incometaxes, primarily operations of our Canadian subsidiaries. Realization of any of our domestic deferred tax assets depends upon future earnings, the timing andamount of which are uncertain. Based on analysis of acquired net operating losses, utilization of our net operating losses will be subject to annual limitationsdue to the ownership change rules under the Internal Revenue Code of 1986, as amended, or the Code, and similar state provisions. In the event we havesubsequent changes in ownership, the availability of net operating losses and research and development credit carryovers could be further limited.49Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Results of OperationsConsolidated Statements of Operations DataThe following tables set forth our results of operations for the specified periods, as well as our results of operations for the specified periods as apercentage of revenue. The period-to-period comparisons of results of operations are not necessarily indicative of results for future periods. Year Ended December 31, 2016 2015 2014 AmountPercent of Revenue AmountPercent ofRevenue AmountPercent ofRevenue (dollars in thousands, except share and per share data)Revenue: Subscription and support$65,552 88% $57,193 82% $48,625 75%Perpetual license1,650 2% 2,805 4% 2,787 4%Total product revenue67,202 90% 59,998 86% 51,412 79%Professional services7,565 10% 9,913 14% 13,162 21%Total revenue74,767 100% 69,911 100% 64,574 100%Cost of revenue: Subscription and support (1)(2)22,734 30% 19,586 28% 14,042 22%Professional services4,831 7% 7,085 10% 9,079 14%Total cost of revenue27,565 37% 26,671 38% 23,121 36%Gross profit47,202 63% 43,240 62% 41,453 64%Operating expenses: Sales and marketing (1)12,160 16% 12,965 19% 14,670 23%Research and development (1)14,919 20% 15,778 23% 26,165 41%Refundable Canadian tax credits(513) (1)% (470) (1)% (1,094) (2)%General and administrative (1)18,286 24% 18,201 26% 13,561 21%Depreciation and amortization5,291 7% 4,534 6% 4,310 7%Acquisition-related expenses5,583 9% 2,455 3% 2,186 3%Total operating expenses55,726 75% 53,463 76% 59,798 93%Loss from operations(8,524) (12)% (10,223) (14)% (18,345) (29)%Other Expense: Interest expense, net(2,781) (4)% (1,858) (3)% (1,951) (3)%Other expense, net(678) (1)% (544) —% 101 —%Total other expense(3,459) (5)% (2,402) (3)% (1,850) (3)%Loss before provision for income taxes(11,983) (17)% (12,625) (17)% (20,195) (32)%Provision for income taxes(1,530) (1)% (1,039) (3)% 78 1%Loss from continuing operations(13,513) (18)% (13,664) (20)% (20,117) (31)%Income (loss) from discontinued operations— — — Net loss$(13,513) (18)% $(13,664) (20)% $(20,117) (31)%Preferred stock dividends and accretion— —% — —% (1,524) (3)%Net loss attributable to common shareholders (3)$(13,513) (18)% $(13,664) (20)% $(21,641) (34)%Net loss per common share: Loss from continuing operations per common share, basic and diluted$(0.82) $(0.91) $(4.43) Loss from discontinued operations per common share, basic and diluted$— $— $— Loss per common share, basic and diluted$(0.82) $(0.91) $(4.43) Weighted-average common shares outstanding, basic and diluted (3)16,472,799 14,939,601 4,889,901 (1)Includes stock-based compensation.(2)Includes depreciation and amortization of $3,916,000, $3,147,000, and $1,640,000 in 2015, 2014, and 2013, respectively.(3)See Note 8 to our consolidated financial statements included elsewhere in this 10-K for a discussion and reconciliation of historical net loss attributable to common stockholders and weighted average sharesoutstanding for historical basic and diluted net loss per share calculations.50Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Comparison of Fiscal Years Ended December 31, 2016 and 2015RevenueYear Ended December 31,20162015ChangeAmountPercent of RevenueAmountPercent of RevenueAmount% Change(dollars in thousands)Revenue:Subscription and support$65,55288%$57,19382%$8,35915%Perpetual license1,6502%2,8054%(1,155)(41)%Total product revenue67,20290%59,99886%7,20412%Professional services7,56510%9,91314%(2,348)(24)%Total revenue$74,767100%$69,911100%$4,8567%Total revenue was $74.8 million in 2016, compared to $69.9 million in 2015, an increase of $4.9 million, or 7%. Of the increase in total revenue, $11.7million was due to the acquisitions we closed in 2015 and 2016. Total revenue also declined by $6.0 million due to the divestiture of the EPM Live productline at the end of February 2016 and by $0.7 million from organic total revenues, or 1% in 2016 compared to 2015 due the change in the foreign currencyexchange rate between the Canadian dollar versus the U.S. dollar for those periods of $0.6 million. Therefore, on a constant currency basis, our organic totalrevenue decreased by $0.1 million.Subscription and support revenue was $65.6 million in 2016, compared to $57.2 million in 2015, an increase of $8.4 million, or 15%. Of the increasein subscription and support revenue, $10.6 million was due to the acquisitions we closed in 2015 and 2016. Subscription and support revenue declined by$2.9 million due to the divestiture of the EPM Live product line at the end of February 2016. The organic subscription and support revenue increased by $0.7million, which includes a negative impact of $0.6 million in 2016 compared to 2015 due to the change in the foreign currency exchange rate between theCanadian dollar versus the U.S. dollar. Therefore, on a constant currency basis, our organic subscription and support revenue increased by $1.3 million, or2%.Perpetual license revenue was $1.7 million in 2016, compared to $2.8 million in 2015, a decrease of $1.1 million, or 41%. The acquisitions we closedin 2015 and 2016 contributed a $0.1 million increase in perpetual license revenue. Perpetual license revenue declined by $0.6 million due to the divestitureof the EPM Live product line at the end of February 2016 . The organic perpetual revenue declined by $0.6 million, or 2% with an immaterial impact fromchanges in the foreign currency exchange rate between the Canadian dollar versus the U.S. dollar on perpetual license revenue.Professional services revenue was $7.6 million in 2016, compared to $9.9 million in 2015, a decrease of $2.3 million, or 24%. The acquisitions weclosed in 2015 and 2016 contributed a $1.0 million increase to professional services revenue. Professional services revenue declined by $2.5 million due tothe divestiture of the EPM Live product line at the end of February 2016. The organic professional services revenue declined by $0.8 million which includeda decline of $0.1 million due to the change in the foreign currency exchange rate between the Canadian dollar versus the U.S. dollar in 2016 compared to2015. Therefore, on a constant currency basis, our organic professional services revenue decreased by $0.7 million, or 7%.51Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Cost of Revenue and Gross Profit PercentageYear Ended December 31,20162015ChangeAmountPercent of RevenueAmountPercent of RevenueAmount% Change(dollars in thousands)Cost of revenue:Subscription and support (1)$22,73430%$19,58628%$3,14816%Professional services4,8317%7,08510%(2,254)(32)%Total cost of revenue27,56537%26,67138%8943%Gross profit$47,20263%$43,24062%$3,9629%(1) Includes depreciation and amortization expense as follows:Depreciation$2,030 3% $1,800 3% $230 13%Amortization$2,473 3% $2,116 3% $357 17%Cost of subscription and support revenue was $22.7 million in 2016, compared to $19.6 million in 2015, an increase of $3.1 million, or 16%. Theorganic portion of our business contributed to a $3.8 million increase. Of the $3.8 million increase, $3.5 million was due to mobile messaging and short codeleasing costs driven by higher mobile messaging volume and activity with the remaining $0.3 million increase from one-time charges related to theremaining unused portion of certain data center contracts as our cloud infrastructure was consolidated. The divestiture of the EPM Live product line in Q12016 contributed to $1.7 million decrease in cost of subscription and support revenue. Of the $1.7 million decrease, $0.7 million was attributable to reducedpersonnel and related costs, $0.2 million from depreciation and amortization, $0.2 million from reduced third party software and equipment costs and theremaining $0.2 million from miscellaneous costs. The 2015 and 2016 acquisitions contributed to a $1.2 million increase in cost of subscription and supportrevenue. Of the $1.2 million increase, $0.4 million was due to higher amortization of intangibles, $0.4 million increase in personnel and related costs, $0.3million increase in data center and hosting costs and the remaining $0.2 million from miscellaneous costs.Cost of professional services revenue was $4.8 million in 2016, compared to $7.1 million in 2015, a decrease of $2.3 million, or 32%. Cost ofprofessional services revenue for organic business decreased $1.0 million driven by a $0.7 million reduction in personnel and related costs, $0.2 millionreduction in contractor fees and $0.1 million reduction in miscellaneous costs which are the result of our planned operating efficiencies. The divestiture ofthe EPM Live product line at the end of February 2016 contributed to $1.8 million decrease in cost. Of the $1.8 million decrease, $1.4 million wasattributable to reduced personnel and related costs, $0.2 million from reduced facility expenses and $0.3 million from miscellaneous costs. The acquisitionswe closed in 2015 and 2016 contributed a $0.6 million increase in cost of professional services revenue. Of the $0.6 million increase, $0.3 million wasattributable to personnel and related costs, $0.1 million attributable to contractor fees, and $0.2 million attributable to miscellaneous costs.52Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Operating ExpensesSales and Marketing ExpenseYear Ended December 31,20162015ChangeAmountPercent of RevenueAmountPercent of RevenueAmount% Change(dollars in thousands)Sales and marketing$12,16016%$12,96519%$(805)(6)%Sales and marketing expense was $12.2 million in 2016, compared to $13.0 million in 2015, a decrease of $0.8 million, or 6%. Of the decrease in salesand marketing expense, $1.5 million was attributable to the organic business primarily due to a decrease in sales and solution consultant personnel andrelated cost of $1.2 million which is the result of our planned operating efficiencies, and reduced spend of $0.3 million for general marketing. The divestitureof the EPM Live product line in Q1 2016 contributed to a decrease of $1.4 million in sales and marketing expense comprised of $0.5 million reduction inpersonnel and related expenses, $0.3 million of bad debt, $0.2 million of commissions, $0.2 million of marketing program spend and $0.3 million ofmiscellaneous expenses. The acquisitions we closed in 2015 and 2016 contributed an increase of $2.1 million in sales and marketing expense comprised of$1.4 million of sales commission, $0.4 million of personnel and related costs, and $0.4 million of miscellaneous expenses.Research and Development ExpenseYear Ended December 31,20162015ChangeAmountPercent ofRevenueAmountPercent ofRevenueAmount% Change(dollars in thousands)Research and development:Research and development$14,91920%$15,77823%$(859)(5)%Refundable Canadian tax credits(513)(1)%(470)(1)%(43)9%Total research and development$14,40619%$15,30822%$(902)(6)%Research and development expense was $14.9 million in 2016, compared to $15.8 million in 2015, a decrease of $0.9 million, or 5%. The organicportion of our business contributed to a $0.9 million decrease in research and development costs from reduced personnel and related costs as a result of ourplanned operating efficiencies. The divestiture of the EPM Live product in February 2016 contributed a decrease of $0.9 million in research anddevelopment expense comprised of $0.6 million of personnel and related costs and $0.3 million of contractor fees. The $0.9 million reduction in research anddevelopment from the divestiture of the EPM Live product line was offset by $0.9 million increase in research and development from the acquisitions weclosed in 2015 and 2016. This increase from acquisitions was comprised of $0.6 million in personnel and related costs, $0.1 million in contractor fees, and$0.2 million of miscellaneous expenses.Refundable Canadian tax credits were $0.5 million in 2016, or flat compared to $0.5 million in 2015.53Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.General and Administrative ExpenseYear Ended December 31,20162015ChangeAmountPercent of RevenueAmountPercent of RevenueAmount% Change(dollars in thousands)General and administrative$18,28624%$18,20126%$85—%General and administrative expense was $18.3 million in 2016, were flat compared to $18.2 million in 2015. General and administrative costs for theorganic portion of our business was flat and included increases due to a $1.4 million increase in stock compensation expense and $0.2 million from facilitycosts, related to costs of closure for office locations acquired in acquisitions, offset by decreases of $0.5 million from lower use of third parties, $0.5 millionreductions in people-related costs, a $0.4 million reduction in non-recurring litigation costs, and $0.2 million from other factors. The divestiture of the EPMLive product in February 2016 contributed a decrease of $0.3 million in general and administrative expense, which was offset by a $0.3 million increase ingeneral and administrative expense from the acquisitions we closed in 2015 and 2016.Depreciation and Amortization ExpenseYear Ended December 31,20162015ChangeAmountPercent ofRevenueAmountPercent ofRevenueAmount% Change(dollars in thousands)Depreciation and amortization:Depreciation$657 1% $452 1% $205 45%Amortization4,634 6% 4,082 6% 552 14%Total depreciation and amortization$5,291 7% $4,534 7% $757 17%Depreciation and amortization expense was $5.3 million in 2016, compared to $4.5 million in 2015, an increase of $0.8 million, or 17%. Theacquisitions we closed in 2015 and 2016 contributed a $0.7 million increase with the majority resulting from amortization of acquired intangible assetscreated from our purchase business combinations. The organic businesses saw a $0.5 million increase in depreciation primarily due to hardware and softwareadditions. This increase was partially offset by a $0.4 million decrease in depreciation and amortization from the divestiture of our EPM Live product inFebruary 2016.Acquisition-related ExpenseYear Ended December 31,20162015ChangeAmountPercent of RevenueAmountPercent of RevenueAmount% Change(dollars in thousands)Acquisition-related expense$5,5837%$2,4554%$3,128127%One-time acquisition-related expense was $5.6 million in 2016, compared to $2.5 million in 2015, an increase of $3.1 million, or 127%. The Companymade three acquisitions during 2016 and signed a fourth acquisition in December 2016 which subsequently closed in January 2017. This acquisition activitywas substantially more than the one acquisition closed in 2015.. As a result, year-over-year comparisons of these expenses are not necessarily meaningful dueto their one-time nature.54Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Other Expense, netYear Ended December 31,20162015ChangeAmountPercent of RevenueAmountPercent of RevenueAmount% Change(dollars in thousands)Other Expense:Interest expense, net$(2,781)(4)%$(1,858)(3)%$(923)50%Other income (expense), net(678)(1)%(544)—%(134)25%Total other expense$(3,459)(5)%$(2,402)(3)%$(1,057)44%Interest expense was $2.8 million in 2016, compared to $1.9 million for 2014, an increase of $0.9 million, or 50%. The increase is attributable toincreased borrowing under our expanded debt facility to support acquisitions.Other expense was $0.7 million in 2016, compared to other expense of $0.5 million in 2015, an increase of $0.1 million, or 25%. Increases in expensewere a loss on the sale of EPM Live of $0.7 million and a loss of $0.2 million from asset retirements over the prior period, offset by a $0.5 million gainassociated with the reduction of earnout obligations to sellers and of $0.2 million from foreign currency gains from non-base currency assets and liabilities.(Provision for) Benefit from Income TaxesYear Ended December 31,20162015ChangeAmountPercent of RevenueAmountPercent of RevenueAmount% Change(dollars in thousands)(Provision for) Benefit from IncomeTaxes$(1,530)(2)%$(1,039)(1)%$(491)47%Provision for income taxes was $1.5 million in 2016, compared to $1.0 million in 2015, an increase in provision for income taxes of $0.5 million, or47%. In 2016 we recorded income taxes that were principally attributable to state and foreign taxes, other than deferred taxes related to tax deductiblegoodwill. The foreign provision for income taxes in 2016 is attributable to net income generated in excess of net operating loss carryforwards and reductionof tax credit carryforwards in Canada. Because we have not generated domestic net income in any period to date, we have recorded a full valuation allowanceagainst our domestic net deferred tax assets, exclusive of tax deductible goodwill. Realization of any of our domestic deferred tax assets depends upon futureearnings, the timing and amount of which are uncertain. Based on analysis of acquired net operating losses, utilization of our net operating losses will besubject to annual limitations due to the ownership change rules under the Code and similar state provisions. In the event we have subsequent changes inownership, the availability of net operating losses and research and development credit carryovers could be further limited. See Note 6 of the Notes toConsolidated Financial Statements for more information regarding our income taxes as they relate to foreign and domestic operations.55Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Comparison of Fiscal Years Ended December 31, 2015 and 2014Revenue Year Ended December 31, 2015 2014 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands)Revenue: Subscription and support$57,193 82% $48,625 75% $8,568 18%Perpetual license2,805 4% 2,787 4% 18 1%Total product revenue59,998 86% 51,412 79% 8,586 17%Professional services9,913 14% 13,162 21% (3,249) (25)%Total revenue$69,911 100% $64,574 100% $5,337 8%Total revenue was $69.9 million in 2015, compared to $64.6 million in 2014, an increase of $5.3 million, or 8%. Of the increase in total revenue, $11.2million was due to the acquisitions we closed in 2014 and 2015. The organic business' total revenue decreased by $2.3 million in 2015 compared to 2014due to the change in the foreign currency exchange rate between the Canadian dollar versus the U.S. dollar for those periods. Therefore, on a constantcurrency basis, our organic total revenue decreased by $3.6 million, or 6%. This decline in organic revenue is primarily due to the decline in professionalservices revenues in accordance with our plan to focus on growing higher margin recurring revenues and de-emphasizing lower-margin professional servicesrevenues.Subscription and support revenue was $57.2 million in 2015, compared to $48.6 million in 2014, an increase of $8.6 million, or 18%. Of the increasein subscription and support revenue, $10.1 million was due to the acquisitions we closed in 2014 and 2015. Subscription and support revenue for the organicbusiness declined by $1.9 million in 2015 compared to 2014 due to the change in the foreign currency exchange rate between the Canadian dollar versus theU.S. dollar for those periods. Therefore, on a constant currency basis, our organic subscription and support revenue increased by $0.4 million, or 1%.Perpetual license revenue was $2.8 million in 2015, compared to $2.8 million in 2014, remaining relatively flat year-over-year. The acquisitions weclosed in late 2014 contributed a $0.3 million increase in perpetual license revenue in 2015 as compared to 2014. This increase was offset by a $0.3 milliondecrease in the organic portion of our business.Professional services revenue was $9.9 million in 2015, compared to $13.2 million in 2014, a decrease of $3.3 million, or 25%. The acquisitions weclosed in 2014 and 2015 contributed a $0.8 million increase to professional services revenue. The organic portion of our professional services businessdecreased by $0.4 million in 2015 compared to 2014 due to the change in the foreign currency exchange rate between the Canadian dollar versus the U.S.dollar for those periods. Therefore, on a constant currency basis, our organic professional services revenue decreased by $3.7 million, or 28%. As mentionedabove, this is in accordance with our plan to focus on growing higher margin recurring revenues and de-emphasizing lower-margin professional servicesrevenues.56Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Cost of Revenue and Gross Profit Percentage Year Ended December 31, 2015 2014 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands)Cost of revenue: Subscription and support (1)$19,586 28% $14,042 22% $5,544 39%Professional services7,085 10% 9,079 14% (1,994) (22)%Total cost of revenue26,671 38% 23,121 36% 3,550 15%Gross profit$43,240 62% $41,453 64% $1,787 4% (1) Includes depreciation and amortization expense as follows: Depreciation$1,800 3% $1,303 2% $497 38%Amortization$2,116 3% $1,844 3% $272 15%Cost of subscription and support revenue was $19.6 million in 2015, compared to $14.0 million in 2014, an increase of $5.6 million, or 39%. Of theincrease in cost of subscription and support revenue, $3.5 million was due to the acquisitions we closed in 2014 and 2015. The acquisitions contributed acost increase primarily due to a $1.3 million increase in hosting cost, $0.9 million in personnel and related cost, $0.6 million in software cost, and $0.3million in amortization of intangibles. Cost of subscription and support revenue for the organic portion of our business increased $2.1 million primarily dueto a $1.2 million increase in personnel and related costs largely due to investment in the customer support and customer success organizations, $0.5 millionincrease in depreciation expense for data center and hosting equipment, and $0.3 million in data center hosting fees.Cost of professional services revenue was $7.1 million in 2015, compared to $9.1 million in 2014, a decrease of $2.0 million, or 22%. Of the decreasein cost of professional services revenue, the organic business decreased $2.6 million primarily due to a $1.7 million decrease in personnel and related cost,$0.5 million decrease in contractor fees, and $0.3 million decrease in employee operational bonus, most of which are the result of our planned operatingefficiencies. The acquisitions we closed in 2014 and 2015 contributed an increase in cost primarily due to a $0.6 million increase to cost of professionalservices revenue. The primary component of cost of professional services revenue from the acquisitions was due to $0.4 million in personnel and relatedcosts.Operating ExpensesSales and Marketing Expense Year Ended December 31, 2015 2014 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands)Sales and marketing$12,965 19% $14,670 23% $(1,705) (12)%Sales and marketing expense was $13.0 million in 2015, compared to $14.7 million in 2014, a decrease of $1.7 million, or 12%. Of the decrease insales and marketing expense, $3.4 million was attributable to the organic business primarily due to a $1.5 million decrease in sales and solution consultantpersonnel and related cost, $0.6 million decrease in marketing program expense, $0.4 million decrease in sales commission expense, $0.4 million decrease inmarketing trade show expense, and a $0.3 million decrease in bad debt expense, most of which are the result of our planned operating efficiencies. Theacquisitions we closed in 2014 and 2015 contributed an increase of57Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.$1.7 million in sales and marketing expense primarily due to $0.8 million in personnel and related costs, $0.3 million in sales commissions, $0.3 million inmarketing programs, and $0.1 million in contractor fees.Research and Development Expense Year Ended December 31, 2015 2014 Change Amount Percent ofRevenue Amount Percent ofRevenue Amount % Change (dollars in thousands)Research and development: Research and development$15,778 23% $26,165 41% $(10,387) (40)%Refundable Canadian tax credits(470) (1)% (1,094) (2)% 624 (57)%Total research and development$15,308 22% $25,071 39% $(9,763) (39)%Research and development expense was $15.8 million in 2015, compared to $26.2 million in 2014, a decrease of $10.4 million, or 40%. In January2014, we issued 1,803,574 shares of common stock in connection with an amendment of a technology services agreement with a related party and took anon-cash charge of $11.2 million. Our agreement with the related party is viewed as a fixed purchase commitment contract that obligates us to annualpurchase commitments even if we do not take delivery of the contracted services. Since the amended agreement still requires payments for future services thatwe believe are not discounted from amounts charged to other customers, we believe the fair value of the common stock consideration provided to the relatedparty to amend the agreement does not represent an asset and, accordingly, was expensed immediately. The remaining $1.1 million decrease in research anddevelopment expense for our organic business was primarily due to a decrease in personnel and related cost in the product development organization, most ofwhich are the result of our planned operating efficiencies. The acquisitions we closed in 2014 and 2015 contributed a $1.9 million increase in research anddevelopment expense primarily due to $1.6 million in personnel and related cost largely for product development and quality assurance.Refundable Canadian tax credits were $0.5 million in 2015 compared to $1.1 million in 2014, a decrease of $0.6 million, or 57%. This decrease isprimarily due to the favorable Canadian Revenue Agency tax audit results that were recognized in the fourth quarter of 2014. General and Administrative Expense Year Ended December 31, 2015 2014 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands)General and administrative$18,201 26% $13,561 21% $4,640 34%General and administrative expense was $18.2 million in 2015, compared to $13.6 million in 2014, an increase of $4.6 million, or 34%. Of the increasein general and administrative expenses, $2.5 million is from the organic businesses primarily due to a $1.9 million increase in personnel and related cost,$1.5 million increase in employee stock-based compensation expense, and $0.3 million increase in business insurance, all of which is primarily due to costincreases necessary to operate as a public company. The organic cost increases were partially offset by a $0.5 million decrease in facility and other officerelated costs, $0.5 million decrease in outsourced professional service fees, and $0.1 million decrease in recruiter fees, most of which are the result of ourplanned operating efficiencies. The remaining $2.1 million increase in general and administrative expense was attributable to the acquisitions we closed in2014 and 2015 primarily due to personnel and related costs.58Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Depreciation and Amortization Expense Year Ended December 31, 2015 2014 Change Amount Percent ofRevenue Amount Percent ofRevenue Amount % Change (dollars in thousands)Depreciation and amortization: Depreciation$452 1% $987 2% $(535) (54)%Amortization4,083 5% 3,323 5% 760 23%Total depreciation and amortization$4,534 6% $4,310 7% $224 5%Depreciation and amortization expense was $4.5 million in 2015, compared to $4.3 million in 2014, an increase of $0.2 million, or 5%. Theacquisitions we closed in 2014 and 2015 contributed a $0.9 million increase with the majority resulting from amortization of intangibles expense. Theorganic businesses realized a $0.7 million decrease in depreciation of equipment and other depreciable assets primarily due to planned operating efficiencies.Acquisition-related Expense Year Ended December 31, 2015 2014 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands)Acquisition-related expense$2,455 4% $2,186 3% $269 12%One-time acquisition-related expense was $2.5 million in 2015, compared to $2.2 million in 2014, an increase of $0.3 million, or 12%. The one-timeacquisition-related expenses vary by acquisition and these costs are expensed as incurred such that the one-time acquisition-related expenses from ouracquisition in late 2013 were expensed in both 2013 and 2014, such costs for our acquisitions in late 2014 were expensed in both 2014 and 2015, and muchof the one-time acquisition-related expenses for our acquisition in late 2015 were expensed in 2015. As a result, year-over-year comparisons of theseexpenses are not necessarily meaningful due to their one-time nature.59Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Other Expense, net Year Ended December 31, 2015 2014 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands)Other Expense: Interest expense, net$(1,858) (3)% $(1,951) (3)% $93 (5)%Other income (expense), net(544) —% 101 —% (645) (639)%Total other expense$(2,402) (3)% $(1,850) (3)% $(552) 30%Interest expense was $1.9 million in 2015, compared to $2.0 million for 2014, a decrease of $0.1 million, or 5%.Other expense was $0.5 million in 2015, compared to other income of $0.1 million in 2014, an increase of $0.6 million, or 639%. The increase in otherexpense was primarily due to loss on foreign currency translation.(Provision for) Benefit from Income Taxes Year Ended December 31, 2015 2014 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands)(Provision for) Benefit from IncomeTaxes$(1,039) (1)% $78 —% $(1,117) (1,432)%Provision for income taxes was $1.0 million in 2015, compared to the benefit from income taxes of $0.1 million in 2014, an increase in provision forincome taxes of $1.1 million, or 1,432%. In 2015, we recorded income taxes that were principally attributable to state and foreign taxes, other than deferredtaxes related to tax deductible goodwill. The foreign provision for income taxes in 2015 is attributable to net income generated in excess of net operatingloss carryforwards and reduction of tax credit carryforwards in Canada. Because we have not generated domestic net income in any period to date, we haverecorded a full valuation allowance against our domestic net deferred tax assets, exclusive of tax deductible goodwill. Realization of any of our domesticdeferred tax assets depends upon future earnings, the timing and amount of which are uncertain. Based on analysis of acquired net operating losses,utilization of our net operating losses will be subject to annual limitations due to the ownership change rules under the Code and similar state provisions. Inthe event we have subsequent changes in ownership, the availability of net operating losses and research and development credit carryovers could be furtherlimited. See Note 6 of the Notes to Consolidated Financial Statements for more information regarding our income taxes as they relate to foreign and domesticoperations.60Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Liquidity and Capital ResourcesTo date, we have financed our operations primarily through capital raising, both through private placements of preferred stock and common stock andsales of our common stock in our initial public offering, cash from operating activities, and to a lesser extent, borrowing under our loan facility and theissuance of seller notes. As of December 31, 2016, we had cash and cash equivalents of $28.8 million, $20.0 million of available borrowings under our loanfacility, and $49.4 million of borrowings outstanding under our loan and security agreements and $24.4 million as of December 31, 2015. In addition to theavailable borrowings noted above, our current credit facility provides for an additional $16.7 million in subordinated seller notes for acquisitions plus anuncommitted $20.0 million accordion loan for future acquisitions. See further discussion under the heading Loan Facility Note 7 to the audited consolidatedfinancial statements included elsewhere in this Annual Report for further details.As of December 31, 2016 and December 31, 2015, we had working capital of $7.6 million and $1.0 million, respectively, which included $23.6million and $19.9 million of deferred revenue recorded as a current liability as of December 31, 2016 and December 31, 2015, respectively. This deferredrevenue will be recognized as revenue in accordance with our revenue recognition policy.The following table summarizes our cash flows for the periods indicated (including cash flows from discontinued operations):Year Ended December 31,2016 2015 2014(dollars in thousands)Consolidated Statements of Cash Flow Data: Net cash provided by (used in) operating activities$3,875 $(1,503) $1,177Net cash used in investing activities(13,229) (9,411) (7,078)Net cash provided by (used in) financing activities19,525 (1,221) 32,384Effect of exchange rate fluctuations on cash114 (380) (198)Change in cash and cash equivalents10,285 (12,515) 26,285Cash and cash equivalents, beginning of period18,473 30,988 4,703Cash and cash equivalents, end of period$28,758 $18,473 $30,988Cash Flows from Operating ActivitiesCash used in operating activities is significantly influenced by the amount of cash we invest in personnel and infrastructure to support the anticipatedgrowth of our business. Our operating assets and liabilities consist primarily of receivables from clients and unbilled professional services, accounts payableand accrued expenses and deferred revenues. The timing of our subscription and support billings, the volume of professional services rendered, the amount ofperpetual licenses sold, and the related timing of collections on those bookings, as well as payments of our accounts payable and accrued payroll and relatedbenefits affect these account balances.Our cash provided by operating activities for the year ended 2016 primarily reflects our net loss of $13.5 million, partially offset by non-cash expensesthat included $9.8 million of depreciation and amortization, $0.5 million of deferred income taxes, $0.3 million of non-cash interest expense, and $4.3million of non-cash stock compensation expense. Working capital sources of cash included a $0.4 million increase in accrued expenses and other liabilitiesand a $2.2 million increase in deferred revenue. These sources of cash were partially offset by a $0.4 million increase in accounts receivable, $1.5 milliondecrease in accounts payable and a $0.6 million decrease in prepaids and other.Our cash provided by operating activities for the year ended 2015 primarily reflects our net loss of $13.7 million, offset by non-cash expenses thatincluded $8.5 million of depreciation and amortization, $0.2 million of deferred income taxes, $1.0 million of foreign currency re-measurement loss, $0.4million of non-cash interest expense, and $2.7 million of non-cash stock compensation expense. Working capital sources of cash included a $0.7 milliondecrease in accounts receivable, a $1.9 million decrease in prepaids and other assets, and a $0.2 million61Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.increase in accounts payable. These sources of cash were offset by a $2.8 million decrease in accrued expenses and other liabilities and a $0.6 milliondecrease in deferred revenue.Our cash provided by operating activities for the year ended 2014 primarily reflects our net loss of $20.1 million, offset by non-cash expenses thatincluded a $11.2 million charge for the 1,803,574 shares of common stock issued to DevFactory, $7.5 million of depreciation and amortization, $0.6 millionof non-cash interest expense, and $1.1 million of non-cash stock compensation expense offset by $0.3 million in deferred income tax benefit. Workingcapital sources of cash included a $0.5 million decrease in prepaids and other assets, a $2.6 million increase in deferred revenue, and a $0.6 million increasein accounts payable. These sources of cash were offset by a $1.6 million increase in accounts receivable and a $0.9 million decrease in accrued expenses andother liabilities.Cash Flows from Investing ActivitiesOur primary investing activities have consisted of acquisitions of complementary technologies, products and businesses. As our business grows, weexpect our primary investing activities to continue to further expand our family of software applications and infrastructure and support additional personnel.For fiscal 2016, 2015 and 2014, cash used in investing activities for business combinations consisted of $12.2 million, $7.7 million and $6.2 million,respectively. In addition, for fiscal 2016, 2015 and 2014, we used $0.7 million, $1.0 million and $0.9 million, respectively, for the purchases of property andequipment. Further, fore fiscal 2016 and 2015 , we used $0.4 million, $0.8 million, and none, respectively, for the purchases of customer relationships. Nocash was used for the purchase of customer relationships in 2014.Cash Flows from Financing ActivitiesOur primary financing activities have consisted of capital raised to fund our operations as well as proceeds from debt obligations entered into tofinance our operations. For fiscal 2016, cash provided by financing activities consisted primarily of $31.0 million in proceeds from debt, partially offset by$7.2 million for repayment of debt. For fiscal 2015, cash provided by financing activities consisted primarily of $24.1 million in proceeds from debt, partiallyoffset by $23.9 million for repayment of debt. For fiscal 2014, cash provided by financing activities consisted primarily of $38.8 million in proceeds from theissuance of common stock, net of issuance costs in our November 2014 IPO and $5.7 million in proceeds from debt, partially offset by $10.9 million forrepayment of debt. For fiscal 2016, 2015 and 2014 cash used for payments on capital leases was $1.7 million, $1.0 million, and $0.5 million, respectively.Loan and Security AgreementsOn November 15, 2016, Upland Software, Inc. (the “Company”) amended its Credit Agreement (the “Credit Agreement”) with a consortium of lenders(the “Lenders”), Wells Fargo Capital Finance, as agent, providing for a secured credit facility (the “Loan Facility”).As of December 31, 2016, there were no amounts drawn on its (i) U.S. revolving loans outstanding under the Credit Agreement, or on its (ii) Canadianrevolving credit facility, and there was (iii) $43.8 million in U.S. term loans outstanding under the Credit Agreement; and (iv) $5.6 million in Canadian termloans outstanding under the Credit Agreement.LoansThe Credit Agreement provides for up to $90.0 million of financing credit as outlined below.The Credit Agreement provides (i) a U.S. revolving credit facility in an aggregate principal amount of up to $9.0 million (the “U.S. Revolver”), (ii) aU.S. term loan facility in an aggregate principal amount of up to $44.4 million (the “U.S. Term Loan”), (iii) a delayed draw term loan facility in an aggregateprincipal amount of up to $10.0 million (the “DDTL”). (iv) a Canadian revolving credit facility in an aggregate principal amount of up to $1.0 million (the“Canadian Revolver” and, together with the U.S. Revolver, the “Revolver”); and (v) a Canadian term loan facility in an aggregate principal amount of up to$5.6 million (the “Canadian Term Loan” and, together with the U.S. Term Loan, the “Term Loan”).62Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The Credit Agreement also includes provisions for optional, uncommitted increases in the maximum size of the loan facility available under the CreditAgreement by an aggregate principal amount of $20.0 million upon the satisfaction of the terms and conditions set forth in the Credit Agreement.The Credit Agreement also provides for, among other things, (i) a maturity date of November 15, 2021, (ii) a maximum amount of permitted stockrepurchases of $8.3 million, and (iii) a maximum amount of seller subordinated indebtedness permitted to be incurred in connection with permittedacquisitions of $16.7 million.Terms of RevolverLoans under the Revolver are available up to the lesser of (i) $10.0 million (the “Maximum Revolver Amount”) or (ii) the result of (a) 100% multipliedby (subject to step-downs beginning December 31, 2016) of certain subsidiaries' recurring revenues on a trailing twelve month basis, minus (b) theoutstanding balance of the Term Loans and any swing line loans made under the Credit Agreement (such amount, the “Credit Amount”). The Revolverprovides a subfacility whereby Borrowers may request letters of credit (the “Letters of Credit”) in an aggregate amount not to exceed, at any one timeoutstanding, $0.5 million and $0.25 million, from the U.S & Canadian facilities, respectively. The aggregate amount of outstanding Letters of Credit arereserved against the credit availability under the Maximum Revolver Amount and the Credit Amount.Loans under the Revolver may be borrowed, repaid and reborrowed until November 15, 2021 (the “Maturity Date”), at which time all amountsborrowed under the Credit Agreement must be repaid.Terms of Term LoansThe Term Loans are repayable, on a quarterly basis beginning December 31, 2016, by an amount equal to 5.0% per annum of the original principalamount of such loan. Any amount remaining unpaid is due and payable in full on the Maturity Date.Terms of Delay Draw Term LoanPursuant to the terms of the Credit Agreement, the DDTL is to be used to finance acquisitions. The DDTL can be drawn upon until November 15, 2018.The DDTL is repayable, on a quarterly basis, by an amount equal to 5.0% per annum of the original funded amount of the DDTL. Any amount remainingunpaid would be due and payable in full on the Maturity Date.Other Terms of Loan FacilityAt the option of the Company, U.S. loans accrue interest at a per annum rate based on (i) the U.S. base rate plus a margin ranging from 3.0% to 4.0%depending on the leverage ratio or (ii) the U.S. LIBOR rate determined in accordance with the Credit Agreement (based on 1, 2, 3 or 6-month interest periods)plus a margin ranging from 4.0% to 5.0% depending on the leverage ratio. The U.S. base rate is a rate equal to the highest of the federal funds rate plus amargin equal to 0.5%, the U.S. LIBOR rate for a 1-month interest period plus 1.0% and Wells Fargo Capital Finance’s prime rate.At the option of the Company, the Canadian loans accrue interest at a per annum rate based on (i) the Canadian prime rate or the U.S. base rate plus amargin ranging from 3.0% to 4.0% depending on the leverage ratio or (ii) the U.S. LIBOR rate determined in accordance with the Credit Agreement (based on1, 2, 3 or 6-month interest periods) (or the Canadian Bankers Acceptance ("Canadian BA") rate determined in accordance with the Credit Agreement forobligations in Canadian dollars) plus a margin ranging from 4.0% to 5.0% depending on the leverage ratio.Accrued interest on the loans will be paid monthly, or, with respect to loans that are accruing interest based on the U.S. LIBOR rate or Canadian BArate, at the end of the applicable U.S. LIBOR or Canadian BA interest rate period.Lenders are entitled to a premium (the “Prepayment Premium”) in the event of certain prepayments of the loans in an amount equal to (i) fromNovember 15, 2016 to November 15, 2017, 2.0% times the sum of (a) the Maximum Revolver Amount plus (b) the outstanding principal amount of the TermLoan and DDTL on the date63Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.immediately prior to the date of the prepayment (such sum, the “Prepayment Amount”) (ii) from November 15, 2017 to November 15, 2018, 1.0% times thePrepayment Amount and (iii) during the period from and after November 15, 2018 to the Maturity Date, 0.0% times the Prepayment Amount. The Companymay also be subject to prepayment fees in the case of commitment reductions of the Revolver and also may be obligated to prepay loans upon the occurrenceof certain events.The Company is also obligated to pay other customary servicing fees, letter of credit fees and unused credit facility fees.The Loan Facility contains customary affirmative and negative covenants. The negative covenants limit the ability of the Company and itssubsidiaries to, among other things (in each case subject to customary exceptions for a credit facility of this size and type):•Incur additional indebtedness or guarantee indebtedness of others;•Create liens on their assets;•Make investments, including certain acquisitions;•Enter into mergers or consolidations;•Dispose of assets;•Pay dividends and make other distributions on the Company’s capital stock, and redeem and repurchase the Company’s capital stock;•Enter into transactions with affiliates; and•Prepay indebtedness or make changes to certain agreements.There are certain financial covenants that become more restrictive starting March 31, 2017. If an event of default occurs, at the election of the Lenders,a default interest rate shall apply on all obligations during an event of default, at a rate per annum equal to 2.00% above the applicable interest rate.The Loan Facility limits the Company's ability to buyback its capital stock, subject to restrictions including a minimum liquidity requirement of $20.0million before and after any such buyback.Interest Rate and Financing CostsCash interest costs averaged 5.2% under the new Credit Agreement for the year ended December 31, 2016. In addition, since inception the Companyhas incurred $1.9 million of financing costs associated with the Credit Agreement and amendments through the year ended December 31, 2016. Thesefinancing costs will be amortized to non-cash interest expense over the term of the Credit Agreement.Contractual Payment ObligationsThe following table summarizes our future contractual obligations as of December 31, 2016 (in thousands):Contractual ObligationsPayment Due by Period Total Less than 1Year 1-3 Years >3-5 Years More Than 5YearsDebt Obligations$49,370 $2,519 $7,556 $39,295 $—Capital Lease Obligations$3,599 $1,645 $1,954 $— $—Operating Lease Obligations$3,257 $1,181 $2,076 $— $—Purchase Commitments$2,471 $2,471 $— $— $—Total$58,697 $7,816 $11,586 $39,295 $—64Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Future debt maturities of long-term debt exclude debt discounts and consist of obligations under the Company's U.S. Loan Agreement, Canadian LoanAgreement, and seller notes.The Company leases office space under operating leases that expire between 2017 and 2020. The company also leases computer equipment and softwareunder capital leases.The Company has an outstanding purchase commitment in 2017 for software development services from DevFactory FZ-LLC pursuant to a technologyservices agreement in the amount of $2.5 million. The agreement has an initial term that expires on December 31, 2017, with an option for either party torenew annually for up to five years. For years after 2017, the purchase commitment amount for software development services will be equal to the prior yearpurchase commitment increased (decreased) by the percentage change in total revenue for the prior year as compared to the preceding year. For example, if2017 total revenues increase by 10% as compared to 2016 total revenues, then the 2018 purchase commitment will increase by approximately $250,000 fromthe 2017 purchase commitment amount to approximately $2.8 million.Off-Balance Sheet ArrangementsDuring the years ended December 31, 2016, 2015, and 2014, we did not have any relationships with unconsolidated organizations or financialpartnerships, such as structured finance or special-purpose entities, that would have been established for the purpose of facilitating off-balance sheetarrangements or other contractually narrow or limited purposes.Critical Accounting Policies and the Use of EstimatesWe prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States. The preparation ofconsolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs andexpenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under thecircumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between ourestimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believethat the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the moresignificant areas involving management’s judgments and estimates.The following critical accounting policies reflect significant judgments and estimates used in the preparation of our consolidated financial statements:•revenue recognition and deferred revenue;•stock-based compensation;•income taxes; and•business combinations and the recoverability of goodwill and long-lived assets.Revenue RecognitionThe Company derives revenue from product revenue, consisting of subscription, support and perpetual licenses, and professional services revenues. TheCompany recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery of the product or services hasoccurred, no Company obligations with regard to implementation considered essential to the functionality remain, the fee is fixed or determinable andcollectability is probable.Subscription and Support RevenueThe Company derives subscription revenues by providing its software-as-a-service solution to customers in which the customer does not have the right totake possession of the software, but can use the software for the contracted term. The Company accounts for these arrangements as service contracts.Subscription and support revenues are65Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.recognized on a straight-line basis over the term of the contractual arrangement, typically one to three years. Amounts that have been invoiced and that aredue are recorded in deferred revenue or revenue, depending on when the criteria for revenue recognition are met. Revenue from usage-based services arerecognized in the month in which such usage is reported.The Company may provide hosting services to customers who purchased a perpetual license. Such hosting services are recognized ratably over the applicableterm of the arrangement. These hosting arrangements are typically for a period of one to three years.Software maintenance agreements provide technical support and the right to unspecified upgrades on an if-and-when-available basis. Revenue frommaintenance agreements is recognized ratably over the life of the related agreement, which is typically one year.Perpetual License RevenueThe Company also records revenue from the sales of proprietary software products under perpetual licenses. For license agreements in which customeracceptance is a condition to earning the license fees, revenue is not recognized until acceptance occurs. The Company’s products do not require significantcustomization. Perpetual licenses are sold along with software maintenance and, sometimes, hosting agreements. When vendor specific objective evidence(VSOE) of fair value exists for the software maintenance and hosting agreement, the perpetual license is recognized under the residual method whereby thefair value of the undelivered software maintenance and hosting agreement is deferred and the remaining contract value is recognized immediately for thedelivered perpetual license. When VSOE of fair value does not exist for the either the software maintenance or hosting agreement, the entire contract value isrecognized ratably over the underlying software maintenance and/or hosting period.Professional Services RevenueProfessional services provided with perpetual licenses consist of implementation fees, data extraction, configuration, and training. The Company’simplementation and configuration services do not involve significant customization of the software and are not considered essential to the functionality.Revenues from professional services are recognized as such services are provided when VSOE of fair value exists for such services and all undeliveredelements such as software maintenance and/or hosting agreements. VSOE of fair value for services is based upon the price charged when these services aresold separately, and is typically an hourly rate. When VSOE of fair value does not exist for software maintenance and/or hosting agreements, revenues fromprofessional services are recognized ratably over the underlying software maintenance and/or hosting period.Professional services, when sold with the subscription arrangements, are accounted for separately when these services have value to the customer on astandalone basis and there is objective and reliable evidence of fair value for each deliverable. When accounted for separately, revenues are recognized as theservices are rendered for time and material contracts. For those arrangements where the elements do not qualify as a separate unit of accounting, the Companyrecognizes professional services ratably over the contractual life of the related application subscription arrangement. Currently, all professional services areaccounted for separately as all have value to the customer on a standalone basis.Multiple Element ArrangementsThe Company enters into arrangements with multiple-element that generally include subscriptions and implementation and other professional services.For multiple-element arrangements, arrangement consideration is allocated to deliverables based on their relative selling price. In order to treat deliverablesin a multiple-element arrangement as separate units of accounting, the elements must have standalone value upon delivery. If the elements have standalonevalue upon delivery, each element must be accounted for separately. The Company’s subscription services have standalone value as such services are oftensold separately. In determining whether implementation and other professional services have standalone value apart from the subscription services, theCompany considers various factors including the availability of the services from other vendors. The Company has concluded that the implementationservices included in multiple-element arrangements have standalone value. As a result, when implementation and other professional services are sold in amultiple-element arrangement, the arrangement consideration is allocated to the66Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.identified separate units based on a relative selling price hierarchy. The selling price for a element is based on its VSOE of selling price, if available, third-party evidence of selling price, or TPE, if VSOE is not available or best estimate of selling price, or BESP, if neither VSOE nor TPE is available. TheCompany has not established VSOE for its subscription services due to lack of pricing consistency, the introduction of new services and other factors. TheCompany has determined that TPE is not a practical alternative due to differences in its service offerings compared to other parties and the availability ofrelevant third-party pricing information. Accordingly, the Company uses BESP to determine the relative selling price.The Company determined BESP by considering its overall pricing objectives and market conditions. Significant pricing practices taken into considerationinclude the Company’s discounting practices, the size and volume of its transactions, customer characteristics, price lists, go-to-market strategy, historicalstandalone sales and agreement prices. As the Company’s go-to-market strategies evolve, it may modify its pricing practices in the future, which could resultin changes in relative selling prices, and include both VSOE and BESP.Deferred RevenueDeferred revenue represents either customer advance payments or billings for which the aforementioned revenue recognition criteria have not yet been met.Stock-Based CompensationStock options awarded to employees and directors are measured at fair value at each grant date. The Company accounts for stock-based compensation inaccordance with authoritative accounting principles which require all share-based compensation to employees, including grants of employee stock options,to be recognized in the financial statements based on their estimated fair value. Compensation expense is determined under the fair value method using theBlack-Scholes option pricing model and recognized ratably over the period the awards vest. The Black-Scholes option pricing model used to compute share-based compensation expense requires extensive use of accounting judgment and financial estimates. Items requiring estimation include the expected termoption holders will retain their vested stock options before exercising them, the estimated volatility of the Company’s common stock price over the expectedterm of each stock option, and the number of stock options that will be forfeited prior to the completion of their vesting requirements. Application ofalternative assumptions could result in significantly different share-based compensation amounts being recorded in the financial statements. The followingtable summarizes the weighted-average grant-date fair value of options granted in 2016, 2015, and 2014 and the assumptions used to develop their fairvalues. As there was no public market for its common stock prior to November 2014, the Company estimates the volatility of its common stock based on thevolatility of publicly traded shares of comparable companies' common stock. The Company's decision to use the volatility of comparable stock was basedupon the Company's assessment that this information is more representative of future stock price trends than the Company's historical volatility. TheCompany estimates the expected term using the simplified method, which calculates the expected term as the midpoint between the vesting date and thecontractual termination date of each award. The dividend yield assumption is based on historical and expected future dividend payouts. The risk-free interestrate is based on observed market interest rates appropriate for the term of each options. Year Ended December 31, 2016 2015 2014Weighted average grant-date fair value ofoptions$3.23 $3.01 $3.76Expected volatility42.5% 42.5% - 44.0% 54.1% - 55.2%Risk-free interest rate1.2% 1.7% - 1.9% 1.6% - 1.9%Expected life in years5.93 5.93 6.29Dividend yield— — —67Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Income TaxesThe Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for theexpected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets andliabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to berecovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities will be recognized in the period that includes the enactment date.A valuation allowance is established against the deferred tax assets to reduce their carrying value to an amount that is more likely than not to be realized.The Company accounts for uncertainty of income taxes based on a “more likely than not” threshold for the recognition and derecognition of tax positions,which includes the accounting for interest and penalties.Goodwill and Other IntangiblesGoodwill arises from business combinations and is measured as the excess of the cost of the business acquired over the sum of the acquisition-date fair valueof tangible and identifiable intangible assets acquired, less any liabilities assumed.Goodwill is evaluated for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not berecoverable. The events and circumstances considered by the Company include the business climate, legal factors, operating performance indicators andcompetition.The Company evaluates the recoverability of goodwill using a two-step impairment process tested at the reporting unit level. The Company has onereporting unit for goodwill impairment purposes. In the first step, the fair value of the reporting unit is compared to the book value, including goodwill. In thecase that the fair value is less than the book value, a second step is performed that compares the implied fair value of goodwill to the book value of goodwill.The fair value for the implied goodwill is determined based on the difference between the fair value of the reporting unit and the net fair value of theidentifiable assets and liabilities, excluding goodwill. If the implied fair value of the goodwill is less than the book value, the difference is recognized as animpairment charge in the consolidated statement of operations. No goodwill impairment charges were recorded during the years ended December 31, 2016,2015, or 2014.Identifiable intangible assets consist of customer relationships, marketing-related intangible assets and developed technology. Intangible assets with definitelives are amortized over their estimated useful lives on a straight-line basis. The straight-line method of amortization represents the Company’s best estimateof the distribution of the economic value of the identifiable intangible assets.Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of intangible assets may not berecoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, asignificant change in the extent or manner in which an asset is used or any other significant adverse change that would indicate that the carrying amount ofan asset or group of assets may not be recoverable. The Company evaluates the recoverability of intangible assets by comparing their carrying amounts to thefuture net undiscounted cash flows expected to be generated by the intangible assets. If such intangible assets are considered to be impaired, the impairmentto be recognized is measured as the amount by which the carrying amount of the intangible assets exceeds the fair value of the assets.The Company determines fair value based on discounted cash flows using a discount rate commensurate with the risk inherent in the Company’s currentbusiness model for the specific intangible asset being valued. There were no such impairments during 2016, 2015, and 2014.Other Key Accounting PoliciesWe also have other key accounting policies, which involve the use of estimates, judgments, and assumptions that are significant to understanding ourresults. See Note 2 “Summary of Significant Accounting Policies” to the consolidated financial statements included in this Annual Report. Of those policies,we believe that the accounting policies enumerated above involve the greatest degree of complexity and exercise of judgment by our management.68Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.We evaluate our estimates, judgments and assumptions on an ongoing basis, and while we believe that our estimates, judgments and assumptions arereasonable, they are based upon information available at the time. Actual results may differ significantly from these estimates under different assumptions,judgments or conditions.Under Section 107(b) of the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as thosestandards apply to private companies. We are choosing to “opt out” of such extended transition period, however, and, as a result, we will comply with newor revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 ofthe JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.69Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 7A. Quantitative and Qualitative Disclosures About Market RiskWe have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business. Theserisks primarily include interest rate, foreign exchange and inflation risks, as well as risks relating to changes in the general economic conditions in thecountries where we conduct business. The statement of operations impact is mitigated by having an offsetting liability in deferred revenue to partially orcompletely offset against the outstanding receivable if an account should become uncollectible. Our cash balances are kept in customary operating accounts,a portion of which are insured by the Federal Deposit Insurance Corporation, and uninsured money market accounts. The majority of our cash balances inmoney market accounts are with Wells Fargo, our lender under our loan facility. To date, we have not used derivative instruments to mitigate the impact ofour market risk exposures. We also have not used, nor do we intend to use, derivatives for trading or speculative purposes.Interest Rate RiskOur exposure to market risk for changes in interest rates primarily relates to our cash equivalents and any variable rate indebtedness.The primary objective of our investment activities is to preserve principal while maximizing yields without significantly increasing risk. Thisobjective is accomplished currently by making diversified investments, consisting only of money market mutual funds and certificates of deposit.Any draws under our loan and security agreements bear interest at a variable rate tied to the prime rate. As of December 31, 2016, we had a principalbalance of $43.8 million under our U.S. Loan Agreement and $5.6 million under our Canadian Loan Agreement. As of December 31, 2015, we had a principalbalance of $18.5 million under our U.S. Loan Agreement and $5.9 million under our Canadian Loan Agreement.Foreign Currency Exchange RiskOur results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. In addition, we incur a portion ofour operating expenses in foreign currencies, including Canadian dollars, British pounds and Euros, and in the future as we expand into other foreigncountries, we expect to incur operating expenses in other foreign currencies. In addition, our customers are generally invoiced in the currency of the countryin which they are located. We are exposed to foreign exchange rate fluctuations as the financial results of our international operations are translated from thelocal functional currency into U.S. dollars upon consolidation. A decline in the U.S. dollar relative to foreign functional currencies would increase our non-U.S. revenue and improve our operating results. Conversely, if the U.S. dollar strengthens relative to foreign functional currencies, our revenue and operatingresults would be adversely affected. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would haveresulted in a change in revenue of $2.1 million for the year ended December 31, 2016. To date, we have not engaged in any hedging strategies. As ourinternational operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in foreign currency exchange rates.InflationWe do not believe that inflation had a material effect on our business, financial condition or results of operations in the last three fiscal years. If ourcosts were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability orfailure to do so could harm our business, financial condition and results of operations.70Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 8.Financial Statements and Supplementary DataUPLAND SOFTWARE, INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm72Consolidated Balance Sheets73Consolidated Statements of Operations74Consolidated Statements of Comprehensive Loss75Consolidated Statements of Stockholders' Equity (Deficit)76Consolidated Statements of Cash Flows77Notes to Consolidated Financial Statements7871Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and Shareholders of Upland Software, Inc.We have audited the accompanying consolidated balance sheets of Upland Software, Inc. (the “Company”) as of December 31, 2016 and 2015, and therelated consolidated statements of operations, comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the three years in the periodended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion onthese financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engagedto perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reportingas a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidencesupporting 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.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Upland Software, Inc. atDecember 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31,2016, in conformity with U.S. generally accepted accounting principles./s/ Ernst & Young LLPAustin, TexasMarch 30, 2017 72Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Upland Software, Inc.Consolidated Balance Sheets(in thousands, except share and per share amounts)December 31, 2016 December 31, 2015Assets Current assets: Cash and cash equivalents$28,758 $18,473Accounts receivable (net of allowance of $658 and $581 at December 31, 2016 and December 31, 2015,respectively)15,254 13,972Prepaid and other3,287 2,603Total current assets47,299 35,048Canadian tax credits receivable978 2,018Property and equipment, net4,356 6,001Intangible assets, net28,512 31,526Goodwill69,097 47,422Other assets346 399Total assets$150,588 $122,414Liabilities and stockholders’ equity Current liabilities: Accounts payable$1,268 $2,548Accrued compensation2,541 2,441Accrued expenses and other5,505 5,173Deferred revenue23,552 19,931Due to sellers4,642 2,409Current maturities of notes payable (includes unamortized discount of $329 and $250 at December 31, 2016 andDecember 31, 2015, respectively)2,190 1,500Total current liabilities39,698 34,002Commitments and contingencies (Note 9) Canadian tax credit liability to sellers361 368Notes payable, less current maturities (includes unamortized discount of $1,113 and $758 at December 31, 2016and December 31, 2015, respectively45,739 22,366Deferred revenue247 8Noncurrent deferred tax liability, net3,404 2,818Other long-term liabilities2,126 2,582Total liabilities91,575 62,144Stockholders’ equity: Common stock, $0.0001 par value; 50,000,000 shares authorized: 17,785,288and 15,746,288 shares issued and outstanding as of December 31, 2016 and December 31, 2015 respectively2 2Additional paid-in capital124,566 112,447Accumulated other comprehensive loss(3,152) (3,289)Accumulated deficit(62,403) (48,890)Total stockholders’ equity59,013 60,270Total liabilities and stockholders’ equity$150,588 $122,414See accompanying notes.73Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Upland Software, Inc.Consolidated Statements of Operations(in thousands, except share and per share amounts)Year Ended December 31, 2016 2015 2014Revenue: Subscription and support$65,552 $57,193 $48,625Perpetual license1,650 2,805 2,787Total product revenue67,202 59,998 51,412Professional services7,565 9,913 13,162Total revenue74,767 69,911 64,574Cost of revenue: Subscription and support22,734 19,586 14,042Professional services4,831 7,085 9,079Total cost of revenue27,565 26,671 23,121Gross profit47,202 43,240 41,453Operating expenses: Sales and marketing12,160 12,965 14,670Research and development14,919 15,778 26,165Refundable Canadian tax credits(513) (470) (1,094)General and administrative18,286 18,201 13,561Depreciation and amortization5,291 4,534 4,310Acquisition-related expenses5,583 2,455 2,186Total operating expenses55,726 53,463 59,798Loss from operations(8,524) (10,223) (18,345)Other expense: Interest expense, net(2,781) (1,858) (1,951)Other income (expense), net(678) (544) 101Total other expense(3,459) (2,402) (1,850)Loss before provision for income taxes(11,983) (12,625) (20,195)Provision for income taxes(1,530) (1,039) 78Net loss$(13,513) $(13,664) $(20,117)Preferred stock dividends and accretion— — (1,524)Net loss attributable to common shareholders$(13,513) $(13,664) $(21,641)Net loss per common share: Net loss per common share, basic and diluted$(0.82) $(0.91) $(4.43)Weighted-average common shares outstanding, basic and diluted16,472,799 14,939,601 4,889,901See accompanying notes.74Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Upland Software, Inc.Consolidated Statements of Comprehensive Loss(in thousands)Year Ended December 31, 2016 2015 2014Net loss$(13,513) $(13,664) $(20,117)Foreign currency translation adjustment137 (1,573) (943)Comprehensive loss$(13,376) $(15,237) $(21,060)See accompanying notes.75Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Upland Software, Inc.Consolidated Statement of Stockholders’ Equity (Deficit)(in thousands, except share amounts)Common Stock AdditionalPaid-InCapital AccumulatedOtherComprehensiveLoss AccumulatedDeficit TotalStockholders’Equity (Deficit) Shares Amount Balance at December 31, 20131,851,319 $— $— $(773) $(15,109) $(15,882)Issuance of common stock upon conversion ofpreferred stock6,834,476 1 52,312 — — 52,313Issuance of common stock in initial public offering3,846,154 1 38,845 — — 38,846Issuance of common stock to related party (Note 16)1,803,574 — 11,219 — — 11,219Issuance of common stock in business combination577,486 — 6,146 — — 6,146Issuance of restricted stock335,673 — — — — —Exercise of stock options436 — 1 — — 1Accretion of preferred stock— — (70) — — (70)Preferred stock dividends— — (1,454) — — (1,454)Stock-based compensation— — 729 — — 729Conversion of warrants from preferred to common— — 609 — — 609Foreign currency translation adjustment— — — (943) — (943)Net loss— — — — (20,117) (20,117)Balance at December 31, 201415,249,118 $2 $108,337 $(1,716) $(35,226) $71,397Issuance of common stock in business combination233,679 — 1,386 — — 1,386Issuance of stock under Company plans, net ofshares withheld for tax263,491 — 27 — — 27Issuance of stock, net of issuance costs— — (44) — — (44)Stock-based compensation— — 2,741 — — 2,741Other comprehensive loss— — — (1,573) — (1,573)Net loss— — — — (13,664) (13,664)Balance at December 31, 201515,746,288 $2 $112,447 $(3,289) $(48,890) $60,270Issuance of common stock in business combination1,344,463 — 8,300 — — 8,300Issuance of stock under Company plans, net ofshares withheld for tax694,537 — (514) — — (514)Stock-based compensation— — 4,333 — — 4,333Other comprehensive loss— — — 137 — 137Net loss— — — — (13,513) (13,513)Balance at December 31, 201617,785,288 $2 $124,566 $(3,152) $(62,403) $59,013See accompanying notes.76Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Upland Software, Inc.Consolidated Statements of Cash Flows(in thousands) Year Ended December 31, 2016 2015 2014Operating activities Net loss $(13,513) $(13,664) $(20,117)Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 9,794 8,451 7,457Deferred income taxes 529 207 (295)Foreign currency re-measurement (gain) loss (64) 981 —Non-cash interest and other expense 327 376 589Non-cash stock compensation expense 4,333 2,741 1,077Stock-based compensation—related party vendor — — 11,220Loss on disposal of business 746 — —Non-cash loss on retirement of fixed assets 276 — —Changes in operating assets and liabilities, net of purchase business combinations: Accounts receivable (361) 741 (1,579)Prepaids and other 648 1,873 484Accounts payable (1,453) 157 639Accrued expenses and other liabilities 413 (2,796) (924)Deferred revenue 2,200 (570) 2,626Net cash provided by (used in) operating activities 3,875 (1,503) 1,177Investing activities Purchase of property and equipment (670) (956) (861)Purchase of customer relationships (408) (791) —Purchase business combinations, net of cash acquired (12,151) (7,664) (6,217)Net cash used in investing activities (13,229) (9,411) (7,078)Financing activities Payments on capital leases (1,683) (1,020) (541)Proceeds from notes payable, net of issuance costs 30,992 24,083 5,685Payments on notes payable (7,190) (23,907) (10,910)Issuance of preferred stock, net of issuance costs — — (97)Issuance of common stock, net of issuance costs (515) (18) 38,846Additional consideration paid to sellers of businesses (2,079) (359) (599)Net cash provided by (used in) financing activities 19,525 (1,221) 32,384Effect of exchange rate fluctuations on cash 114 (380) (198)Change in cash and cash equivalents 10,285 (12,515) 26,285Cash and cash equivalents, beginning of period 18,473 30,988 4,703Cash and cash equivalents, end of period $28,758 $18,473 $30,988Supplemental disclosures of cash flow information: Cash paid for interest $2,455 $1,523 $1,382Cash paid for taxes $488 $314 $252Noncash investing and financing activities: Equipment acquired pursuant to capital lease obligations $1,293 $3,428 $1,572Issuance of common stock in business combination $8,300 $1,386 $6,146See accompanying notes.77Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Upland Software, Inc.Notes to Consolidated Financial Statements1. Organization and Nature of OperationsUpland Software, Inc. (“Upland” or the “Company”) is a provider of cloud-based enterprise work management software. Upland’s software applications helporganizations better optimize the allocation and utilization of their people, time and money. Upland provides a family of cloud-based enterprise workmanagement software applications for the information technology, process excellence, finance, professional services and marketing functions withinorganizations. Upland’s software applications address a broad range of enterprise work management needs, from strategic planning to task execution.2. Summary of Significant Accounting PoliciesBasis of PresentationThese consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, or GAAP. Theconsolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions havebeen eliminated in consolidation. Certain prior period amounts have been reclassified to confirm to the current period presentation.Use of EstimatesThe preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, andthe reported amounts of revenues and expenses. Significant items subject to such estimates include allowance for doubtful accounts, stock-basedcompensation, acquired intangible assets, the useful lives of intangible assets and property and equipment, and income taxes. In accordance with GAAP,management bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances.Management regularly evaluates its estimates and assumptions using historical experience and other factors; however, actual results could differ from thoseestimates.Cash and Cash EquivalentsCash and cash equivalents consist of cash deposits and liquid investments with original maturities of three months or less when purchased. Cash equivalentsare stated at cost, which approximates market value, because of the short maturity of these instruments.Accounts Receivable and Allowance for Doubtful AccountsThe Company extends credit to the majority of its customers. Issuance of credit is based on ongoing credit evaluations by the Company of customers’financial condition and generally requires no collateral. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Invoicesgenerally require payment within 30 days from the invoice date. The Company generally does not charge interest on past due payments, although theCompany's contracts with its customers usually allow it to do so.The Company maintains an allowance for doubtful accounts to reserve for potential uncollectible receivables. The allowance is based upon thecreditworthiness of the Company’s customers, the customers’ historical payment experience, the age of the receivables and current market conditions.Provisions for potentially uncollectible accounts are recorded in sales and marketing expenses. The Company writes off accounts receivable balances to theallowance for doubtful accounts when it becomes likely that they will not be collected.78Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The following table presents the changes in the allowance for doubtful accounts (in thousands): Year Ended December 31, 2016 2015 2014Balance at beginning of year$581 $890 $454Provision863 412 829Acquisitions— — 400Divestitures(230) — —Writeoffs, net of recoveries(556) (721) (793)Balance at end of year$658 $581 $890Concentrations of Credit Risk and Significant CustomersFinancial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents and accounts receivable. The Company’s cashand cash equivalents are placed with high-quality financial institutions, which, at times, may exceed federally insured limits. The Company has notexperienced any losses in these accounts, and the Company does not believe it is exposed to any significant credit risk related to cash and cash equivalents.The Company provides credit, in the normal course of business, to a number of its customers. The Company performs periodic credit evaluations of itscustomers and generally does not require collateral. No individual customer represented more than 10% of total revenues nor more than 10% of accountsreceivable in the years ended December 31, 2016, 2015, or 2014.Property and EquipmentProperty and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation of property and equipment is computed using thestraight-line method over each asset’s useful life. Leasehold improvements are amortized over the shorter of the lease term or of the estimated useful lives ofthe related assets. Upon retirement or disposal, the cost of each asset and the related accumulated depreciation are removed from the accounts and anyresulting gain or loss is credited or charged to income. Repairs, maintenance, and minor replacements are expensed as incurred. The estimated useful lives ofproperty and equipment are as follows:Computer hardware and equipment3 - 5 yearsPurchased software and licenses3 - 5 yearsFurniture and fixtures7 yearsLeasehold improvementsLesser of estimated useful life or lease termGoodwill and Other IntangiblesGoodwill arises from business combinations and is measured as the excess of the cost of the business acquired over the sum of the acquisition-date fair valueof tangible and identifiable intangible assets acquired, less any liabilities assumed.Goodwill is evaluated for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not berecoverable. The events and circumstances considered by the Company include the business climate, legal factors, operating performance indicators andcompetition.The Company evaluates the recoverability of goodwill using a two-step impairment process tested at the reporting unit level. The Company has onereporting unit for goodwill impairment purposes. In the first step, the fair value of the reporting unit is compared to the book value, including goodwill. In thecase that the fair value is less than the book value, a second step is performed that compares the implied fair value of goodwill to the book value of goodwill.The fair value for the implied goodwill is determined based on the difference between the fair value of the reporting unit and the net fair value of theidentifiable assets and liabilities, excluding goodwill. If the implied fair value of the goodwill is less than the book value, the difference is recognized as animpairment charge in the79Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.consolidated statement of operations. No goodwill impairment charges were recorded during the years ended December 31, 2016, 2015, or 2014.Identifiable intangible assets consist of customer relationships, marketing-related intangible assets and developed technology. Intangible assets with definitelives are amortized over their estimated useful lives on a straight-line basis. The straight-line method of amortization represents the Company’s best estimateof the distribution of the economic value of the identifiable intangible assets.Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of intangible assets may not berecoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, asignificant change in the extent or manner in which an asset is used or any other significant adverse change that would indicate that the carrying amount ofan asset or group of assets may not be recoverable. The Company evaluates the recoverability of intangible assets by comparing their carrying amounts to thefuture net undiscounted cash flows expected to be generated by the intangible assets. If such intangible assets are considered to be impaired, the impairmentto be recognized is measured as the amount by which the carrying amount of the intangible assets exceeds the fair value of the assets.The Company determines fair value based on discounted cash flows using a discount rate commensurate with the risk inherent in the Company’s currentbusiness model for the specific intangible asset being valued. There were no impairments during 2016, 2015, and 2014.Long-Lived AssetsLong-lived assets are reviewed for impairment whenever events or circumstances indicate their carrying value may not be recoverable. When such events orcircumstances arise, an estimate of future undiscounted cash flows produced by the asset, or the appropriate grouping of assets, is compared to the asset'scarrying value to determine whether impairment exists. If the asset is determined to be impaired, the impairment loss is measured based on the excess of itscarrying value over its fair value. Assets to be disposed of are reported at the lower of the carrying value or net realizable value. No indicators of impairmentwere identified during the years ended December 31, 2016, 2015, or 2014. Software Development CostsSoftware development costs are expensed as incurred until the point the Company establishes technological feasibility. Technological feasibility isestablished upon the completion of a working model. Costs incurred by the Company between establishment of technological feasibility and the point atwhich the product is ready for general release are capitalized, subject to their recoverability, and amortized over the economic life of the related products.Because the Company believes its current process for developing its software products essentially results in the completion of a working product concurrentwith the establishment of technological feasibility, no software development costs have been capitalized to date. There were no software development costsrequired to be capitalized under ASC 985-20, Costs of Software to be Sold, Leased or Marketed, and under ASC 350-40, Internal-Use Software.Canadian Tax CreditsCanadian tax credits related to current expenses are accounted for as a reduction of the research and development costs. Such credits relate to the Company'soperations in Canada and are not dependent upon taxable income. Credits are accrued in the year in which the research and development costs or the capitalexpenditures are incurred, provided the Company is reasonably certain that the credits will be received. The government credit must be examined andapproved by the tax authorities, and it is possible that the amounts granted will differ from the amounts recorded.80Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Debt Issuance CostsThe Company capitalizes underwriting, legal, and other direct costs incurred related to the issuance of debt, which are recorded as a direct deduction from thecarrying amount of the related debt liability and amortized to interest expense over the term of the related debt using the effective interest rate method. Uponthe extinguishment of the related debt, any unamortized capitalized deferred financing costs are recorded to interest expense. In 2014, the Company wrote offapproximately $0.4 million of deferred financing costs associated with a financing facility no longer required after the initial public offering. In 2015, theCompany wrote off approximately $0.2 million of deferred financing costs associated with its Comerica facility replaced by the new Wells Fargo facility. In2016, the Company wrote off approximately $0.1 million of deferred financing costs associated with the expansion of its Wells Fargo facility.Fair Value of Financial InstrumentsThe Company accounts for financial instruments in accordance with the authoritative guidance on fair value measurements and disclosures for financialassets and liabilities. This guidance defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosuresabout fair value measurements. The guidance also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.These tiers include Level 1, defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices inactive markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore,requiring an entity to develop its own assumptions.The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, and accounts payable, long–term debt andwarrant liabilities. The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value, primarily due to shortmaturities. The carrying values of the Company’s debt instruments approximated their fair value based on rates currently available to the Company. Thecarrying values of warrant liabilities are marked to the market at each reporting period.Revenue RecognitionThe Company derives revenue from product revenue, consisting of subscription, support and perpetual licenses, and professional services revenues. TheCompany recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery of the product or services hasoccurred, no Company obligations with regard to implementation considered essential to the functionality remain, the fee is fixed or determinable andcollectability is probable.Subscription and Support RevenueThe Company derives subscription revenues by providing its software-as-a-service solution to customers in which the customer does not have the right totake possession of the software, but can use the software for the contracted term. The Company accounts for these arrangements as service contracts.Subscription and support revenues are recognized on a straight-line basis over the term of the contractual arrangement, typically one to three years. Amountsthat have been invoiced and that are due are recorded in deferred revenue or revenue, depending on when the criteria for revenue recognition are met. Revenue from usage-based services are recognized in the month in which such usage is reported.The Company may provide hosting services to customers who purchased a perpetual license. Such hosting services are recognized ratably over the applicableterm of the arrangement. These hosting arrangements are typically for a period of one to three years.Software maintenance agreements provide technical support and the right to unspecified upgrades on an if-and-when-available basis. Revenue frommaintenance agreements is recognized ratably over the life of the related agreement, which is typically one year.81Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Perpetual License RevenueThe Company also records revenue from the sales of proprietary software products under perpetual licenses. For license agreements in which customeracceptance is a condition to earning the license fees, revenue is not recognized until acceptance occurs. The Company’s products do not require significantcustomization. Perpetual licenses are sold along with software maintenance and, sometimes, hosting agreements. When vendor specific objective evidence(VSOE) of fair value exists for the software maintenance and hosting agreement, the perpetual license is recognized under the residual method whereby thefair value of the undelivered software maintenance and hosting agreement is deferred and the remaining contract value is recognized immediately for thedelivered perpetual license. When VSOE of fair value does not exist for the either the software maintenance or hosting agreement, the entire contract value isrecognized ratably over the underlying software maintenance and/or hosting period.Professional Services RevenueProfessional services provided with perpetual licenses consist of implementation fees, data extraction, configuration, and training. The Company’simplementation and configuration services do not involve significant customization of the software and are not considered essential to the functionality.Revenues from professional services are recognized as such services are provided when VSOE of fair value exists for such services and all undeliveredelements such as software maintenance and/or hosting agreements. VSOE of fair value for services is based upon the price charged when these services aresold separately, and is typically an hourly rate. When VSOE of fair value does not exist for software maintenance and/or hosting agreements, revenues fromprofessional services are recognized ratably over the underlying software maintenance and/or hosting period.Professional services, when sold with the subscription arrangements, are accounted for separately when these services have value to the customer on astandalone basis and there is objective and reliable evidence of fair value for each deliverable. When accounted for separately, revenues are recognized as theservices are rendered for time and material contracts. For those arrangements where the elements do not qualify as a separate unit of accounting, the Companyrecognizes professional services ratably over the contractual life of the related application subscription arrangement. Currently, all professional services areaccounted for separately as all have value to the customer on a standalone basis.Multiple Element ArrangementsThe Company enters into arrangements with multiple-element that generally include subscriptions and implementation and other professional services.For multiple-element arrangements, arrangement consideration is allocated to deliverables based on their relative selling price. In order to treat deliverablesin a multiple-element arrangement as separate units of accounting, the elements must have standalone value upon delivery. If the elements have standalonevalue upon delivery, each element must be accounted for separately. The Company’s subscription services have standalone value as such services are oftensold separately. In determining whether implementation and other professional services have standalone value apart from the subscription services, theCompany considers various factors including the availability of the services from other vendors. The Company has concluded that the implementationservices included in multiple-element arrangements have standalone value. As a result, when implementation and other professional services are sold in amultiple-element arrangement, the arrangement consideration is allocated to the identified separate units based on a relative selling price hierarchy. Theselling price for a element is based on its VSOE of selling price, if available, third-party evidence of selling price, or TPE, if VSOE is not available or bestestimate of selling price, or BESP, if neither VSOE nor TPE is available. The Company has not established VSOE for its subscription services due to lack ofpricing consistency, the introduction of new services and other factors. The Company has determined that TPE is not a practical alternative due to differencesin its service offerings compared to other parties and the availability of relevant third-party pricing information. Accordingly, the Company uses BESP todetermine the relative selling price.The Company determined BESP by considering its overall pricing objectives and market conditions. Significant pricing practices taken into considerationinclude the Company’s discounting practices, the size and volume of its transactions, customer characteristics, price lists, go-to-market strategy, historicalstandalone sales and agreement82Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.prices. As the Company’s go-to-market strategies evolve, it may modify its pricing practices in the future, which could result in changes in relative sellingprices, and include both VSOE and BESP.Deferred RevenueDeferred revenue represents either customer advance payments or billings for which the aforementioned revenue recognition criteria have not yet been met.Messaging-related RevenueThe Company recognizes subscription revenue for its digital engagement application which provides short code connectivity for its two-way SMS programsand campaigns. The Company evaluates whether it is appropriate to recognize revenue based on the gross amount billed to its customers for these services. Since the Company is primarily obligated in these transactions, has latitude in establishing prices associated with its messaging program managementservices, is responsible for fulfillment of the transaction, and has credit risk, revenue is recorded on a gross basis. While none of the factors individually areconsidered presumptive or determinative, in reaching conclusions on gross versus net revenue recognition, the Company places the most weight on theanalysis of whether or not it is the primary obligor in the arrangement.Cost of RevenueCost of revenue primarily consists of salaries and related expenses (e.g. bonuses, employee benefits, and payroll taxes) for personnel directly involved in thedelivery of services and products directly to customers. Cost of revenue also includes the amortization of acquired technology.Customer Contract Acquisition CostsCosts associated with the acquisition or origination of customer contracts are expensed as incurred.Customer Relationship Acquisition CostsCosts associated with the acquisition or origination of customer relationships are capitalized as customer relationship assets as incurred and amortized overthe estimated life of the customer relationship.Advertising CostsAdvertising costs are expensed in the period incurred. Advertising expenses were $59,000, $347,000 and $283,000 for the years ended December 31, 2016,2015, or 2014, respectively. Advertising costs are recorded in sales and marketing expenses in the accompanying consolidated statement of operations.Income TaxesThe Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for theexpected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets andliabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to berecovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities will be recognized in the period that includes the enactment date.A valuation allowance is established against the deferred tax assets to reduce their carrying value to an amount that is more likely than not to be realized.The Company has adopted a permanent reinvestment position whereby foreign earnings for foreign subsidiaries are expected to be reinvested and futureearnings are not expected to repatriated. As a result of this policy, no tax liability has been accrued in anticipation of future dividends from foreignsubsidiaries.The Company accounts for uncertainty of income taxes based on a “more likely than not” threshold for the recognition and derecognition of tax positions,which includes the accounting for interest and penalties.83Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Stock-Based CompensationStock options awarded to employees and directors are measured at fair value at each grant date. The Company accounts for stock-based compensation inaccordance with authoritative accounting principles which require all share-based compensation to employees, including grants of employee stock options,to be recognized in the financial statements based on their estimated fair value. Compensation expense is determined under the fair value method using theBlack-Scholes option pricing model and recognized ratably over the period the awards vest. The Black-Scholes option pricing model used to compute share-based compensation expense requires extensive use of accounting judgment and financial estimates. Items requiring estimation include the expected termoption holders will retain their vested stock options before exercising them, the estimated volatility of the Company’s common stock price over the expectedterm of each stock option, and the number of stock options that will be forfeited prior to the completion of their vesting requirements. Application ofalternative assumptions could result in significantly different share-based compensation amounts being recorded in the financial statements. The followingtable summarizes the weighted-average grant-date fair value of options granted in 2016, 2015, and 2014 and the assumptions used to develop their fairvalues. As there was no public market for its common stock prior to November 2014, the Company estimates the volatility of its common stock based on thevolatility of publicly traded shares of comparable companies' common stock. The Company's decision to use the volatility of comparable stock was basedupon the Company's assessment that this information is more representative of future stock price trends than the Company's historical volatility. TheCompany estimates the expected term using the simplified method, which calculates the expected term as the midpoint between the vesting date and thecontractual termination date of each award. The dividend yield assumption is based on historical and expected future dividend payouts. The risk-free interestrate is based on observed market interest rates appropriate for the term of each options. Year Ended December 31, 2016 2015 2014Weighted average grant-date fair value ofoptions$3.23 $3.01 $3.76Expected volatility42.5% 42.5% - 44.0% 54.1% - 55.2%Risk-free interest rate1.2% 1.7% - 1.9% 1.6% - 1.9%Expected life in years5.93 5.93 6.29Dividend yield— — —Comprehensive LossThe Company utilizes the guidance in Accounting Standards Codification (ASC) Topic 220, Comprehensive Income, for the reporting and display ofcomprehensive loss and its components in the consolidated financial statements. Comprehensive loss comprises net loss and cumulative foreign currencytranslation adjustments. The accumulated comprehensive loss as of December 31, 2016, 2015, and 2014 was due to foreign currency translation adjustments.Foreign Currency TransactionsResults of operations for foreign subsidiaries are translated in United State dollars using the average exchange rates on a monthly basis during the year. Theassets and liabilities of those subsidiaries are translated into United States dollars using the exchange rates at the balance sheet date. The related translationadjustments are recorded in a separate component of stockholders' equity in accumulated other comprehensive loss. Foreign currency transaction gains andlosses are included in the statements of operations and include the impact of revaluation of certain foreign currency denominated net assets or liabilities heldinternationally. For the years ended December 31, 2016, 2015, and 2014, foreign currency transaction losses were $271,000, $515,000, and $2,000,respectively.84Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Basic and Diluted Net Loss per Common ShareThe Company uses the two-class method to compute net loss per common share because the Company has issued securities, other than common stock, thatcontractually entitle the holders to participate in dividends and earnings of the Company. The two-class method requires earnings for the period to beallocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings. Holders ofthe Company’s Series A, B, B-1, B-2 and C preferred stock are entitled, on a pari passu basis, to receive dividends when, as, and if declared by the board ofdirectors, prior and in preference to any declaration or payment of any dividend on the common stock until such time as the total dividends paid on eachshare of Series A, B, B-1, B-2 and C preferred stock is equal to the original issue price of the shares. As a result, all series of the Company’s preferred stock areconsidered participating securities. All of the outstanding preferred stock was converted to common stock upon the Company's initial public offering inNovember 2014.Under the two-class method, for periods with net income, basic net income per common share is computed by dividing the net income attributable tocommon stockholders by the weighted-average number shares of common stock outstanding during the period. Net income attributable to commonstockholders is computed by subtracting from net income the portion of current year earnings that the participating securities would have been entitled toreceive pursuant to their dividend rights had all of the year’s earnings been distributed. No such adjustment to earnings is made during periods with a netloss, as the holders of the participating securities have no obligation to fund losses. Diluted net loss per common share is computed under the two-classmethod by using the weighted-average number of shares of common stock outstanding plus, for periods with net income attributable to commonstockholders, the potential dilutive effects of stock options and warrants. In addition, the Company analyzes the potential dilutive effect of the outstandingparticipating securities under the if-converted method when calculating diluted earnings per share, in which it is assumed that the outstanding participatingsecurities convert into common stock at the beginning of the period. The Company reports the more dilutive of the approaches as its diluted net income pershare during the period. Due to net losses for the years ended December 31, 2016, 2015, and 2014, basic and diluted net loss per share were the same, as theeffect of all potentially dilutive securities would have been anti-dilutive.Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts withCustomers. This ASU amends the existing accounting standards for revenue recognition and is based on the principle that revenue should be recognized todepict the transfer of goods or services to a customer at an amount that reflects the consideration a company expects to receive in exchange for those goods orservices. The Company will adopt this ASU on January 1, 2018, and we expect to use the modified retrospective application method. The Company iscurrently evaluating each of its revenue streams to identify any differences in the timing, measurement or presentation of revenue recognition under the newstandard. We expect to have our preliminary evaluation, including the selection of an adoption method, completed by the end of the first half of 2017.In August 2014, the FASB issued FASB ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure ofUncertainties about an Entity's Ability to Continue as a Going Concern. The new standard provides guidance around management's responsibility to evaluatewhether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The new standard iseffective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016, with early adoption permitted. The adoption ofthis standard is not expected to have a material impact on the Company's financial statements.In November 2015, the FASB issued ASU No. 2015-17,” Income Taxes: Balance Sheet Classification of Deferred Taxes”, to require that deferred taxliabilities and assets be classified entirely as non-current. This amended guidance is effective for fiscal years beginning after December 15, 2016, includinginterim periods within those years. Early adoption is permitted, and the amended guidance may be applied prospectively to all deferred tax liabilities andassets or retrospectively to all periods presented. The Company adopted ASU 2015-17 during the85Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.fourth quarter of 2016 on a prospective basis and the impact on our consolidated financial statements is reflected in Note 6 - Income Taxes and had no impacton our Balance Sheet presentation.In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The core change with ASU 2016-2 is the requirement for the recognition oflease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The new standard is effective for fiscal years,and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating theeffect that the adoption of ASU 2016-02 will have on its financial statements.In March 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718). The core change with ASU 2016-09 is the simplification ofseveral aspects of the accounting for share-based payment transactions, including the income tax consequences, classifications of awards as either equity orliabilities, and classification on the statement of cash flows. The new standard is effective for fiscal years, and interim periods within those fiscal years,beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the effect that the adoption of ASU 2016-09 willhave on its financial statements.In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) No. 2016-13, “FinancialInstruments - Credit Losses: Measurement of Credit Losses on Financial Instruments”, which changes the impairment model for most financial assets. Thenew model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. ASU 2016-13 is effectivefor annual and interim periods beginning after December 15, 2019 and early adoption is permitted for annual and interim periods beginning afterDecember 15, 2018. The Company is currently evaluating the effect that the adoption of ASU 2016-13 will have on its financial statements.In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-15, Classification of CertainCash Receipts and Cash Payments (ASU 2016-15). ASU 2016-15 is intended to add or clarify guidance on the classification of certain cash receipts andpayments in the statement of cash flows and to eliminate the diversity in practice related to such classifications. The guidance in ASU 2016-15 is required forannual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the effect that theadoption of ASU 2016-15 will have on its financial statements.3. Acquisitions2014 AcquisitionsOn November 21, 2014, the Company acquired 100% of the outstanding capital of Solution Q Inc. (Solution Q) for total purchase consideration of $6.1million, which includes cash of $4.5 million, net of $0.4 million of cash acquired, and 150,977 shares of the Company’s common stock with a fair value of$1.6 million. Solution Q provides mid-market organizations an easy-to-use, turnkey solution for their project management and portfolio visibility needs.Revenues recorded since the acquisition date for the year ended December 31, 2014 were approximately $0.3 million.On December 10, 2014, the Company acquired 100% of the outstanding capital of Mobile Commons, Inc. (Mobile Commons) for total purchaseconsideration of $10.2 million including cash of $5.7 million, net of $0.3 million of cash acquired, 386,253 shares of common stock valued at $4.5 millionand excluding potential additional consideration for incremental additional revenue described below. The Company agreed to pay additional considerationof up to $1.5 million in both cash and common stock to the selling shareholders of Mobile Commons based on the achievement of certain incrementalrevenue targets during fiscal 2015. The acquisition-date fair value of the contingent payment was measured based on the probability-adjusted present valueof the consideration expected to be transferred, which amounted to $0.5 million. Mobile Commons’ enterprise-class application drives and manages digitalengagement through two-way SMS programs and campaigns. Revenues recorded since the acquisition date for the year ended December 31, 2014 wereapproximately $0.5 million.86Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.2015 AcquisitionsOn November 13, 2015, the Company acquired 100% of the outstanding capital of Ultriva, Inc. (Ultriva) for total purchase consideration of $7.2 million,which included cash of $5.6 million, net of $0.4 million of cash acquired, 179,298 shares of the Company’s common stock with a fair value of $1.4 million,and an additional $200,000 in shares of common stock held in escrow, subject to indemnification claims, one year from the date of the acquisition. InNovember 2016, the Company issued 24,587 shares of common stock valued at approximately $200,000 as a result of the escrow release. Ultriva providescloud-based supply chain work management software.2016 AcquisitionsOn January 7, 2016, Upland completed its purchase of substantially all of the assets of LeadLander, Inc. (LeadLander), a website analytics provider. Thepurchase price consideration paid was approximately $8.0 million in cash payable at closing (net of approximately $0.4 million of cash acquired) and a $1.2million cash holdback payable in 12 months (subject to indemnification claims), which was fully paid after December 31, 2016. Revenues recorded since theacquisition date through December 31, 2016 were approximately $3.3 million.In addition to the cash consideration described above, the Asset Purchase Agreement included a contingent share consideration component pursuant towhich Upland issued an aggregate of $2.4 million in common stock on July 25, 2016. The Company agreed to additional consideration of up to $3.1 millionin cash to the selling shareholders of LeadLander based on the achievement of certain revenue targets during fiscal years 2016 and 2017.On March 14, 2016, Upland completed its purchase of substantially all of the assets of HipCricket, Inc., a cloud-based mobile messaging software provider.The consideration paid to the seller consisted of our issuance of one million shares of our common stock and the transfer of our EPM Live product business.The value of the shares on the closing date of the transaction was approximately $5.7 million and the fair value of our EPM Live product business wasapproximately $5.9 million. The Company recognized a loss on the transfer in conjunction with the EPM Live net asset value of approximately $0.7 millionin Other expense, net. Prior to the transaction, HipCricket was owned by an affiliate of ESW Capital, LLC, which is a shareholder of Upland. Raymond James& Co. provided a fairness opinion to Upland in connection with the transaction. Revenues recorded since the acquisition date through December 31, 2016were approximately $3.4 million.On April 27, 2016, Upland acquired Advanced Processing & Imaging, Inc., a content management platform driving workflow in governments and schools.The purchase price consideration consisted of $4.1 million in cash payable at closing (net of $0.1 million of cash acquired), and a $0.8 million cash holdbackpayable in 12 months (subject to indemnification claims). Revenues recorded since the acquisition date through December 31, 2016 were approximately $1.6million.The Company recorded the purchase of the acquisitions described above using the acquisition method of accounting and, accordingly, recognized the assetsacquired and liabilities assumed at their fair values as of the date of the acquisition. The purchase price allocations for the 2015 acquisition of Ultriva and the2016 acquisitions of LeadLander and HipCricket are final, and API is preliminary as the Company has not obtained and evaluated all of the detailedinformation necessary to finalize the opening balance sheet amounts in all respects. Management has recorded the purchase price allocations based uponacquired company information that is currently available. Management expects to finalize its purchase price allocations in the first half of 2017.87Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The following condensed table presents the preliminary acquisition-date fair value of the assets acquired and liabilities assumed for the acquisitions, as wellas assets and liabilities (in thousands): API LeadLander HipCricket UltrivaYear Acquired or Divested2016 2016 2016 2015 Cash$125 $365 $— $372Accounts receivable821 199 1,226 689Other current assets54 55 273 52Canadian tax credit receivable— — — —Property and equipment68 5 — 16Customer relationships1,420 970 1,000 1,820Trade name40 70 70 140Technology810 1,410 900 960Goodwill3,420 13,104 8,531 4,739Other assets89 6 — 32Total assets acquired6,847 16,184 12,000 8,820Accounts payable(11) — (44) (196)Accrued expense and other(137) (254) — (284)Deferred tax liabilities— — — —Deferred revenue(1,699) (910) (356) (760)Canadian tax credit liability toseller— — — —Total liabilities assumed(1,847) (1,164) (400) (1,240)Total consideration$5,000 $15,020 $11,600 $7,580Tangible assets were valued at their respective carrying amounts, which approximates their estimated fair value. The valuation of identifiable intangibleassets reflects management’s estimates based on, among other factors, use of established valuation methods. Customer relationships were valued using anincome approach, which estimates fair value