Mattersight Corp (Form: 10-K, Received: 03/11/2016 16:54:01)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-27975

Mattersight Corporation

(Exact Name of Registrant as Specified in Its Charter)

Delaware

36-4304577

(State or other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

200 W. Madison Street, Suite 3100

Chicago, Illinois 60606

(Address of Registrant’s Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (877) 235-6925

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share		NASDAQ Global Market

Securities 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 o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 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 o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Annual Report on Form 10-K or any amendment to this Annual Report on Form 10-K. x

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

Large accelerated filer	o	Accelerated filer	o

Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The aggregate market value of