based on the earnings and cash flow capacity of the subject asset. The value of the marketing-related intangibleswas determined using a relief-from-royalty method, which estimates fair value based on the value the owner of the asset receives from not having to pay aroyalty to use the asset. Developed technology was valued using a cost-to-recreate approach.Goodwill deductible for tax purposes is $4.9 million for our LeadLander acquisition and $8.2 million for HipCricket. There was no Goodwill deductible fortax purposes for our API acquisition.88Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.4. Fair Value MeasurementsFair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction betweenmarket participants as of the measurement date. Fair Value Measurements at December 31, 2015 Level 1 Level 2 Level 3 TotalLiabilities: Earnout consideration liability$— $— $500 $500 Fair Value Measurements at December 31, 2016 Level 1 Level 2 Level 3 TotalLiabilities: Earnout consideration liability$— $— $2,500 $2,500The following table presents additional information about liabilities measured at fair value on a recurring basis and for which we have utilized significantunobservable (Level 3) inputs to determine fair value:Ending balance at December 31, 2014$500Ending balance at December 31, 2015500Additions - stock earnouts2,400Additions - cash earnouts2,500Settlements - stock earnouts(2,400)Settlements - cash earnouts(500)Ending balance at December 31, 2016$2,500The fair value of the earnout consideration was determined using the Binary Option model based on the present value of the probability-weighted earnoutconsideration.DebtThe Company believes the carrying value of its long-term debt at December 31, 2016 approximates its fair value based on the variable interest rate feature orbased upon interest rates currently available to the Company.The estimated fair value of our debt at December 31, 2016 and 2015 is $49.4 million and $24.9 million, respectively, based on valuation methodologiesusing interest rates currently available to the Company which are Level 2 inputs.89Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.5. Goodwill and Other Intangible AssetsChanges in the Company’s goodwill balance for each of the two years in the period ended December 31, 2016 are summarized in the table below(in thousands):Balance at December 31, 2013$33,630Acquired in business combinations12,313Finalization of 2013 business combination—Foreign currency translation adjustment(797)Balance at December 31, 201445,146Acquired in business combinations4,700Adjustment due to finalization of 2014 business combination(120)Foreign currency translation adjustment(2,304)Balance at December 31, 201547,422Acquired in business combinations25,037Divestiture of business(3,775)Adjustment due to prior year business combinations57Foreign currency translation adjustment356Balance at December 31, 2016$69,097Intangible assets, net, include the estimated acquisition-date fair values of customer relationships, marketing-related assets, and developed technology thatthe Company recorded as part of its business acquisitions purchases and from acquisitions of customer relationships. The following is a summary of theCompany’s intangible assets, net (in thousands): Estimated UsefulLife (Years) GrossCarrying Amount AccumulatedAmortization Net CarryingAmountDecember 31, 2016 Customer relationships1-10 $32,703 $12,418 $20,285Trade name1.5-3 2,636 2,462 174Developed technology4-7 15,228 7,175 8,053Total intangible assets $50,567 $22,055 $28,512 Estimated UsefulLife (Years) GrossCarrying Amount AccumulatedAmortization Net CarryingAmountDecember 31, 2015 Customer relationships1-10 $31,848 $9,054 $22,794Trade name1-3 2,909 2,476 433Developed technology4-7 13,808 5,509 8,299Total intangible assets $48,565 $17,039 $31,526The following table summarizes the Company’s weighted-average amortization period, in total and by major finite-lived intangible asset class, byacquisition during the year ended December 31 (in years):90Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 2016 2015Customer relationships9.3 9.3Trade name2.8 2.9Developed technology6.3 6.4Total weighted-average amortization period8.0 8.1The Company periodically reviews the estimated useful lives of its identifiable intangible assets, taking into consideration any events or circumstances thatmight result in either a diminished fair value or revised useful life. Management has determined there have been no other indicators of impairment or changein the useful life during the years ended December 31, 2016, 2015, and 2014. Total amortization expense was $7.2 million, $6.1 million, and $5.2 millionduring the years ended December 31, 2016, 2015, and 2014, respectively.Estimated annual amortization expense for the next five years and thereafter is as follows (in thousands): AmortizationExpenseYear ending December 31: 2017$6,00620185,66320194,85720203,89120213,4962022 and thereafter4,599Total$28,51291Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.6. Income TaxesThe Company's loss from continuing operations before income taxes for the years ended December 31, was as follows (in thousands): 2016 2015 2014Income (loss) before provision for income taxes: United States$(14,242) $(13,254) $(18,455)Foreign2,259 629 (1,740) $(11,983) $(12,625) $(20,195)The components of the provision (benefit) for income taxes attributable to continuing operations are as follows (in thousands): 2016 2015 2014Current Federal$— $— $—State37 (100) 54Foreign964 932 163Total Current$1,001 $832 $217 Deferred Federal$727 $293 $300State131 31 10Foreign(329) (117) (605)Total Deferred529 207 (295) $1,530 $1,039 $(78)As of December 31, 2016, the Company had federal net operating loss carryforwards of approximately $83 million and research and development creditcarryforwards of approximately $1.3 million. The net operating loss and credit carryforwards will expire beginning in 2017, if not utilized. Utilization of thenet operating losses and tax credits may be subject to substantial annual limitation due to the “change of ownership” provisions of the Internal RevenueCode of 1986. The annual limitation will result in the expiration of approximately $16.2 million of net operating losses and $0.8 million of creditcarryforwards before utilization.92Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred taxes as of December 31 are as follows (inthousands): 2016 2015 2014Deferred tax assets: Accrued expenses and allowances$993 $793 $733Deferred revenue573 671 549Stock compensation1,054 582 350Net operating loss and tax credit carryforwards24,895 20,871 16,755Capital expenses307 — —Other176 196 123Valuation allowance for noncurrent deferred tax assets(24,588) (18,507) (13,107)Net deferred tax assets$3,410 $4,606 $5,403 Deferred tax liabilities: Capital expenses$— $(2) $(202)Prepaid expenses(31) (1) (1)Intangible assets(5,718) (6,481) (7,217)Goodwill(1,029) (561) (252)Tax credit carryforwards(38) (379) (737)Net deferred tax liabilities$(6,816) $(7,424) $(8,409)Net deferred taxes$(3,406) $(2,818) $(3,006)Due to the uncertainty surrounding the timing of realizing the benefits of its domestic favorable tax attributes in future tax returns, the Company has placed avaluation allowance against its domestic net deferred tax asset, exclusive of goodwill. During the year ended December 31, 2016 and 2015, the valuationallowance increased by approximately $6.1 and $5.4 million, respectively, due primarily to operations and acquisitions.At December 31, 2016, we did not provide deferred income taxes on temporary differences resulting from earnings of certain foreign subsidiaries whichare indefinitely reinvested. The reversal of these temporary differences could result in additional tax; however, it is not practicable to estimate the amount ofany unrecognized deferred income tax liabilities at this time.The Company’s provision for income taxes differs from the expected tax expense (benefit) amount computed by applying the statutory federal income taxrate of 34% to income before taxes due to the following: 2016 2015 2014Federal statutory rate34.0 % 34.0 % 34.0 %State taxes, net of federal benefit1.2 % 3.5 % 3.5 %Tax credits(0.1)% (0.2)% (1.1)%Effect of foreign operations1.1 % (2.2)% 0.1 %Stock compensation(1.7)% (2.9)% — %Permanent items and other(1.6)% (3.3)% (1.7)%Tax carryforwards not benefited(45.7)% (37.1)% (34.4)% (12.8)% (8.2)% 0.4 %Under ASC 740-10, Income Taxes - Overall, the Company periodically reviews the uncertainties and judgments related to the application of complex incometax regulations to determine income tax liabilities in several93Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.jurisdictions. The Company uses a “more likely than not” criterion for recognizing an asset for unrecognized income tax benefits or a liability for uncertaintax positions. The Company has determined it has the following unrecognized assets or liabilities related to uncertain tax positions as of December 31, 2016.The Company does not anticipate any significant changes in such uncertainties and judgments during the next 12 months. To the extent the Company isrequired to recognize interest and penalties related to unrecognized tax liabilities, this amount will be recorded as an accrued liability, (in thousands).Balance at December 31, 2014$53Additional based on tax positions related to the current year—Additions for tax positions of prior years568Reductions for tax positions of prior years—Settlements—Balance at December 31, 2015$621Additional based on tax positions related to the current year—Additions for tax positions of prior years84Reductions for tax positions of prior years—Settlements—Balance at December 31, 2016$705Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not materially impact the Company’s effective tax rate.If the Company were to recognize unrecognized tax benefits as of December 31, 2016, $399,000 would impact the effective tax rate. The Company’sassessment of its unrecognized tax benefits is subject to change as a function of the Company’s financial statement audit.The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2016, the Company had noaccrued interest or penalties related to uncertain tax positions.The Company and its subsidiaries file tax returns in the U.S. federal jurisdiction and in several state and foreign jurisdictions. The Company is no longersubject to U.S. federal income tax examinations for years ending before December 31, 2013 and is no longer subject to state and local or foreign income taxexaminations by tax authorities for years ending before December 31, 2012. The Company is not currently under audit for federal, state or any foreignjurisdictions.94Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.7. DebtLong-term debt consisted of the following at December 31, 2016 and 2015 (in thousands): December 31, 2016 2015Senior secured loans (includes unamortized discount of $1,442 and $1,008 at December 31, 2016 andDecember 31, 2015, respectively, based on imputed interest rate of 6.6%)$47,929 $23,366Seller notes due 2016— 500 47,929 23,866Less current maturities(2,190) (1,500)Total long-term debt$45,739 $22,366Loan and Security AgreementsLoan and Security AgreementsOn November 15, 2016, Upland Software, Inc. (the “Company”) amended its Credit Agreement (the “Credit Agreement”) with a consortium of lenders (the“Lenders”), Wells Fargo Capital Finance, as agent, providing for a secured credit facility (the “Loan Facility”).As of December 31, 2016, there was (i) none in U.S. revolving loans outstanding under the Credit Agreement, (ii) none drawn on the Canadian revolvingcredit facility, (iii) $43.8 million in U.S. term loans outstanding under the Credit Agreement; and (iv) $5.6 million in Canadian term loans outstanding underthe Credit Agreement.LoansThe Credit Agreement provides for up to $90.0 million of financing credit as outlined below.The Credit Agreement provides (i) a U.S. revolving credit facility in an aggregate principal amount of up to $9.0 million (the “U.S. Revolver”), (ii) a U.S. termloan facility in an aggregate principal amount of up to $44.4 million (the “U.S. Term Loan”), (iii) a delayed draw term loan facility in an aggregate principalamount of up to $10.0 million (the “DDTL”). (iv) a Canadian revolving credit facility in an aggregate principal amount of up to $1.0 million (the “CanadianRevolver” and, together with the U.S. Revolver, the “Revolver”); and (v) a Canadian term loan facility in an aggregate principal amount of up to $5.6 million(the “Canadian Term Loan” and, together with the U.S. Term Loan, the “Term Loan”).The Credit Agreement also includes provisions for optional, uncommitted increases in the maximum size of the loan facility available under the CreditAgreement by an aggregate principal amount of $20.0 million upon the satisfaction of the terms and conditions set forth in the Credit Agreement.The Credit Agreement also provides for, among other things, (i) a maturity date of November 15, 2021, (ii) a maximum amount of permitted stock repurchasesof $8,300,000, and (iii) a maximum amount of seller subordinated indebtedness permitted to be incurred in connection with permitted acquisitions of$16,700,000.Terms of RevolverLoans under the Revolver are available up to the lesser of (i) $10.0 million (the “Maximum Revolver Amount”) or (ii) the result of (a) 100% multiplied by(subject to step-downs beginning December 31, 2016) of certain subsidiaries' recurring revenues on a trailing twelve month basis, minus (b) the outstandingbalance of the Term Loans and any swing line loans made under the Credit Agreement (such amount, the “Credit Amount”). The Revolver provides asubfacility whereby Borrowers may request letters of credit (the “Letters of Credit”) in an aggregate amount not to exceed, at any one time outstanding, $0.5million and $0.25 million, from the U.S & Canadian facilities, respectively. The aggregate amount of outstanding Letters of Credit are reserved against thecredit availability under the Maximum Revolver Amount and the Credit Amount.95Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Loans under the Revolver may be borrowed, repaid and reborrowed until November 15, 2021 (the “Maturity Date”), at which time all amounts borrowedunder the Credit Agreement must be repaid.Terms of Term LoansThe Term Loans are repayable, on a quarterly basis beginning December 31, 2016, by an amount equal to 5.0% per annum of the original principal amount ofsuch loan. Any amount remaining unpaid is due and payable in full on the Maturity Date.Terms of Delay Draw Term LoanPursuant to the terms of the Credit Agreement, the DDTL is to be used to finance acquisitions. The DDTL can be drawn upon until November 15, 2018. TheDDTL is repayable, on a quarterly basis, by an amount equal to 5.0% per annum of the original funded amount of the DDTL. Any amount remaining unpaidwould be due and payable in full on the Maturity Date.Other Terms of Loan FacilityAt the option of the Company, U.S. loans accrue interest at a per annum rate based on (i) the U.S. base rate plus a margin ranging from 3.0% to 4.0%depending on the leverage ratio or (ii) the U.S. LIBOR rate determined in accordance with the Credit Agreement (based on 1, 2, 3 or 6-month interest periods)plus a margin ranging from 4.0% to 5.0% depending on the leverage ratio. The U.S. base rate is a rate equal to the highest of the federal funds rate plus amargin equal to 0.5%, the U.S. LIBOR rate for a 1-month interest period plus 1.0% and Wells Fargo Capital Finance’s prime rate.At the option of the Company, the Canadian loans accrue interest at a per annum rate based on (i) the Canadian prime rate or the U.S. base rate plus a marginranging from 3.0% to 4.0% depending on the leverage ratio or (ii) the U.S. LIBOR rate determined in accordance with the Credit Agreement (based on 1, 2, 3or 6-month interest periods) (or the Canadian Bankers Acceptance ("Canadian BA") rate determined in accordance with the Credit Agreement for obligationsin Canadian dollars) plus a margin ranging from 4.0% to 5.0% depending on the leverage ratio.Accrued interest on the loans will be paid monthly, or, with respect to loans that are accruing interest based on the U.S. LIBOR rate or Canadian BA rate, atthe end of the applicable U.S. LIBOR or Canadian BA interest rate period.The Company is also obligated to pay other customary servicing fees, letter of credit fees and unused credit facility fees.The Loan Facility contains customary affirmative and negative covenants. The negative covenants limit the ability of the Company and its subsidiaries to,among other things (in each case subject to customary exceptions for a credit facility of this size and type):•Incur additional indebtedness or guarantee indebtedness of others;•Create liens on their assets;•Make investments, including certain acquisitions;•Enter into mergers or consolidations;•Dispose of assets;•Pay dividends and make other distributions on the Company’s capital stock, and redeem and repurchase the Company’s capital stock;•Enter into transactions with affiliates; and•Prepay indebtedness or make changes to certain agreements.There are certain financial covenants that become more restrictive starting March 31, 2017. If an event of default occurs, at the election of the Lenders,a default interest rate shall apply on all obligations during an event of default, at a rate per annum equal to 2.00% above the applicable interest rate.96Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The Loan Facility limits the Company's ability to buyback its capital stock, subject to restrictions including a minimum liquidity requirement of $20.0million before and after any such buyback.Termination of Prior Credit AgreementsIn conjunction with the amended facility, the Company expensed unamortized financing costs of $0.1 million.Interest Rate and Financing CostsCash interest costs averaged 5.7% under the new Credit Agreement for the year ended December 31, 2016. In addition, the Company incurred $1.9 million offinancing costs associated with the Credit Agreement in the year ended December 31, 2016. These financing costs will be amortized to non-cash interestexpense over the term of the Credit Agreement.Seller NotesIn May 2013, the Company issued seller notes payable in connection with the acquisition of FileBound. The notes had an aggregate principal amount of$3.5 million with 5% stated interest. $3.0 million of the notes were paid in May 2015 and $500,000 of the notes were paid in May 2016.Debt MaturitiesFuture debt maturities of long-term debt excluding debt discounts at December 31, 2016 are as follows, (in thousands):Year ending December 31: 2017$2,51920182,51920192,51920202,519202139,294Thereafter— $49,3708. Net Loss Per ShareThe following table sets for the computations of loss per share (in thousands, except share and per share amounts): December 31, 2016 2015 2014Numerators: Loss from continuing operations attributable to commonstockholders$(13,513) $(13,664) $(20,117)Preferred stock dividends and accretion— — (1,524)Net loss attributable to common stockholders$(13,513) $(13,664) $(21,641)Denominator: Weighted–average common shares outstanding, basic anddiluted16,472,799 14,939,601 4,889,901Loss from continuing operations per share, basic and diluted$(0.82) $(0.91) $(4.43)Loss from discontinued operations per share, basic and diluted— — —Net loss per common share, basic and diluted$(0.82) $(0.91) $(4.43)97Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Due to the net losses for the years ended December 31, 2016, 2015, and 2014, basic and diluted loss per share were the same, as the effect of all potentiallydilutive securities would have been anti-dilutive. The following table sets forth the anti-dilutive common share equivalents: December 31, 2016 2015 2014Stock options759,719 778,385 665,216Restricted stock839,477 513,943 438,939Total anti–dilutive common share equivalents1,599,196 1,292,328 1,104,1559. Commitments and ContingenciesOperating LeasesThe Company leases office space under operating leases that expire between 2017 and 2020.Future minimum lease payments under operating and capital lease obligations are as follows (in thousands): CapitalLeases OperatingLeases PurchaseCommitments2017$1,644 $1,182 $2,47120181,249 900 —2019628 916 —202078 259 —2021— — —Thereafter— — —Total minimum lease payments3,599 $3,257 $2,471Less amount representing interest(418) Present value of capital lease obligations3,181 Less current portion of capital lease obligations(1,644) Long-term capital lease obligations$1,537 The Company has an outstanding purchase commitment in 2017 for software development services from DevFactory FZ-LLC pursuant to a technologyservices agreement in the amount of $2.5 million. The agreement has an initial term that expires on December 31, 2017, with an option for either party torenew annually for up to five years. For years after 2017, the purchase commitment amount for software development services will be equal to the prior yearpurchase commitment increased (decreased) by the percentage change in total revenue for the prior year as compared to the preceding year. For example, if2017 total revenues increase by 10% as compared to 2016 total revenues, then the 2018 purchase commitment will increase by approximately $250,000 fromthe 2017 purchase commitment amount to approximately $2.8 million.Total rent expense for the years ended December 31, 2016, 2015, and 2014 were approximately $2.1 million, $2.1 million, and $1.9 million, respectively. In2017, we have subleased two of our operating leases and will receive sublease income of $231,000 which offsets operating lease obligations shown above.Both the underlying sublease and the associated operating leases end during 2017. The current and long-term portion of capital lease obligations arerecorded in other current liabilities and other long-term liabilities line items on the balance sheet, respectively. Capital lease agreements are generally for fouryears and contain a bargain purchase option at the end of the lease term.98Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.LitigationIn the normal course of business, the Company may become involved in various lawsuits and legal proceedings. While the ultimate results of these matterscannot be predicted with certainty, management does not expect them to have a material adverse effect on the consolidated financial position or results ofoperations of the Company.10. Property and Equipment, NetProperty and equipment consisted of the following (in thousands) at: December 31, 2016 December 31, 2015Equipment (including equipment under capital lease of $6,087 and $6,199 at December 31, 2016 and 2015,respectively)$11,317 $11,599Furniture and fixtures (including furniture under capital lease of $0 and $143 at December 31, 2016 and2015, respectively)205 484Leasehold improvements729 819Accumulated depreciation (including for equipment and furniture under capital lease of $2,961 and $2,218 atDecember 31, 2016 and 2015, respectively)(7,895) (6,901)Property and equipment, net$4,356 $6,001Amortization of assets recorded under capital leases is included with depreciation expense. Depreciation and amortization expense on property andequipment was $2.7 million, $2.3 million and $2.3 million for the years ended December 31, 2016, 2015, and 2014, respectively. The Company recorded noimpairment of property and equipment and recorded losses on the disposal of property and equipment of $0.2 million, $0.0 million, and $0.0 million duringthe years ended December 31, 2016, 2015, and 2014.11. Stockholders' EquityCommon StockOur certificate of incorporation authorizes shares of stock as follows: 50,000,000 shares of common stock and 5,000,000 shares of preferred stock. Thecommon and preferred stock have a par value of $0.0001 per share.Each share of common stock is entitled to one vote at all meetings of stockholders. The number of authorized shares of common stock may be increased ordecreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of shares of capital stock of the Companyrepresenting a majority of the votes represented by all outstanding shares of capital stock of the Company entitled to vote. The holders of common stock arealso entitled to receive dividends, when, if and as declared by our board of directors, whenever funds are legally available therefore, subject to the priorityrights of any outstanding preferred stock.•In January 2014, the Company issued 1,803,574 shares of common stock to this company in connection with the amendment of such technologyservices agreement and took a noncash charge of $11.2 million recorded in research and development expenses.•In September 2014, the Company granted 294,010 shares of restricted stock with a grant-date fair value of $8.73. The restricted stock has restrictionswhich vest over three years from date of grant for 40,990 shares and over four years from the date of grant for 253,020 shares. The grant-date fairvalue of the shares is recognized over the requisite vesting period. If vesting periods are not achieved, the shares will be forfeited by the employee.•In November 2014, the Company granted 41,664 shares of restricted stock with a grant-date fair value of $12.00 to members of the Board ofDirectors. The restricted stock has restrictions which vest fully after twelve months from date of grant. The grant-date fair value of the shares isrecognized over the requisite vesting period. If vesting periods are not achieved, the shares will be forfeited by the respective Director.99Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.•In November, 2014, the Company issued 3,846,154 shares of common stock, at a price of $12.00 per share, before underwriting discounts andcommissions. The IPO generated net proceeds of approximately $42.9 million, after deducting underwriting discounts and commissions. Expensesincurred by us for the IPO were approximately $4.1 million and will be recorded against the proceeds received from the IPO.•In November 2014, the Company issued 6,834,476 share of common stock for conversion of all outstanding shares of preferred stock on a one-to-one basis in connection with the Company's IPO.•In November 2014, the Company issued 150,977 shares of common stock valued at $1.6 million in connection with the acquisition of Solution Q. Inaddition, the company issued 65,570 shares of common stock to two employees valued at $0.7 million. The restricted stock has restrictions whichvest fully two years from date of grant. The grant-date fair value of the shares is recognized over the requisite vesting period. If vesting periods arenot achieved, the shares will be forfeited by the respective employee.•In December 2014, the Company agreed to issue 386,253 shares of common stock valued at $4.5 million in connection with the acquisition ofMobile Commons. As of December 31, 2014, 316,747 shares of common stock were issued to certain former shareholders of Mobile Commons,44,192 shares were being held in escrow for eighteen (18) months and subject to indemnification claims by the Company and an additional 25,314shares were reserved for issuance upon the completion of certain documentation by certain former shareholders of Mobile Commons.•In November 2015, the Company agreed to issue 179,298 shares of common stock valued at approximately $1,388,000 in connection with theacquisition of Ultriva. In addition, the company issued 45,767 shares of common stock to an employee valued at approximately $0.4 million. Therestricted stock has restrictions which vest at three different events during the year following the acquisition. The grant-date fair value of the sharesis recognized over the requisite vesting period, which occurred during 2016.•In March 2016, the Company issued 1,000,000 shares of common stock valued at approximately $5,700,000 in connection with the acquisition ofHipCricket, Inc.•In July, 2016, the Company issued 318,302 shares of common stock valued at approximately $2,400,000 in connection with the acquisition ofLeadLander, Inc.•In November, 2016, the Company issued 24,587 shares of common stock valued at approximately $200,000 in connection with the acquisition ofUltriva, Inc.Stock Compensation PlansThe Company maintains two stock-based compensation plans, the 2010 Stock Option Plan (the “2010 Plan”) and the 2014 Stock Option Plan (the “2014Plan”), which are described below.2010 PlanAt December 31, 2016, there were 294,502 options outstanding under the 2010 Plan. Following the effectiveness of the Company’s 2014 Plan in November2014, no further awards have been made under the 2010 Plan, although each option previously granted under the 2010 Plan will remain outstanding subjectto its terms. Any such shares of common stock that are subject to awards under the 2010 Plan which are forfeited or lapse unexercised and would otherwisehave been returned to the share reserve under the 2010 Plan instead will be available for issuance under the 2014 Plan.100Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.2014 PlanIn November 2014, the Company adopted the 2014 Plan, providing for the granting of incentive stock options, as defined by the Internal Revenue Code, toemployees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance units andperformance shares to employees, directors and consultants. The 2014 Plan also provides for the automatic grant of option awards to our non-employeedirectors. As of December 31, 2016, there were 465,217 options outstanding under the 2014 Plan and shares of common stock reserved for issuance under the2014 Plan consist of 163,928 shares of common stock. In addition, the number of shares available for issuance under the 2014 Plan will be increased annuallyin an amount equal to the least of (i) 4% of the outstanding Shares on the last day of the immediately preceding Fiscal Year or (ii) such number of Sharesdetermined by the Board. At December 31, 2016, there were 839,477 restricted stock units outstanding under the 2014 Plan.Shares issued upon any stock option exercise under the 2010 Plan or 2014 Plan will be issued from the Company's authorized but unissued shares. Stock Option ActivityA summary of the Company’s stock option activity under all Plans is as follows: Number ofOptionsOutstanding Weighted–AverageExercisePrice Weighted–AverageRemainingContractual Life(In Years) Weighted-Average FairValueper ShareOutstanding at December 31, 2013 357,991 $1.40 9.16 $0.79Options granted 386,797 7.03 3.76Options exercised (435) 1.77 0.93Options forfeited (79,143) 3.87 2.09Outstanding at December 31, 2014 665,210 $4.39 8.78 $2.37Options granted 420,616 6.93 6.93Options exercised (106,338) 2.17 2.24Options forfeited (201,100) 5.62 4.99Outstanding at December 31, 2015 778,388 $5.75 8.39 $5.75Options granted 137,586 7.74 3.23Options exercised (43,101) 4.93 2.54Options forfeited (75,251) 7.01 3.69Options expired (37,903) 4.94 4.90Outstanding at December 31, 2016 759,719 $6.06 7.73 $2.84 Options vested and expected to vest at December 31, 2014 149,907 $1.58 7.81 Options vested and exercisable at December 31, 2014 149,907 $1.58 7.81 Options vested and expected to vest at December 31, 2015 769,142 $5.72 8.37 Options vested and exercisable at December 31, 2015 244,631 $3.78 6.91 Options vested and expected to vest at December 31, 2016 747,736 $6.04 7.70 Options vested and exercisable at December 31, 2016 482,731 $5.41 7.25 101Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The aggregate intrinsic value of options vested during the years ended December 31, 2016 and 2015, was approximately $0.8 million and $0.6million, respectively. The aggregate intrinsic value of options outstanding at December 31, 2016 and 2015, was approximately $2.2 million and $1.3million, respectively. The aggregate intrinsic value of options exercised at December 31, 2016 and 2015, was approximately $0.1 million and $0.6 million,respectively. The aggregate intrinsic value of options exercisable, vested and expected to vest at December 31, 2016 and 2015 was approximately $2.2million and $1.3 million. The total fair value of employee options vested during the years ended December 31, 2016 and 2015 was approximately $1.0million and $0.8 million, respectively. Unvested shares as of December 31, 2016 and 2015 have a weighted-average grant date fair value of $3.45 and $3.53per share, respectively. Total stock-based compensation was approximately $4.3 million, $2.7 million, and $1.1 million for the years ended December 31, 2016, 2015, and2014, respectively. As of December 31, 2016, $0.8 million of unrecognized compensation cost related to stock options is expected to be recognized over aweighted-average period of 1.39 years.The Company received approximately $212,000 in cash from option exercises under the respective Plans in 2016. The Company issued shares fromamounts reserved under the respective Plans upon the exercise of these stock options. The Company does not currently expect to repurchase shares from anysource to satisfy such obligation under any of the Company’s stock option Plans. The exercise of stock options during the year ended December 31, 2016resulted in an excess tax deduction of approximately $402,000. The expected tax benefits of approximately $148,000 will be included as part of the deferredtax asset associated with net operating loss carryforwards, currently fully offset by a valuation allowance, upon adoption of ASU 2016-09 in the first quarterof 2017.Restricted Stock AwardsA summary of the Company’s restricted stock activity under the 2010 and 2014 Plan is as follows: Number ofRestricted SharesOutstandingUnvested balances at December 31, 2013240,279Awards granted401,244Awards vested(202,584)Unvested balances at December 31, 2014438,939Awards granted242,500Awards vested(144,268)Awards forfeited(23,228)Unvested balances at December 31, 2015513,943Awards granted778,097Awards vested(385,895)Awards forfeited(66,668)December 31, 2016839,477During 2016, 385,895 restricted stock awards vested with a weighted average grant date fair value of $7.72 per share.102Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Share-based CompensationThe Company recognized share-based compensation expense from all awards in the following expense categories (in thousands): Year Ended December 31, 2016 2015 2014Cost of subscription and support revenue$43 $47 $30Cost of professional services revenue1 (5) 19Sales and marketing105 65 39Research and development204 203 61General and administrative3,980 2,431 928Total$4,333 $2,741 $1,07712. Redeemable Convertible Preferred Stock▪In 2011, the Company issued 2,652,110 shares of Series A redeemable convertible preferred stock for aggregate proceeds of $16.0 million, net ofissuance costs of $199,000.▪In January 2012, the Company issued 169,054 shares of Series A redeemable convertible preferred stock for aggregate proceeds of $1.0 million, net ofissuance costs of $24,000.▪In January 2012, the Company issued 1,701,909 shares of Series B redeemable convertible preferred stock for aggregate proceeds of $10.4 million,net of issuance costs of $22,000.▪In November 2012, the Company issued 131,168 shares of Series B-1 redeemable convertible preferred stock valued at $800,000 in connection withthe acquisition of EPM Live. Such shares are subject to forfeiture obligations based upon continued employment over a 24-month period. TheCompany is accounting for such shares as compensation as the shares vest. At December 31, 2014, all shares are now fully amortized.▪In May 2013, the Company issued 106,572 shares of B-1 redeemable convertible preferred stock valued at $624,000 in connection with theacquisition of FileBound.▪In November 2013, the Company issued 155,598 shares of Series B-2 redeemable convertible preferred stock valued at $949,000 in connection withthe acquisition of ComSci.▪In December 2013, the Company issued 1,918,048 shares of Series C redeemable convertible preferred stock for aggregate proceeds of $19.7 million,net of issuance costs of $82,000. The proceeds from the issuance of Series C preferred stock included the conversion of $4.9 million of convertiblepromissory bridge notes and accrued interest payable.▪In November 2014, all of the shares of preferred stock were converted into 6,834,476 shares of common stock on a one-to-one basis in connectionwith the Company's IPO.DividendsDividends on shares of Series C redeemable convertible preferred stock shall begin to accrue on a daily basis at a rate of 8% per annum, shall be cumulative,and shall compound on an annual basis. Series C redeemable convertible preferred stock dividends shall be due and payable upon the earliest of (i) anyliquidation, dissolution, or winding up of the Company; (ii) the redemption of the Series C redeemable convertible preferred stock; or (iii) the payment of anydividends with respect to common stock or Series A, B, B–1 redeemable convertible Preferred Stock.103Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Cumulative dividends on shares of Series C redeemable convertible preferred stock shall cease to accrue and all accrued and unpaid cumulative dividendsshall be canceled and any rights to such dividends shall terminate at the time such share of Series C redeemable convertible preferred stock is converted tocommon stock.The holders of outstanding shares of Series A, B, B–1, and B–2 redeemable convertible preferred stock shall be entitled to receive dividends, when, as, and ifdeclared by the Board of Directors, out of any assets legally available at the annual rate of $0.49 per share payable in preference and priority to anydeclaration or payment of any distribution on common stock. No dividends shall be made with respect to the common stock unless dividends on the PreferredStock have been declared and paid or set aside for payment to the preferred stockholders. The right to receive dividends on shares of Series A, B, B–1 and B–2 redeemable convertible preferred stock shall not be cumulative, and no right to dividends shall accrue to holders of Series A, B, B–1 and B–2 redeemableconvertible preferred stock by reason of the fact that dividends on said shares are not declared or paid. Payment of any dividends to the holders of Series A, B,B–1, and B–2 redeemable convertible preferred stock shall be on a pro rata basis.13. Preferred Stock WarrantsThe Company had 19,675 Series A preferred stock warrants and 56,839 Series B redeemable convertible preferred stock warrants outstanding as ofDecember 31, 2013 with an exercise price of $6.10 per share. All of these warrants were issued in connection with the Comerica loan agreements described inNote 7. The warrants were converted to warrants to purchase common stock in November 2014. See Note 4.The fair value of warrants to purchase convertible preferred stock was determined using the Black-Scholes option pricing model.14. Employee Benefit PlansThe Company has established two voluntary defined contribution retirement plans qualifying under Section 401(k) of the Internal Revenue Code. TheCompany made no contributions to the 401(k) plans for the years ended December 31, 2016, 2015, and 2014.104Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.15. Domestic and Foreign OperationsRevenue by geography is based on the ship-to address of the customer, which is intended to approximate where the customers' users are located. The ship-tocountry is generally the same as the billing country. The Company has operations in the U.S., Canada and Europe. Information about these operations ispresented below (in thousands): December 31, 2016 2015 2014Revenues: U.S.$62,534 $56,778 $50,661Canada4,090 4,280 3,713Other International8,143 8,853 10,200Total Revenues$74,767 $69,911 $64,574 December 31, 2016 2015 2014Identifiable long-lived assets: U.S.$4,054 $5,501 $3,330Canada284 469 600Other International18 31 —Total identifiable long-lived assets$4,356 $6,001 $3,93016. Related Party TransactionsWe are a party to three agreements with companies controlled by a non-management investor in the Company:•During the fiscal years ended December 31, 2016, 2015, and 2014, the Company purchased software development services pursuant to a technologyservices agreement with DevFactory FZ-LLC, in the amount of $2.3 million, $2.1 million, and $2.1 million, respectively. In January 2014, theCompany issued 1,803,574 shares of common stock to this company in connection with the amendment of such technology services agreement andtook a noncash charge of $11.2 million recorded in research and development expenses. The Company has an outstanding purchase commitment in2017 for software development services pursuant to a technology services agreement in the amount of $2.5 million. The agreement has an initialterm that expires on December 31, 2017, with an option for either party to renew annually for up to five years. For years after 2017, the purchasecommitment amount for software development services will be equal to the prior year purchase commitment increased (decreased) by the percentagechange in total revenue for the prior year as compared to the preceding year. For example, if 2017 total revenues increase by 10% as compared to2016 total revenues, then the 2018 purchase commitment will increase by approximately $250,000 from the 2017 purchase commitment amount toapproximately $2.8 million. At December 31, 2016 and 2015, amounts included in accounts payable owed to this company totaled $0.6 million and$0.7 million, respectively.•In 2016, the Company purchased approximately $1.8 million in services from Crossover, Inc. While there are no purchase commitments with thiscompany, the Company continues to use their services in 2017.•On March 14, 2016, Upland completed its purchase of substantially all of the assets of HipCricket, Inc., a cloud-based mobile messaging softwareprovider, and completed the transfer of its EPM Live product business. Prior to the transaction, HipCricket was owned by an affiliate of ESW Capital,LLC, which is a shareholder of Upland. Raymond James & Co. provided a fairness opinion to Upland in connection with105Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the transaction. Refer to Note 3 for a description of the transaction. Relating to this transaction, the Company is providing certain transition servicesto and receiving certain transition services from the affiliate. The cost offsets earned by the Company for these services during the twelve monthsended December 31, 2016 totaled $706,000 and the fees owed to the affiliate by the Company for these services during the twelve months endedDecember 31, 2016 totaled $112,000.When the Company receives requested services as detailed by statements of work pursuant to the software development agreement, it determines whethersuch software development costs should be capitalized as either internally-used software or software to be sold or otherwise marketed. If such costs are notcapitalizable, the Company expenses such costs as the services are received. If the Company anticipates that it will not utilize the full amount of the annualminimum fee, the estimated unused portion of the annual minimum fee is expensed at that time.The Company has an arrangement with a former subsidiary to provide management, human resource/payroll and administrative services, for which thecompany received fees during 2016 totaled $360,000 and are expected to be similar in 2017.17. Subsequent EventsThe Company has evaluated subsequent events through the date the consolidated financial statements were available for issuance.On January 10, 2017, Upland completed its purchase of 100% of Omtool, Ltd, a document capture, fax and workflow solution company. The purchase priceconsideration paid was approximately $19.2 million in cash payable at closing (net of approximately $3.0 million of cash acquired).The Company recorded the purchase of the acquisition described above using the acquisition method of accounting and, accordingly, recognized the assetsacquired and liabilities assumed at their fair values as of the date of the acquisition. The purchase price allocations for the 2017 acquisition is preliminary asthe Company has not obtained and evaluated all of the detailed information necessary to finalize the opening balance sheet amounts in all respects.Management has recorded the purchase price allocations based upon acquired company information that is currently available. Management expects tofinalize its purchase price allocations in the first half of 2017.On March 28, 2017, the Company entered into an amendment to the Amended and Restated Technology Services Agreement with DevFactory FZ-LLC toextend the initial term end date from December 31, 2017 to December 31, 2021. Additionally, the Company amended the option for either party to renewannually for one additional year from what was provided in the prior agreement. The effective date of the amendment is January 1, 2017.106Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.18. Quarterly Results (Unaudited)The following table sets forth our unaudited quarterly condensed consolidated statements of operations data for each of the last eight quarters throughDecember 31, 2016. The data has been prepared on the same basis as the audited consolidated financial statements and related notes included elsewhere inthis Annual Report and you should read the following tables together with such financial statements. The quarterly results of operations include all normalrecurring adjustments necessary for a fair presentation of this data. Results of interim periods are not necessarily indicative of results for the entire year andare not necessarily indicative of future results. 3/31/15 6/30/15 9/30/15 12/31/15 3/31/16 6/30/16 9/30/16 12/31/16 (dollars in thousands, except per share data)Consolidated Statements of Operations Data: Revenue: Subscription and support$14,322 $14,023 $14,129 $14,719 $15,241 $16,220 $17,029 $17,062Perpetual license811 846 540 608 318 458 332 542Total product revenue15,133 14,869 14,669 15,327 15,559 16,678 17,361 17,604Professional services2,395 2,809 2,436 2,273 2,023 1,892 1,880 1,770Total revenue17,528 17,678 17,105 17,600 17,582 18,570 19,241 19,374Cost of revenue: Subscription and support(1)(2)4,732 4,841 4,771 5,242 5,226 5,634 5,747 6,127Professional services(1)1,908 1,732 1,677 1,768 1,624 1,106 1,045 1,056Total cost of revenue6,640 6,573 6,448 7,010 6,850 6,740 6,792 7,183Gross profit10,888 11,105 10,657 10,590 10,732 11,830 12,449 12,191Operating expenses: Sales and marketing(1)3,532 3,446 2,929 3,058 3,069 2,953 3,097 3,041Research and development(1)3,926 4,152 3,852 3,848 3,910 4,054 3,737 3,218Refundable Canadian tax credits(121) (122) (115) (112) (109) (116) (115) (173)General and administrative(1)5,119 4,714 4,494 3,874 4,123 4,547 4,670 4,946Depreciation and amortization1,014 1,063 1,130 1,327 1,472 1,476 1,322 1,021Acquisition-related expenses545 360 176 1,374 2,428 1,380 1,047 728Total operating expenses14,015 13,613 12,466 13,369 14,893 14,294 13,758 12,781Income (loss) from operations(3,127) (2,508) (1,809) (2,779) (4,161) (2,464) (1,309) (590)Other expense: Interest expense, net(347) (576) (462) (473) (561) (662) (709) (849)Other expense, net(512) (12) 137 (157) (748) (293) (64) 427Total other expense(859) (588) (325) (630) (1,309) (955) (773) (422)Loss before provision for income taxes(3,986) (3,096) (2,134) (3,409) (5,470) (3,419) (2,082) (1,012)Provision for income taxes243 (238) (190) (854) (103) (158) (308) (961)Net income (loss)$(3,743) $(3,334) $(2,324) $(4,263) $(5,573) $(3,577) $(2,390) $(1,973)Net loss per common share: Loss from continuing operations per common share, basic anddiluted$(0.25) $(0.22) $(0.16) $(0.28) $(0.36) $(0.22) $(0.14) $(0.12)(1) includes stock-based compensation (2) Includes depreciation and amortization 107Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone.Item 9A.Controls and ProceduresEvaluation of Disclosure Controls and ProceduresUnder the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer (ourprincipal executive officer and principal financial officer, respectively), we have evaluated our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as of December 31, 2016. Based upon that evaluation, the Chief Executive Officer and theChief Financial Officer have concluded that, as of December 31, 2016, the Company's disclosure controls and procedures were effective in ensuringinformation required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed,summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to the Company'smanagement, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures willprevent or detect all errors and all fraud. Disclosure controls and procedures, no matter how well designed, operated and managed, can provide onlyreasonable assurance that the objectives of the disclosure controls and procedures are met. Because of the inherent limitations of disclosure controls andprocedures, no evaluation of such disclosure controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any,have been detected.Management’s Annual Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined inExchange Act Rules 13a-15(f) and 15d-15(f). Because of its inherent limitations, internal control over financial reporting may not prevent or detectmisstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because ofchanges in conditions, or that the degree of compliance with policies or procedures may deteriorate. Our management, with the participation of our ChiefExecutive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. In makingthis assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in InternalControl - Integrated Framework (2013).Based on our evaluation using those criteria, our management has concluded that, as of December 31, 2016, our internal control over financialreporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles.This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm on our internal control over financialreporting due to an exemption established by the JOBS Act for "emerging growth companies."Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting during the fourth quarter of fiscal 2016 that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.Item 9B.Other InformationNone.108Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.PART IIIItem 10.Directors, Officers and Corporate GovernanceWe have adopted a code of ethics that applies to the Company’s directors, officers and employees, including the Chief Executive Officer and the ChiefFinancial Officer and any other persons performing similar functions. The text of our code of ethics, “Code of Business Conduct and Ethics,” has been postedon our website at http://investor.uplandsoftware.com/code-of-conduct. We will provide a copy of the code of ethics without charge upon request to CorporateSecretary, Upland Software, Inc., 401 Congress Ave., Suite 1850, Austin, Texas 78701.Additional information required by this item is incorporated by reference from our definitive proxy statement for the 2017 Annual Meeting ofStockholders under the headings “Proposal One: Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Directors andCorporate Governance” and “Executive Officers.”Item 11.Executive CompensationThe information required by this item is incorporated by reference from our definitive proxy statement for the 2017 Annual Meeting of Stockholders,under the headings “Executive Compensation” and “Directors and Corporate Governance-Compensation Committee Interlocks and Insider Participation.”Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this item is incorporated by reference from our definitive proxy statement for the 2017 Annual Meeting of Stockholdersunder the headings “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management.”Item 13.Certain Relationships, and Related Transactions, and Director IndependenceThe information required by this item is incorporated by reference from our definitive proxy statement for the 2017 Annual Meeting of Stockholdersunder the headings “Certain Relationships and Related Party Transactions” and “Directors and Corporate Governance-Director Independence.”Item 14.Principal Accounting Fees and ServicesThe information required by this item is incorporated by reference from our definitive proxy statement for the 2017 Annual Meeting of Stockholdersunder the heading “Proposal Two: Ratification of Selection of Independent Registered Public Accounting Firm.”PART IVItem 15. Exhibits and Financial Statement Schedules(a) Financial StatementsThe financial statements filed as part of this Annual Report on Form 10-K are listed on the "Index to Consolidated Financial Statements"included in Item 8 herein.(b) ExhibitsSee Exhibit Index at the end of this Annual Report on Form 10-K, which is incorporated by reference.109Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(c) Financial Statement SchedulesThe following schedule is filed as part of this Annual Report on Form 10-K:Item 16. Form 10-K SummaryNot applicable.Schedule II-Valuation and Qualifying AccountsThis schedule has been omitted as the required information has been included in the notes to the consolidated financial statements.110Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.SIGNATURESPursuant to the requirement of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized.Date: March 30, 2017 Upland Software, Inc. By:/s/ John T. McDonald John T. McDonald Chief Executive Officer and ChairmanPOWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints John T. McDonaldand Michael D. Hill and each of them, as his true and lawful attorney-in-fact and agent with full power of substitution, for him in any and all capacities, tosign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connectiontherewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent the full power and authority to do and perform eachand every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person,hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue thereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated: Signature Title Date /s/ John T. McDonald Chief Executive Officer and Chairman March 30, 2017John T. McDonald (Principal Executive Officer) /s/ Michael D. Hill Chief Financial Officer, Secretary and Treasurer March 30, 2017Michael D. Hill (Principal Financial Officer and Principal AccountingOfficer) /s/ John D. Thornton Director March 30, 2017John D. Thornton /s/ David May Director March 30, 2017David May /s/ Stephen E. Courter Director March 30, 2017Stephen E. Courter /s/ Rodney C. Favaron Director March 30, 2017Rodney C. Favaron 111Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT INDEX Incorporated by ReferenceExhibit No.Description of ExhibitFormFile No.ExhibitFiling Date2.1Agreement and Plan of Merger by and among the Registrant, Steering WheelAcquisition Corp., PowerSteering Software, Inc. and Michael Pehl, asStockholder representative, dated February 3, 2012S-1333-1985742.1September 4, 20142.2Stock Purchase Agreement by and among the Registrant, Tenrox Inc., thestockholders named therein and Novacap II, L.P. and Aramazd Israilian, asrepresentatives, dated February 10, 2012S-1333-1985742.2September 4, 20142.3Membership Interest Purchase Agreement by and among the Registrant, LMRSolutions, LLC, Joseph Larscheid and Cheryl Larscheid, dated November 13,2012S-1333-1985742.3September 4, 20142.4Stock Purchase Agreement by and among the Registrant, Marex Group Inc.,FileBound Solutions, Inc., the Selling Stockholders (as defined therein) and RexLamb, as representative of the Selling Stockholders, dated May 16, 2013S-1333-1985742.4September 4, 20142.5Membership Interest Purchase Agreement by and among the Registrant, UplandSoftware, Inc., ComSci, LLC and Robert Svec, dated November 7, 2013S-1333-1985742.5September 4, 20142.6Stock Purchase Agreement by and among the Registrant, Clickability, Inc. andLimelight Networks, Inc. dated December 23, 2013S-1333-1985742.6September 4, 20143.1Amended and Restated Certificate of Incorporation, as currently in effect10-K001-367203.1March 30, 20163.2Amended and Restated Bylaws, as currently in effect10-K001-367203.2March 30, 20164.1Amended and Restated Investors’ Rights Agreement among the Registrant andcertain stockholders, dated December 20, 2013S-1333-1985744.1September 4, 201410.1+Form of Indemnification Agreement for directors and officersS-1333-19857410.2October 27, 201410.2+Amended and Restated 2010 Stock Plan, as amended September 2, 2014S-1333-19857410.3.1September 4, 201410.3+Form of Stock Option Agreement under Amended and Restated 2010 StockPlan (Standard)S-1333-19857410.4September 4, 201410.3.1+Form of Stock Option Agreement under Amended and Restated 2010 StockPlan (Former ComSci, LLC Employees)S-1333-19857410.4.1September 4, 201410.3.2+Form of Stock Option Agreement under Amended and Restated 2010 StockPlan (Executive)S-1333-19857410.4.2September 4, 201410.3.3+Form of Amendment to Stock Option Agreement under Amended and Restated2010 Stock Plan with Certain ExecutivesS-1333-19857410.4.3September 4, 201410.4+Form of Restricted Stock Purchase Agreement under Amended and Restated2010 Stock PlanS-1333-19857410.5September 4, 201410.4.1+Form of Amendment to Restricted Stock Purchase Agreement under Amendedand Restated 2010 Stock PlanS-1333-19857410.5.1September 4, 201410.5+2014 Equity Incentive PlanS-1333-19857410.6October 27, 201410.6+Form of Stock Option Award Agreement under 2014 Equity Incentive PlanS-1333-19857410.7October 27, 201410.6.1+Form of Stock Option Award Agreement under 2014 Equity Incentive Plan(Executive)S-1333-19857410.7.1October 27, 20141Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Incorporated by Reference10.7+Form of Restricted Stock Purchase Agreement under 2014 Equity IncentivePlanS-1333-19857410.8October 27, 201410.7.1+Form of Restricted Stock Purchase Agreement under 2014 Equity IncentivePlan (Executive)S-1333-19857410.8.1October 27, 201410.8+Form of Restricted Stock Unit Award Agreement under 2014 Equity IncentivePlanS-1333-19857410.9October 27, 201410.8.1+Form of Restricted Stock Unit Award Agreement under 2014 Equity IncentivePlan (Executive)S-1333-19857410.9.1October 27, 201410.9+Employment Agreement between the Registrant and John T. McDonald, datedMay 9, 2014S-1333-19857410.12September 4, 201410.10+Offer of Employment between the Registrant and Timothy Mattox, dated July 7,201410-K001-3672010.13March 31, 201510.11Office Lease between the Registrant and TPG-401 Congress LLC, datedFebruary 27, 2014S-1333-19857410.17September 4, 201410.11.1First Amendment to Office Lease between Registrant and TPG-401 CongressLLCS-1333-19857410.17.1September 4, 201410.12Lease Agreement between Tenrox Inc. and A.R.E. Quebec, dated November 5,2012, as amendedS-1333-19857410.18September 4, 201410.13Sublease Agreement between Marex Properties, LLC and Marex Group Inc.,dated May 10, 2013S-1333-19857410.19September 4, 201410.14Amended and Restated Technology Services Agreement between the Registrantand DevFactory FZ-LLC, dated January 1, 2014S-1333-19857410.37October 27, 201410.14.1*Second Amended and Restated Technology Services Agreement between theRegistrant and DevFactory FZ-LLC, dated January 1, 2017 10.15Letter Agreement between the Registrant and DevFactory FZ-LLC, datedJanuary 1, 2014S-1333-19857410.38September 4, 201410.16Stock Purchase Agreement between the Registrant and DevFactory FZ-LLC,dated January 27, 2014S-1333-19857410.39September 4, 201410.17Lease by and between Lincoln One, LLC and the Registrant dated June 19,20158-K001-3672010.1June 22, 201510.18Credit Agreement by and between the Registrant and Wells Fargo Finance,dated May 14, 201510-Q001-3672010.1August 14, 201510.18.1*First Amendment to Credit Agreement, among the Registrant, Wells FargoBank, N.A. and the other parties thereto, dated September 23, 2015. 10.18.2*Second Amendment to Credit Agreement, among the Registrant, Wells FargoBank, N.A. and the other parties thereto, dated April 25, 2016. 10.18.3*Third Amendment to Credit Agreement, among the Registrant, Wells FargoBank, N.A. and the other parties thereto, dated November 15, 2016. 10.19Guaranty and Security Agreement by and between the Registrant and WellsFargo Capital Finance, dated May 14, 201510-Q001-3672010.2August 14, 201510.20Canadian Guarantee and Security Agreement by and between the Registrant andWells Fargo Capital Finance, dated May 14, 201510-Q001-3672010.3August 14, 201510.21*+Employment Agreement between the Registrant and Michael D. Hill, datedMarch 28, 2017 10.22*+Employment Agreement between the Registrant and Timothy Mattox, datedMarch 28, 2017 10.23*+Employment Agreement between the Registrant and John T. McDonald, datedMarch 28, 2017 21.1*List of subsidiaries of Upland Software, Inc. 2Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Incorporated by Reference23.1*Consent of Ernst & Young LLP, Independent Registered Public AccountingFirm 24.1*Power of Attorney (included on signature pages hereto) 31.1*Certification of the Principal Executive Officer Required Under Rules 13a-14(a)and 15d-14(a) of the Securities Act of 1934, as amended, as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 2002 31.2*Certification of the Principal Financial Officer Required Under Rules 13a-14(a)and 15d-14(a) of the Securities Act of 1934, as amended, as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 2002 32.1*(1)Certification of Principal Executive Officer Required Under Rules 13a-14(a)and 15d-14(a) of the Securities Exchange Act of 1934, as amended, and 18U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002 32.2*(1)Certification of Principal Financial Officer Required Under Rules 13a-14(a) and15d-14(a) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C.Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002 101.INSXBRL Instance Document 101.SCHXBRL Taxonomy Extension Schema 101.CALXBRL Taxonomy Extension Calculation Linkbase 101.LABXBRL Taxonomy Extension Label Linkbase 101.PREXBRL Taxonomy Extension Presentation Linkbase 101.DEFXBRL Taxonomy Extension Definition Linkbase + Indicates management contract, compensatory plan or arrangement.* Filed herewith.(1) The material contained in Exhibit 32.1 and Exhibit 32.2 is not deemed “filed” with the SEC and is not to be incorporated by reference into anyfiling of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespectiveof any general incorporation language contained in such filing, except to the extent that the Company specifically incorporates it by reference.3Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 3.1UPLAND SOFTWARE, INC.AMENDED AND RESTATED CERTIFICATE OF INCORPORATIONUpland Software, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies asfollows:A. The corporation was originally incorporated under the name of Silverback Acquisition Corporation, and the originalCertificate of Incorporation of the corporation was filed with the Secretary of State of the State of Delaware on July 7, 2010.B. This Amended and Restated Certificate of Incorporation was duly adopted in accordance with Sections 242 and 245 of theGeneral Corporation Law of the State of Delaware (the “DGCL”), and has been duly approved by the written consent of thestockholders of the corporation in accordance with Section 228 of the DGCL.C. The Certificate of Incorporation of the corporation is hereby amended and restated in its entirety to read as follows:Article IThe name of the corporation is Upland Software, Inc.Article IIThe address of the corporation’s registered office in the State of Delaware is 2711 Centerville Road, Suite 400, City ofWilmington, County of New Castle, State of Delaware 19808. The name of its registered agent at such address is The CorporationService Company.Article IIIThe purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under theDGCL.Article IVThe total number of shares of stock that the corporation shall have authority to issue is 55,000,000, consisting of the following:50,000,000 shares of Common Stock, par value $0.0001 per share. Each share of Common Stock shall entitle the holderthereof to one (1) vote on each matter submitted to a vote at a meeting of stockholders. There shall be no cumulative voting of theCommon Stock of the corporation.5,000,000 shares of Preferred Stock, par value $0.0001 per share, which may be issued from time to time in one or more seriespursuant to a resolution or resolutions providing for such issue duly adopted by the Board of Directors (authority to do so being herebyexpressly vested in the Board of Directors). The Board of Directors is further authorized, subject to limitations prescribed by law, to fixby resolution or resolutions the designations, powers, preferences and rights, and the qualifications, limitations orSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.restrictions thereof, of any wholly unissued series of Preferred Stock, including without limitation authority to fix by resolution orresolutions the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fundprovisions), redemption price or prices, and liquidation preferences of any such series, and the number of shares constituting any suchseries and the designation thereof, or any of the foregoing.The Board of Directors is further authorized to increase (but not above the total number of authorized shares of the class) ordecrease (but not below the number of shares of any such series then outstanding) the number of shares of any series, the number ofwhich was fixed by it, subsequent to the issuance of shares of such series then outstanding, subject to the powers, preferences andrights, and the qualifications, limitations and restrictions thereof stated in the Certificate of Incorporation or the resolution of the Boardof Directors originally fixing the number of shares of such series. If the number of shares of any series is so decreased, then the sharesconstituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number ofshares of such series.Article VThe number of directors that constitutes the entire Board of Directors of the corporation shall be fixed by, or in the mannerprovided in, the Bylaws of the corporation. At each annual meeting of stockholders, directors of the corporation shall be elected to holdoffice until the expiration of the term for which they are elected and until their successors have been duly elected and qualified or untiltheir earlier resignation or removal; except that if any such election shall not be so held, such election shall take place at a stockholders’meeting called and held in accordance with the DGCL.Effective upon the effective date of the corporation’s initial public offering (the “Effective Date”), the directors of thecorporation shall be divided into three classes as nearly equal in size as is practicable, hereby designated Class I, Class II and Class III.The Board of Directors may assign members of the Board of Directors already in office to such classes at the time such classificationbecomes effective. The term of office of the initial Class I directors shall expire at the first regularly-scheduled annual meeting of thestockholders following the Effective Date, the term of office of the initial Class II directors shall expire at the second annual meeting ofthe stockholders following the Effective Date and the term of office of the initial Class III directors shall expire at the third annualmeeting of the stockholders following the Effective Date. At each annual meeting of stockholders, commencing with the first regularly-scheduled annual meeting of stockholders following the Effective Date, each of the successors elected to replace the directors of aClass whose term shall have expired at such annual meeting shall be elected to hold office until the third annual meeting nextsucceeding his or her election and until his or her respective successor shall have been duly elected and qualified.Notwithstanding the foregoing provisions of this Article, each director shall serve until his or her successor is duly elected andqualified or until his or her death, resignation, or removal. If the number of directors is hereafter changed, any newly createddirectorships or decrease in directorships shall be so apportioned among the classes as to make all classes as nearly equal in number asis practicable, provided that no decrease in the number of directors constituting the Board of Directors shall shorten the term of anyincumbent director.Any director may be removed from office by the stockholders of the corporation only for cause. Vacancies occurring on theBoard of Directors for any reason and newly created directorships resulting from an increase in the authorized number of directors maybe filled only by vote of a majority of the remaining members of the Board of Directors, although less than a quorum, or by a soleremainingSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.director, at any meeting of the Board of Directors. A person so elected by the Board of Directors to fill a vacancy or newly createddirectorship shall hold office until the next election of the class for which such director shall have been chosen and until his or hersuccessor shall be duly elected and qualified.Article VIIn furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the corporation is expresslyauthorized to adopt, amend or repeal the Bylaws of the corporation.Article VIIElections of directors need not be by written ballot unless the Bylaws of the corporation shall so provide.Article VIIINo action shall be taken by the stockholders of the corporation except at an annual or special meeting of the stockholders calledin accordance with the Bylaws, and no action shall be taken by the stockholders by written consent.Article IXTo the fullest extent permitted by the DGCL, as it presently exists or may hereafter be amended from time to time, a director ofthe corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty asa director. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, thenthe liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.Neither any amendment nor repeal of this Article, nor the adoption of any provision of this corporation’s Certificate ofIncorporation inconsistent with this Article, shall eliminate or reduce the effect of this Article in respect of any matter occurring, or anycause of action, suit or proceeding accruing or arising or that, but for this Article, would accrue or arise, prior to such amendment,repeal or adoption of an inconsistent provision.Article XSubject to any provisions in the Bylaws of the corporation related to indemnification of directors or officers of the corporation,the corporation may indemnify, to the fullest extent permitted by applicable law, any director or officer of the corporation who was oris a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal,administrative or investigative (a “Proceeding”) by reason of the fact that he or she is or was a director, officer, employee or agent ofthe corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation,partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses(including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person inconnection with any such Proceeding. The corporation may be required to indemnify a person in connection with a Proceedinginitiated by such person only if the Proceeding was authorized by the Board.The corporation shall have the power to indemnify, to the extent permitted by the DGCL, as it presently exists or may hereafterbe amended from time to time, any employee or agent of the corporationSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.who was or is a party or is threatened to be made a party to any Proceeding by reason of the fact that he or she is or was a director,officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee oragent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefitplans, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurredby such person in connection with any such Proceeding.A right to indemnification or to advancement of expenses arising under a provision of this Certificate of Incorporation or abylaw of the corporation shall not be eliminated or impaired by an amendment to this Certificate of Incorporation or the Bylaws of thecorporation after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suitor proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act oromission explicitly authorizes such elimination or impairment after such action or omission has occurred.Article XIExcept as provided in Article IX and Article X above, the corporation reserves the right to amend, alter, change or repeal anyprovision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferredupon stockholders herein are granted subject to this reservation. Notwithstanding any other provision of this Certificate ofIncorporation, and in addition to any other vote that may be required by law or the terms of any series of Preferred Stock, theaffirmative vote of the holders of at least two-thirds of the voting power of all then outstanding shares of capital stock of thecorporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend, alter orrepeal, or adopt any provision as part of this Certificate of Incorporation inconsistent with the purpose and intent of, Article IV, ArticleV, Article VI, Article VII, Article IX, Article X or this Article XI (including, without limitation, any such Article as renumbered as aresult of any amendment, alteration, change, repeal or adoption of any other Article).IN WITNESS WHEREOF, Upland Software, Inc. has caused this Amended and Restated Certificate of Incorporation to besigned by the Chief Executive Officer of the corporation on this 12th day of November 2014.By: /s/ John T. McDonald John T. McDonald, Chief Executive OfficerSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 3.2AMENDED AND RESTATED BYLAWS OFUPLAND SOFTWARE, INC.(as amended and restated on October 9, 2014 and effective as of November 12, 2014)Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.TABLE OF CONTENTSPageARTICLE I - CORPORATE OFFICES11.1REGISTERED OFFICE11.2OTHER OFFICES1ARTICLE II - MEETINGS OF STOCKHOLDERS12.1PLACE OF MEETING12.2ANNUAL MEETING12.3SPECIAL MEETING12.4ADVANCE NOTICE PROCEDURES12.5NOTICE OF STOCKHOLDERS' MEETINGS12.6QUORUM12.7ADJOURNED MEETING; NOTICE12.8CONDUCT OF BUSINESS12.9VOTING12.10STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING12.11RECORD DATES12.12PROXIES12.13LIST OF STOCKHOLDERS ENTITLED TO VOTE12.14INSPECTORS OF ELECTION1ARTICLE III - DIRECTORS93.1POWERS93.2NUMBER OF DIRECTORS93.3ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS93.4RESIGNATION AND VACANCIES93.5PLACE OF MEETINGS; MEETINGS BY TELEPHONE93.6REGULAR MEETINGS93.7SPECIAL MEETINGS; NOTICE93.8QUORUM; VOTING93.9BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING93.10FEES AND COMPENSATION OF DIRECTORS93.11REMOVAL OF DIRECTORS9iSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.TABLE OF CONTENTS(continued)ARTICLE IV - COMMITTEES124.1COMMITTEES OF DIRECTORS124.2COMMITEE MINUTES124.3MEETINGS AND ACTION OF COMMITTEES124.4SUBCOMMITTEES12ARTICLE V - OFFICERS135.1OFFICERS135.2APPOINTMENT OF OFFICERS135.3SUBORDINATE OFFICERS135.4REMOVAL AND RESIGNATION OF OFFICERS135.5VACANCIES IN OFFICES135.6REPRESENTATION OF SHARES OF OTHER CORPORATIONS135.7AUTHORITY AND DUTIES OF OFFICERS13ARTICLE VI - STOCK156.1STOCK CERTIFICATES; PARTLY PAID SHARES156.2SPECIAL DESIGNATION ON CERTIFICATES156.3LOST CERTIFICATES156.4DIVIDENDS156.5TRANSFER OF STOCK156.6STOCK TRANSFER AGREEMENTS156.7REGISTERED STOCKHOLDERS15ARTICLE VII - MANNER OF GIVING NOTICE AND WAIVER177.1NOTICE OF STOCKHOLDERS' MEETINGS177.2NOTICE BY ELECTRONIC TRANSMISSION177.3NOTICE TO STOCKHOLDERS SHARING AN ADDRESS177.4NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL177.5WAIVER OF NOTICE17ARTICLE VIII - INDEMNIFICIATION188.1INDEMNIFICATION OF DIRECTORS AND OFFICERS IN THIRD PARTY PROCEEDINGS188.2INDEMNIFICATION OF DIRECTORS AND OFFICERS IN ACTION BY OR IN THE RIGHT OF THECORPORATION188.3SUCCESSFUL DEFENSE18iiSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.TABLE OF CONTENTS(continued)8.4INDEMNIFICATION OF OTHERS188.5ADVANCED PAYMENT OF EXPENSES188.6LIMITATION ON INDEMNIFICATION188.7DETERMINATION; CLAIM188.8NON-EXCLUSIVITY OF RIGHTS188.9INSURANCE188.10SURVIVAL188.11EFFECT OF REPEAL OR MODIFICATION188.12CERTAIN DEFINITIONS18ARTICLE IX - GENERAL MATTERS229.1EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS229.2FISCAL YEAR229.3SEAL229.4CONSTRUCTION; DEFINITIONS22ARTICLE X - AMENDMENTS23iiiSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.BYLAWS OF UPLAND SOFTWARE, INC.ARTICLE I - CORPORATE OFFICES1.1REGISTERED OFFICEThe registered office of Upland Software, Inc. shall be fixed in the corporation’s certificate of incorporation, as the same maybe amended from time to time, including the terms of any certificate of designations of any series of Preferred Stock.1.2OTHER OFFICESThe corporation’s board of directors may at any time establish other offices at any place or places where the corporation isqualified to do business.ARTICLE II - MEETINGS OF STOCKHOLDERS2.1PLACE OF MEETINGSMeetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the board ofdirectors. The board of directors may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, butmay instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware GeneralCorporation Law (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at thecorporation’s principal executive office.2.2ANNUAL MEETINGThe annual meeting of stockholders shall be held each year. The board of directors shall designate the date and time of theannual meeting. At the annual meeting, directors shall be elected and any other proper business may be transacted.2.3SPECIAL MEETING(i)A special meeting of the stockholders, other than those required by statute, may be called at any time by theboard of directors, chairperson of the board of directors, chief executive officer or president (in the absence of a chief executiveofficer), but a special meeting may not be called by any other person or persons. The board of directors may cancel, postpone orreschedule any previously scheduled special meeting at any time, before or after the notice for such meeting has been sent to thestockholders.(ii)The notice of a special meeting shall include the purpose for which the meeting is called. Only such businessshall be conducted at a special meeting of stockholders as shall have been brought before the meeting by or at the direction of the boardof directors, chairperson of the board of directors, chief executive officer or president (in the absence of a chief executive officer).Nothing contained in this Section 2.3(ii) shall be construed as limiting, fixing or affecting the time when a meeting of stockholderscalled by action of the board of directors may be held.1Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.2.4ADVANCE NOTICE PROCEDURES(i)Advance Notice of Stockholder Business. At an annual meeting of the stockholders, only such business shallbe conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business mustbe brought: (A) pursuant to the corporation’s proxy materials with respect to such meeting, (B) by or at the direction of the board ofdirectors, or (C) by a stockholder of the corporation who (1) is a stockholder of record at the time of the giving of the notice requiredby this Section 2.4(i), on the record date for the determination of stockholders entitled to notice of the annual meeting and on the recorddate for the determination of stockholders entitled to vote at the annual meeting and (2) has timely complied in proper written form withthe notice procedures set forth in this Section 2.4(i). In addition, for business to be properly brought before an annual meeting by astockholder, such business must be a proper matter for stockholder action pursuant to these bylaws and applicable law. For theavoidance of doubt, clause (C) above shall be the exclusive means for a stockholder to bring business before an annual meeting ofstockholders.(a)To comply with clause (C) of Section 2.4(i) above, a stockholder’s notice must set forth allinformation required under this Section 2.4(i) and must be timely received by the secretary of the corporation. To be timely, astockholder’s notice must be received by the secretary at the principal executive offices of the corporation not later than the 45th daynor earlier than the 75th day before the one-year anniversary of the date on which the corporation first mailed its proxy materials or anotice of availability of proxy materials (whichever is earlier) for the preceding year’s annual meeting; provided, however, that in theevent that no annual meeting was held in the previous year or if the date of the annual meeting is advanced by more than 30 days priorto or delayed by more than 60 days after the one-year anniversary of the date of the previous year’s annual meeting, then, for notice bythe stockholder to be timely, it must be so received by the secretary not earlier than the close of business on the 120th day prior to suchannual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting, or (ii) the tenth dayfollowing the day on which Public Announcement (as defined below) of the date of such annual meeting is first made. In no eventshall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the givingof a stockholder’s notice as described in this Section 2.4(i)(a). “Public Announcement” shall mean disclosure in a press releasereported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed bythe corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of1934, as amended, or any successor thereto (the “1934 Act”).(b)To be in proper written form, a stockholder’s notice to the secretary must set forth as to each matter ofbusiness the stockholder intends to bring before the annual meeting: (1) a brief description of the business intended to be broughtbefore the annual meeting and the reasons for conducting such business at the annual meeting, (2) the name and address, as theyappear on the corporation’s books, of the stockholder proposing such business and any Stockholder Associated Person (as definedbelow), (3) the class and number of shares of the corporation that are held of record or are beneficially owned by the stockholder orany Stockholder Associated Person and any derivative positions held or beneficially held by the stockholder or any StockholderAssociated Person, (4) whether and the extent to which any hedging or other transaction or series of transactions has been entered intoby or on behalf of such stockholder or any Stockholder Associated Person with respect to any securities of the corporation, and adescription of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares),the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase ordecrease the voting power of, such stockholder or any Stockholder Associated Person with respect to any securities of the corporation,(5) any material interest of the stockholder or a Stockholder Associated Person in such business, and (6) a statement whether eithersuch stockholder or any Stockholder Associated Person will deliver a proxy2Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.statement and form of proxy to holders of at least the percentage of the corporation’s voting shares required under applicable law tocarry the proposal (such information provided and statements made as required by clauses (1) through (6), a “Business SolicitationStatement”). In addition, to be in proper written form, a stockholder’s notice to the secretary must be supplemented not later than tendays following the record date for the determination of stockholders entitled to notice of the meeting, to disclose the informationcontained in clauses (3) and (4) above as of the applicable record date. For purposes of this Section 2.4, a “Stockholder AssociatedPerson” of any stockholder shall mean (i) any person controlling, directly or indirectly, or acting in concert with, such stockholder, (ii)any beneficial owner of shares of stock of the corporation owned of record or beneficially by such stockholder and on whose behalfthe proposal or nomination, as the case may be, is being made, or (iii) any person controlling, controlled by or under common controlwith such person referred to in the preceding clauses (i) and (ii).(c)Without exception, no business shall be conducted at any annual meeting except in accordance withthe provisions set forth in this Section 2.4(i) and, if applicable, Section 2.4(ii). In addition, business proposed to be brought by astockholder may not be brought before the annual meeting if such stockholder or a Stockholder Associated Person, as applicable, takesaction contrary to the representations made in the Business Solicitation Statement applicable to such business or if the BusinessSolicitation Statement applicable to such business contains an untrue statement of a material fact or omits to state a material factnecessary to make the statements therein not misleading. The chairperson of the annual meeting shall, if the facts warrant, determineand declare at the annual meeting that business was not properly brought before the annual meeting and in accordance with theprovisions of this Section 2.4(i), and, if the chairperson should so determine, he or she shall so declare at the annual meeting that anysuch business not properly brought before the annual meeting shall not be conducted.(ii)Advance Notice of Director Nominations at Annual Meetings. Notwithstanding anything in these bylaws tothe contrary, only persons who are nominated in accordance with the procedures set forth in this Section 2.4(ii) shall be eligible forelection or re-election as directors at an annual meeting of stockholders. Nominations of persons for election or re-election to the boardof directors of the corporation shall be made at an annual meeting of stockholders only (A) by or at the direction of the board ofdirectors or (B) by a stockholder of the corporation who (1) was a stockholder of record at the time of the giving of the notice requiredby this Section 2.4(ii), on the record date for the determination of stockholders entitled to notice of the annual meeting and on therecord date for the determination of stockholders entitled to vote at the annual meeting and (2) has complied with the notice proceduresset forth in this Section 2.4(ii). In addition to any other applicable requirements, for a nomination to be made by a stockholder, thestockholder must have given timely notice thereof in proper written form to the secretary of the corporation.(a)To comply with clause (B) of Section 2.4(ii) above, a nomination to be made by a stockholder mustset forth all information required under this Section 2.4(ii) and must be received by the secretary of the corporation at the principalexecutive offices of the corporation at the time set forth in, and in accordance with, the final three sentences of Section 2.4(i)(a) above.(b)To be in proper written form, such stockholder’s notice to the secretary must set forth:(1)as to each person (a “nominee”) whom the stockholder proposes to nominate for election orre-election as a director: (A) the name, age, business address and residence address of the nominee, (B) the principal occupation oremployment of the nominee, (C) the class and number of shares of the corporation that are held of record or are beneficially owned bythe nominee and3Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.any derivative positions held or beneficially held by the nominee, (D) whether and the extent to which any hedging or other transactionor series of transactions has been entered into by or on behalf of the nominee with respect to any securities of the corporation, and adescription of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares),the effect or intent of which is to mitigate loss to, or to manage the risk or benefit of share price changes for, or to increase or decreasethe voting power of the nominee, (E) a description of all arrangements or understandings between the stockholder and each nomineeand any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by thestockholder, (F) a written statement executed by the nominee acknowledging that as a director of the corporation, the nominee willowe a fiduciary duty under Delaware law with respect to the corporation and its stockholders, and (G) any other information relating tothe nominee that would be required to be disclosed about such nominee if proxies were being solicited for the election or re-election ofthe nominee as a director, or that is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including withoutlimitation the nominee’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director ifelected or re-elected, as the case may be); and(2)as to such stockholder giving notice, (A) the information required to be provided pursuant toclauses (2) through (5) of Section 2.4(i)(b) above, and the supplement referenced in the second sentence of Section 2.4(i)(b) above(except that the references to “business” in such clauses shall instead refer to nominations of directors for purposes of this paragraph),and (B) a statement whether either such stockholder or Stockholder Associated Person will deliver a proxy statement and form ofproxy to holders of a number of the corporation’s voting shares reasonably believed by such stockholder or Stockholder AssociatedPerson to be necessary to elect or re-elect such nominee(s) (such information provided and statements made as required by clauses (A)and (B) above, a “Nominee Solicitation Statement”).(c)At the request of the board of directors, any person nominated by a stockholder for election or re-election as a director must furnish to the secretary of the corporation (1) that information required to be set forth in the stockholder’snotice of nomination of such person as a director as of a date subsequent to the date on which the notice of such person’s nominationwas given and (2) such other information as may reasonably be required by the corporation to determine the eligibility of suchproposed nominee to serve as an independent director or audit committee financial expert of the corporation or that could be material toa reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee; in the absence of the furnishing ofsuch information if requested, such stockholder’s nomination shall not be considered in proper form pursuant to this Section 2.4(ii).(d)Without exception, no person shall be eligible for election or re-election as a director of thecorporation at an annual meeting of stockholders unless nominated in accordance with the provisions set forth in this Section 2.4(ii). Inaddition, a nominee shall not be eligible for election or re-election if a stockholder or Stockholder Associated Person, as applicable,takes action contrary to the representations made in the Nominee Solicitation Statement applicable to such nominee or if the NomineeSolicitation Statement applicable to such nominee contains an untrue statement of a material fact or omits to state a material factnecessary to make the statements therein not misleading. The chairperson of the annual meeting shall, if the facts warrant, determineand declare at the annual meeting that a nomination was not made in accordance with the provisions prescribed by these bylaws, and ifthe chairperson should so determine, he or she shall so declare at the annual meeting, and the defective nomination shall bedisregarded.(iii)Advance Notice of Director Nominations for Special Meetings.4Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (a)For a special meeting of stockholders at which directors are to be elected or re-elected pursuant toSection 2.3, nominations of persons for election or re-election to the board of directors shall be made only (1) by or at the direction ofthe board of directors or (2) by any stockholder of the corporation who (A) is a stockholder of record at the time of the giving of thenotice required by this Section 2.4(iii), on the record date for the determination of stockholders entitled to notice of the special meetingand on the record date for the determination of stockholders entitled to vote at the special meeting and (B) delivers a timely writtennotice of the nomination to the secretary of the corporation that includes the information set forth in Sections 2.4(ii)(b) and (ii)(c)above. To be timely, such notice must be received by the secretary at the principal executive offices of the corporation not later than theclose of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which PublicAnnouncement is first made of the date of the special meeting and of the nominees proposed by the board of directors to be elected orre-elected at such meeting. A person shall not be eligible for election or re-election as a director at a special meeting unless the person isnominated (i) by or at the direction of the board of directors or (ii) by a stockholder in accordance with the notice procedures set forthin this Section 2.4(iii). In addition, a nominee shall not be eligible for election or re-election if a stockholder or Stockholder AssociatedPerson, as applicable, takes action contrary to the representations made in the Nominee Solicitation Statement applicable to suchnominee or if the Nominee Solicitation Statement applicable to such nominee contains an untrue statement of a material fact or omits tostate a material fact necessary to make the statements therein not misleading.(b)The chairperson of the special meeting shall, if the facts warrant, determine and declare at the meetingthat a nomination or business was not made in accordance with the procedures prescribed by these bylaws, and if the chairpersonshould so determine, he or she shall so declare at the meeting, and the defective nomination or business shall be disregarded.(iv)Other Requirements and Rights. In addition to the foregoing provisions of this Section 2.4, a stockholdermust also comply with all applicable requirements of state law and of the 1934 Act and the rules and regulations thereunder withrespect to the matters set forth in this Section 2.4, including, with respect to business such stockholder intends to bring before theannual meeting that involves a proposal that such stockholder requests to be included in the corporation’s proxy statement, therequirements of Rule 14a-8 (or any successor provision) under the 1934 Act. Nothing in this Section 2.4 shall be deemed to affect anyright of the corporation to omit a proposal from the corporation’s proxy statement pursuant to Rule 14a-8 (or any successor provision)under the 1934 Act.2.5NOTICE OF STOCKHOLDERS’ MEETINGSWhenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be givenwhich shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholdersand proxy holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholdersentitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of themeeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Except as otherwise provided inthe DGCL, the certificate of incorporation or these bylaws, the written notice of any meeting of stockholders shall be given not lessthan 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record datefor determining the stockholders entitled to notice of the meeting.5Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.2.6QUORUMThe holders of a majority of the stock issued and outstanding and entitled to vote, present in person or represented by proxy,shall constitute a quorum for the transaction of business at all meetings of the stockholders. Where a separate vote by a class or series orclasses or series is required, a majority of the outstanding shares of such class or series or classes or series, present in person orrepresented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter, except as otherwiseprovided by law, the certificate of incorporation or these bylaws.If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of themeeting, or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have power to adjournthe meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. Atsuch adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted atthe meeting as originally noticed.2.7ADJOURNED MEETING; NOTICE When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of theadjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders andproxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which theadjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been transacted at theoriginal meeting. If the adjournment is for more than 30 days, a notice of the adjourned meeting shall be given to each stockholder ofrecord entitled to vote at the meeting. If after the adjournment a new record date for stockholders entitled to vote is fixed for theadjourned meeting, the board of directors shall fix a new record date for notice of such adjourned meeting in accordance with Section213(a) of the DGCL and Section 2.11 of these bylaws, and shall give notice of the adjourned meeting to each stockholder of recordentitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.2.8CONDUCT OF BUSINESSThe chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting,including such regulation of the manner of voting and the conduct of business.2.9VOTINGThe stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions ofSection 2.11 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) andSection 218 (relating to voting trusts and other voting agreements) of the DGCL.Except as may be otherwise provided in the certificate of incorporation or these bylaws, each stockholder shall be entitled toone vote for each share of capital stock held by such stockholder. There shall be no cumulative voting of the shares of capital stock ofthe corporation.Except as otherwise required by law, the certificate of incorporation or these bylaws, in all matters other than the election ofdirectors, the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meetingand entitled to vote on the subject matter shall be6Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the act of the stockholders. Except as otherwise required by law, the certificate of incorporation or these bylaws, directors shall beelected by a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote onthe election of directors. Where a separate vote by a class or series or classes or series is required, in all matters other than the electionof directors, the affirmative vote of the majority of shares of such class or series or classes or series present in person or represented byproxy at the meeting shall be the act of such class or series or classes or series, except as otherwise provided by law, the certificate ofincorporation or these bylaws.2.10STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETINGSubject to the rights of the holders of the shares of any series of Preferred Stock or any other class of stock or series thereof thathave been expressly granted the right to take action by written consent, any action required or permitted to be taken by the stockholdersof the corporation must be effected at a duly called annual or special meeting of stockholders of the corporation and may not beeffected by any consent in writing by such stockholders.2.11RECORD DATESIn order that the corporation may determine the stockholders entitled to notice of any meeting of stockholders or anyadjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which theresolution fixing the record date is adopted by the board of directors and which record date shall not be more than 60 nor less than 10days before the date of such meeting. If the board of directors so fixes a date, such date shall also be the record date for determining thestockholders entitled to vote at such meeting unless the board of directors determines, at the time it fixes such record date, that a laterdate on or before the date of the meeting shall be the date for making such determination.If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of and to voteat a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice iswaived, at the close of business on the day next preceding the day on which the meeting is held.A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to anyadjournment of the meeting; provided, however, that the board of directors may fix a new record date for determination of stockholdersentitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of suchadjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with theprovisions of Section 213 of the DGCL and this Section 2.11 at the adjourned meeting.In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution orallotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, orfor the purpose of any other lawful action, the board of directors may fix a record date, which record date shall not precede the dateupon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action.If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the dayon which the board of directors adopts the resolution relating thereto.7Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.2.12PROXIESEach stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for suchstockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with theprocedure established for the meeting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxyprovides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisionsof Section 212 of the DGCL.2.13LIST OF STOCKHOLDERS ENTITLED TO VOTEThe officer who has charge of the stock ledger of the corporation shall prepare and make, at least 10 days before every meetingof stockholders, a complete list of the stockholders entitled to vote at the meeting; provided, however, if the record date for determiningthe stockholders entitled to vote is less than 10 days before the meeting date, the list shall reflect the stockholders entitled to vote as ofthe tenth day before the meeting date, arranged in alphabetical order, and showing the address of each stockholder and the number ofshares registered in the name of each stockholder. The corporation shall not be required to include electronic mail addresses or otherelectronic contact information on such list. Such list shall be open to the examination of any stockholder for any purpose germane tothe meeting for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that theinformation required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at thecorporation’s principal place of business. In the event that the corporation determines to make the list available on an electronicnetwork, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation.If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the wholetime thereof, and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remotecommunication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on areasonably accessible electronic network, and the information required to access such list shall be provided with the notice of themeeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number ofshares held by each of them.2.14INSPECTORS OF ELECTIONA written proxy may be in the form of a telegram, cablegram, or other means of electronic transmission which sets forth or issubmitted with information from which it can be determined that the telegram, cablegram, or other means of electronic transmissionwas authorized by the person.Before any meeting of stockholders, the board of directors shall appoint an inspector or inspectors of election to act at themeeting or its adjournment. The number of inspectors shall be either one (1) or three (3). If any person appointed as inspector fails toappear or fails or refuses to act, then the chairperson of the meeting may, and upon the request of any stockholder or a stockholder’sproxy shall, appoint a person to fill that vacancy.Such inspectors shall:(i)determine the number of shares outstanding and the voting power of each, the number of shares represented atthe meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;8Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(ii)receive votes, ballots or consents;(iii)hear and determine all challenges and questions in any way arising in connection with the right to vote;(iv)count and tabulate all votes or consents;(v)determine when the polls shall close;(vi)determine the result; and(vii)do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously asis practical. If there are three (3) inspectors of election, the decision, act or certificate of a majority is effective in all respects as thedecision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts statedtherein.ARTICLE III - DIRECTORS3.1POWERSThe business and affairs of the corporation shall be managed by or under the direction of the board of directors, except as maybe otherwise provided in the DGCL or the certificate of incorporation.3.2NUMBER OF DIRECTORSThe board of directors shall consist of one or more members, each of whom shall be a natural person. Unless the certificate ofincorporation fixes the number of directors, the number of directors shall be determined from time to time by resolution of the board ofdirectors. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s termof office expires.3.3ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORSExcept as provided in Section 3.4 of these bylaws, each director, including a director elected to fill a vacancy, shall hold officeuntil the expiration of the term for which elected and until such director’s successor is elected and qualified or until such director’searlier death, resignation or removal. Directors need not be stockholders unless so required by the certificate of incorporation or thesebylaws. The certificate of incorporation or these bylaws may prescribe other qualifications for directors.If so provided in the certificate of incorporation, the directors of the corporation shall be divided into classes.3.4RESIGNATION AND VACANCIESAny director may resign at any time upon notice given in writing or by electronic transmission to the corporation; provided,however, that if such notice is given by electronic transmission, such electronic transmission must either set forth or be submitted withinformation from which it can be determined that9Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the electronic transmission was authorized by the director. A resignation is effective when the resignation is delivered unless theresignation specifies a later effective date or an effective date determined upon the happening of an event or events. Acceptance ofsuch resignation shall not be necessary to make it effective. A resignation which is conditioned upon the director failing to receive aspecified vote for reelection as a director may provide that it is irrevocable. Unless otherwise provided in the certificate of incorporationor these bylaws, when one or more directors resign from the board of directors, effective at a future date, a majority of the directorsthen in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effectwhen such resignation or resignations shall become effective.Unless otherwise provided in the certificate of incorporation or these bylaws, vacancies and newly created directorshipsresulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a singleclass may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. If thedirectors are divided into classes, a person so elected by the directors then in office to fill a vacancy or newly created directorship shallhold office until the next election of the class for which such director shall have been chosen and until his or her successor shall havebeen duly elected and qualified.If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then anyofficer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with likeresponsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions ofthe certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election asprovided in Section 211 of the DGCL.If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majorityof the whole board of directors (as constituted immediately prior to any such increase), the Court of Chancery may, upon application ofany stockholder or stockholders holding at least 10% of the voting stock at the time outstanding having the right to vote for suchdirectors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directorschosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the DGCL asfar as applicable.3.5PLACE OF MEETINGS; MEETINGS BY TELEPHONEThe board of directors may hold meetings, both regular and special, either within or outside the State of Delaware.Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or anycommittee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means ofconference telephone or other communications equipment by means of which all persons participating in the meeting can hear eachother, and such participation in a meeting shall constitute presence in person at the meeting.3.6REGULAR MEETINGSRegular meetings of the board of directors may be held without notice at such time and at such place as shall from time to timebe determined by the board of directors.10Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.3.7SPECIAL MEETINGS; NOTICESpecial meetings of the board of directors for any purpose or purposes may be called at any time by the chairperson of theboard of directors, the chief executive officer, the president, the secretary or a majority of the authorized number of directors, at suchtimes and places as he or she or they shall designate.Notice of the time and place of special meetings shall be:(i)delivered personally by hand, by courier or by telephone;(ii)sent by United States first-class mail, postage prepaid;(iii)sent by facsimile; or(iv)sent by electronic mail,directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, as the case may be,as shown on the corporation’s records.If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail,it shall be delivered or sent at least 24 hours before the time of the holding of the meeting. If the notice is sent by United States mail, itshall be deposited in the United States mail at least four days before the time of the holding of the meeting. Any oral notice may becommunicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the corporation’sprincipal executive office) nor the purpose of the meeting.3.8QUORUM; VOTINGAt all meetings of the board of directors, a majority of the total authorized number of directors shall constitute a quorum for thetransaction of business. If a quorum is not present at any meeting of the board of directors, then the directors present thereat mayadjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting atwhich a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken isapproved by at least a majority of the required quorum for that meeting.The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board ofdirectors, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws.If the certificate of incorporation provides that one or more directors shall have more or less than one vote per director on anymatter, every reference in these bylaws to a majority or other proportion of the directors shall refer to a majority or other proportion ofthe votes of the directors.3.9BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETINGUnless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken atany meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board ofdirectors or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings orelectronic transmission or11Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.transmissions are filed with the minutes of proceedings of the board of directors or committee. Such filing shall be in paper form if theminutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. Any person(whether or not then a director) may provide, whether through instruction to an agent or otherwise, that a consent to action will beeffective at a future time (including a time determined upon the happening of an event), no later than 60 days after such instruction isgiven or such provision is made and such consent shall be deemed to have been given for purposes of this Section 3.9 at such effectivetime so long as such person is then a director and did not revoke the consent prior to such time. Any such consent shall be revocableprior to its becoming effective.3.10FEES AND COMPENSATION OF DIRECTORSUnless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority tofix the compensation of directors.3.11REMOVAL OF DIRECTORSAny director may be removed from office by the stockholders of the corporation only for cause.No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of suchdirector’s term of office.ARTICLE IV - COMMITTEES4.1COMMITTEES OF DIRECTORSThe board of directors may, by resolution passed by a majority of the authorized number of directors, designate one or morecommittees, each committee to consist of one or more of the directors of the corporation. The board of directors may designate one ormore directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of thecommittee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting andnot disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another memberof the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extentprovided in the resolution of the board of directors or in these bylaws, shall have and may exercise all the powers and authority of theboard of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to beaffixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommendto the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to besubmitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the corporation.4.2COMMITTEE MINUTESEach committee shall keep regular minutes of its meetings and report the same to the board of directors when required.4.3MEETINGS AND ACTION OF COMMITTEESMeetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:12Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(i)Section 3.5 (place of meetings and meetings by telephone);(ii)Section 3.6 (regular meetings);(iii)Section 3.7 (special meetings and notice);(iv)Section 3.8 (quorum; voting);(v)Section 7.5 (waiver of notice); and(vi)Section 3.9 (action without a meeting)with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directorsand its members. However:(i)the time of regular meetings of committees may be determined either by resolution of the board of directors orby resolution of the committee;(ii)special meetings of committees may also be called by resolution of the board of directors; and(iii)notice of special meetings of committees shall also be given to all alternate members, who shall have theright to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee notinconsistent with the provisions of these bylaws.Any provision in the certificate of incorporation providing that one or more directors shall have more or less than one vote perdirector on any matter shall apply to voting in any committee or subcommittee, unless otherwise provided in the certificate ofincorporation or these bylaws.4.4SUBCOMMITTEESUnless otherwise provided in the certificate of incorporation, these bylaws or the resolutions of the board of directorsdesignating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more membersof the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.ARTICLE V - OFFICERS5.1OFFICERSThe officers of the corporation shall be a president and a secretary. The corporation may also have, at the discretion of theboard of directors, a chairperson of the board of directors, a vice chairperson of the board of directors, a chief executive officer, a chieffinancial officer or treasurer, one or more vice presidents, one or more assistant vice presidents, one or more assistant treasurers, one ormore assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Anynumber of offices may be held by the same person.13Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.5.2APPOINTMENT OF OFFICERSThe board of directors shall appoint the officers of the corporation, except such officers as may be appointed in accordancewith the provisions of Sections 5.3 of these bylaws, subject to the rights, if any, of an officer under any contract of employment.5.3SUBORDINATE OFFICERSThe board of directors may appoint, or empower the chief executive officer or, in the absence of a chief executive officer, thepresident, to appoint, such other officers and agents as the business of the corporation may require. Each of such officers and agentsshall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board ofdirectors may from time to time determine.5.4REMOVAL AND RESIGNATION OF OFFICERSSubject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with orwithout cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board of directorsor, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may beconferred by the board of directors.Any officer may resign at any time by giving written or electronic notice to the corporation; provided, however, that if suchnotice is given by electronic transmission, such electronic transmission must either set forth or be submitted with information fromwhich it can be determined that the electronic transmission was authorized by the officer. Any resignation shall take effect at the date ofthe receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, theacceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of thecorporation under any contract to which the officer is a party.5.5VACANCIES IN OFFICESAny vacancy occurring in any office of the corporation shall be filled by the board of directors or as provided in Section 5.3.5.6REPRESENTATION OF SHARES OF OTHER CORPORATIONSThe chairperson of the board of directors, the president, any vice president, the treasurer, the secretary or assistant secretary ofthis corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote,represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporationsstanding in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any otherperson authorized to do so by proxy or power of attorney duly executed by such person having the authority.5.7AUTHORITY AND DUTIES OF OFFICERSAll officers of the corporation shall respectively have such authority and perform such duties in the management of the businessof the corporation as may be designated from time to time by the board of14Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.directors or the stockholders and, to the extent not so provided, as generally pertain to their respective offices, subject to the control ofthe board of directors.ARTICLE VI - STOCK6.1STOCK CERTIFICATES; PARTLY PAID SHARESThe shares of the corporation shall be represented by certificates, provided that the board of directors may provide by resolutionor resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall notapply to shares represented by a certificate until such certificate is surrendered to the corporation. Every holder of stock represented bycertificates shall be entitled to have a certificate signed by, or in the name of the corporation by the chairperson of the board of directorsor vice-chairperson of the board of directors, or the president or a vice-president, and by the treasurer or an assistant treasurer, or thesecretary or an assistant secretary of the corporation representing the number of shares registered in certificate form. Any or all of thesignatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimilesignature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, itmay be issued by the corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.The corporation shall not have power to issue a certificate in bearer form.The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of theconsideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly-paid shares, orupon the books and records of the corporation in the case of uncertificated partly-paid shares, the total amount of the consideration tobe paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully-paid shares, the corporationshall declare a dividend upon partly-paid shares of the same class, but only upon the basis of the percentage of the considerationactually paid thereon.6.2SPECIAL DESIGNATION ON CERTIFICATESIf the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, thedesignations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof andthe qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or backof the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwiseprovided in Section 202 of the DGCL, in lieu of the foregoing requirements there may be set forth on the face or back of the certificatethat the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge toeach stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights ofeach class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within areasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a writtennotice containing the information required to be set forth or stated on certificates pursuant to this section 6.2 or Sections 156, 202(a) or218(a) of the DGCL or with respect to this section 6.2 a statement that the corporation will furnish without charge to each stockholderwho so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stockor series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expresslyprovided by law, the rights and obligations of the holders of uncertificated stock and the rights and obligations of the holders ofcertificates representing stock of the same class and series shall be identical.15Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.6.3LOST CERTIFICATESExcept as provided in this Section 6.3, no new certificates for shares shall be issued to replace a previously issued certificateunless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stockor uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and thecorporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give thecorporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft ordestruction of any such certificate or the issuance of such new certificate or uncertificated shares.6.4DIVIDENDSThe board of directors, subject to any restrictions contained in the certificate of incorporation or applicable law, may declareand pay dividends upon the shares of the corporation’s capital stock. Dividends may be paid in cash, in property, or in shares of thecorporation’s capital stock, subject to the provisions of the certificate of incorporation.The board of directors may set apart out of any of the funds of the corporation available for dividends a reserve or reserves forany proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairingor maintaining any property of the corporation, and meeting contingencies.6.5TRANSFER OF STOCK Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person orby an attorney duly authorized, and, if such stock is certificated, upon the surrender of a certificate or certificates for a like number ofshares, properly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer; provided, however,that such succession, assignment or authority to transfer is not prohibited by the certificate of incorporation, these bylaws, applicablelaw or contract.6.6STOCK TRANSFER AGREEMENTSThe corporation shall have power to enter into and perform any agreement with any number of stockholders of any one ormore classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes ownedby such stockholders in any manner not prohibited by the DGCL.6.7REGISTERED STOCKHOLDERSThe corporation:(i)shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares toreceive dividends and to vote as such owner;(ii)shall be entitled to hold liable for calls and assessments the person registered on its books as the owner ofshares; and16Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(iii)shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the partof another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.ARTICLE VII - MANNER OF GIVING NOTICE AND WAIVER7.1NOTICE OF STOCKHOLDERS’ MEETINGSNotice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed tothe stockholder at such stockholder’s address as it appears on the corporation’s records. An affidavit of the secretary or an assistantsecretary of the corporation or of the transfer agent or other agent of the corporation that the notice has been given shall, in the absenceof fraud, be prima facie evidence of the facts stated therein.7.2NOTICE BY ELECTRONIC TRANSMISSIONWithout limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, thecertificate of incorporation or these bylaws, any notice to stockholders given by the corporation under any provision of the DGCL, thecertificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by thestockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation.Any such consent shall be deemed revoked if:(i)the corporation is unable to deliver by electronic transmission two consecutive notices given by thecorporation in accordance with such consent; and(ii)such inability becomes known to the secretary or an assistant secretary of the corporation or to the transferagent, or other person responsible for the giving of notice.However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.Any notice given pursuant to the preceding paragraph shall be deemed given:(iii)if by facsimile telecommunication, when directed to a number at which the stockholder has consented toreceive notice;(iv)if by electronic mail, when directed to an electronic mail address at which the stockholder has consented toreceive notice;(v)if by a posting on an electronic network together with separate notice to the stockholder of such specificposting, upon the later of (A) such posting and (B) the giving of such separate notice; and(vi)if by any other form of electronic transmission, when directed to the stockholder.An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice hasbeen given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.17Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper,that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paperform by such a recipient through an automated process.7.3NOTICE TO STOCKHOLDERS SHARING AN ADDRESSExcept as otherwise prohibited under the DGCL, without limiting the manner by which notice otherwise may be giveneffectively to stockholders, any notice to stockholders given by the corporation under the provisions of the DGCL, the certificate ofincorporation or these bylaws shall be effective if given by a single written notice to stockholders who share an address if consented toby the stockholders at that address to whom such notice is given. Any such consent shall be revocable by the stockholder by writtennotice to the corporation. Any stockholder who fails to object in writing to the corporation, within 60 days of having been givenwritten notice by the corporation of its intention to send the single notice, shall be deemed to have consented to receiving such singlewritten notice.7.4NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFULWhenever notice is required to be given, under the DGCL, the certificate of incorporation or these bylaws, to any person withwhom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply toany governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall betaken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if suchnotice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under theDGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receivenotice except such persons with whom communication is unlawful.7.5WAIVER OF NOTICEWhenever notice is required to be given to stockholders, directors or other persons under any provision of the DGCL, thecertificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronictransmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall bedeemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when theperson attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any businessbecause the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular orspecial meeting of the stockholders or board of directors, as the case may be, need be specified in any written waiver of notice or anywaiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.ARTICLE VIII - INDEMNIFICATION 8.1INDEMNIFICATION OF DIRECTORS AND OFFICERS IN THIRD PARTY PROCEEDINGSSubject to the other provisions of this Article VIII, the corporation shall indemnify, to the fullest extent permitted by the DGCL,as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending orcompleted action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) (other than an action byor in the right of18Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the corporation) by reason of the fact that such person is or was a director or officer of the corporation, or is or was a director or officerof the corporation serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership,joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlementactually and reasonably incurred by such person in connection with such Proceeding if such person acted in good faith and in a mannersuch person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal actionor proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any Proceeding byjudgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumptionthat the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the bestinterests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’sconduct was unlawful.8.2INDEMNIFICATION OF DIRECTORS AND OFFICERS IN ACTIONS BY OR IN THE RIGHT OF THECORPORATIONSubject to the other provisions of this Article VIII, the corporation shall indemnify, to the fullest extent permitted by the DGCL,as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending orcompleted action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person isor was a director or officer of the corporation, or is or was a director or officer of the corporation serving at the request of thecorporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise againstexpenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement ofsuch action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to thebest interests of the corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which suchperson shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court inwhich such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all thecircumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery orsuch other court shall deem proper.8.3SUCCESSFUL DEFENSETo the extent that a present or former director or officer of the corporation has been successful on the merits or otherwise indefense of any action, suit or proceeding described in Section 8.1 or Section 8.2, or in defense of any claim, issue or matter therein,such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person inconnection therewith.8.4INDEMNIFICATION OF OTHERSSubject to the other provisions of this Article VIII, the corporation shall have power to indemnify its employees and agents tothe extent not prohibited by the DGCL or other applicable law. The board of directors shall have the power to delegate to such personor persons the determination of whether employees or agents shall be indemnified.19Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.8.5ADVANCED PAYMENT OF EXPENSESExpenses (including attorneys’ fees) incurred by an officer or director of the corporation in defending any Proceeding shall bepaid by the corporation in advance of the final disposition of such Proceeding upon receipt of a written request therefor (together withdocumentation reasonably evidencing such expenses) and an undertaking by or on behalf of the person to repay such amounts if itshall ultimately be determined that the person is not entitled to be indemnified under this Article VIII or the DGCL. Such expenses(including attorneys’ fees) incurred by former directors and officers or other employees and agents of the corporation or by personsserving at the request of the corporation as directors, officers, employees or agents of another corporation, partnership, joint venture,trust or other enterprise may be so paid upon such terms and conditions, if any, as the corporation deems appropriate and shall besubject to the corporation’s expense guidelines. The right to advancement of expenses shall not apply to any claim for which indemnityis excluded pursuant to these bylaws, but shall apply to any Proceeding referenced in Section 8.6(ii) or 8.6(iii) prior to a determinationthat the person is not entitled to be indemnified by the corporation.Notwithstanding the foregoing, unless otherwise determined pursuant to Section 8.8, no advance shall be made by thecorporation to an officer of the corporation (except by reason of the fact that such officer is or was a director of the corporation, inwhich event this paragraph shall not apply) in any Proceeding if a determination is reasonably and promptly made (i) by a majorityvote of the directors who are not parties to such Proceeding, even though less than a quorum, or (ii) by a committee of such directorsdesignated by majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directorsso direct, by independent legal counsel in a written opinion, that facts known to the decision-making party at the time suchdetermination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did notbelieve to be in or not opposed to the best interests of the corporation.8.6LIMITATION ON INDEMNIFICATIONSubject to the requirements in Section 8.3 and the DGCL, the corporation shall not be obligated to indemnify any personpursuant to this Article VIII in connection with any Proceeding (or any part of any Proceeding):(i)for which payment has actually been made to or on behalf of such person under any statute, insurance policy,indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;(ii)for an accounting or disgorgement of profits pursuant to Section 16(b) of the 1934 Act, or similar provisionsof federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlementarrangements);(iii)for any reimbursement of the corporation by such person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of securities of the corporation, as required in each caseunder the 1934 Act (including any such reimbursements that arise from an accounting restatement of the corporation pursuant toSection 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the corporation of profits arising fromthe purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liabletherefor (including pursuant to any settlement arrangements);20Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(iv)initiated by such person, including any Proceeding (or any part of any Proceeding) initiated by such personagainst the corporation or its directors, officers, employees, agents or other indemnitees, unless (a) the board of directors authorized theProceeding (or the relevant part of the Proceeding) prior to its initiation, (b) the corporation provides the indemnification, in its solediscretion, pursuant to the powers vested in the corporation under applicable law, (c) otherwise required to be made under Section 8.7or (d) otherwise required by applicable law; or(v)if prohibited by applicable law.8.7DETERMINATION; CLAIMIf a claim for indemnification or advancement of expenses under this Article VIII is not paid in full within 90 days after receiptby the corporation of the written request therefor, the claimant shall be entitled to an adjudication by a court of competent jurisdictionof his or her entitlement to such indemnification or advancement of expenses. The corporation shall indemnify such person against anyand all expenses that are incurred by such person in connection with any action for indemnification or advancement of expenses fromthe corporation under this Article VIII, to the extent such person is successful in such action, and to the extent not prohibited by law. Inany such suit, the corporation shall, to the fullest extent not prohibited by law, have the burden of proving that the claimant is notentitled to the requested indemnification or advancement of expenses.8.8NON-EXCLUSIVITY OF RIGHTSThe indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall not be deemedexclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the certificateof incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in suchperson’s official capacity and as to action in another capacity while holding such office. The corporation is specifically authorized toenter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advancementof expenses, to the fullest extent not prohibited by the DGCL or other applicable law.8.9INSURANCEThe corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee oragent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of anothercorporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by suchperson in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power toindemnify such person against such liability under the provisions of the DGCL.8.10SURVIVALThe rights to indemnification and advancement of expenses conferred by this Article VIII shall continue as to a person who hasceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such aperson.21Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.8.11EFFECT OF REPEAL OR MODIFICATIONA right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylawshall not be eliminated or impaired by an amendment to the certificate of incorporation or these bylaws after the occurrence of the actor omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnificationor advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes suchelimination or impairment after such action or omission has occurred.8.12CERTAIN DEFINITIONSFor purposes of this Article VIII, references to the “corporation” shall include, in addition to the resulting corporation, anyconstituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separateexistence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that anyperson who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of suchconstituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or otherenterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporationas such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of thisArticle VIII, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excisetaxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation”shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by,such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person whoacted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of anemployee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referredto in this Article VIII.ARTICLE IX - GENERAL MATTERS9.1EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTSExcept as otherwise provided by law, the certificate of incorporation or these bylaws, the board of directors may authorize anyofficer or officers, or agent or agents, to enter into any contract or execute any document or instrument in the name of and on behalf ofthe corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board ofdirectors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind thecorporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.9.2FISCAL YEARThe fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board ofdirectors.22Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.9.3SEAL The corporation may adopt a corporate seal, which shall be adopted and which may be altered by the board of directors. Thecorporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other mannerreproduced.9.4CONSTRUCTION; DEFINITIONSUnless the context requires otherwise, the general provisions, rules of construction, and definitions in the DGCL shall governthe construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the pluralnumber includes the singular, and the term “person” includes both an entity and a natural person.ARTICLE X - AMENDMENTSThese bylaws may be adopted, amended or repealed by the stockholders entitled to vote. However, the corporation may, in itscertificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has beenso conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws.A bylaw amendment adopted by stockholders which specifies the votes that shall be necessary for the election of directors shallnot be further amended or repealed by the board of directors.UPLAND SOFTWARE, INC.CERTIFICATE OF AMENDMENT OF BYLAWSThe undersigned hereby certifies that he or she is the duly elected, qualified, and acting Secretary or Assistant Secretary ofUpland Software, Inc., a Delaware corporation and that the foregoing bylaws, comprising 23 pages (excluding the table of contents),were amended and restated on October 9, 2014 by the corporation’s board of directors.IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this 15th day of October, 2014. /s/ Robert V. Housley Robert V. Housley, Secretary23Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.UPLAND SOFTWARE, INC.EXECUTIVE EMPLOYMENT AGREEMENTThis Executive Employment Agreement (the “Agreement”) is entered into as of March 22, 2017 (the “Effective Date”) by andbetween Upland Software, Inc., a Delaware corporation (the “Company”), and Michael D. Hill (“Executive”).RECITALSWHEREAS, the Company and Executive desire to memorialize the terms of employment of Executive as of the EffectiveDate.AGREEMENTNOW, THEREFORE, in consideration of the premises and mutual covenants herein and for other good and valuableconsideration, the parties agree as follows:1.Duties and Scope of Employment.(a) Positions and Duties. As of the Effective Date, Executive will continue to serve as Chief Financial Officer of theCompany. The period of Executive’s employment under this Agreement is referred to herein as the “Employment Term.” During theEmployment Term, Executive will render such business and professional services in the performance of Executive’s duties as arecustomarily associated with Executive’s positions within the Company and Executive agrees to perform such other duties andfunctions as shall from time to time be reasonably assigned or delegated to Executive by the Board of Directors (the “Board”).(b) Obligations. During the Employment Term, Executive will perform Executive’s duties faithfully and to the best ofExecutive’s ability and will devote Executive’s full business efforts and time to the Company. During the Employment Term,Executive agrees to devote substantially all of his business time to the Company and shall not engage in any other materialemployment, occupation or consulting activity with material remuneration without the prior written consent of the Board.2. At-Will Employment. Executive and the Company agree and acknowledge Executive’s employment with the Companyconstitutes “at-will” employment. Executive and the Company further agree and acknowledge that this employment relationship (andthe Employment Term) may be terminated at any time, with or without cause or good reason, at the option of either Executive or theCompany. Executive understands and agrees that neither Executive’s job performance nor promotions, commendations, bonuses or thelike from the Company give rise to or in any way serve as the basis for modification, amendment, or extension, by implication orotherwise, of Executive’s employment with the Company.3. Compensation.(a) Base Salary. During the Employment Term, the Company will pay Executive as compensation for Executive’s services abase salary at the annualized rate of $270,000 (the “Base-1-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Salary”). The Base Salary will be paid in regular installments in accordance with the Company’s normal payroll practices (subject torequired withholding). During the Employment Term, Executive’s compensation shall be reviewed by the Board from time to time andat least once every 12 months. Any increase or decrease in Base Salary (together with the then existing Base Salary) shall serve as the“Base Salary” under this Agreement. The first and last payment will be adjusted, if necessary, to reflect a commencement ortermination date other than the first or last working day of a pay period.(b) Target Bonus. During the Employment Term, Executive will be eligible to receive an annual bonus of up to 100% ofExecutive’s Base Salary, less applicable withholdings, upon achievement of performance objectives to be determined by the Board inits sole discretion, which shall be based upon, among other things, achievement of revenue, acquisition and EBITDA targets (the“Target Bonus”). Any Bonus will be earned only if the Company achieves the annual performance objectives during the designatedtime period and Executive is continuously employed by the Company on the date that such performance objectives are achieved. TheCompany shall pay such Bonus at the same time as bonuses are normally paid to senior management, unless the Board approves anexception for payment of a particular bonus on a case by case basis, but in any event, any earned Bonus shall be paid no later than twomonths and 15 days after the end of the Company’s taxable year in which such Bonus was earned.(c) Equity. Executive shall be entitled to receive annual equity grants of stock as determined appropriate by a duly-appointedcommittee of the Company’s board of directors.4. Employee Benefits. During the Employment Term, Executive will be entitled to participate in the employee benefit planscurrently and hereafter maintained by the Company of general applicability to other senior executives of the Company. The Companyreserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.5. Vacation. Executive will be entitled to paid vacation generally applicable to the senior executives of the Company, inaccordance with the Company’s vacation policy.6. Business Expenses. During the Employment Term, the Company will reimburse Executive for reasonable travel,entertainment and other expenses incurred by Executive in the furtherance of or in connection with the performance of Executive’sduties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time (the “ExpenseReimbursement”).7. Severance.(a) For Cause Termination by the Company; Voluntary Termination without Good Reason by Executive. If the Companyterminates Executive’s employment for Cause or if Executive terminates Executive’s employment voluntarily without Good Reason,then Executive will (i) receive the earned but unpaid compensation and earned but unpaid Bonus through the date of termination, (ii)any accrued but unpaid vacation pay for the fiscal year during which the termination occurs and Expense Reimbursement and (iii) notreceive any other compensation or benefits from the Company except as may be required by law or in accordance with establishedCompany plans and policies; provided, however, nothing herein shall be deemed to alter or affect Executive’s vested rights in anypension, 401(k) or other benefit plan with the Company, if any.-2-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(b) Termination Without Cause by the Company; Termination For Good Reason by Executive. If the Company terminatesExecutive’s employment without Cause or if Executive terminates Executive’s employment for Good Reason, then Executive shall beentitled to receive (i) any earned but unpaid compensation, earned but unpaid Bonus, and accrued but unpaid vacation pay and anyExpense Reimbursement, (ii) severance in the form of continuation of Executive’s Base Salary in effect on the effective date oftermination for a period of twelve (12) months after the date of such termination to be paid periodically in accordance with theCompany’s normal payroll practices, and (iii) reimbursement of any health care benefit continuation premiums for a period of twelve(12) months after the date of such termination, provided Executive timely elects continuation of coverage under COBRA or applicablestate law; provided, further, that such COBRA premium reimbursements set forth in clause (iii) shall terminate upon commencement ofnew employment by an employer that offers health care coverage to its employees and Executive shall be required to notify theCompany of such other employment prior to the effective date thereof. . Notwithstanding the foregoing, upon Executive’s materialbreach of this Agreement or the Proprietary Information Agreement (as defined in Section 11), the Company shall no longer beobligated to pay any amounts set forth in clauses (ii) and (iii), and Executive shall not be entitled to receive any further monthlyinstallments of the severance payments set forth in clauses (ii) and (iii).(c) Section 409A.(i) Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning ofSection 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the final regulations and any guidance promulgatedthereunder (“Section 409A”) at the time of Executive’s termination (other than due to death), and the severance payable to Executive,if any, pursuant to this Agreement, when considered together with any other severance payments or separation benefits that areconsidered deferred compensation under Section 409A (together, the “Deferred Compensation Separation Benefits”) that are payablewithin the first six (6) months following Executive’s termination of employment, will become payable on the first payroll date thatoccurs on or after the date six (6) months and one (1) day following the date of Executive’s termination of employment. All subsequentDeferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to eachpayment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following his termination but prior to the six (6)month anniversary of his termination, then any payments delayed in accordance with this paragraph will be payable in a lump sum assoon as administratively practicable after the date of Executive’s death and all other Deferred Compensation Separation Benefits willbe payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable underthis Agreement is intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.(ii) Any amount paid under the Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section1.409A-1(b)(4) of the Treasury Regulations shall not constitute Deferred Compensation Separation Benefits for purposes of Section7(c)(i) above.(iii) Any amount paid under the Agreement that qualifies as a payment made as a result of an involuntary separation fromservice pursuant to Section 1.409A-1(b)(9)(iii) of the-3-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Treasury Regulations that does not exceed the Section 409A Limit shall not constitute Deferred Compensation Separation Benefits forpurposes of Section 7(c)(i) above. For purposes of this Section 7(c), “Section 409A Limit” will mean the lesser of two (2) times: (A)Executive’s annualized compensation based upon the annual rate of pay paid to Executive during the Company’s taxable yearpreceding the Company’s taxable year of Executive’s termination of employment as determined under Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (B) the maximum amount that may betaken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive’s employment isterminated.8. Death or Disability. The Employment Term and Executive’s employment shall terminate upon Executive’s death orDisability. Upon termination of Executive’s employment for either death or Disability, Executive or Executive’s estate, as the case maybe, shall be entitled to receive any earned but unpaid compensation, earned but unpaid Bonus, and accrued but unpaid vacation payand any Expense Reimbursement. Further, any equity grants which are unvested at the time of the termination of the Executive’semployment due to death or Disability shall automatically accelerate and become fully vested effective upon the date of suchtermination. Upon termination of Executive’s employment due to death or Disability pursuant to this Section 8, Executive orExecutive’s estate, as the case may be, shall have no further rights to any compensation or any other benefits under this Agreementexcept as explicitly provided herein. All other benefits, if any, due Executive following Executive’s termination for death or Disabilityshall be determined in accordance with established Company plans and practices.9. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwisepayable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section9, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive's severance and other benefits will beeither: (i) delivered in full, or (ii) delivered as to such lesser extent which would result in no portion of such severance and otherbenefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account theapplicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on anafter-tax basis, of the greatest amount of severance and other benefits, notwithstanding that all or some portion of such severance andother benefits may be taxable under Section 4999 of the Code. Unless the Company and Executive otherwise agree in writing, anydetermination required under this Section 9 will be made in writing by the Company’s independent public accountants immediatelyprior to a Change of Control (the “Accountants”), whose determination will be conclusive and binding upon Executive and theCompany for all purposes. For purposes of making the calculations required by this Section 9, the Accountants may make reasonableassumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning theapplication of Sections 280G and 4999 of the Code. The Company and Executive shall furnish to the Accountants such informationand documents as the Accountants may reasonably request in order to make a determination under this Section 9. The Company shallbear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 9. In the eventthe Accountants determine that this Section 9 requires a reduction in Executive's severance or other benefits, the reduction will occur inthe following order: reduction of cash payments; reduction of employee benefits; cancellation of accelerated vesting of equity awards;cancellation of equity awards that are considered to be contingent upon the Change of Control transaction. If Executive fails to makean appropriate reduction election within the reasonable-4-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.time period determined by the Board, in its sole discretion, the order of reduction shall be determined by the Board.10. Definitions.(a) Change of Control. For purposes of this Agreement, “Change of Control” means (X) the acquisition of the Company byanother entity by means of any transaction or series of related transactions (including, without limitation, any merger, consolidation orother form of reorganization in which outstanding shares of the Company are exchanged for securities or other consideration issued, orcaused to be issued, by the acquiring entity or its subsidiary, but excluding any transaction effected primarily for the purpose ofchanging the Company’s jurisdiction of incorporation), unless the Company’s stockholders of record as constituted immediately priorto such transaction or series of related transactions will, immediately after such transaction or series of related transactions hold at leasta majority of the voting power of the surviving or acquiring entity or (Y) a sale of all or substantially all of the assets of the Company.(b) Cause. For purposes of this Agreement, “Cause” means (i) Executive’s willful failure to perform the duties and obligationsof Executive’s position with the Company; (ii) any material act of personal dishonesty, fraud or misrepresentation taken by Executivewhich was intended to result in substantial gain or personal enrichment of Executive at the expense of the Company; (iii) Executive’sviolation of a federal or state law or regulation applicable to the Company’s business which violation was or is reasonably likely to bematerially injurious to the Company; (iv) Executive’s conviction of, or plea of nolo contendere or guilty to, a felony under the laws ofthe United States or any State, excluding felonies for minor traffic violation and vicarious liability (so long as Executive did not knowof the felony and did not willfully violate the law); or (v) Executive’s material breach of the terms of this Agreement or the ProprietaryInformation Agreement (as defined in Section 11).(c) Good Reason. For purposes of this Agreement, “Good Reason” means, (i) without Executive’s consent, a materialreduction of Executive’s duties or responsibilities relative to Executive’s duties or responsibilities as in effect immediately prior to suchreduction; provided, however, any reduction in Executive’s duties or responsibilities resulting solely from the Company being acquiredby and made a part of a larger entity (as, for example, when a chief executive officer becomes an employee of the acquiringcorporation following a Change of Control but is not the chief executive officer of the acquiring corporation) shall not constitute GoodReason; (ii) without Executive’s written consent, a material reduction in the Base Salary of Executive as in effect immediately prior tosuch reduction, unless such reduction is part of a reduction in expenses generally affecting senior executives of the Company;(iii) without Executive’s consent, a material reduction by the Company in the kind or level of employee benefits to which Executivewas entitled immediately prior to such reduction, with the result that Executive’s overall benefits package is materially reduced, unlesssuch reduction is part of a reduction in benefits generally affecting senior executives of the Company or (iv) without Executive’sconsent, his relocation to a facility or a location more than twenty-five (25) miles from his present working locations (currently Austin,Texas). Good Reason shall not exist unless Executive provides (i) notice to the Company within ninety (90) days of the initialexistence of the condition triggering Good Reason and (ii) the Company the opportunity of at least thirty (30) days to cure suchcondition.-5-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(d) Disability. For purposes of this Agreement, “Disability” means Executive’s inability to perform Executive’s duties due toExecutive’s physical or mental incapacity, as reasonably determined by the Board or its designee, for an aggregate of 180 days in any365 consecutive day period.11. Confidential Information. Executive confirms Executive’s obligations under the Employee Proprietary InformationAgreement entered into by the Company and Executive on or about March 22, 2017 (the “Proprietary Information Agreement”).12. Assignment. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legalrepresentatives of Executive upon Executive’s death and (b) any successor of the Company. Any such successor of the Company willbe deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means anyperson, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectlyacquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form ofcompensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution.None of the obligations of Executive under this Agreement may be assigned or transferred. Any other attempted assignment, transfer,conveyance or other disposition of Executive’s right to compensation or other benefits will be null and void.13. Notices. All notices, requests, demands and other communications called for under this Agreement shall be in writing andshall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, or sent by facsimiledirected to the party to be notified at the address or facsimile number indicated for such party on the signature page to this Agreement,or at such other address or facsimile number as such party may designate by ten (10) days’ advance written notice to the other partieshereto. All such notices and other communications shall be deemed given upon personal delivery, three (3) days after the date ofmailing, or upon confirmation of facsimile transfer.14. Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdictionto be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.15. Arbitration.(a) Executive agrees that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or theinterpretation, validity, construction, performance, breach, or termination thereof, shall be settled by binding arbitration to be held inAustin, Texas in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the AmericanArbitration Association (the “Rules”). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decisionof the arbitrator will be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’sdecision in any court having jurisdiction.(b) The arbitrator(s) will apply Texas law to the merits of any dispute or claim, without reference to rules of conflicts of law.The arbitration proceedings will be governed by federal arbitration law and by the Rules, without reference to state arbitration law.Executive hereby consents to the-6-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.personal jurisdiction of the state and federal courts located in Texas for any action or proceeding arising from or relating to thisAgreement or relating to any arbitration in which the parties are participants.(c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION.EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANYCLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THEINTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TOBINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE’SRIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTSOF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, DISCRIMINATION CLAIMS.16. Term. The term of this Agreement shall commence on the Effective Date and continue until the earlier of (i) the thirdanniversary of the Effective Date, or (ii) or the end of the Employment Term. Notwithstanding the foregoing, Sections 2 and 7 – 21 ofthis Agreement shall survive any such termination or expiration.17. Integration. This Agreement, together with any Restricted Stock Award or Option agreements outstanding on theEffective Date, the Proprietary Information Agreement, and the Indemnification Agreement between the Company and Executive,represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior orcontemporaneous agreements whether written or oral. To the extent that any provision of the Proprietary Information Agreementconflicts with a provision of this Agreement, this Agreement shall control. No waiver, alteration or modification of any of theprovisions of this Agreement will be binding unless in writing and signed by duly authorized representatives of the parties hereto.18. No Waiver. Other than expressly set forth herein, nothing in this Agreement constitutes or shall be deemed to constitute awaiver of, or otherwise reduce, affect or impair, any of the rights or remedies available to Executive under any applicable law or atequity, all of such rights or remedies being hereby expressly reserved.19. Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.20. Governing Law; Consent to Personal Jurisdiction. THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OFTHE STATE OF TEXAS WITHOUT REGARD FOR CONFLICTS OF LAWS PRINCIPLES. SUBJECT TO THEARBITRATION PROVISION IN SECTION 15, I HEREBY EXPRESSLY CONSENT TO THE PERSONAL JURISDICTIONOF THE STATE AND FEDERAL COURTS LOCATED IN TEXAS FOR ANY LAWSUIT FILED THERE AGAINST ME BYTHE COMPANY CONCERNING MY EMPLOYMENT OR THE TERMINATION OF MY EMPLOYMENT OR ARISINGFROM OR RELATING TO THIS AGREEMENT.21. Acknowledgment. Executive acknowledges that Executive has had the opportunity to discuss this matter with and obtainadvice from Executive’s private attorney, Executive has had sufficient time-7-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into thisAgreement.[signature page follows]IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by their dulyauthorized officers, as of the day and year first above written.“COMPANY”Upland Software, Inc.By: /s/ David May Name: David May Title: Director “EXECUTIVE”/s/ Michael D. Hill Michael D. Hill-8-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.UPLAND SOFTWARE, INC.EXECUTIVE EMPLOYMENT AGREEMENTThis Executive Employment Agreement (the “Agreement”) is entered into as of March 22, 2017 (the “Effective Date”) by andbetween Upland Software, Inc., a Delaware corporation (the “Company”), and Timothy Mattox (“Executive”).RECITALSWHEREAS, the Company and Executive desire to memorialize the terms of employment of Executive as of the EffectiveDate.AGREEMENTNOW, THEREFORE, in consideration of the premises and mutual covenants herein and for other good and valuableconsideration, the parties agree as follows:1.Duties and Scope of Employment.(a) Positions and Duties. As of the Effective Date, Executive will continue to serve as President and Chief Operating Officerof the Company. The period of Executive’s employment under this Agreement is referred to herein as the “Employment Term.”During the Employment Term, Executive will render such business and professional services in the performance of Executive’s dutiesas are customarily associated with Executive’s positions within the Company and Executive agrees to perform such other duties andfunctions as shall from time to time be reasonably assigned or delegated to Executive by the Board of Directors (the “Board”).(b) Obligations. During the Employment Term, Executive will perform Executive’s duties faithfully and to the best ofExecutive’s ability and will devote Executive’s full business efforts and time to the Company. During the Employment Term,Executive agrees to devote substantially all of his business time to the Company and shall not engage in any other materialemployment, occupation or consulting activity with material remuneration without the prior written consent of the Board.2. At-Will Employment. Executive and the Company agree and acknowledge Executive’s employment with the Companyconstitutes “at-will” employment. Executive and the Company further agree and acknowledge that this employment relationship (andthe Employment Term) may be terminated at any time, with or without cause or good reason, at the option of either Executive or theCompany. Executive understands and agrees that neither Executive’s job performance nor promotions, commendations, bonuses or thelike from the Company give rise to or in any way serve as the basis for modification, amendment, or extension, by implication orotherwise, of Executive’s employment with the Company.3. Compensation.(a) Base Salary. During the Employment Term, the Company will pay Executive as compensation for Executive’s services abase salary at the annualized rate of $325,000 (the “Base-1-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Salary”). The Base Salary will be paid in regular installments in accordance with the Company’s normal payroll practices (subject torequired withholding). During the Employment Term, Executive’s compensation shall be reviewed by the Board from time to time andat least once every 12 months. Any increase or decrease in Base Salary (together with the then existing Base Salary) shall serve as the“Base Salary” under this Agreement. The first and last payment will be adjusted, if necessary, to reflect a commencement ortermination date other than the first or last working day of a pay period.(b) Target Bonus. During the Employment Term, Executive will be eligible to receive an annual bonus of up to 100% ofExecutive’s Base Salary, less applicable withholdings, upon achievement of performance objectives to be determined by the Board inits sole discretion, which shall be based upon, among other things, achievement of revenue, acquisition and EBITDA targets (the“Target Bonus”). Any Bonus will be earned only if the Company achieves the annual performance objectives during the designatedtime period and Executive is continuously employed by the Company on the date that such performance objectives are achieved. TheCompany shall pay such Bonus at the same time as bonuses are normally paid to senior management, unless the Board approves anexception for payment of a particular bonus on a case by case basis, but in any event, any earned Bonus shall be paid no later than twomonths and 15 days after the end of the Company’s taxable year in which such Bonus was earned.(c) Equity. Executive shall be entitled to receive annual equity grants of stock as determined appropriate by a duly-appointedcommittee of the Company’s board of directors.4. Employee Benefits. During the Employment Term, Executive will be entitled to participate in the employee benefit planscurrently and hereafter maintained by the Company of general applicability to other senior executives of the Company. The Companyreserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.5. Vacation. Executive will be entitled to paid vacation generally applicable to the senior executives of the Company, inaccordance with the Company’s vacation policy.6. Business Expenses. During the Employment Term, the Company will reimburse Executive for reasonable travel,entertainment and other expenses incurred by Executive in the furtherance of or in connection with the performance of Executive’sduties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time (the “ExpenseReimbursement”).7. Severance.(a) For Cause Termination by the Company; Voluntary Termination without Good Reason by Executive. If the Companyterminates Executive’s employment for Cause or if Executive terminates Executive’s employment voluntarily without Good Reason,then Executive will (i) receive the earned but unpaid compensation and earned but unpaid Bonus through the date of termination, (ii)any accrued but unpaid vacation pay for the fiscal year during which the termination occurs and Expense Reimbursement and (iii) notreceive any other compensation or benefits from the Company except as may be required by law or in accordance with establishedCompany plans and policies; provided, however, nothing herein shall be deemed to alter or affect Executive’s vested rights in anypension, 401(k) or other benefit plan with the Company, if any.-2-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(b) Termination Without Cause by the Company; Termination For Good Reason by Executive. If the Company terminatesExecutive’s employment without Cause or if Executive terminates Executive’s employment for Good Reason, then Executive shall beentitled to receive (i) any earned but unpaid compensation, earned but unpaid Bonus, and accrued but unpaid vacation pay and anyExpense Reimbursement, (ii) severance in the form of continuation of Executive’s Base Salary in effect on the effective date oftermination for a period of twelve (12) months after the date of such termination to be paid periodically in accordance with theCompany’s normal payroll practices, and (iii) reimbursement of any health care benefit continuation premiums for a period of twelve(12) months after the date of such termination, provided Executive timely elects continuation of coverage under COBRA or applicablestate law; provided, further, that such COBRA premium reimbursements set forth in clause (iii) shall terminate upon commencement ofnew employment by an employer that offers health care coverage to its employees and Executive shall be required to notify theCompany of such other employment prior to the effective date thereof. Notwithstanding the foregoing, upon Executive’s materialbreach of this Agreement or the Proprietary Information Agreement (as defined in Section 11), the Company shall no longer beobligated to pay any amounts set forth in clauses (ii) and (iii), and Executive shall not be entitled to receive any further monthlyinstallments of the severance payments set forth in clauses (ii) and (iii).(c) Section 409A.(i) Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning ofSection 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the final regulations and any guidance promulgatedthereunder (“Section 409A”) at the time of Executive’s termination (other than due to death), and the severance payable to Executive,if any, pursuant to this Agreement, when considered together with any other severance payments or separation benefits that areconsidered deferred compensation under Section 409A (together, the “Deferred Compensation Separation Benefits”) that are payablewithin the first six (6) months following Executive’s termination of employment, will become payable on the first payroll date thatoccurs on or after the date six (6) months and one (1) day following the date of Executive’s termination of employment. All subsequentDeferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to eachpayment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following his termination but prior to the six (6)month anniversary of his termination, then any payments delayed in accordance with this paragraph will be payable in a lump sum assoon as administratively practicable after the date of Executive’s death and all other Deferred Compensation Separation Benefits willbe payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable underthis Agreement is intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.(ii) Any amount paid under the Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section1.409A-1(b)(4) of the Treasury Regulations shall not constitute Deferred Compensation Separation Benefits for purposes of Section7(c)(i) above.(iii) Any amount paid under the Agreement that qualifies as a payment made as a result of an involuntary separation fromservice pursuant to Section 1.409A-1(b)(9)(iii) of the-3-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Treasury Regulations that does not exceed the Section 409A Limit shall not constitute Deferred Compensation Separation Benefits forpurposes of Section 7(c)(i) above. For purposes of this Section 7(c), “Section 409A Limit” will mean the lesser of two (2) times: (A)Executive’s annualized compensation based upon the annual rate of pay paid to Executive during the Company’s taxable yearpreceding the Company’s taxable year of Executive’s termination of employment as determined under Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (B) the maximum amount that may betaken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive’s employment isterminated.8. Death or Disability. The Employment Term and Executive’s employment shall terminate upon Executive’s death orDisability. Upon termination of Executive’s employment for either death or Disability, Executive or Executive’s estate, as the case maybe, shall be entitled to receive any earned but unpaid compensation, earned but unpaid Bonus, and accrued but unpaid vacation payand any Expense Reimbursement. Further, any equity grants which are unvested at the time of the termination of the Executive’semployment due to death or Disability shall automatically accelerate and become fully vested effective upon the date of suchtermination. Upon termination of Executive’s employment due to death or Disability pursuant to this Section 8, Executive orExecutive’s estate, as the case may be, shall have no further rights to any compensation or any other benefits under this Agreementexcept as explicitly provided herein. All other benefits, if any, due Executive following Executive’s termination for death or Disabilityshall be determined in accordance with established Company plans and practices.9. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwisepayable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section9, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive's severance and other benefits will beeither: (i) delivered in full, or (ii) delivered as to such lesser extent which would result in no portion of such severance and otherbenefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account theapplicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on anafter-tax basis, of the greatest amount of severance and other benefits, notwithstanding that all or some portion of such severance andother benefits may be taxable under Section 4999 of the Code. Unless the Company and Executive otherwise agree in writing, anydetermination required under this Section 9 will be made in writing by the Company’s independent public accountants immediatelyprior to a Change of Control (the “Accountants”), whose determination will be conclusive and binding upon Executive and theCompany for all purposes. For purposes of making the calculations required by this Section 9, the Accountants may make reasonableassumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning theapplication of Sections 280G and 4999 of the Code. The Company and Executive shall furnish to the Accountants such informationand documents as the Accountants may reasonably request in order to make a determination under this Section 9. The Company shallbear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 9. In the eventthe Accountants determine that this Section 9 requires a reduction in Executive's severance or other benefits, the reduction will occur inthe following order: reduction of cash payments; reduction of employee benefits; cancellation of accelerated vesting of equity awards;cancellation of equity awards that are considered to be contingent upon the Change of Control transaction. If Executive fails to makean appropriate reduction election within the reasonable-4-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.time period determined by the Board, in its sole discretion, the order of reduction shall be determined by the Board.10. Definitions.(a) Change of Control. For purposes of this Agreement, “Change of Control” means (X) the acquisition of the Company byanother entity by means of any transaction or series of related transactions (including, without limitation, any merger, consolidation orother form of reorganization in which outstanding shares of the Company are exchanged for securities or other consideration issued, orcaused to be issued, by the acquiring entity or its subsidiary, but excluding any transaction effected primarily for the purpose ofchanging the Company’s jurisdiction of incorporation), unless the Company’s stockholders of record as constituted immediately priorto such transaction or series of related transactions will, immediately after such transaction or series of related transactions hold at leasta majority of the voting power of the surviving or acquiring entity or (Y) a sale of all or substantially all of the assets of the Company.(b) Cause. For purposes of this Agreement, “Cause” means (i) Executive’s willful failure to perform the duties and obligationsof Executive’s position with the Company; (ii) any material act of personal dishonesty, fraud or misrepresentation taken by Executivewhich was intended to result in substantial gain or personal enrichment of Executive at the expense of the Company; (iii) Executive’sviolation of a federal or state law or regulation applicable to the Company’s business which violation was or is reasonably likely to bematerially injurious to the Company; (iv) Executive’s conviction of, or plea of nolo contendere or guilty to, a felony under the laws ofthe United States or any State, excluding felonies for minor traffic violation and vicarious liability (so long as Executive did not knowof the felony and did not willfully violate the law); or (v) Executive’s material breach of the terms of this Agreement or the ProprietaryInformation Agreement (as defined in Section 11).(c) Good Reason. For purposes of this Agreement, “Good Reason” means, (i) without Executive’s consent, a materialreduction of Executive’s duties or responsibilities relative to Executive’s duties or responsibilities as in effect immediately prior to suchreduction; provided, however, any reduction in Executive’s duties or responsibilities resulting solely from the Company being acquiredby and made a part of a larger entity (as, for example, when a chief executive officer becomes an employee of the acquiringcorporation following a Change of Control but is not the chief executive officer of the acquiring corporation) shall not constitute GoodReason; (ii) without Executive’s written consent, a material reduction in the Base Salary of Executive as in effect immediately prior tosuch reduction, unless such reduction is part of a reduction in expenses generally affecting senior executives of the Company;(iii) without Executive’s consent, a material reduction by the Company in the kind or level of employee benefits to which Executivewas entitled immediately prior to such reduction, with the result that Executive’s overall benefits package is materially reduced, unlesssuch reduction is part of a reduction in benefits generally affecting senior executives of the Company or (iv) without Executive’sconsent, his relocation to a facility or a location more than twenty-five (25) miles from his present working locations (currently Austin,Texas). Good Reason shall not exist unless Executive provides (i) notice to the Company within ninety (90) days of the initialexistence of the condition triggering Good Reason and (ii) the Company the opportunity of at least thirty (30) days to cure suchcondition.-5-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(d) Disability. For purposes of this Agreement, “Disability” means Executive’s inability to perform Executive’s duties due toExecutive’s physical or mental incapacity, as reasonably determined by the Board or its designee, for an aggregate of 180 days in any365 consecutive day period.11. Confidential Information. Executive confirms Executive’s obligations under the Employee Proprietary InformationAgreement entered into by the Company and Executive on or about March 22, 2017 (the “Proprietary Information Agreement”).12. Assignment. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legalrepresentatives of Executive upon Executive’s death and (b) any successor of the Company. Any such successor of the Company willbe deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means anyperson, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectlyacquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form ofcompensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution.None of the obligations of Executive under this Agreement may be assigned or transferred. Any other attempted assignment, transfer,conveyance or other disposition of Executive’s right to compensation or other benefits will be null and void.13. Notices. All notices, requests, demands and other communications called for under this Agreement shall be in writing andshall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, or sent by facsimiledirected to the party to be notified at the address or facsimile number indicated for such party on the signature page to this Agreement,or at such other address or facsimile number as such party may designate by ten (10) days’ advance written notice to the other partieshereto. All such notices and other communications shall be deemed given upon personal delivery, three (3) days after the date ofmailing, or upon confirmation of facsimile transfer.14. Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdictionto be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.15. Arbitration.(a) Executive agrees that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or theinterpretation, validity, construction, performance, breach, or termination thereof, shall be settled by binding arbitration to be held inAustin, Texas in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the AmericanArbitration Association (the “Rules”). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decisionof the arbitrator will be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’sdecision in any court having jurisdiction.(b) The arbitrator(s) will apply Texas law to the merits of any dispute or claim, without reference to rules of conflicts of law.The arbitration proceedings will be governed by federal arbitration law and by the Rules, without reference to state arbitration law.Executive hereby consents to the-6-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.personal jurisdiction of the state and federal courts located in Texas for any action or proceeding arising from or relating to thisAgreement or relating to any arbitration in which the parties are participants.(c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION.EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANYCLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THEINTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TOBINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE’SRIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTSOF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, DISCRIMINATION CLAIMS.16. Term. The term of this Agreement shall commence on the Effective Date and continue until the earlier of (i) the thirdanniversary of the Effective Date, or (ii) or the end of the Employment Term. Notwithstanding the foregoing, Sections 2 and 7 – 21 ofthis Agreement shall survive any such termination or expiration.17. Integration. This Agreement, together with any Restricted Stock Award or Option agreements outstanding on theEffective Date, the Proprietary Information Agreement, and the Indemnification Agreement between the Company and Executive,represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior orcontemporaneous agreements whether written or oral. To the extent that any provision of the Proprietary Information Agreementconflicts with a provision of this Agreement, this Agreement shall control. No waiver, alteration or modification of any of theprovisions of this Agreement will be binding unless in writing and signed by duly authorized representatives of the parties hereto.18. No Waiver. Other than expressly set forth herein, nothing in this Agreement constitutes or shall be deemed to constitute awaiver of, or otherwise reduce, affect or impair, any of the rights or remedies available to Executive under any applicable law or atequity, all of such rights or remedies being hereby expressly reserved.19. Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.20. Governing Law; Consent to Personal Jurisdiction. THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OFTHE STATE OF TEXAS WITHOUT REGARD FOR CONFLICTS OF LAWS PRINCIPLES. SUBJECT TO THEARBITRATION PROVISION IN SECTION 14, I HEREBY EXPRESSLY CONSENT TO THE PERSONAL JURISDICTIONOF THE STATE AND FEDERAL COURTS LOCATED IN TEXAS FOR ANY LAWSUIT FILED THERE AGAINST ME BYTHE COMPANY CONCERNING MY EMPLOYMENT OR THE TERMINATION OF MY EMPLOYMENT OR ARISINGFROM OR RELATING TO THIS AGREEMENT.21. Acknowledgment. Executive acknowledges that Executive has had the opportunity to discuss this matter with and obtainadvice from Executive’s private attorney, Executive has had sufficient time-7-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into thisAgreement.[signature page follows]IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by their dulyauthorized officers, as of the day and year first above written.“COMPANY”Upland Software, Inc.By: /s/ David May Name: David May Title: Director “EXECUTIVE”/s/ Timothy Mattox Timothy Mattox-8-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.UPLAND SOFTWARE, INC.EXECUTIVE EMPLOYMENT AGREEMENTThis Executive Employment Agreement (the “Agreement”) is entered into as of March 22, 2017 (the “Effective Date”) by andbetween Upland Software, Inc., a Delaware corporation (the “Company”), and John T. McDonald (“Executive”).RECITALSWHEREAS, the Company and Executive desire to memorialize the terms of employment of Executive as of the EffectiveDate.AGREEMENTNOW, THEREFORE, in consideration of the premises and mutual covenants herein and for other good and valuableconsideration, the parties agree as follows:1.Duties and Scope of Employment.(a) Positions and Duties. As of the Effective Date, Executive will continue to serve as Chief Executive Officer and/orExecutive Chairman of the Company. The period of Executive’s employment under this Agreement is referred to herein as the“Employment Term.” During the Employment Term, Executive will render such business and professional services in the performanceof Executive’s duties as are customarily associated with Executive’s positions within the Company and Executive agrees to performsuch other duties and functions as shall from time to time be reasonably assigned or delegated to Executive by the Board of Directors(the “Board”).(b) Obligations. During the Employment Term, Executive will perform Executive’s duties faithfully and to the best ofExecutive’s ability and will devote Executive’s full business efforts and time to the Company. During the Employment Term,Executive agrees to devote substantially all of his business time to the Company. Notwithstanding the foregoing, the Company andExecutive acknowledge and agree that Executive shall be permitted to invest in and serve on the boards (or similar advisory role) ofother companies or entities.2. At-Will Employment. Executive and the Company agree and acknowledge Executive’s employment with the Companyconstitutes “at-will” employment. Executive and the Company further agree and acknowledge that this employment relationship (andthe Employment Term) may be terminated at any time, with or without cause or good reason, at the option of either Executive or theCompany. Executive understands and agrees that neither Executive’s job performance nor promotions, commendations, bonuses or thelike from the Company give rise to or in any way serve as the basis for modification, amendment, or extension, by implication orotherwise, of Executive’s employment with the Company.3. Compensation.-1-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(a) Base Salary. During the Employment Term, the Company will pay Executive as compensation for Executive’s services abase salary at the annualized rate of $325,000 (the “Base Salary”). The Base Salary will be paid in regular installments in accordancewith the Company’s normal payroll practices (subject to required withholding). During the Employment Term, Executive’scompensation shall be reviewed by the Board from time to time and at least once every 12 months. Any increase or decrease in BaseSalary (together with the then existing Base Salary) shall serve as the “Base Salary” under this Agreement. The first and last paymentwill be adjusted, if necessary, to reflect a commencement or termination date other than the first or last working day of a pay period.(b) Target Bonus. During the Employment Term, Executive will be eligible to receive an annual bonus of up to 100% ofExecutive’s Base Salary, less applicable withholdings, upon achievement of performance objectives to be determined by the Board inits sole discretion, which shall be based upon, among other things, achievement of revenue, acquisition and EBITDA targets (the“Target Bonus”). Any Bonus will be earned only if the Company achieves the annual performance objectives during the designatedtime period and Executive is continuously employed by the Company on the date that such performance objectives are achieved. TheCompany shall pay such Bonus at the same time as bonuses are normally paid to senior management, unless the Board approves anexception for payment of a particular bonus on a case by case basis, but in any event, any earned Bonus shall be paid no later than twomonths and 15 days after the end of the Company’s taxable year in which such Bonus was earned.(c) Equity. Executive shall be entitled to receive annual equity grants of stock as determined appropriate by a duly-appointedcommittee of the Company’s board of directors.4. Employee Benefits. During the Employment Term, Executive will be entitled to participate in the employee benefit planscurrently and hereafter maintained by the Company of general applicability to other senior executives of the Company. The Companyreserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.5. Vacation. Executive will be entitled to paid vacation generally applicable to the senior executives of the Company, inaccordance with the Company’s vacation policy.6. Business Expenses. During the Employment Term, the Company will reimburse Executive for reasonable travel,entertainment and other expenses incurred by Executive in the furtherance of or in connection with the performance of Executive’sduties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time (the “ExpenseReimbursement”).7. Severance.(a) For Cause Termination by the Company; Voluntary Termination without Good Reason by Executive. If the Companyterminates Executive’s employment for Cause or if Executive terminates Executive’s employment voluntarily without Good Reason,then Executive will (i) receive the earned but unpaid compensation and earned but unpaid Bonus through the date of termination, (ii)any accrued but unpaid vacation pay for the fiscal year during which the termination occurs and Expense Reimbursement and (iii) notreceive any other compensation or benefits from the Company except as may be required by law or in accordance with establishedCompany plans and policies; provided,-2-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.however, nothing herein shall be deemed to alter or affect Executive’s vested rights in any pension, 401(k) or other benefit plan withthe Company, if any.(b) Termination Without Cause by the Company; Termination For Good Reason by Executive. If the Company terminatesExecutive’s employment without Cause or if Executive terminates Executive’s employment for Good Reason, then Executive shall beentitled to receive (i) any earned but unpaid compensation, earned but unpaid Bonus, and accrued but unpaid vacation pay and anyExpense Reimbursement, (ii) severance in the form of continuation of Executive’s Base Salary in effect on the effective date oftermination for a period of twelve (12) months after the date of such termination to be paid periodically in accordance with theCompany’s normal payroll practices, and (iii) reimbursement of any health care benefit continuation premiums for a period of twelve(12) months after the date of such termination, provided Executive timely elects continuation of coverage under COBRA or applicablestate law; provided, further, that such COBRA premium reimbursements set forth in clause (iii) shall terminate upon commencement ofnew employment by an employer that offers health care coverage to its employees and Executive shall be required to notify theCompany of such other employment prior to the effective date thereof. Notwithstanding the foregoing, upon Executive’s materialbreach of this Agreement or the Proprietary Information Agreement (as defined in Section 11), the Company shall no longer beobligated to pay any amounts set forth in clauses (ii) and (iii), and Executive shall not be entitled to receive any further monthlyinstallments of the severance payments set forth in clauses (ii) and (iii).(c) Section 409A.(i) Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning ofSection 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the final regulations and any guidance promulgatedthereunder (“Section 409A”) at the time of Executive’s termination (other than due to death), and the severance payable to Executive,if any, pursuant to this Agreement, when considered together with any other severance payments or separation benefits that areconsidered deferred compensation under Section 409A (together, the “Deferred Compensation Separation Benefits”) that are payablewithin the first six (6) months following Executive’s termination of employment, will become payable on the first payroll date thatoccurs on or after the date six (6) months and one (1) day following the date of Executive’s termination of employment. All subsequentDeferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to eachpayment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following his termination but prior to the six (6)month anniversary of his termination, then any payments delayed in accordance with this paragraph will be payable in a lump sum assoon as administratively practicable after the date of Executive’s death and all other Deferred Compensation Separation Benefits willbe payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable underthis Agreement is intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.(ii) Any amount paid under the Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section1.409A-1(b)(4) of the Treasury Regulations shall not constitute Deferred Compensation Separation Benefits for purposes of Section7(c)(i) above.-3-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(iii) Any amount paid under the Agreement that qualifies as a payment made as a result of an involuntary separation fromservice pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit shall notconstitute Deferred Compensation Separation Benefits for purposes of Section 7(c)(i) above. For purposes of this Section 7(c),“Section 409A Limit” will mean the lesser of two (2) times: (A) Executive’s annualized compensation based upon the annual rate ofpay paid to Executive during the Company’s taxable year preceding the Company’s taxable year of Executive’s termination ofemployment as determined under Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issuedwith respect thereto; or (B) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17)of the Code for the year in which Executive’s employment is terminated.8. Death or Disability. The Employment Term and Executive’s employment shall terminate upon Executive’s death orDisability. Upon termination of Executive’s employment for either death or Disability, Executive or Executive’s estate, as the case maybe, shall be entitled to receive any earned but unpaid compensation, earned but unpaid Bonus, and accrued but unpaid vacation payand any Expense Reimbursement. Further, any equity grants which are unvested at the time of the termination of the Executive’semployment due to death or Disability shall automatically accelerate and become fully vested effective upon the date of suchtermination. Upon termination of Executive’s employment due to death or Disability pursuant to this Section 8, Executive orExecutive’s estate, as the case may be, shall have no further rights to any compensation or any other benefits under this Agreementexcept as explicitly provided herein. All other benefits, if any, due Executive following Executive’s termination for death or Disabilityshall be determined in accordance with established Company plans and practices.9. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwisepayable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section9, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive's severance and other benefits will beeither: (i) delivered in full, or (ii) delivered as to such lesser extent which would result in no portion of such severance and otherbenefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account theapplicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on anafter-tax basis, of the greatest amount of severance and other benefits, notwithstanding that all or some portion of such severance andother benefits may be taxable under Section 4999 of the Code. Unless the Company and Executive otherwise agree in writing, anydetermination required under this Section 9 will be made in writing by the Company’s independent public accountants immediatelyprior to a Change of Control (the “Accountants”), whose determination will be conclusive and binding upon Executive and theCompany for all purposes. For purposes of making the calculations required by this Section 9, the Accountants may make reasonableassumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning theapplication of Sections 280G and 4999 of the Code. The Company and Executive shall furnish to the Accountants such informationand documents as the Accountants may reasonably request in order to make a determination under this Section 9. The Company shallbear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 9. In the eventthe Accountants determine that this Section 9 requires a reduction in Executive's severance or other benefits, the reduction will occur inthe following order: reduction of cash payments; reduction of employee benefits; cancellation of accelerated vesting-4-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.of equity awards; cancellation of equity awards that are considered to be contingent upon the Change of Control transaction. IfExecutive fails to make an appropriate reduction election within the reasonable time period determined by the Board, in its solediscretion, the order of reduction shall be determined by the Board.10. Definitions.(a) Change of Control. For purposes of this Agreement, “Change of Control” means (X) the acquisition of the Company byanother entity by means of any transaction or series of related transactions (including, without limitation, any merger, consolidation orother form of reorganization in which outstanding shares of the Company are exchanged for securities or other consideration issued, orcaused to be issued, by the acquiring entity or its subsidiary, but excluding any transaction effected primarily for the purpose ofchanging the Company’s jurisdiction of incorporation), unless the Company’s stockholders of record as constituted immediately priorto such transaction or series of related transactions will, immediately after such transaction or series of related transactions hold at leasta majority of the voting power of the surviving or acquiring entity or (Y) a sale of all or substantially all of the assets of the Company.(b) Cause. For purposes of this Agreement, “Cause” means (i) Executive’s willful failure to perform the duties and obligationsof Executive’s position with the Company; (ii) any material act of personal dishonesty, fraud or misrepresentation taken by Executivewhich was intended to result in substantial gain or personal enrichment of Executive at the expense of the Company; (iii) Executive’sviolation of a federal or state law or regulation applicable to the Company’s business which violation was or is reasonably likely to bematerially injurious to the Company; (iv) Executive’s conviction of, or plea of nolo contendere or guilty to, a felony under the laws ofthe United States or any State, excluding felonies for minor traffic violation and vicarious liability (so long as Executive did not knowof the felony and did not willfully violate the law); or (v) Executive’s material breach of the terms of this Agreement or the ProprietaryInformation Agreement (as defined in Section 11).(c) Good Reason. For purposes of this Agreement, “Good Reason” means, (i) without Executive’s consent, a materialreduction of Executive’s duties or responsibilities relative to Executive’s duties or responsibilities as in effect immediately prior to suchreduction; provided, however, any reduction in Executive’s duties or responsibilities resulting solely from the Company being acquiredby and made a part of a larger entity (as, for example, when a chief executive officer becomes an employee of the acquiringcorporation following a Change of Control but is not the chief executive officer of the acquiring corporation) shall not constitute GoodReason; (ii) without Executive’s written consent, a material reduction in the Base Salary of Executive as in effect immediately prior tosuch reduction, unless such reduction is part of a reduction in expenses generally affecting senior executives of the Company;(iii) without Executive’s consent, a material reduction by the Company in the kind or level of employee benefits to which Executivewas entitled immediately prior to such reduction, with the result that Executive’s overall benefits package is materially reduced, unlesssuch reduction is part of a reduction in benefits generally affecting senior executives of the Company or (iv) without Executive’sconsent, his relocation to a facility or a location more than twenty-five (25) miles from his present working locations (currently Austin,Texas). Good Reason shall not exist unless Executive provides (i) notice to the Company within ninety (90) days of the initialexistence of the condition-5-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.triggering Good Reason and (ii) the Company the opportunity of at least thirty (30) days to cure such condition.(d) Disability. For purposes of this Agreement, “Disability” means Executive’s inability to perform Executive’s duties due toExecutive’s physical or mental incapacity, as reasonably determined by the Board or its designee, for an aggregate of 180 days in any365 consecutive day period.11. Confidential Information. Executive confirms Executive’s obligations under the Employee Proprietary InformationAgreement entered into by the Company and Executive on or about March 22, 2017 (the “Proprietary Information Agreement”).12. Assignment. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legalrepresentatives of Executive upon Executive’s death and (b) any successor of the Company. Any such successor of the Company willbe deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means anyperson, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectlyacquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form ofcompensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution.None of the obligations of Executive under this Agreement may be assigned or transferred. Any other attempted assignment, transfer,conveyance or other disposition of Executive’s right to compensation or other benefits will be null and void.13. Notices. All notices, requests, demands and other communications called for under this Agreement shall be in writing andshall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, or sent by facsimiledirected to the party to be notified at the address or facsimile number indicated for such party on the signature page to this Agreement,or at such other address or facsimile number as such party may designate by ten (10) days’ advance written notice to the other partieshereto. All such notices and other communications shall be deemed given upon personal delivery, three (3) days after the date ofmailing, or upon confirmation of facsimile transfer.14. Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdictionto be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.15. Arbitration.(a) Executive agrees that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or theinterpretation, validity, construction, performance, breach, or termination thereof, shall be settled by binding arbitration to be held inAustin, Texas in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the AmericanArbitration Association (the “Rules”). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decisionof the arbitrator will be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’sdecision in any court having jurisdiction.-6-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(b) The arbitrator(s) will apply Texas law to the merits of any dispute or claim, without reference to rules of conflicts of law.The arbitration proceedings will be governed by federal arbitration law and by the Rules, without reference to state arbitration law.Executive hereby consents to the personal jurisdiction of the state and federal courts located in Texas for any action or proceedingarising from or relating to this Agreement or relating to any arbitration in which the parties are participants.(c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION.EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANYCLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THEINTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TOBINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE’SRIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTSOF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, DISCRIMINATION CLAIMS.16. Term. The term of this Agreement shall commence on the Effective Date and continue until the earlier of (i) the thirdanniversary of the Effective Date, or (ii) or the end of the Employment Term. Notwithstanding the foregoing, Sections 2 and 7 – 21 ofthis Agreement shall survive any such termination or expiration.17. Integration. This Agreement, together with any Restricted Stock Award or Option agreements outstanding on theEffective Date, the Proprietary Information Agreement, and the Indemnification Agreement between the Company and Executive,represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior orcontemporaneous agreements whether written or oral. To the extent that any provision of the Proprietary Information Agreementconflicts with a provision of this Agreement, this Agreement shall control. No waiver, alteration or modification of any of theprovisions of this Agreement will be binding unless in writing and signed by duly authorized representatives of the parties hereto.18. No Waiver. Other than expressly set forth herein, nothing in this Agreement constitutes or shall be deemed to constitute awaiver of, or otherwise reduce, affect or impair, any of the rights or remedies available to Executive under any applicable law or atequity, all of such rights or remedies being hereby expressly reserved.19. Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.20. Governing Law; Consent to Personal Jurisdiction. THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OFTHE STATE OF TEXAS WITHOUT REGARD FOR CONFLICTS OF LAWS PRINCIPLES. SUBJECT TO THEARBITRATION PROVISION IN SECTION 15, I HEREBY EXPRESSLY CONSENT TO THE PERSONAL JURISDICTIONOF THE STATE AND FEDERAL COURTS LOCATED IN TEXAS FOR ANY LAWSUIT FILED THERE AGAINST ME BYTHE COMPANY CONCERNING MY EMPLOYMENT OR THE TERMINATION OF MY EMPLOYMENT OR ARISINGFROM OR RELATING TO THIS AGREEMENT.-7-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.21. Acknowledgment. Executive acknowledges that Executive has had the opportunity to discuss this matter with and obtainadvice from Executive’s private attorney, Executive has had sufficient time to, and has carefully read and fully understands all theprovisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.[signature page follows]IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by their dulyauthorized officers, as of the day and year first above written.“COMPANY”Upland Software, Inc.By: /s/ David May Name: David May Title: Director “EXECUTIVE”/s/ John T. McDonald John T. McDonald-8-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.SECOND AMENDED AND RESTATEDTECHNOLOGY SERVICES AGREEMENTEffective Date: January 1, 2017This Second Amended and Restated Technology Services Agreement (“Agreement”)is entered into by and between DevFactory FZ-LLC, 705-706 Al Thuraya Tower No.01, Seventh Floor, Dubai Media City, P.O. Box 502092, Dubai, 43659 UNITEDARAB EMIRATES (“DevFactory”) and Upland Software, Inc. (f.k.a. SilverbackEnterprise Group, Inc., “Client”), with offices at 401 Congress Avenue, Suite 1850,Austin, Texas 78701, and sets forth the terms and conditions under which DevFactorywill provide certain technology services to Client as may from time to time be mutuallyagreed upon by the parties.1Scope of Services1.1 Deliverables Based Work. Unless otherwise provided on a Statement of Work,all Work to be performed hereunder shall be performed on a scoped deliverable basisand not on a time and material basis. The parties shall work in good faith to specify theapplicable deliverables in the applicable SOW.1.2 Statements of Work. DevFactory agrees to provide the technology services(“Services”) described on separate, mutually executed statements of work (the“Statement(s) of Work” or SOW(s)”) as may from time to time be issued hereunder.Each Statement of Work shall define the Services to be provided to Client, theapplicable pricing, Deliverables to be created thereunder, Client deliverables andobligations, and all other appropriate terms and conditions. DevFactory will not beginany work unless a Statement of Work governing has been executed by both parties.DevFactory may immediately cease performing Services, without liability, if aStatement of Work expires and is not immediately extended or replaced with a validStatement of Work.1.3 Change Control Process. Change control for additional Services or scope to bedelivered under a Statement of Work will be completed according to the followingprocedure prior to DevFactory starting any work.(a)Specific changes may be proposed by Client’s business team members.(b)Proposed changes will be reviewed by DevFactory and a report of the scope,schedule, resource and budget impact (“Impact Report”) will be prepared anddelivered to Client management.(c)Client management reviews the Impact Report and approves by signature ordenies changes in scope, schedule, resources and/or budget.(d)DevFactory receives the signed, approved Impact Report and creates. forClient’s approval, an additional Statement of Work with a copy of the ImpactReport attached.(e)Client approves by signature such Statement of Work and delivers suchStatement of Work to DevFactory for DevFactory’s signature.(f)DevFactory begins work on specific changes defined in the signed, approvedImpact Report only upon the mutual execution of the new Statement of Workreferenced above.1.4 Testing and Acceptance. Following completion of any Deliverable (asdefined below) to be provided to Client hereunder, Client may test the Deliverable todetermine whether the Deliverable conforms to the specifications established for suchDeliverable in the applicable SOW for a period not to exceed thirty (30) days afterdelivery to Client of the Deliverable (the “Acceptance Period”). Upon the expirationof the Acceptance Period, Client will either (i) certify to DevFactory that theDeliverable is accepted (“Acceptance”); or (ii) deliver to DevFactory a writtendescription of any specific failure of the Deliverable to conform to the applicablespecifications. In no such written response is provided, the Deliverable shall bedeemed to be Accepted and complete. Further, if the Deliverable substantiallyconforms to the specifications but Client identifies certain minor non-conformities,Client shall Accept the Deliverable and the parties shall work in good faith to eithercorrect such non- conformities or agree on appropriate Work Credits (as definedbelow) to compensate Client for such non-conformities. Upon proper notice of afailure of Acceptance, DevFactory will promptly undertake such corrections as arenecessary for the Deliverable to conform to the specifications and DevFactory willnotify Client when such corrections and modifications have been made. IfSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.DevFactory has performed corrections to the Deliverable, Client will have thirty (30)days after delivery of such corrections to perform acceptance testing to determineSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.whether the Deliverable conforms to the applicable specifications. If after a secondattempt the Deliverable still does not conform to the applicable specifications, Clientshall have the right to (1) allow continued attempts to correct the Deliverable, subjectto this Section 1.4, or (2) terminate the applicable service obligation for the faileddeliverable and receive a Work Credit (as defined below) to just that failedDeliverable. If DevFactory notifies Client that Client has failed to properly providenotice that a Deliverable has failed, if Client otherwise improperly fails to Accept aDeliverable, or if the parties disagree as to whether a Deliverable substantiallyconforms to the specifications, such dispute shall be resolved in accordance withSection 12.16. For clarity, any concerns by Client that a Deliverable does not meetClient’s expectations, but otherwise complies with all applicable specifications, shallnot be actionable under this provision, but, rather, shall constitute an additionalservice request.1.5 Order of Precedence. Each Statement of Work shall be governed by the termsand conditions of this Agreement (including its schedules and attachments);however, in the event of any conflict between this Agreement and a Statement ofWork the provisions of the Statement of Work shall prevail.1.6 Service Credits. Client’s sole remedy for any failure of Services or Deliverablessubmitted by DevFactory shall be (i) to obtain the repair, replacement, and correctionof the defective services or deliverables by DevFactory in accordance with Section1.4, or (ii) to obtain a credit equal to the amounts attributable to the defective Servicesor Deliverables with such credit to be utilized for a future Deliverable or Services (the“Work Credit”). Should a Work Credit be issued, it shall be applied to the purchase ofadditional work above and beyond work performed for the Minimum Fee (as definedin Schedule A) and shall not, except as provided below, reduce payments due orpayable to DevFactory under the Agreement. The Minimum Fee shall be applied to allwork performed before any Work Credits shall carry over to future years (the “WorkCredit Balance”). If certain types of Services are consistently leading to theaccumulation of Work Credits, Client and DevFactory shall work together in goodfaith to allocate Work Credits to the types of Services that can be successfullydelivered by DevFactory, provided that client has a need for such Service (even if thatneed had been fulfilled by employees or other providers). If (a) Client has applied itsWork Credits and Service requests to the recommended Services as described aboveand (b) the Work Credit balance exceeds 10% of the previous year’s Minimum Fee,and (c) Dev Factory has not worked in good faith under this Agreement, then thecurrent year’s Minimum Fee shall be reduced by the difference between the WorkCredit Balance and 10% of the previous year’s Minimum Fee. The Work CreditBalance shall be reduced by the same amount.2Subcontractors2.1 Client acknowledges that DevFactory shall subcontract Services to a third party(“Subcontractor”), subject to provisions contained under Section 5.4. DevFactoryshall be responsible for the Subcontractor’s compliance with this Agreement. Clientunderstands that the Subcontractors shall be foreign nationals and may be located in acountry other than the United States (but will not be located in Iran, Sudan, Syria,Iraq, Cuba or North Korea or any other country subject to embargo or otherrestrictions by the United States government). Either party warrants that any export ofits Confidential Information, data or software, and its performance hereunder, willcomply with all foreign and domestic federal, state and local laws and ordinances,including any and all import and export restrictions and all customs requirements.3Term3.1 Agreement Term. This Agreement shall commence on the Effective Date andshall remain in force for an initial period of forty- eight (48) months and shallautomatically renew for up to six successive one year periods thereafter at the electionof either party as provided herein. If both parties have failed to indicate a desire torenew a term prior to the date that is thirty (30) days prior to the then currentexpiration date, each party shall provide written notice to the other seeking to confirmsuch other party’s desire not to renew. Each party shall have thirty days to confirm itsposition on renewal or non renewal. The Agreement shall continue in effect throughthe confirmation process.3.2 Statement of Work Term. Each Statement of Work shall remain in effect untilit has expired on its own terms or the Services and Deliverables authorized thereunderare complete. The parties agree that they are contractually obligated to enter intoStatements of Work pursuant to the structure set forth in Schedule A which is attachedhereto and made a part hereof. As such, Schedule A sets forth the percentage ofrevenue of any and all entities and business lines acquired by Client that is payable toDevFactory throughout the term of the Agreement and likewise, DevFactory herebyagrees to provide the Deliverables as to all entities acquired by Client as per ScheduleA.Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.A.4Price and Payment4.1 Service Fees. In consideration of the Services provided by DevFactory, Clientshall pay the Services Fees set forth in the applicable Statement of Work or asotherwise provided on Schedule A, subject to the payment provisions set forth inSchedule A. In the event a Statement of Work does not reference any specific pricing,such Services shall be provided at rates and charges in accordance with Section 4 ofSchedule A.Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.4.2 Expenses. Client shall reimburse DevFactory for all reasonable travel, food,lodging and other out-of-pocket expenses incurred in performance of a givenStatement of Work. DevFactory shall obtain Client’s prior written expense prior toincurring any single expense in excess of $500.4.3 Payment Due Date. DevFactory will submit invoices for charges and expenseshereunder monthly. Client shall make payment of each invoice in US dollars withinthirty (30) days from the invoice date. Notwithstanding any provision to the contrary,any and all payments required to be made hereunder shall be timely made, and nopayments to DevFactory shall be withheld, delayed, reduced or refunded ifDevFactory has fully performed its material obligations and its inability to meet anyschedule or delivery requirements is caused by Client’s failure to provide certain of itsfacilities, computer resources, software programs, project management activities,personnel, and business information as are required to perform any work.4.4 Purchase Orders. Client agrees to provide DevFactory with a valid purchaseorder, if applicable, promptly upon execution of a Statement of Work.Notwithstanding anything to the contrary herein, purchase orders are to be used solelyfor Client’s accounting purposes and any terms and conditions contained therein shallbe deemed null and void with respect to the parties’ relationship and this Agreement.Client’s failure to issue a purchase order or provide such purchase order toDevFactory, however, shall in no way relieve Client of any obligation entered intopursuant to this Agreement or any Statement of Work entered into hereunder,including, but not limited to, its obligation to pay DevFactory in a timely fashion.4.5 Late Payment. Any late payment shall be subject to any costs of collection(including reasonable legal fees) and shall bear interest at the rate of one and one-halfpercent (1.5%) per month (prorated for partial periods) or at the maximum ratepermitted by law, whichever is less. In addition to other rights and remedies availableto DevFactory hereunder and under the law, DevFactory shall have the right towithdraw all consulting staff as well as all unfinished Services or Deliverablesperformed under a Statement of Work in the event of Client’s failure to pay anyundisputed (a dispute as to invoice may only be commenced on the basis of properform or amount for such invoice) open invoice within thirty (30) days following thedue date. The Services will not be re-staffed until: (i) all amounts due to DevFactoryhave been paid in full; (ii) any and all contractual terms and/or deadlines that have beenaffected by the delay have been revised and agreed upon by the parties; and (iii)DevFactory resources have become available for redeployment on Client’s project.4.6 Taxes. The charges required to be paid hereunder do not include any amount fortaxes or levy (including interest and penalties). Client shall reimburse DevFactory andhold DevFactory harmless for all sales, use, VAT, excise, property, or other taxes orlevies which DevFactory is required to collect or remit to applicable tax authorities.This provision does not apply to DevFactory’s income or franchise taxes, or any taxesfor which Client is exempt, provided Client has furnished DevFactory with a valid taxexemption certificate.4.7 Invoice Dispute Resolution. Without limiting any rights or obligations underthe Agreement, including Section 4.5 above, the following steps will be taken if aninvoice becomes past due. DevFactory’s accounts receivable and Client’s accountspayable representatives shall use all reasonable efforts to facilitate immediate paymentof the invoice. In the event DevFactory does not receive a commitment for promptpayment, each party shall escalate the matter to DevFactory’s Primary Contact for theServices in question, as designated in the Statement of Work, or DevFactory’sdesignated financial officer and Client’s Chief Executive Officer (the “FinalEscalation”) for investigation and resolution. Notwithstanding anything to thecontrary, the initial contact with Client’s vice president pursuant to such FinalEscalation shall constitute “notice of default” pursuant to Section 9.1.1.5Confidential/Proprietary Information5.1 Definition. All information which is defined as Confidential Informationhereunder in tangible form shall be marked as “Confidential” or the like or, ifintangible (e.g. visually or orally disclosed), shall be designated as being confidentialat the time of disclosure and shall be confirmed as such in writing within thirty (30)days of the initial disclosure. “Confidential Information” may include all technical,product, business, financial, and other information regarding the business andsoftware programs of either party, its customers, employees, investors, contractors,vendors and suppliers, including but not limited to programming techniques andmethods, research and development, computer programs, documentation, marketingplans, customer identity, and business methods. Without limiting the generality of theforegoing and notwithstanding any marking requirement, Confidential Informationshall include all information and materials disclosed orally or in any other form,regarding DevFactory’s software products or software product development and otherinformation of or relating to DevFactory’s software products or derived from testingSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.information of or relating to DevFactory’s software products or derived from testingor other use thereof. All such Confidential Information may be disclosed by eitherparty, before or after the Effective Date. Confidential Information includes informationgenerally not publicly known, whether tangible or intangible and in whatever form ormedium provided, as well as any information generated by a party that contains,reflects, or is derived from such information. For the purpose of this entire Section 5,‘DevFactory’ shall include all its Affiliates.5.2 Exceptions. Without granting any right or license, the obligations of the partieshereunder shall not apply to any material or information that: (i) is or becomes a partof the public domain through no act or omission by the receiving party; (ii) isindependently developed by the receiving party without use of the disclosing party’sConfidential Information; (iii) is rightfully obtained from a third party without anyobligation of confidentiality to the receiving party; or (iv) is already known by thereceiving party withoutSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.any obligation of confidentiality prior to obtaining the Confidential Information fromthe disclosing party. In addition, neither party shall be liable for disclosure ofConfidential Information if made in response to a valid order of a court or authorizedagency of government, provided that notice is promptly given to the party whoseConfidential Information is to be disclosed so that such party may seek a protectiveorder and engage in other efforts to minimize the required disclosure. The parties shallcooperate fully in seeking such protective order and in engaging in such other efforts.Notwithstanding the foregoing, except for intellectual property owned by DevFactoryprior to execution of the applicable SOW or developed separately by DevFactory forwhich fees were not paid to DevFactory hereunder (“DevFactory Pre- existingTechnology”), Deliverables provided to Client hereunder are the ConfidentialInformation of Client and shall not be subject to the exceptions set forth in this Section5.2.5.3 Ownership of Confidential Information. Nothing in this Agreement shall beconstrued to convey any title or ownership rights to the DevFactory ConfidentialInformation or to any patent, copyright, trademark, or trade secret embodied therein, orto grant any other right title, or ownership interest in the DevFactory ConfidentialInformation to Client. Nothing in this Agreement shall be construed to convey any titleor ownership rights to Client’s Confidential Information or to any patent, copyright,trademark, or trade secret embodied therein, or to grant any other right, title, orownership interest in the Client’s Confidential Information to DevFactory. Neitherparty shall disassemble, decompile, or reverse engineer the other party’s ConfidentialInformation or permit others to do so. Neither party shall, in whole or in part, sell,lease, license, assign, transfer, or disclose the Confidential Information to any thirdparty and shall not copy, reproduce or distribute the Confidential Information exceptas expressly permitted in this Agreement. Each party shall take every reasonableprecaution, but no less than those precautions used to protect its own ConfidentialInformation, to prevent the theft, disclosure, and the unauthorized copying,reproduction or distribution of the Confidential Information.5.4 Non-Disclosure. Each party agrees at all times to use all reasonable efforts, butin any case no less than the efforts that each party uses in the protection of its ownConfidential Information (as hereinafter defined) of like value to protect ConfidentialInformation belonging to the other party. Each party agrees to restrict access to theother party’s Confidential Information only to those employees (or in DevFactory’scase, its Subcontractors) who (i) require access in the course of their assigned dutiesand responsibilities, and (ii) have agreed in writing to be bound by provisions no lessrestrictive than those set forth in this Section 5.5.5 Injunctive Relief. Each party acknowledges that any unauthorized disclosure oruse of the Confidential Information would cause the other party imminent irreparableinjury and that such party shall be entitled to, in addition to any other remediesavailable at law or in equity, temporary, preliminary, and permanent injunctive relief inthe event the other party does not fulfill its obligations under this Section 5.5.6 Individual Agreements. DevFactory shall require mutually agreed uponindividuals providing services hereunder to sign any agreement reasonably requestedby Client, including but not limited to access agreements, security agreements,facilities agreements or individual confidentiality agreements. Any portion of suchagreements that are inconsistent with the terms and conditions of this Agreement shallbe deemed to be null and void. All such agreement shall be approved by DevFactoryprior to presenting such agreements to the individuals.5.7 Affiliates. For the purpose of this entire Section 5 ‘DevFactory’ shall include allits Affiliates.5.8 Return of Confidential Information. Upon the written request of disclosingparty or termination of this Agreement, receiving party shall return or destroy (andcertify such destruction in a signed writing) all Confidential Information of disclosingparty, including all copies thereof and materials incorporating such ConfidentialInformation, whether in physical or electronic form. Each party may retain a copy ofthe other party’s Confidential Information solely for archival purposes. To the extentthat it is impracticable to return or destroy any Confidential Information, and withrespect to any copies retained for archival purposes, receiving party shall continue tomaintain the Confidential Information in accordance with this Agreement. Theconfidentiality obligations set forth in this Agreement shall survive the termination ofthis Agreement and remain in full force and effect until such Confidential Information,through no act or omission of receiving party, ceases to be Confidential Information asdefined hereunder.6Client’s Support6.1 To the extent reasonably required by DevFactory, Client will make available toDevFactory certain of its programs, networks, personnel, and business informationas are required to perform any Statement of Work hereunder. DevFactory agrees tocomply with Client’s network access rules and regulations regarding safety, security,and conduct provided DevFactory has been made aware of such rules andregulations.Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.regulations.7Warranties7.1 DevFactory warrants that it has the right to enter into this Agreement and grantthe rights and licenses set forth herein, and that all Services performed under thisAgreement shall be performed in a workmanlike and professional manner.7.2 EXCEPT AS OTHERWISE STATED IN THIS AGREEMENT, ANY ANDALL SERVICES, DELIVERABLES, CUSTOMIZATIONS, DOCUMENTATION,CONFIDENTIAL INFORMATION AND ANY OTHER TECHNOLOGY ORSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.MATERIALS PROVIDED BY DEVFACTORY TO THE CLIENT AREPROVIDED “AS IS” AND WITHOUT WARRANTY OF ANY KIND,WHETHER EXPRESS OR IMPLIED INCLUDING EXPRESS OR IMPLIEDWARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULARPURPOSE, OR NONINFRINGEMENT.8Limitation of Liability8.1 IN NO EVENT SHALL EITHER PARTY, OR ITS SUBCONTRACTORSOR THIRD PARTY LICENSORS BE LIABLE ON ANY THEORY OFLIABILITY, WHETHER IN AN EQUITBALE, LEGAL, OR COMMON LAWACTION ARISING HEREUNDER FOR CONTRACT, STRICT LIABILITY,INDEMNITY, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, FORDAMAGES WHICH, IN THE AGGREGATE, EXCEED THE AMOUNT OFCHARGES PAID OR PAYABLE BY CLIENT HEREUNDER FOR THESERVICES AND/OR DELIVERABLES WHICH GAVE RISE TO SUCHDAMAGES (PROVIDED IN THE RESPECTIVE STATEMENT OF WORK)AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OFANY REMEDY.8.2 IN NO EVENT SHALL EITHER PARTY OR ITS SUBCONTRACTORSOR THIRD PARTY LICENSORS BE LIABLE FOR ANY SPECIAL,INCIDENTAL, INDIRECT, EXEMPLARY, PUNITIVE, OR CONSEQUENTIALDAMAGES OF ANY KIND AND HOWEVER CAUSED, INCLUDING BUTNOT LIMITED TO BUSINESS INTERRUPTION OR LOSS OF PROFITS,BUSINESS OPPORTUNITIES. OR GOOD WILL EVEN IF NOTIFIED OF THEPOSSIBILITY OF SUCH DAMAGE, AND NOTWITHSTANDING THEFAILURE OF ESSENTIAL PURPOSE OF ANY REMEDY.8.3 The limitations of liability and exclusion of damages set forth in Sections 8.1shall not apply to breach of Section 5 or to a party’s indemnification obligationsherein.9Termination9.1 This Agreement, any license granted herein, and/or any Statement of Work maybe terminated prior to expiration or completion in accordance with the following:9.1.1By DevFactory by giving prior written notice to Client if Client fails toperform any material obligation required of it hereunder, and such failure isnot cured within thirty (30) days of Client’s receipt of DevFactory’s notice tocure such non-performance of material obligation.9.1.2By Client by giving prior written notice to DevFactory if DevFactory fails toperform any material obligation required of it hereunder, and such failure isnot cured within thirty (30) days from DevFactory’s receipt of Client’s noticeto cure such non-performance of material obligation.9.2 Effect of Termination. Upon termination of this Agreement, Client’s rights toany Deliverables not paid for, DevFactory Confidential Information, and otherDevFactory materials (except for those DevFactory materials included in Deliverablesowned by Client) (all collectively “Materials”) shall cease. Client shall immediatelystop using such Materials and shall return such Materials to DevFactory or destroy allcopies thereof. In addition, Client shall provide DevFactory with written certificationsigned by an officer of Client that all copies of the Materials have been returned ordestroyed and that no copies have been retained by Client for any purpose whatsoever.Following termination, any use of the Materials by Client shall be an infringementand/or misappropriation of DevFactory’s proprietary rights in the Materials. Upontermination of this Agreement by Client, DevFactory shall have no further obligationor liability hereunder and all fees due under the Agreement shall become due andpayable to DevFactory immediately upon such termination. Termination of thisAgreement or any license created hereunder shall not limit either party from pursuingother remedies available to it, nor shall such termination relieve Client’s obligation topay all fees that have accrued or are otherwise owed by Client under this Agreementincluding, but not limited to, any License schedule, Statement of Work, or exhibit.9Ownership10.1 Ownership in Deliverables. By signing this Agreement and subject toClient’s full payment for Services provided and Deliverables created under anapplicable Statement of Work, DevFactory acknowledges that, subject to the licensesgranted herein, DevFactory has no ownership interest in the Deliverables, or Materialsprovided to Client. Client shall own all right, title, and interest in such Deliverables, orMaterials, subject to any limitations associated with intellectual property rights of thirdSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Materials, subject to any limitations associated with intellectual property rights of thirdparties, and DevFactory hereby assigns all right, title and interest in and to suchDeliverables and Materials, including without limitation all accompanying worldwideintellectual property rights.10.2 Rights to Deliverables. Client hereby grants to DevFactory, a perpetual,royalty free, internal, worldwide, nonexclusive, nontransferable license to the objectcode and source code versions of the Deliverables to use the code, techniques,strategies and know-how contained in the Deliverables for other projects anddevelopment, if and for so long as any Confidential Information of Client incorporatedinto such Deliverables, are not provided to, or included in any deliverable provided to,any third party. For clarity, provided that the Deliverables have been made generic. asdescribed in the preceding provision, DevFactory shall have the perpetual, royaltyfree, worldwide, nonexclusive, nontransferable and irrevocable right and license to (i)modify and otherwise create derivativeSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.works based on the generic Deliverables, and (ii) reproduce, distribute, perform,display (publicly or otherwise), and otherwise use and exploit the generic Deliverablesand derivative works thereof; but DevFactory may not use, license or distributesoftware programs as a whole, but may use, license and distribute, generic routines,algorithms, and other portions of the software programs.10.3 Ownership in the event of material breach. Notwithstanding anythingprovision to the contrary herein (including sections 10.1 and 10.2 above), in the eventthat there is a termination of this Agreement, or any SOW, as a result of a materialbreach by Client of this Agreement and/or any such SOW, any and all rights, title andinterest in any applicable Deliverables or Materials for which Client has not made fullpayment shall automatically revert to DevFactory and the Client shall have noownership rights whatsoever therein. Promptly after notification from DevFactory, theClient shall undertake any and all reasonable actions to assert DevFactory’s right, titleand interest in such Deliverables and Materials. In the event of Deliverables orMaterials for which partial payment has been made, the parties shall discuss in goodfaith whether a partial Deliverable or a refund shall be provided to Client.10.4 No Support of Deliverables. DevFactory shall have no support andenhancement obligations related to any Deliverable except as otherwise mutuallyspecified in a Statement of Work.10.5 Third Party Rights. Client acknowledges that in the event DevFactoryprovides Services pertaining to any third party products required by Client (includingsoftware, hardware, equipment or any other material), all rights in such third partyproducts (“Third Party Rights”) are retained by the respective third party. Client shallbe required to obtain any Third Party Rights from the respective third party directlyand any rights in the DevFactory Services related to such Third Party Rights shall besubject to Client’s agreement with the respective third party. If any such Third PartyRights are included in the Deliverables by DevFactory, or if DevFactory includes anyDevFactory Pre-existing Technology, then DevFactory hereby grants to Client aworldwide, perpetual, irrevocable right and license to use, copy, market, promote andmake derivative works of the foregoing, and to make, have made, sell, have sold,import and export products incorporating any of the foregoing. DevFactory shallconsult with Client, and obtain Client’s prior written consent, prior to including anyThird Party Rights or DevFactory Pre-existing Technology in any Deliverables.10.6 Further Rights. Nothing in this Agreement shall preclude DevFactory fromusing in any manner or for any purpose it deems necessary, the know-how,techniques, or procedures acquired or used by DevFactory in the performance ofServices hereunder.10Indemnification11.1 Infringement Indemnity. DevFactory will defend any action brought againstClient to the extent that it is based upon a claim that the Deliverables, as provided byDevFactory to Client under this Agreement and used within the scope of thisAgreement, infringe any patent, trademark, trade secret, copyright or other intellectualproperty right of a third party, and will pay any costs, damages and reasonableattorneys’ fees attributable to such claim incurred by Client, provided that Client: (a)promptly notifies DevFactory in writing of the claim; (b) grants DevFactory solecontrol of the defense and settlement of the claim; and (c) provides DevFactory withall reasonable assistance, information and authority required for the defense andsettlement of the claim.11.2 Injunctions. If Client’s use of any of the Deliverables hereunder is, or inDevFactory’s opinion is likely to be, enjoined due to the type of infringementspecified in Section 11.1 above, DevFactory may, at its sole option and expense: (a)procure for Client the right to continue using such Deliverables under the terms of thisAgreement; (b) replace or modify such Deliverables so that they are non-infringingand substantially equivalent in function to the enjoined Deliverables; or (c) if options(a) and (b) above cannot be accomplished despite DevFactory’s reasonable efforts,then DevFactory may terminate Client’s rights and DevFactory’s obligationshereunder with respect to such Deliverables and refund to Client the fees paidhereunder for such Deliverables.11.3 Exclusions. Notwithstanding the terms of Section 11.1, DevFactory will haveno liability for any infringement claim of any kind to the extent it results from: (a)modification of the Deliverables made other than by DevFactory or DevFactory’scontractors or agents; or (b) compliance by DevFactory with designs, plans orSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.contractors or agents; or (b) compliance by DevFactory with designs, plans orspecifications furnished by or on behalf of Client.11General Terms and Conditions12.2 Import/Export. Each party shall comply with all then- current export andimport laws and regulations of the United States and such other governments as areapplicable.12.3 Compliance with Laws. Both parties agree to comply with all applicable laws,regulations, and ordinances relating to such party’s performance under thisAgreement.12.4 Assignment. Neither party may assign this Agreement or transfer any licensecreated hereunder, by operation of law, change of control or otherwise (“Assign”)without the prior written consent of the other party, and such consent shall not beunreasonably withheld. Notwithstanding the language of this Section 12.3, however, aparty (the “Assigning Party”) may Assign this Agreement to any person, firm orcorporation which, through merger, acquisition by or of the Assigning Party orotherwise, succeeds to all or substantially all of the Assigning Party’s business,provided (i) the Assigning Party provides the other party with thirty (30) days priorwritten notice; (ii) the assignee does not compete directly or indirectly with the otherparty; (iii) the Assigning Party and any assignee are current in all fees or otherobligations due hereunder to the other party; (iv) any such assignee agreesSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.in writing to be bound by the terms and conditions of this Agreement; and (v) if Clientis the Assigning Party, the licenses and rights of Client under this Agreement shallapply to, and may be exercised only in connection with, the operations of Client asthey exist on the date of the acquisition, and the Deliverables, Materials, andConfidential Information of DevFactory may be made available only to Clientpersonnel working in such operations. In the event that Client is subject to a change incontrol, at DevFactory’s option and election, the Minimum Fee (as set forth inSchedule A) following such change in control shall become set (without being subjectto change thereafter) to the then current Minimum Fee amount in effect at the time ofthe acquisition.12.5 Survival. The provisions set forth in sections 4, 5, 7, 8, 9.2, 10, 11 and 12 ofthis Agreement shall survive termination or expiration of this Agreement and anyapplicable license hereunder.12.6 Notices. Any notice required under this Agreement shall be given in writingand shall be deemed effective upon delivery to the party addressed. All notices shall besent to the applicable address specified on the face page hereof or to such otheraddress as the parties may designate in writing. Unless otherwise specified, all noticesto DevFactory shall be sent to the attention of the Contracts Manager. Any notice ofmaterial breach pursuant to Section 9 shall clearly define the breach including thespecific contractual obligation that has been breached.12.7 Force Majeure. DevFactory shall not be liable to Client for any delay or failureof DevFactory to perform, its obligations hereunder if such delay or failure arisesfrom any cause or causes beyond the reasonable control of DevFactory. Such causesshall include, but are not limited to, acts of God, floods, fires, loss of electricity orother utilities (unless due to DevFactory’s acts or omissions), or delays by Client inproviding required resources or support or performing any other requirementshereunder,12.8 Conflict. In the event of a conflict between the terms and conditions of thisAgreement, a License Schedule, an exhibit, or a Statement of Work, the terms andconditions of the SOW, license schedule or exhibit shall prevail, in that order.12.9 Restricted Rights. Use of the Deliverables and/or Materials by or for theUnited States Government is conditioned upon the Government agreeing that theDeliverables and/or Materials are subject to Restricted Rights as provided under theprovisions set forth in FAR 52.227-19. Client shall be responsible for ensuring thatthis provision is included in all agreements with the United States Government andthat the Deliverables and Materials, when delivered to the Government, is correctlymarked as required by applicable Government regulations governing such RestrictedRights as of such delivery,12.10 Entire Agreement. This Agreement (including any schedules or attachmentshereto), and including any separately executed Statements of Work and any exhibits,shall constitute the entire agreement between the parties regarding the subject matterhereof and supersede all proposals and prior discussions and writings between theparties with respect thereto, including without limitation the Technology ServicesAgreement entered into between DevFactory LLC-FZ and Silverback EnterpriseGroup, Inc. on January 18, 2012 and the Amendment #1 thereto entered into onJanuary 26, 2012, which agreements shall be of no further force and effect as of thedate hereof, which agreements shall be deemed fully performed with no furtherobligations by one party to the other owed thereunder and of no further force andeffect as of the date hereof.12.11 Modifications. The parties agree that this Agreement, and any SOW executedhereunder, cannot be altered, amended or modified, except by a writing signed by anauthorized representative of each party.12.12 Nonsolicitation. During the term of this Agreement and for a period of one(1) year thereafter, each party agrees not to solicit, nor attempt to solicit, the services ofany employee or Subcontractor of the other party without the prior written consent ofsuch other party. Each party further agrees not to solicit nor attempt to solicit, theservices of any former employee or Subcontractor of the other party for a period of six(6) months from such former employee’s or Subcontractor’s last date of service withthe other party. Violation of this provision shall entitle the aggrieved party toliquidated damages against the violating party equal to two hundred percent (200%) ofthe solicited person’s gross annual compensation. Generalized employment searches,such as Internet postings, classified advertising, job fairs or the like, shall not violatethis Section 12.11.12.13 Headings. Headings are for reference purposes only, have no substantiveeffect, and shall not enter into the interpretation hereof.12.14 No Waiver. No failure or delay in enforcing any right or exercising anyremedy will be deemed a waiver of any right or remedy.12.15 Severability and Reformation. Each provision of this Agreement is aSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.12.15 Severability and Reformation. Each provision of this Agreement is aseparately enforceable provision. If any provision of this Agreement is determined tobe or becomes unenforceable or illegal, such provision shall be reformed to theminimum extent necessary in order for this Agreement to remain in effect inaccordance with its terms as modified by such reformation.12.16 Independent Contractor. DevFactory is an independent contractor andnothing in this Agreement shall be deemed to make DevFactory an agent, employee,partner or joint venturer of Client. Neither party shall have authority to bind, commit,or otherwise obligate the other party in any manner whatsoever.Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.12.17 Dispute Resolution. Any dispute, controversy or claim arising under, out ofor relating to this contract and any subsequent amendments of this contract, including,without limitation, its formation, validity, binding effect, interpretation, performance,breach or termination, as well as non-contractual claims, shall be submitted tomediation in accordance with the WIPO Mediation Rules. The place of mediation shallbe Austin, Texas, USA. The language to be used in the mediation shall be English. If,and to the extent that, any such dispute. controversy or claim has not been settledpursuant to the mediation within sixty (60) days of the commencement of themediation, it shall, upon the filing of a Request for Arbitration by either party, bereferred to and finally determined by arbitration in accordance with the WIPOExpedited Arbitration Rules. Alternatively, if, before the expiration of the said periodof sixty (60) days, either party fails to participate or to continue to participate in themediation, the dispute, controversy or claim shall, upon the filing of a Request forArbitration by the other party, be referred to and finally determined by arbitration inaccordance with the WIPO Expedited Arbitration Rules. The place of arbitration shallbe Austin, Texas, USA. The language to be used in the arbitral proceedings shall beEnglish. The parties acknowledge and agree that mediation and arbitration as set forthabove, and not litigation, are the only dispute resolution procedures that will be usedfor disputes, controversies or claims arising as a result of this Agreement.Notwithstanding anything contained hereunder, Client agrees and acknowledges thatno dispute resolution shall be pursued by Client for any breach of this Agreement untiland unless DevFactory has had an opportunity to cure any alleged breach. Clientagrees to provide DevFactory with a detailed description of any alleged failure anddescription of the steps that Client understands must be taken by DevFactory toresolve the failure. DevFactory shall have thirty (30) days from DevFactory’s receiptof Client’s notice to complete and cure.12.18 Choice of Law. THIS AGREEMENT SHALL BE GOVERNED ANDINTERPRETED BY THE LAWS OF THE STATE OF TEXAS, USA, WITHOUTREGARD TO THE CONFLICTS OF LAW PROVISIONS OF ANY STATE ORJURISDICTION.[signature page follows]Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The parties hereto agree to the foregoing as evidenced by their signatures below.On behalf of Upland Software, Inc.On behalf of DevFactory FZ-LLCBy: /s/ John T. McDonaldBy: /s/ Rahul SubramaniamPrint Name: John T. McDonaldPrint Name: Rahul SubramaniamTitle: CEOTitle: CEODate: March 28, 2017Date: March 22, 2017Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.SCHEDULE A1STATEMENT OF WORK & GENERAL TERMS1.GENERALLYThe Services to be performed under the Agreement are provided for in this Statement of Work (“SOW”), which is made under the Second Amended and RestatedTechnology Services Agreement (the “Agreement”). The terms of this SOW are binding upon both parties immediately upon signature below. All terms not defined hereinhave the meaning ascribed to them in the Agreement.2.PROVISION OF SERVICES BY DEVFACTORYDevFactory shall provide the below Services (including any future versions, capabilities, updates and upgrades thereto during the Term) to Client:1)Access to Aline services including:a.Source code analysis and developer productivity suite2)Automated code compilation, builds and deployments3)Services to onboard source code, migrate code repositories and created automated builds4)Code cleanup service5)Unit test development service6)Source code safekeeping and hosted source code repository7)Application hosting for software sold to clients on a “software-as-a-service” basis, including:a.Port software to Amazon’s EC2b.Hosting at Amazon EC2c.Hosting operations8)Automated testcase development9)Functional testcase automation platform and services10)24/7/365 Level 1 and Level 2 Support of Client including email and phone11)High performance (1:3:1) teams12)Client may designate a mutually agreed amount of the Minimum Fee (as defined below) towards spending on Crossover services. If no such amount is agreed,then the amount shall be deemed to be zero dollars.Support and AvailabilityDevFactory shall provide support and availability for the Services in accordance with Exhibit 1 to this SOW.Security and Disaster RecoveryDevFactory shall comply with Client’s reasonable information security requirements, including participating in an annual information security review with Client.Changes to ServicesDevFactory shall notify Client at least 48 hours before making any changes to the production environment and will work with Client to schedule such changes to ensureminimal disruption to Client’s end-users.Committed completion dates for individual Deliverables will be mutually agreed upon by the parties.Client understands that DevFactory operates based upon high volumes of activity for specific Services. Therefore, Client and DevFactory shall use all reasonable efforts tomutually agree to limit the number of Services utilized at any point in time and to reasonably cooperate in limiting the frequency of changes thereto.3.TECHNOLOGY SERVICES FEES AND EXPENSESIn consideration for the preferred access and most favored nation pricing provisions in Section 4 below, the parties agree that Client shall purchase from DevFactory underthe Agreement for each calendar year that this Agreement is in effect a dollar amount of Services equal to the Minimum Fee (as defined).For the purpose of the Agreement and this Schedule A1, the term “Minimum Fee” shall mean, for calendar year 2016, $2,307,833, and for each calendar year thereafter thatthe Agreement is in effect, the Minimum Fee shall be the immediately preceding calendar year’s Minimum Fee amount increased (or decreased, as the case may be) by suchimmediately preceding year’s Adjustment Rate.Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.For the purpose of the Agreement and this Schedule A1, the term “Adjustment Rate” for any calendar year shall mean the amount, stated as a percentage, by which suchcalendar year’s Total Revenue increased (or decreased, as the case may be) over the immediately preceding calendar year.For the purpose of the Agreement and this Schedule A1, the term “Total Revenue” shall mean all revenue generated by Client and all of its direct and indirect subsidiaries andany entity or asset that is otherwise directly or indirectly managed or controlled by Client. Beginning in 2017, Client shall by March 31 of each year deliver to DevFactory (i)Client’s audited financial statements for the immediately preceding calendar year prepared in accordance with GAAP and (II) a calculation of the Minimum Fee for the currentcalendar year. DevFactory and Client shall within fifteen days after delivery thereof agree upon a final Minimum Fee amount for the current calendar year. Client shall provideDevFactory reasonable access to Client’s financial information to enable its review and to ensure compliance with this provision.In the event that the actual total fees paid to DevFactory in a given calendar year are less than the applicable Minimum Fee for such calendar year (as set forth above), thenupon expiration of such calendar year, Client shall make a payment to DevFactory of an amount equal to the Minimum Fees less the actual fee paid so as to ensure that no lessthan the Minimum Fee is paid to DevFactory in each calendar year.It is Client’s sole responsibility to solicit the performance of Services via a SOW or by selecting services from DevFactory’s menu of services, following which, DevFactoryshall promptly commence providing the Services in accordance with such SOW or Client’s selection.4.PRIORITY AND PRICINGPriority. DevFactory shall grant Client access to the provision of Services in priority to all other DevFactory clients of the same size or smaller except for companies that aredirectly or indirectly owned or controlled by Joe Liemandt (“Liemandt Companies”). Subject to the prioritization set out in the preceding sentence, DevFactory agrees to workin good faith with Client to balance the resource demands from Liemandt Companies and Client in order to reasonably satisfy the demands of both businesses.Pricing Provision. The fees in an applicable SOW for specific deliverables shall be materially comparable to or more favorable than the fees that DevFactory is currentlyoffering and will offer to other similarly situated DevFactory clients purchasing the same or substantially similar services in similar volumes except for the LiemandtCompanies and shall not be greater than those fees set forth in the pricing sheet dated as of the date hereof, as may be adjusted from time to time consistent with ordinarycourse price changes applicable to all DevFactory clients generally. DevFactory shall provide Client reasonable access to pricing information to ensure compliance with thispricing provision. The parties agree that a violation of the foregoing pricing provisions will not constitute a breach of the Agreement and that the remedy of Client for aDevFactory failure of such pricing provision shall be, at Client’s option, (a) issuance by DevFactory of a Work Credit equal to the amount of overpayment by Client, or (b) arefund of the equal to the amount of overpayment by Client. Notwithstanding the foregoing, Client’s total payment to DevFactory in each year shall never be less than theMinimum Fee for such year.[signature page follows]Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The parties hereto agree to the foregoing as evidenced by their signatures below.On behalf of Upland Software, Inc.On behalf of DevFactory FZ-LLCBy: /s/ Jack McDonaldBy: /s/ Rahul SubramaniamPrint Name: John T. McDonaldPrint Name: Rahul SubramaniamTitle: CEOTitle: CEODate: March 28, 2017Date: March 22, 2017Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 1 – SLADevFactory Service Level AgreementThe purpose of this document is to define the service levels that DevFactory FZ-LLC (hereinafter, “DevFactory”) will endeavor to provide for the maintenance and support of theapplication that Upland Software, Inc. (including all its current and future acquired businesses, hereinafter “Client”) has obtained pursuant to the Second Amended and RestatedTechnology Services Agreement (“TSA”) between Client and DevFactory effective January 01, 2017 and the applicable Statements of Work thereunder the TSA (“Application”)(the TSA and other applicable Statements of Work are referred to as, the “Agreement”) and this document (the “SLA”) is hereby incorporated by reference into the Agreement.Capitalized terms not otherwise defined herein have the meaning set forth in the Agreement.1.Application Administration. DevFactory will make commercially reasonable efforts to provide the following during the applicable subscription term of the Applicationunder the Agreement in accordance with this SLA:1.1.Technical Support. Online support during coverage hours, 24x7 access to support portal;1.2.Service Management. Client activation, security monitoring, change control, problem management, and escalation procedures;1.3.Application Administration. Installation and server setup, support, monitoring, response, repair, tuning and capacity planning; and1.4.Data Backup and Retention. Backups of Client data stored within the Application.Client is responsible for purchase, maintenance and administration of its own equipment, hardware and access, including but not limited to network and data connection, toestablish a network connection to the Application.2.Service Measures1.Availability of Service Levels. DevFactory will make commercially reasonable efforts to meet the following during the applicable subscription term for eachApplication:MeasurementDefinitionDevFactory SLASoftware AvailabilityThe periods of time that the Application is Available (as defined below) for useby the Client not including Scheduled Downtime (defined below). “Availability”or “Available” means that an authorized user can log in and access theApplication.Available in all material respects 99.9% average over a month(calculated on a 24 x 7 x 365 basis, other than Scheduled Downtimeand other than any period of downtime that lasts five (5) continuousminutes or less).BackupsDevFactory shall conduct backups at least on a nightly basis.Database and file backups are performed at least on a nightly basis.Backup files will be retained for 30 days from the date of such backup.Restoration ofServicesIn the event of a major disaster, such as flooding of the hosting facility, anearthquake or any acts of God that destroys the infrastructure or as otherwisedeemed necessary by DevFactory.Backup will be restored within 24 hours.2.Exceptions to Service Levels. The Availability of the Application and DevFactory’s obligations with respect to the other service measures set forth herein may be subject tolimitations, delays, and other problems inherent to the general use of the internet and other public networks or caused by the Client, authorized users or third parties.DevFactory is not responsible for any delays or other damage resulting from problems outside of DevFactory’s control. Without limiting the foregoing, the following areexceptions to DevFactory’s obligations under this SLA:(i)a failure or malfunction resulting from scripts, data, applications, equipment, or services provided and/or administered by the Client;(ii)outages initiated by DevFactory or its third party suppliers at the request or direction of the Client for maintenance, back up, or other purposes;(iii)outages occurring as a result of any actions or omissions taken by DevFactory or its third party suppliers at the request or direction of the Client;(iv)outages resulting from the Client’s equipment and/or third party equipment not within the sole control of DevFactory;(v)events resulting from an interruption or shut down of the Application due to circumstances reasonably believed by DevFactory to be a significant threat to thenormal operation of the Application, the facility from which the Application is provided, or access to or integrity of data (e.g., a hacker or a virus attack);Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(vi)outages due to system administration, commands, file transfers performed by the Client’s representatives;(vii)other activities the Client directs, denial of service attacks, natural disasters, power and other utility outages, internet service outages, changes resulting fromgovernment, political, or other regulatory actions or court orders, strikes or labor disputes, acts of civil disobedience, acts of war, or other events caused bycircumstances beyond DevFactory’s reasonable control;(viii)The Client’s negligence or breach of its material obligations under this SLA, the Agreement, or any other agreement between the Client and DevFactory; and(ix)lack of availability or untimely response time of the Client to respond to incidents that require its participation for source identification and/or resolution.3.Priority Levels. If the Application is not accessible as specified in Section 2.1 (an “Issue”), DevFactory will use commercially reasonable endeavors to correct the Issuewith a level of effort commensurate with the severity of the Issue. DevFactory and the Client will comply with the following resolution procedures for all Issues reported bythe Client:1.Notice of Issue. If the Client encounters an Issue, the Client must sufficiently define the Issue in a written notice to DevFactory. After receipt of written notice of anIssue from the Client via the ticketing system, DevFactory will notify the Client if DevFactory cannot identify the cause of the Issue. If DevFactory cannot identifythe cause of the Issue, the Client will provide additional information regarding the Issue as DevFactory may request in order to assist DevFactory with identifyingthe cause of the Issue. The Client will provide a separate written notice for each Issue encountered by the Client. All notices pursuant to this SLA may be providedvia email.2.Issue Classification. In its notice of an Issue, the Client will reasonably classify for DevFactory the initial priority of the Issue. Client will use the nature of the Issueand Client's business situation to initially classify each Issue. Client will classify each Issue in accordance with the severity classification table below. To the extentthat DevFactory disagrees with any Issue classification provided by Client, DevFactory will promptly advise Client of the revised classification of any Issue.3.Response Time. DevFactory will respond to each of Client's written notices of an Issue within the period set forth in the severity classification table below.Response time is the elapsed time between Client's first report of an identified Issue and the provision of a plan for resolution by a DevFactory technical contact. Issue DescriptionInitial Response SLATarget Resolution TimeSLACommitmentPriority 1The Issue causes complete loss of Service or use of the Applicationand cannot reasonably continue as a feature or the function doesnot allow completion of work and its operation is mission critical toClient’s business.Examples:Majority or all of the authorized users are unable to use theApplication (i.e. aLine and any of its components such asSCM),Highly important reports cannot be generated,System crashes repeatedly after restart attempts.1 hour during primarycoverage hoursWorked on continuouslyuntil a solutions found,however, targeting an 8hour resolution time oruntil a viable workaroundcan be appliedThe Issue will be worked onuntil fixed or a reasonableworkaround is applied.Updates will be provided toClient every 4 hours.Priority 2A major Application function is experiencing a reproducibleproblem that causes a major inconvenience to the Client. Anacceptable workaround may or may not be available, however,operation can continue in a restricted fashion. The current releaseshould be patched if a permanent workaround cannot be found andthe next release is not imminent.4 hour during primarycoverage hours3 business daysThe Issue will be worked onuntil fixed or a reasonableworkaround is applied.Updates will be provided at theend of every day.Priority 3The Issue causes minor loss of Service or is a minor error. Theimpact is an inconvenience that may require a workaround torestore functionality or is a minor error, incorrect behavior, or adocumentation error that does not impede the operation of asystem.24 hour during primarycoverage hours5 business days ormutually agreed to timeDevFactory will work withClient to mutually prioritize andschedule resolutions into regularrelease cycles. Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.4.Downtime/Maintenance. DevFactory periodically adds, repairs, and upgrades the data center network, hardware and the Application and shall use commercially reasonableefforts to accomplish this without affecting the Client’s access to the Application; however, repairs of an emergency or critical nature may result in the Application not beingavailable for the Client’s usage during the course of such repairs. DevFactory reserves the right to take down the server(s) at the data center in order to conduct routinemaintenance to both software and hardware according to the following protocols.ItemDescriptionCommitmentStandard Maintenance WindowAs communicated to the Client by DevFactory, not to exceed 20hours per month. N/AScheduled UpdatesRegular planned updates of new functionality will take placeduring the standard maintenance window.Minimum of 5 days’ notice prior to the upload going into theproduction environment. The notice will be displayed on the mainsite where the Application is accessible.Scheduled MaintenanceRoutine, scheduled maintenance will be performed inside themaintenance window.A message will be displayed on the main site stating Applicationwill be down.Non-Scheduled/ Emergency MaintenanceMay be performed outside the maintenance window and will becounted as unscheduled downtime.Client will be notified via a message on the main site stating theApplication will be down. Periods during which the Application is unavailable as a result of Items 1, 2 and 3, in the table above, are “Scheduled Downtime” and are not included in thecalculation of Availability.5.Uptime & Incident Reports. DevFactory will provide an uptime report on monthly basis for all aLine components including SCM/Code Repository Service.In the event of an outage caused by the DevFactory, Client will receive an incident report outlining the following:◦How long was the outage?◦Root cause of the outage?◦What action(s) are taken to mitigate/prevent future incidents?3.Client Obligations1.Trained Contacts. Client will appoint IT and/or individuals within Client’s organization to serve as primary contacts between Client and DevFactory with regards to theApplication and the administration of Client systems. Client must initiate all requests through these contacts.2.Reasonable Assistance. Client will provide DevFactory with reasonable access to all necessary personnel to answer questions regarding Issues reported by Client.3.Good Standing. The provision of the Application by DevFactory during the term of this SLA is contingent upon Client’s performance of its payment and otherobligations under the Agreement.4.Disclaimers1.Security. The parties expressly recognize that it is impossible to maintain flawless security, but DevFactory shall take reasonable steps to prevent security breaches inDevFactory’s server interaction with Client’s network, and security breaches in DevFactory’s server interaction with resources or users outside of any firewall that may bebuilt into DevFactory’s server. Client agrees that it will only access and use the Application via authorized access provided by DevFactory (e.g. password protected access).DevFactory’s Application and Data Access Control policies are available upon request.2.Downloading of Data or Files. The parties expressly recognize that DevFactory cannot and does not guarantee or warrant that files available for downloading throughthe Application will be free of infection, viruses, worms, Trojan horses or other code that manifests contaminating or destructive properties. DevFactory agrees that it shallbe solely responsible for implementing sufficient procedures to satisfy DevFactory’s particular requirements for accuracy of data input and output, and for maintaining aseparate means for the reconstruction of any lost data.3.Accuracy Disclaimer. Client is solely responsible for the accuracy and integrity of its own data, reports, and documentation. DevFactory or third parties may providelinks to other web sites or resources as part of the Application. DevFactory does not endorse and is not responsible for any data, software or other content available fromsuch sites or resources. Client acknowledges and agrees that DevFactory shall not be liable, directly or indirectly, for any damage or loss relating to Client’s use of orreliance on such data, software or other content.4.Reasonable Efforts. Client acknowledges that the service levels and all provisions under this SLA are not binding and that the DevFactory shall not be liable, directly orindirectly, for any non-compliance thereof. However, DevFactory will use commercially reasonable efforts to adhere to them and to remain compliant with them.Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.This SLA along with the terms of the Agreement shall constitute the entire agreement between the parties with respect to the service levels agreed upon under this SLA. In the eventof a conflict between the terms of this SLA and the Agreement, the terms of the Agreement shall prevail, unless expressly stated otherwise. Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.CONSENT AND FIRST AMENDMENT TO CREDIT AGREEMENTThis CONSENT AND FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered into as ofSeptember 23, 2015, by and among WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, asadministrative agent for each member of the Lender Group (in such capacity, the “Agent”), the Lenders (as defined in the CreditAgreement as defined below) party hereto, Upland Software, Inc., a Delaware corporation (“Parent”), each subsidiary of Parentidentified on the signature pages hereof as a “US Borrower” (collectively, the “US Borrowers”), Upland Software Inc., a Canadianfederal corporation (“Upland CAD”), and Solution Q Inc., an Ontario corporation (“Solution Q”; Parent, US Borrowers and UplandCAD each, a “Borrower” and collectively, the “Borrowers”).WHEREAS, the Borrowers, Agent, and the Lenders are parties to that certain Credit Agreement dated as of May 14, 2015 (asamended, restated, modified or supplemented from time to time, the “Credit Agreement”);WHEREAS, the Borrowers have advised Agent that Parent desires to amend certain Warrants to Purchase Stock datedFebruary 10, 2012, March 5, 2012, and April 11, 2013 (collectively, the “Warrants”), with respect to Equity Interests of Parent(formerly known as Silverback Enterprise Group, Inc.), and held by Comerica Ventures Incorporated, a California corporation,successor-by-assignment from Comerica Bank, a Texas banking association (the “First Amendment to Warrants to Purchase Stock”) inthe form of Exhibit A attached hereto in order to provide for the cashless exercise of the Warrants; which cashless exercise, as a resultof the First Amendment to Warrants to Purchase Stock, would otherwise constitute Restricted Payments subject to clause (f) of Section6.7 (Restricted Payments) of the Credit Agreement in the absence of Required Lenders’ consent; andWHEREAS, the Borrowers have requested that Agent and the Required Lenders consent to the First Amendment to Warrantsto Purchase Stock and amend the Credit Agreement in certain respects, and Agent and the Required Lenders have agreed to consent tothe First Amendment to Warrants to Purchase Stock and amend the Credit Agreement in certain respects, subject to the terms andconditions contained herein.NOW THEREFORE, in consideration of the premises and mutual agreements herein contained, the parties hereto agree asfollows:1.Defined Terms. Unless otherwise defined herein, capitalized terms used herein and not otherwise defined shall havethe meanings ascribed to such terms in the Credit Agreement.2. Consent. In reliance upon the representations and warranties of each Borrower set forth in Section 7 below and subject tothe satisfaction of the conditions to effectiveness set forth in Section 6 below, the undersigned Lenders, constituting Required Lenderspursuant to the Credit Agreement, hereby consent to the First Amendment to Warrants to Purchase Stock and the cashless exercise ofthe Warrants in accordance therewith without the use of any basket amount provided in clause (f) of Section 6.7 of the CreditAgreement. Except as expressly set forth herein, the foregoing consent is a limited consent and shall not constitute (i) a modification oralteration of the terms,Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.conditions or covenants of the Credit Agreement or any other Loan Document or (ii) a waiver, release or limitation upon the exerciseby Agent and/or Lenders of any of their respective rights, legal or equitable thereunder.3. Amendments to Credit Agreement. In reliance upon the representations and warranties of each Borrower set forth inSection 7 below and subject to the satisfaction of the conditions to effectiveness set forth in Section 6 below, the Credit Agreementshall be amended as follows:(a) Section 6.3 of the Credit Agreement is hereby amended to delete the reference therein to “such US Borrower must be thesurviving entity” and insert in lieu thereof a reference to “a US Borrower must be the surviving entity”.(b) Section 6.3 of the Credit Agreement is hereby amended to delete the reference therein to “such Canadian Borrower mustbe the surviving entity” and insert in lieu thereof a reference to “a Canadian Borrower must be the surviving entity.”(c) Section 6.7(e) of the Credit Agreement is hereby amended to delete each reference therein to “stock options or warrants”and insert in lieu thereof, in each instance, a reference to “stock options, warrants or other similar rights.”4. Continuing Effect. Except as expressly set forth in Sections 2 and 3 of this Amendment, nothing in this Amendment shallconstitute a waiver of any other terms or provisions of the Credit Agreement or any other Loan Document, and the Credit Agreementand the other Loan Documents shall remain unchanged and shall continue in full force and effect, in each case as amended hereby.This Amendment is a Loan Document.5. Reaffirmation and Confirmation. Each Borrower hereby ratifies, affirms, acknowledges and agrees that the CreditAgreement and the other Loan Documents to which it is a party represent the valid, enforceable and collectible obligations of suchBorrower, and further acknowledges that there are no existing claims, defenses, personal or otherwise, or rights of setoff whatsoeverwith respect to the Credit Agreement or any other Loan Document as of the date hereof. Each Borrower hereby agrees that thisAmendment in no way acts as a release or relinquishment of the Liens and rights securing payments of the Obligations. The Liens andrights securing payment of the Obligations are hereby ratified and confirmed by each Borrower in all respects.6. Conditions to Effectiveness. This Amendment shall become effective upon the satisfaction of each of the followingconditions precedent, in each case satisfactory to Agent in all respects:(a) Agent shall have received a copy of this Amendment executed and delivered by Required Lenders, and the Borrower;(b) Agent shall have received a copy of the First Amendment to Warrants to Purchase Stock executed and delivered by Parentand the other parties thereto; and2Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(c) no Default or Event of Default shall have occurred and be continuing on the date hereof or as of the date of theeffectiveness of this Amendment.7. Representations and Warranties. In order to induce Agent and Lenders to enter into this Amendment, each Borrowerhereby represents and warrants to Agent and Lenders that:(a) after giving effect to this Amendment, all representations and warranties contained in the Loan Documents to which suchBorrower is a party are true and correct in all material respects (except that such materiality qualifier shall not be applicable to anyrepresentations and warranties that already are qualified or modified by materiality in the text thereof) on and as of the date of thisAmendment, as though made on and as of such date (except to the extent that such representations and warranties relate solely to anearlier date, in which case such representations and warranties shall be true and correct in all material respects (except that suchmateriality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality inthe text thereof) on and as of such earlier date);(b) no Default or Event of Default has occurred and is continuing; and(c) this Amendment and the Loan Documents, as amended hereby, constitute legal, valid and binding obligations of suchBorrower and are enforceable against such Borrower in accordance with their respective terms, except as enforcement may be limitedby equitable principles or by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rightsgenerally.8. Miscellaneous.(a) Choice of Law and Venue; Jury Trial Waiver; Reference Provision. Without limiting the applicability of any otherprovision of the Credit Agreement or any other Loan Document, the terms and provisions set forth in Section 12 of the CreditAgreement are expressly incorporated herein by reference.(b) Counterparts. This Amendment may be executed in any number of counterparts, and by the parties hereto on the same orseparate counterparts, and each such counterpart, when executed and delivered, shall be deemed to be an original, but all suchcounterparts shall together constitute but one and the same Amendment.9. Release.(a) In consideration of the agreements of Agent and Lenders contained herein and for other good and valuable consideration,the receipt and sufficiency of which is hereby acknowledged, each Borrower, on behalf of itself and its successors, assigns, and otherlegal representatives (each Borrower and all such other Persons being hereinafter referred to collectively as the “Releasors” andindividually as a “Releasor”), hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges Agent andLenders, and their successors and assigns, and their present and former shareholders, affiliates, subsidiaries, divisions, predecessors,directors, officers, attorneys, employees, agents and other representatives (Agent, each Lender and all such other3Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Persons being hereinafter referred to collectively as the “Releasees” and individually as a “Releasee”), of and from all demands,actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings,damages and any and all other claims, counterclaims, defenses, rights of set-off, demands and liabilities whatsoever (individually, a“Claim” and collectively, “Claims”) of every name and nature, known or unknown, suspected or unsuspected, both at law and inequity, which any Releasor may now own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason ofany circumstance, action, cause or thing whatsoever which arises at any time on or prior to the day and date of this Amendment, in anyway related to or in connection with the Credit Agreement, or any of the other Loan Documents or transactions thereunder or relatedthereto.(b) Each Borrower understands, acknowledges and agrees that the release set forth above may be pleaded as a full andcomplete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted,prosecuted or attempted in breach of the provisions of such release.(c) Each Borrower agrees that no fact, event, circumstance, evidence or transaction which could now be asserted or whichmay hereafter be discovered shall affect in any manner the final, absolute and unconditional nature of the release set forth above.[Signature Page Follows]4Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officersthereunto duly authorized and delivered as of the date first above written.PARENT AND A US BORROWER:UPLAND SOFTWARE, INC.,a Delaware corporationBy: Name: John T. McDonald Title: Chairman and Chief Executive OfficerUS BORROWERS:UPLAND SOFTWARE I, INC.,a Delaware corporationBy: Name: John T. McDonald Title: President UPLAND SOFTWARE II, INC.,a Delaware corporationBy: Name: John T. McDonald Title: President UPLAND SOFTWARE III, LLC,a Delaware limited liability companyBy: Name: John T. McDonald Title: President UPLAND SOFTWARE IV, LLC,a Nebraska corporationBy: Name: John T. McDonald Title: President UPLAND SOFTWARE V, LLC,a Delaware corporationBy: Name: John T. McDonald Title: PresidentSignature Page to Consent and First Amendment under Credit AgreementSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. UPLAND SOFTWARE VI, LLC,a New Jersey limited liability companyBy: Name: John T. McDonald Title: President UPLAND SOFTWARE VII, LLC,a Delaware corporationBy: Name: John T. McDonald Title: President UPLAND IX, LLC,a Delaware limited liability companyBy: Name: John T. McDonald Title: President and ChairmanSignature Page to Consent and First Amendment under Credit AgreementSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.CANADIAN BORROWERS:UPLAND SOFTWARE, INC.,a Canadian federal corporationBy: Name: John T. McDonald Title: President SOLUTION Q INC.,an Ontario corporationBy: Name: John T. McDonald Title: Chief Executive Officer and PresidentSignature Page to Consent and First Amendment under Credit AgreementSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. WELLS FARGO BANK, NATIONAL ASSOCIATION, anational banking association, as Agent and as a LenderBy: Name: Title: WELLS FARGO CAPITAL FINANCE CORPORATIONCANADA, an Ontario corporation, as a LenderBy: Name: Title: Signature Page to Consent and First Amendment under Credit AgreementSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT AFirst Amendment to Warrants to Purchase StockSee Attached.Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.FIRST AMENDMENT TO WARRANTS TO PURCHASE STOCKThis First Amendment to Warrants to Purchase Stock (this “Amendment”) is made as of day of August, 2015 by and betweenUpland Software, Inc., a Delaware corporation (the “Company”), and Comerica Ventures Incorporated, a California Corporation, theholder of the Warrants (as hereinafter defined) (the “Holder”).A. The Holder is the holder of certain Warrants to Purchase Stock dated February 10, 2012, March 5, 2012, and April 11,2013 (collectively the “Warrants”) by assignment from its affiliate, Comerica Bank, a Texas banking association;B. The Holder and the Company wish to amend the Warrants in order to modify the method in which the Warrants may beexercised by the Holder; andC. Capitalized terms not otherwise defined herein shall have the respective meanings ascribed thereto in the Warrants.NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged, the parties mutually agree as follows:1. Amendment. Section 1.1 of each of the Warrants is hereby amended and restated in its entirety to read as follows:“Method of Exercise. Holder may exercise this Warrant by a duly executed Notice of Exercise in substantially the formattached as Appendix I to the principal office of the Company (or such other appropriate location as Holder is so instructed bythe Company). Payment of the aggregate Warrant Price for the Shares being purchased shall be made, at the option of theHolder, by the following methods: (i) by delivery to the Company of a check, wire transfer (to an account designated by theCompany) or other form of payment acceptable to the Company; (ii) by instructing the Company to withhold a number ofShares then issuable upon exercise of this Warrant with an aggregate Fair Market Value as of the date of delivery of the Noticeof Exercise equal to such aggregate Warrant Price; or (iii) any combination of the foregoing. In the event of any withholding ofShares pursuant to clause (ii) or (iii) above where the number of Shares whose value is equal to the aggregate Warrant Price forthe Shares being purchased is not a whole number, the number of Shares withheld by or surrendered to the Company shall berounded up to the nearest whole Share and the Company shall make a cash payment to the Holder (by delivery of a check orby wire transfer of immediately available funds) based on the incremental fraction of a Share being so withheld by orsurrendered to the Company in an amount equal to the product of (x) such incremental fraction of a Share being so withheld orSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.surrendered multiplied by (y) the Fair Market Value per Share as of the date of delivery of the Notice of Exercise.For the purpose of this Warrant, “Fair Market Value” means, as of any particular date: (a) the volume weighted average of theclosing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock mayat the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the averageof the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on anysuch day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock asquoted on the Nasdaq Stock Market, Inc. (“Nasdaq”), the National Association of Securities Dealers, Inc. OTC Bulletin Board(“OTC Bulletin Board”) or similar quotation system or association for such day; or (d) if there have been no sales of theCommon Stock on Nasdaq, the OTC Bulletin Board or similar quotation system or association on such day, the average of thehighest bid and lowest asked prices for the Common Stock quoted on Nasdaq, the OTC Bulletin Board or similar quotationsystem or association at the end of such day. If at any time the Common Stock is not listed on any domestic securities exchangeor quoted on Nasdaq, the OTC Bulletin Board or similar quotation system or association, the “Fair Market Value” of theCommon Stock shall be the fair market value per share as determined jointly by the Company’s board of directors and theHolder.2. No Other Amendments. Except as amended hereby, the Warrants each remain in full force and effect in accordance its originalterms.3. Miscellaneous.a. Severability. If one or more provisions of this Amendment are held to be unenforceable under applicable law, such provisionshall be excluded from this Amendment and the balance of the Amendment shall be interpreted as if such provision were so excludedand shall be enforceable in accordance with its terms.b. Counterparts. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original,but all of which together shall constitute one and the same instrument.c. Entire Agreement. The Warrants, as amended by this Amendment, each constitutes the entire agreement of the parties withregard to the subject matter hereof and supersedes any prior oral or written agreements or understandings.d. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State ofCalifornia, without regard to the conflicts of law provisions of the State of California or any other state.[Signature Page Follows]2Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.IN WITNESS WHEREOF, the parties have executed this First Amendment to Warrants to Purchase Stock as of the date firstabove written.THE COMPANY:Upland Software, Inc.By: Name:Title:HOLDER:Comerica Ventures IncorporatedBy: Name:Title:SIGNATURE PAGE TO FIRST AMENDMENT TO WARRANT TO PURCHASE STOCKSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.CONSENT AND SECOND AMENDMENT TO CREDIT AGREEMENTThis CONSENT AND SECOND AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered intoas of April 25, 2016, by and among WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, asadministrative agent and collateral agent for each member of the Lender Group and the Bank Product Providers (in such capacities,together with its successors and assigns in such capacities, “Agent”) and as United States administrative agent for each member of theLender Group and the Bank Product Providers (in such capacity, together with its successors and assigns in such capacity, “USAgent”), WELLS FARGO CAPITAL FINANCE CORPORATION CANADA, an Ontario corporation, as Canadian administrativeagent for each member of the Lender Group and the Bank Product Providers (in such capacity, together with its successors and assignsin such capacity, “Canadian Agent”), the Lenders (as defined in the Credit Agreement as defined below) party hereto, UplandSoftware, Inc., a Delaware corporation (“Parent”), each subsidiary of Parent identified on the signature pages hereof as a “USBorrower” (collectively, the “US Borrowers”) and Upland Software Inc., a Canadian federal corporation (“Upland CAD”; collectivelywith Parent and US Borrowers each, a “Borrower” and collectively, the “Borrowers”).WHEREAS, the Borrowers, Agent, US Agent, Canadian Agent and the Lenders are parties to that certain CreditAgreement dated as of May 14, 2015 (as amended, restated, modified or supplemented from time to time, the “Credit Agreement”);WHEREAS, the Borrowers have advised Agent that the US Borrowers desire to make a Delayed Term Loan Drawpursuant to Section 2.14 of the Credit Agreement in an amount equal to $10,000,000 on the date hereof (the “Specified DDTL Draw”)for working capital, capital expenditures and general corporate needs (the “Specified Purposes”);WHEREAS, pursuant to Section 2.14(b) of the Credit Agreement, Administrative Borrower is required to deliver toAgent a Delayed Draw Term Loan Notice not later than ten (10) Business Days prior to the Delayed Draw Term Loan Funding Dateof any proposed Delayed Term Loan Draw (the “Required Notice of Borrowing”);WHEREAS, Borrowers have provided Agent with the Required Notice of Borrowing less than ten (10) days prior tothe requested Delayed Draw Term Loan Funding Date with respect to the proposed Specified DDTL Draw;WHEREAS, the Specified Purposes constitute a usage of proceeds that without requisite Lender consent wouldotherwise constitute a breach of Section 6.11 of the Credit Agreement, resulting in an Event of Default under Section 8.2(a) of theCredit Agreement;WHEREAS, the Borrowers have requested that Agent and the Required Lenders (a) consent to (i) AdministrativeBorrower’s delivery of the Required Notice of Borrowing less than ten (10) Business Days prior to the Delayed Draw Term LoanFunding Date solely with respect to the Specified DDTL Draw and (ii) the usage by US Borrowers of the proceeds of the SpecifiedDDTL Draw for the Specified Purposes, and (b) amend the Credit Agreement in certain respects; and1Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.WHEREAS, Agent and the Required Lenders have agreed to the foregoing, in each case, subject to the terms andconditions contained herein.NOW THEREFORE, in consideration of the premises and mutual agreements herein contained, the parties heretoagree as follows:1.Defined Terms. Unless otherwise defined herein, capitalized terms used herein and not otherwise defined shallhave the meanings ascribed to such terms in the Credit Agreement.2. Consent. In reliance upon the representations and warranties of each Borrower set forth in Section 7 below andsubject to the satisfaction of the conditions to effectiveness set forth in Section 6 below, the undersigned Lenders, constituting RequiredLenders pursuant to the Credit Agreement, hereby consent to:(a)Administrative Borrower’s delivery of the Required Notice of Borrowing less than ten (10) Business Days priorto the Delayed Draw Term Loan Funding Date solely with respect to the Delayed Term Loan Draw constituting the Specified DDTLDraw; and(b) the usage by US Borrowers of the proceeds of the Specified DDTL Draw for the Specified Purposes.Except as expressly set forth herein, the foregoing consents are_ limited consents and shall not constitute (i) amodification or alteration of the terms, conditions- or covenants of the Credit Agreement or any other Loan Document or (ii) a waiver,release or limitation upon the exercise by Agent and/or Lenders of any of their respective rights, legal or equitable thereunder.3. Amendments to Credit Agreement. In reliance upon the representations and warranties of each Borrower set forth inSection 7 below and subject to the satisfaction of the conditions to effectiveness set forth in Section 6 below, the Credit Agreementshall be amended as follows:(a) Section 2.14(a) of the Credit Agreement is hereby amended to delete the reference therein to “Delayed Draw TermLoan Draw” and insert in lieu thereof a reference to “Delayed Term Loan Draw”.(b) Clause (b) of the definition of “Permitted Acquisition” set forth on Schedule 1.1 to the Credit Agreement is herebyamended and restated in its entirety as follows:(b) no Indebtedness will be incurred, assumed, or would exist with respect to Parent or its Subsidiaries as aresult of such Acquisition, other than Indebtedness permitted under clauses (a), (f), (g), (m) or (n) of the definition ofPermitted Indebtedness, and no Liens will be incurred, assumed, or would exist with respect to the assets of Parent or itsSubsidiaries as a result of such Acquisition other than Permitted Liens,2Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(c) Clause (g) of the definition of “Permitted Acquisition” set forth on Schedule 1.1 to the Credit Agreement is herebyamended and restated in its entirety as follows:(g) Administrative Borrower has provided Agent with (i) written notice of the proposed Acquisition at least 10Business Days prior to the anticipated closing date of the proposed Acquisition, (ii) not later than 5 Business Days priorto the anticipated closing date of the proposed Acquisition, then-current drafts of the acquisition agreement and othermaterial documents relative to the proposed Acquisition, which agreement and documents must be reasonablyacceptable to Agent, (iii) not later than the Business Day prior to the anticipated closing date of the proposedAcquisition, copies of executed or execution versions of the acquisition agreement and other material documentsrelative to the proposed Acquisition, which agreement and documents must be reasonably acceptable to Agent, and (iv)to the extent not previously delivered, on the closing date of the proposed Acquisition, copies of the executedacquisition agreement and other material documents relative to the proposed Acquisition, which agreement anddocuments must be reasonably acceptable to Agent,(d) Clause (v) of the definition of “Permitted Indebtedness” set forth on Schedule 1.1 to the Credit Agreement ishereby amended and restated in its entirety as follows:(v) Indebtedness of Advanced Processing & Imaging, Inc. owing to Pacific Western Bank in an aggregateoutstanding amount not to exceed $30,000 at any one time in respect of credit cards, credit card processing services,debit cards, stored value cards, commercial cards (including so-called “purchase cards”, “procurement cards” or “p-cards”) pursuant to that certain Square 1 Bank Mastercard® Business Credit Card Application and MasterCard®Business Credit Card Agreement, executed on or about June 17, 2013, and(e) Clause (u) of the definition of Permitted Liens” set forth on Schedule 1.1 to the Credit Agreement is herebyamended and restated in its entirety as follows:(u) Solely during the period commencing on the Second Amendment Effective Date and ending on the date thatis the 120th day after the Second Amendment Effective Date, Liens in favor of Pacific Western Bank on cash collateralin an amount not to exceed $30,000, securing Indebtedness permitted pursuant to clause (v) of the definition ofPermitted Indebtedness,4. Schedule 1.1 to the Credit Agreement is hereby amended by adding the following defined term in alphabeticalorder:“Second Amendment Effective Date” means April 25, 2016.5. Continuing Effect. Except as expressly set forth in Sections 2 and 3 of this Amendment, nothing in this Amendmentshall constitute a waiver or other modification of any other terms or provisions of the Credit Agreement or any other Loan Document,and the Credit Agreement3Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.and the other Loan Documents shall remain unchanged and shall continue in full force and effect, in each case as amended hereby.This Amendment is a Loan Document.6. Reaffirmation and Confirmation. Each Borrower hereby ratifies, affirms, acknowledges and agrees that the CreditAgreement and the other Loan Documents to which it is a party represent the valid, enforceable and collectible obligations of suchBorrower, and further acknowledges that there are no existing claims, defenses, personal or otherwise, or rights of setoff whatsoeverwith respect to the Credit Agreement or any other Loan Document as of the date hereof. Each Borrower hereby agrees that thisAmendment in no way acts as a release or relinquishment of the Liens and rights securing payments of the Obligations. The Liens andrights securing payment of the Obligations are hereby ratified and confirmed by each Borrower in all respects.7. Conditions to Effectiveness. This Amendment shall become effective upon the satisfaction of each of the followingconditions precedent, in each case satisfactory to Agent in AI respects:(a) Agent shall have received a copy of this Amendment executed and delivered by Required Lenders, and eachBorrower; and(b) no Default or Event of Default shall have occurred and be continuing on the date thereof or as of the date of theeffectiveness of this Amendment.8. Representations and Warranties. In order to induce Agent and Lenders to enter in this Amendment, each Borrowerhereby represents and warrants to Agent and Lenders that:(a) after giving effect to this Amendment, all representations and warranties contained in the Loan Documents towhich such Borrower is a party are true and correct in all material respects (except that such materiality qualifier shall not be applicableto any representations and warranties that already are qualified or modified by materiality in the text thereof) on and as of the date ofthis Amendment, as though made on and as of such date (except to the extent that such representations and warranties relate solely toan earlier date, in which case such representations and warranties shall be true and correct in all material respects (except the suchmateriality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality inthe text thereof) on and as of such earlier date);(b) no Default or Event of Default has occurred and is continuing; and(c) this Amendment and the Loan Documents, as amended hereby, constitute legal, valid and binding obligations ofsuch Borrower and are enforceable against such Borrower in accordance with their respective terms, except as enforcement may belimited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limitingcreditors’ rights generally.9. Miscellaneous.4Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(a) Choice of Law and Venue; Jury Trial Waiver; Reference Provision. Without limiting the applicability of any otherprovision of the Credit Agreement or any other Loan Document, the terms and provisions set forth in Section 12 of the CreditAgreement are expressly incorporated herein by reference.(b) Counterparts. This Amendment may be executed in any number of counterparts, and by the parties hereto on thesame or separate counterparts, and each such counterpart, when executed and delivered, shall be deemed to be an original, but all suchcounterparts shall together constitute but one and the same Amendment.10. Release.(a) In consideration of the agreements of Agent and Lenders contained herein and for other good and valuableconsideration, the receipt and sufficiency of which is hereby acknowledged, each Borrower, on behalf of itself and its successors,assigns, and other legal representatives (each Borrower and all such other Persons being hereinafter referred to collectively as the“Releasors” and individually as a “Releasor”), hereby absolutely, unconditionally and irrevocably releases, remises and foreverdischarges Agent and Lenders, and their successors and assigns, and their present and former shareholders, affiliates, subsidiaries,divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives (Agent, each Lender and all suchother Persons being hereinafter referred to collectively as the “Releasees” and individually as a “Releasee”), of and from all demands,actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings,damages and any and all other claims, counterclaims, defenses, rights of set-off, demands and liabilities whatsoever (individually, a“Claim” and collectively, “Claims”) of every name and nature, known or unknown, suspected or unsuspected, both at law and inequity, which any Releasor may now own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason ofany circumstance, action, cause or thing whatsoever which arises at any time on or prior to the day and date of this Amendment, in anyway related to or in connection with the Credit Agreement, or any of the other Loan Documents or transactions thereunder or relatedthereto.(b) Each Borrower understands, acknowledges and agrees that the release set forth above may be pleaded as a full andcomplete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted,prosecuted or attempted in breach of the provisions of such release.(c) Each Borrower agrees that no fact, event, circumstance, evidence or transaction which could now be asserted orwhich may hereafter be discovered shall affect in any manner the final, absolute and unconditional nature of the release set forth above.[Signature Page Follows]5Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officersthereunto duly authorized and delivered as of the date first above written.PARENT AND A US BORROWER: UPLAND SOFTWARE, INC.,A Delaware corporationBy: Name: Michael D. HillTitle: Chief Financial Officer, Treasurer, Secretary US BORROWERS: UPLAND SOFTWARE I, INC.,a Delaware corporationBy: Name: Michael D. HillTitle: Assistant Secretary UPLAND SOFTWARE II, INC.,a Delaware corporationBy: Name: Michael D. HillTitle: Assistant Secretary UPLAND SOFTWARE III, LLC,a Delaware limited liability companyBy: Name: Michael D. HillTitle: Assistant SecretarySignature Page to Consent and Second Amendment to Credit AgreementSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. UPLAND SOFTWARE IV, INC.,a Nebraska corporationBy: Name: Michael D. HillTitle: Assistant Secretary UPLAND SOFTWARE V, INC.,a Delaware corporationBy: Name: Michael D. HillTitle: Assistant Secretary UPLAND SOFTWARE VI, LLC,a New Jersey limited liability companyBy: Name: Michael D. HillTitle: Assistant Secretary UPLAND SOFTWARE VII, INC.,a Delaware corporationBy: Name: Michael D. HillTitle: Assistant Secretary UPLAND SOFTWARE IX, LLC,a Delaware limited liability companyBy: Name: Michael D. HillTitle: SecretarySignature Page to Consent and Second Amendment to Credit AgreementSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ULTRIVA, INC.,a California corporationBy: Name: Michael D. HillTitle: SecretarySignature Page to Consent and Second Amendment to Credit AgreementSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CANADIAN BORROWER: UPLAND SOFTWARE, INC.,a Canadian federal corporationBy: Name: Michael D. HillTitle: SecretarySignature Page to Consent and Second Amendment to Credit AgreementSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. WELLS FARGO BANK, NATIONAL ASSOCIATION, a nationalbanking association, as Agent, US Agent and as a LenderBy: Name: Tiffany OrmonTitle: Director WELLS FARGO CAPITAL FINANCE CORPORATION CANADA,an Ontario corporation, as Canadian Agent and as a LenderBy: Name: Title: Signature Page to Consent and Second Amendment to Credit AgreementSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. WELLS FARGO BANK, NATIONAL ASSOCIATION, a nationalbanking association, as Agent, US Agent and as a LenderBy: Name: Tiffany OrmonTitle: Director WELLS FARGO CAPITAL FINANCE CORPORATION CANADA,an Ontario corporation, as Canadian Agent and as a LenderBy: Name: Title: Signature Page to Consent and Second Amendment to Credit AgreementSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.THIRD AMENDMENT TO CREDIT AGREEMENTThis THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into as of November 15,2016, by and among WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as administrativeagent and collateral agent for each member of the Lender Group and the Bank Product Providers (in such capacities, together with itssuccessors and assigns in such capacities, "Agent") and as United States administrative agent for each member of the Lender Groupand the Bank Product Providers (in such capacity, together with its successors and assigns in such capacity, "US Agent"), WELLSFARGO CAPITAL FINANCE CORPORATION CANADA, an Ontario corporation, as Canadian administrative agent for eachmember of the Lender Group and the Bank Product Providers (in such capacity, together with its successors and assigns in suchcapacity, "Canadian Agent"), the Lenders (as defined in the Credit Agreement as defined below) party hereto, UPLANDSOFTWARE, INC., a Delaware corporation ("Parent"), each subsidiary of Parent identified on the signature pages hereof as a "USBorrower" (collectively, the "US Borrowers"), UPLAND SOFTWARE INC. / LOGICIELS UPLAND INC., a Canadian federalcorporation ("Upland CAD"; collectively with Parent and US Borrowers each, a "Borrower" and collectively, the "Borrowers") andCIT BANK, N.A. ("New Lender").WHEREAS, the Borrowers, Agent, US Agent, Canadian Agent and the Lenders are parties to that certain CreditAgreement dated as of May 14, 2015 (as amended, restated, modified or supplemented from time to time, the "Credit Agreement");WHEREAS, New Lender has agreed to join the Credit Agreement as a Lender;WHEREAS, the Borrowers have requested that Agent and the Lenders amend the Credit Agreement in certain respectsas provided herein; andWHEREAS, Agent and the Lenders have agreed to the foregoing, in each case, subject to the terms and conditionscontained herein.NOW THEREFORE, in consideration of the premises and mutual agreements herein contained, the parties heretoagree as follows:1. Defined Terms. Unless otherwise defined herein, capitalized terms used herein and not otherwise defined shall havethe meanings ascribed to such terms in the Credit Agreement.2. Joinder of New Lender; Reallocation.(a) New Lender (i) hereby joins the Credit Agreement as a Lender and shall have the rights and obligations of aLender under the Loan Documents; (ii) represents and warrants that it is legally authorized to enter into this Amendment and the CreditAgreement; (iii) confirms that it has received copies of the Credit Agreement and the other Loan Documents, together with copies ofthe financial statements referred to therein and such other documents and information as it hasSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.deemed appropriate to make its own credit analysis and decision to enter into this Amendment; (iv) agrees that it will, independentlyand without reliance upon Agent or any other Lender, based upon such documents and information as it shall deem appropriate at thetime, continue to make its own credit decisions in taking or not taking any action under the Loan Documents; (v) appoints andauthorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegatedto Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (vi) agrees that it will perform inaccordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as aLender; and (vii) confirms that prior to the date hereof, it has delivered to the Agent and the Administrative Borrower the formsprescribed by the Internal Revenue Service of the United States certifying New Lender’s status for purposes of determining exemptionfrom United States withholding taxes with respect to all payments to be made to New Lender under the Credit Agreement.(a) In connection herewith, the Revolver Commitments will be allocated to Wells Fargo Bank, National Association,as a Lender, and New Lender in the amounts set forth on the attached Exhibit A. New Lender agrees to make settlement payments toAgent as provided in the Credit Agreement, such that after giving effect to the making of such settlement payments, each Lender'sshare of the outstanding US Revolver Usage shall equal such Lender's Pro Rata Share. Nothing contained herein shall constitute anovation of any Obligation.(b) Wells Fargo Bank, National Association, and CIT Bank, N.A., are each hereby appointed as Joint Lead Arrangersand Joint Syndication Agents.3. Amendments to Credit Agreement. In reliance upon the representations and warranties of each Borrower set forth inSection 7 below and subject to the satisfaction of the conditions to effectiveness set forth in Section 6 below, the Credit Agreementshall be amended as follows:(a) Section 2.1(a)(ii)(B)(3) is hereby amended and restated in its entirety as follows:"the sum of (I) the Canadian Letter of Credit Usage at such time, plus (II) the principal amount of Canadian RevolvingLoans (including Canadian Swing Loans) outstanding at such time plus (III) the principal amount of Canadian Term Loansoutstanding at such time."(b) Section 2.1(b)(ii)(B)(3) is hereby amended and restated in its entirety as follows:"the sum of (I) the US Letter of Credit Usage at such time, plus (II) the principal amount of US Revolving Loans(including US Swing Loans) outstanding at such time, plus (III) the principal amount of US Term Loans outstanding at suchtime."-2-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(c) Section 2.2(a) of the Credit Agreement is hereby amended and restated in its entirety as follows:(a) Subject to the terms and conditions of this Agreement, on the Closing Date the Lenders with a US Term LoanCommitment (as of the Closing Date) made a term loan to the US Borrowers in the original principal amount of $19,000,000and on April 25, 2016, the Lenders with a Delayed Draw Term Loan Commitment (as of April 25, 2016) made a DelayedDraw Term Loan to the US Borrowers in the original principal amount of $10,000,000. Immediately prior to the effectivenessof the Third Amendment as of the Third Amendment Closing Date, the outstanding principal balance of the US Term Loanmade under and as defined in this Agreement was $27,687,500 (the "Original US Term Loan"). Subject to the terms andconditions of this Agreement and the Third Amendment, the Lenders agree (severally, not jointly or jointly and severally) tomake additional term loans in Dollars to the US Borrowers on the Third Amendment Closing Date in an aggregate originalprincipal amount of $16,687,500 (together with the Original US Term Loan, the "US Term Loan"). Each Lender's obligationto fund the portion of the US Term Loan to be funded on the Third Amendment Closing Date shall be limited to the amount setforth in footnote 1 on Schedule C-1 as the amount funded by it on the Third Amendment Closing Date.-3-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(d) The table set forth in Section 2.2(b) of the Credit Agreement is hereby amended and restated in its entirety asfollows:DateInstallment AmountDecember 31, 2016$554,687.50March 31, 2017$554,687.50June 30, 2017$554,687.50September 30, 2017$554,687.50December 31, 2017$554,687.50March 31, 2018$554,687.50June 30, 2018$554,687.50September 30, 2018$554,687.50December 31, 2018$554,687.50March 31, 2019$554,687.50June 30, 2019$554,687.50September 30, 2019$554,687.50December 31, 2019$554,687.50March 31, 2020$554,687.50June 30, 2020$554,687.50September 30, 2020$554,687.50December 31, 2020$554,687.50March 31, 2021$554,687.50June 30, 2021$554,687.50September 30, 2021$554,687.50-4-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(e) The table set forth in Section 2.2(d) of the Credit Agreement is hereby amended and restated in its entirety asfollows:DateInstallment AmountDecember 31, 2016$75,000March 31, 2017$75,000June 30, 2017$75,000September 30, 2017$75,000December 31, 2017$75,000March 31, 2018$75,000June 30, 2018$75,000September 30, 2018$75,000December 31, 2018$75,000March 31, 2019$75,000June 30, 2019$75,000September 30, 2019$75,000December 31, 2019$75,000March 31, 2020$75,000June 30, 2020$75,000September 30, 2020$75,000December 31, 2020$75,000March 31, 2021$75,000June 30, 2021$75,000September 30, 2021$75,000(f) Section 2.14(a) of the Credit Agreement is hereby amended and restated in its entirety as follows:(a) Subject to the terms and conditions of this Agreement, at the election of and on a date (which shall be a BusinessDay) identified by Administrative Borrower after the Third Amendment Closing Date but prior to the Delayed Draw TermLoan Commitment Termination Date, each Lender with a Delayed Draw Term Loan Commitment agrees (severally, not jointlyor jointly and severally) to make a delayed draw term loan in Dollars to US Borrowers (each such advance a "Delayed TermLoan Draw" and collectively, the "Delayed Draw Term Loan") in an amount equal to such Lender's Pro Rata Share of theDelayed Draw Term Loan Amount; provided, that (a) the aggregate principal amount of each Delayed Draw Term Loan Drawshall not be less than $2,500,000, and, in any event, shall be in an amount which is an integral multiple of $500,000, (b) aftergiving effect to any such Delayed Term Loan Draw, the aggregate original principal amount of the Delayed Term Loan Drawsshall not exceed the Delayed Draw Term Loan Amount, (c) the conditions precedent set forth in Section 3 shall have beensatisfied, and (d) Borrowers have-5-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.delivered to Agent an updated pro forma certified calculation of the Leverage Ratio (after giving effect to the borrowing of theapplicable Delayed Draw Term Loan) for the most recently ended fiscal quarter for which financial statements have beenreceived pursuant to Section 5.1, and such Leverage Ratio is not greater than (i) with respect to any Delayed Term Loan Drawadvanced on or before December 31, 2016, 4.25:1.0 and (ii) with respect to any Delayed Term Loan Draw advanced on orafter January 1, 2017, the required Leverage Ratio for the applicable period set forth in Section 7(b).(g) Section 2.15(a) of the Credit Agreement is hereby amended and restated in its entirety as follows:(a) At any time during the period from and after the Third Amendment Closing Date through but excluding the datethat is the 4 year anniversary of the Third Amendment Closing Date, at the option of Administrative Borrower (but subject tothe conditions set forth in clause (b) below), the US Term Loan Amount and/or the Canadian Term Loan Amount may beincreased by an amount in the aggregate for all such increases of the US Term Loan Amount and the Canadian Term Loan notto exceed the Available Increase Amount (each such increase, an "Increase"). Agent shall invite each applicable Lender toincrease its Pro Rata Share of the US Term Loan Amount or the Canadian Term Loan Amount (as the case may be) (it beingunderstood that no Lender shall be obligated to increase its Pro Rata Share of the US Term Loan Amount or the CanadianTerm Loan Amount) in connection with a proposed Increase at the interest margin proposed by applicable Borrowers, and ifsufficient Lenders do not agree to increase their Pro Rata Share of the US Term Loan Amount or the Canadian Term LoanAmount (as the case may be) in connection with such proposed Increase, then Applicable Agent or applicable Borrowers mayinvite any prospective lender who is reasonably satisfactory to Applicable Agent and applicable Borrowers to become a Lenderin connection with a proposed Increase. Any Increase shall be in an amount of at least $5,000,000 and integral multiples of$1,000,000 in excess thereof. In no event may the US Term Loan Amount and the Canadian Term Loan Amount be increasedon or after the Third Amendment Closing Date pursuant to this Section 2.15 on more than 2 occasions in the aggregate for allsuch Increases. Additionally, for the avoidance of doubt, it is understood and agreed that in no event shall the Dollar Equivalentof the aggregate amount of the Increases to the US Term Loan Amount and the Canadian Term Loan Amount exceed$20,000,000.(h) Section 2.15(b)(iii) of the Credit Agreement is hereby amended and restated in its entirety as follows:(iii) (A) Borrowers have delivered to Agent updated pro forma Projections (after giving effect to the applicableIncrease) for Parent and its Subsidiaries evidencing compliance on a pro forma basis with Section 7 for the 4 fiscal quarters (ona quarter-by-quarter basis) immediately following the proposed date of the-6-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.applicable Increase, (B) Borrowers have delivered to Agent an updated pro forma certified calculation of the Leverage Ratio(after giving effect to the applicable Increase) for the most recently ended fiscal quarter for which financial statements havebeen received pursuant to Section 5.1, and such Leverage Ratio is not greater than the lesser of (i) 4.25:1.0 and (ii) the requiredLeverage Ratio for the applicable period set forth Section 7(b) less 0.25, and (C) Borrowers have delivered to Agent anupdated pro forma certified calculation of the Recurring Revenue Ratio (after giving effect to the applicable Increase) for themost recently ended fiscal quarter for which financial statements have been received pursuant to Section 5.1, and suchRecurring Revenue Ratio is not greater than 1.00:1.0, and(i) Section 2.15(c) of the Credit Agreement is hereby amended to (i) delete the reference therein to "September 30,2015" and insert in lieu thereof a reference to "December 31, 2016" and (ii) delete the reference therein to "March 31, 2020" and insertin lieu thereof a reference to "September 30, 2021".(j) Section 2.15(d) of the Credit Agreement is hereby amended to (i) delete the reference therein to "September 30,2015" and insert in lieu thereof a reference to "December 31, 2016" and (ii) delete the reference therein to "March 31, 2020" and insertin lieu thereof a reference to "September 30, 2021".(k) Section 5.14 of the Credit Agreement is hereby amended and restated in its entirety as follows:Bank Products. On and after the Third Amendment Closing Date, the Loan Parties shall (i) maintain a depositoryrelationship in the United States with Wells Fargo or one or more of its Affiliates, (ii) maintain their primary treasurymanagement relationships in the United States with Wells Fargo or one or more of its Affiliates and (iii) maintain suchdepository and primary treasury management relationships at all times during the term of the Agreement; provided that nothingin the foregoing shall prohibit the Loan Parties from maintaining depository relationships with any other financial institutionincluding one or more Lenders or their respective Affiliates.(l) Section 5.15 of the Credit Agreement is hereby amended and restated in its entirety as follows:Hedge Agreements. For so long as any lender party hereto is a Lender, during the term of this Agreement, the LoanParties shall offer such Lender, or one or more of its Affiliates, the first opportunity to bid all interest rate protection, currencyhedge agreements, foreign exchange agreements, or commodity hedge agreements to be entered into by any Borrower or oneof its Subsidiaries.(m) Section 6.7(a) of the Credit Agreement is hereby amended to delete the reference therein to "$500,000" and insertin lieu thereof a reference to "$830,000".-7-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(n) Section 6.7(f) of the Credit Agreement is hereby amended to delete the reference therein to "$5,000,000" andinsert in lieu thereof a reference to "$8,300,000".(o) Section 7(a) of the Credit Agreement is hereby amended and restated in its entirety as follows:(a) Fixed Charge Coverage Ratio. Have a Fixed Charge Coverage Ratio, measured on each March 31, June 30,September 30 and December 31 of at least 1.25 to 1.00 for the 4 quarter period ending on each such date.(p) Section 7(b) of the Credit Agreement is hereby amended and restated in its entirety as follows:(b) Leverage Ratio. Have a Leverage Ratio, measured on a quarter-end basis, of not greater than the applicable ratioset forth in the following table for the applicable date set forth opposite thereto:Applicable DateApplicable RatioDecember 31, 20164.50 to 1.00March 31, 20174.25 to 1.00June 30, 20174.00 to 1.00September 30, 20173.75 to 1.00December 31, 20173.50 to 1.00March 31, 20183.25 to 1.00June 30, 20183.00 to 1.00September 30, 20183.00 to 1.00December 31, 20183.00 to 1.00March 31, 20192.85 to 1.00June 30, 20192.50 to 1.00September 30, 20192.50 to 1.00December 31, 20192.25 to 1.00March 31, 20202.25 to 1.00June 30, 2020 and each September 30,December 31 and March 31 thereafter2.00 to 1.00-8-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(q) The definition of "Applicable Credit Amount Percentage" set forth on Schedule 1.1 to the Credit Agreement ishereby amended and restated in its entirety as follows:"Applicable Credit Amount Percentage" means the percentage set forth in the following table for the applicable periodset forth opposite thereto:Applicable PeriodApplicable Credit Amount PercentageFrom the Third Amendment Closing Date through December 30,2016100.00%December 31, 2016 through March 30, 201798.80%March 31, 2017 through June 29, 201797.50%June 30, 2017 through September 29, 201796.30%September 30, 2017 through December 30, 201795.00%December 31, 2017 through March 30, 201893.80%March 31, 2018 through June 29, 201892.50%June 30, 2018 through September 29, 201891.30%September 30, 2018 through December 30, 201890.00%December 31, 2018 through March 30, 201988.80%March 31, 2019 through June 29, 201987.50%June 30, 2019 through September 29, 201986.30%September 30, 2019 through December 30, 201985.00%December 31, 2019 through March 30, 202083.80%March 31, 2020 through the June 29, 202082.50%June 30, 2020 through September 29, 202081.30%September 30, 2020 through the Maturity Date80.00%(r) The definition of "Applicable Margin" set forth on Schedule 1.1 to the Credit Agreement is hereby amended todelete the reference therein to "December 31, 2015" and insert in lieu thereof a reference to "March 31, 2017".(s) The definition of "Available Increase Amount" set forth on Schedule 1.1 to the Credit Agreement is herebyamended to delete the reference therein to "$15,000,000" and insert in lieu thereof a reference to "$20,000,000".(t) The definition of "Delayed Draw Term Loan Commitment Termination Date" is hereby amended to delete thereference therein to "May 14, 2017" and insert in lieu thereof a reference to "November 15, 2018".(u) The definition of "EBITDA" set forth on Schedule 1.1 to the Credit Agreement is hereby amended to (i) delete thereference to "and" at the end of clause (c)(xv) thereof,-9-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(ii) insert a reference to "and" at the end of clause (c)(xvi) and (iii) add a new clause (c)(xvii) thereto as follows:(xvii) costs, fees, charges and expenses, in respect of restructuring items for reductions in force occurring on or beforeNovember 30, 2016, in an amount equal to (A) $2,404,993 for the 12 month period ending on September 30, 2016, (B)$1,505,113 for the 12 month period ending on December 31, 2016 and (C) $557,732 for the 12 month period ending on March31, 2017,(v) The paragraph at the end of the definition of "EBITDA" set forth on Schedule 1.1 to the Credit Agreement ishereby amended and restated in its entirety as follows:For the purposes of calculating EBITDA for any period of 4 consecutive fiscal quarters (each, a "Reference Period"),(a) if at any time during such Reference Period (and after the Closing Date), Parent or any of its Subsidiaries shall have made aPermitted Acquisition, EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto (includingpro forma adjustments arising out of events which are directly attributable to such Permitted Acquisition, are factuallysupportable, and are expected to have a continuing impact, in each case to be mutually and reasonably agreed upon by Parentand Agent) or in such other manner acceptable to Agent as if any such Permitted Acquisition or adjustment occurred on thefirst day of such Reference Period, and (b) EBITDA for the fiscal quarter ended December 31, 2015, shall be deemed to be$2,727,865, (c) EBITDA for the fiscal quarter ended March 31, 2016, shall be deemed to be $2,374,204, and (d) EBITDA forthe fiscal quarter ended June 30, 2016, shall be deemed to be $2,785,205.(w) The definition of "Fee Letter" set forth on Schedule 1.1 to the Credit Agreement is hereby amended and restatedin its entirety as follows:"Fee Letter" means that certain amended and restated fee letter dated as of the Third Amendment Closing Date betweenBorrowers and Agent, in form and substance satisfactory to Agent.(x) The definition of "Maturity Date" set forth on Schedule 1.1 to the Credit Agreement is hereby amended andrestated in its entirety as follows:"Maturity Date" means November 15, 2021.(y) Clause (g) of the definition of "Permitted Indebtedness" set forth on Schedule 1.1 to the Credit Agreement ishereby amended to delete the reference therein to "$500,000" and insert in lieu thereof a reference to "$830,000".(z) Clause (l) of the definition of "Permitted Indebtedness" set forth on Schedule 1.1 to the Credit Agreement is herebyamended to delete the reference therein to "$500,000" and insert in lieu thereof a reference to "$830,000".-10-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(aa) Clause (m) of the definition of "Permitted Indebtedness" set forth on Schedule 1.1 to the Credit Agreement ishereby amended to delete the reference therein to "$10,000,000" and insert in lieu thereof a reference to "$16,700,000".(bb) The definition of "US Term Loan Amount" is hereby amended by deleting the reference therein to"$19,000,000" and inserting in lieu thereof a reference to "$44,375,000".(cc) Schedule 1.1 to the Credit Agreement is hereby amended by adding the following defined terms in alphabeticalorder:"Original US Term Loan" has the meaning specified therefor in Section 2.2(a) of the Agreement."Recurring Revenue Ratio" means, as of any date of determination, the ratio of (a) Funded Indebtedness as of such dateto (b) TTM Recurring Revenue."Third Amendment" means that certain Third Amendment to Credit Agreement, dated as of the Third AmendmentClosing Date, by and among the Borrowers, Agent and the Lenders party thereto."Third Amendment Closing Date" means November 15, 2016.(dd) Schedule C-1 to the Credit Agreement is hereby amended and restated in its entirety as set forth on Exhibit Aattached hereto.4. Continuing Effect. Except as expressly set forth in Sections 2 and 3 of this Amendment, nothing in this Amendmentshall constitute a waiver or other modification of any other terms or provisions of the Credit Agreement or any other Loan Document,and the Credit Agreement and the other Loan Documents shall remain unchanged and shall continue in full force and effect, in eachcase as amended hereby. This Amendment is a Loan Document.5. Reaffirmation and Confirmation. Each Borrower hereby ratifies, affirms, acknowledges and agrees that the CreditAgreement and the other Loan Documents to which it is a party represent the valid, enforceable and collectible obligations of suchBorrower, and further acknowledges that there are no existing claims, defenses, personal or otherwise, or rights of setoff whatsoeverwith respect to the Credit Agreement or any other Loan Document as of the date hereof. Each Borrower hereby agrees that thisAmendment in no way acts as a release or relinquishment of the Liens and rights securing payments of the Obligations. The Liens andrights securing payment of the Obligations are hereby ratified and confirmed by each Borrower in all respects.6. Conditions to Effectiveness. This Amendment shall become effective upon the satisfaction of each of the followingconditions precedent, in each case satisfactory to Agent in all respects:(a) Agent shall have received a copy of this Amendment executed and delivered by the Lenders, and each Borrower,and each agreement, document and instrument set forth on the Closing Checklist attached hereto as Exhibit B;-11-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(b) after giving effect to the making of the Loans and other extensions of credit to be advanced by the Lenders to theBorrowers, any prepayment of Loans to be made on the date hereof, and the payment of all fees and expenses required to be paid bythe Borrowers under this Amendment, the Credit Agreement and the other Loan Documents on the date hereof, Borrowers haveAvailability, plus Qualified Cash, that exceeds $30,000,000;(c) after giving effect to the making of the Loans and other extensions of credit to be advanced by the Lenders to theBorrowers on the date hereof and any prepayment of Loans to be made on the date hereof, the ratio of (x) Obligations outstanding asof the date hereof to (y) EBITDA for the 12 month period ended September 30, 2016, is not greater than 4.00:1.0;(d) Agent shall have received payment of all fees, expenses, and other amounts due and payable on the date hereofunder each Loan Document, including without limitation, all fees and expenses pertaining to this Amendment; and(e) no Default or Event of Default shall have occurred and be continuing on the date hereof or as of the date of theeffectiveness of this Amendment.7. Representations and Warranties. In order to induce Agent and Lenders to enter into this Amendment, eachBorrower hereby represents and warrants to Agent and Lenders that:(a) after giving effect to this Amendment, all representations and warranties contained in the Loan Documents towhich such Borrower is a party are true and correct in all material respects (except that such materiality qualifier shall not be applicableto any representations and warranties that already are qualified or modified by materiality in the text thereof) on and as of the date ofthis Amendment, as though made on and as of such date (except to the extent that such representations and warranties relate solely toan earlier date, in which case such representations and warranties shall be true and correct in all material respects (except that suchmateriality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality inthe text thereof) on and as of such earlier date);(b) no Default or Event of Default has occurred and is continuing; and(c) this Amendment and the Loan Documents, as amended hereby, constitute legal, valid and binding obligations ofsuch Borrower and are enforceable against such Borrower in accordance with their respective terms, except as enforcement may belimited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors'rights generally.8. Post-Closing Covenants.(a) Borrowers shall deliver to Agent, within five (5) Business Days following the date hereof (unless such period isextended, in writing, by Agent in its sole discretion), a restated certificate of formation, dated on or about the date hereof, with respectto Upland Software VI,-12-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.LLC, certified by the Treasurer of the Department of the Treasury of New Jersey and in form and substance reasonably satisfactory toAgent.(b) Borrowers shall deliver to Agent, within thirty (30) days following the date hereof (unless such period is extended,in writing, by Agent in its sole discretion), a certificate of status with respect to Upland IX, LLC, issued by the appropriate officer ofthe State of Tennessee and indicating that Upland IX, LLC is in good standing in such jurisdiction and registered to do business insuch jurisdiction under its legal name.9. Miscellaneous.(a) Choice of Law and Venue; Jury Trial Waiver; Reference Provision. Without limiting the applicability of any otherprovision of the Credit Agreement or any other Loan Document, the terms and provisions set forth in Section 12 of the CreditAgreement are expressly incorporated herein by reference.(b) Counterparts. This Amendment may be executed in any number of counterparts, and by the parties hereto on thesame or separate counterparts, and each such counterpart, when executed and delivered, shall be deemed to be an original, but all suchcounterparts shall together constitute but one and the same Amendment.(c) No Novation. The parties hereto acknowledge and agree that: (i) this Amendment and any other document orinstrument executed and delivered in connection herewith do not constitute and shall in no event be deemed to be a compromise,satisfaction, reinstatement, accord and satisfaction, novation, release or termination of the Obligations as in effect prior to the ThirdAmendment Closing Date, or of any the Loan Documents or any rights or obligations thereunder, or a waiver by Agent or Lenders ofany of their rights under this Amendment or the other the Loan Documents, whether at law or in equity or otherwise; (ii) theObligations are in all respects continuing with only the terms thereof being modified to the extent expressly provided in thisAmendment; and (iii) the guarantees and the Liens and security interests as granted or purported to be granted under or pursuant to theCredit Agreement and the other Loan Documents securing payment of the Obligations are in all such respects continuing in full forceand effect and secure the payment of the Obligations as provided therein.10. Release.(a) In consideration of the agreements of Agent and Lenders contained herein and for other good and valuableconsideration, the receipt and sufficiency of which is hereby acknowledged, each Borrower, on behalf of itself and its successors,assigns, and other legal representatives (each Borrower and all such other Persons being hereinafter referred to collectively as the"Releasors" and individually as a "Releasor"), hereby absolutely, unconditionally and irrevocably releases, remises and foreverdischarges Agent and Lenders, and their successors and assigns, and their present and former shareholders, affiliates, subsidiaries,divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives (Agent, each Lender and all suchother Persons being hereinafter referred to collectively as the "Releasees" and individually as a "Releasee"), of and from all demands,actions, causes of action, suits, covenants, contracts,-13-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims,defenses, rights of set‑off, demands and liabilities whatsoever (individually, a "Claim" and collectively, "Claims") of every name andnature, known or unknown, suspected or unsuspected, both at law and in equity, which any Releasor may now own, hold, have orclaim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing whatsoeverwhich arises at any time on or prior to the day and date of this Amendment, in any way related to or in connection with the CreditAgreement, or any of the other Loan Documents or transactions thereunder or related thereto.(b) Each Borrower understands, acknowledges and agrees that the release set forth above may be pleaded as a full andcomplete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted,prosecuted or attempted in breach of the provisions of such release.(c) Each Borrower agrees that no fact, event, circumstance, evidence or transaction which could now be asserted orwhich may hereafter be discovered shall affect in any manner the final, absolute and unconditional nature of the release set forth above.[Signature Page Follows]-14-Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officersthereunto duly authorized and delivered as of the date first above written.PARENT AND A US BORROWER:UPLAND SOFTWARE, INC., a Delaware corporation By: Name:Title:US BORROWERS:UPLAND SOFTWARE I, INC., a Delaware corporation By: Name:Title: UPLAND SOFTWARE II, INC., a Delaware corporation By: Name:Title: UPLAND SOFTWARE III, LLC, a Delaware limited liability company By: Name:Title:Signature Page to Third Amendment to Credit AgreementSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. UPLAND SOFTWARE IV, INC., a Nebraska corporation By: Name:Title: UPLAND SOFTWARE V, INC., a Delaware corporation By: Name:Title: UPLAND SOFTWARE VI, LLC, a New Jersey limited liability company By: Name:Title: UPLAND SOFTWARE VII, INC., a Delaware corporation By: Name:Title: UPLAND IX, LLC, a Delaware limited liability company By: Name:Title: ULTRIVA, INC., a California corporation By: Name:Title:Signature Page to Third Amendment to Credit AgreementSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ADVANCED PROCESSING & IMAGING, INC., a Florida corporation By: Name:Title:Signature Page to Third Amendment to Credit AgreementSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.CANADIAN BORROWER:UPLAND SOFTWARE INC. / LOGICIELSUPLAND INC., a Canadian federal corporation By: Name:Title:Signature Page to Third Amendment to Credit AgreementSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. WELLS FARGO BANK, NATIONALASSOCIATION, a national banking association, asAgent, US Agent and as a Lender By: Name:Title: WELLS FARGO CAPITAL FINANCECORPORATION CANADA, an Ontariocorporation, as Canadian Agent and as a Lender By: Name:Title: CIT BANK, N.A., a national banking association, asa Lender By: Name: Title:_________________________Signature Page to Third Amendment to Credit AgreementSource: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT A Schedule C-1LenderCanadian RevolverCommitmentUS RevolverCommitmentCanadian Term LoanCommitmentUS Term LoanCommitmentDelayed Draw TermLoan CommitmentTotal CommitmentsWells Fargo Bank,National Association$0$6,142,857.14$0$30,089,285.71$7,142,857.14$43,375,000Wells Fargo CapitalFinance CorporationCanada$1,000,000$0$5,625,000$0$0$6,625,000CIT Bank, N.A.$0$2,857,142.86$0$14,285,714.29$2,857,142.86$20,000,000TOTAL$1,000,000$9,000,000$5,625,000$44,375,000$10,000,000$70,000,000Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT B Closing Checklist[see attached]Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 21.1List of Subsidiaries of Upland Software, Inc. as of December 31, 2016Upland Software I, Inc. (f/k/a PowerSteering Software, Inc.)Upland Software II, LLC (f/k/a Upland Software II, Inc., f/k/a Tenrox Inc. (U.S.))Upland Software IV, LLC (f/k/a Upland Software IV, Inc, f/k/a Filebound Solutions, Inc.)Upland Software V, Inc. (f/k/a ComSci, Inc.)Upland Software VI, LLC (f/k/a ComSci, LLC)Upland Software VII, LLC (f/k/a Upland Software VII, Inc., f/k/a Clickability Inc.)Upland IX, LLC (f/k/a Mobile Commons, Inc.)Upland Software Inc. (f/k/a Tenrox Inc. (Canada))PowerSteering Software Limited (UK)Ultriva, LLC (f/k/a Ultriva, Inc.)Advanced Processing & Imaging, Inc.Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the Registration Statement on Forms S-8 (No. 333-211560, 333-203574 and 333-199961) pertaining to the2014 Equity Incentive Plan and the Amended and Restated 2010 Stock Plan of Upland Software, Inc. of our report dated March 30, 2017, with respect to theconsolidated financial statements of Upland Software, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2016./s/ Ernst & Young LLPAustin, TexasMarch 30, 2017Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 31.1CERTIFICATION PURSUANT TO RULES 13A-14(A) AND 15D-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANTTO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, John T. McDonald, certify that:1.I have reviewed this Annual Report on Form 10-K of Upland Software, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial 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 inExchange 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 havea.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 withinthose 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal 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 theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe 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 arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date:March 30, 2017 /s/ John T. McDonald John T. McDonald Chief Executive Officer (Principal Executive Officer)Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 31.2CERTIFICATION PURSUANT TO RULES 13A-14(A) AND 15D-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANTTO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Michael D. Hill, certify that:1.I have reviewed this Annual Report on Form 10-K of Upland Software, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial 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 inExchange 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 withinthose 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal 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 theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe 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 arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: March 30, 2017 /s/ Michael D. Hill Michael D. Hill Chief Financial Officer (Principal Financial Officer)Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Upland Software, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2016 as filed withthe Securities and Exchange Commission on the date hereof (the “Report”), I, John T. McDonald, Chief Executive Officer of the Company, certify, pursuantto 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 30, 2017 /s/ John T. McDonaldJohn T. McDonaldChief Executive Officer(Principal Executive Officer)Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Upland Software, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2016 as filed withthe Securities and Exchange Commission on the date hereof (the “Report”), I, Michael D. Hill, Chief Financial Officer of the Company, certify, pursuant to 18U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 30, 2017 /s/ Michael D. HillMichael D. HillChief Financial Officer(Principal Financial Officer)Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Upland Software, Inc., 10-K, March 30, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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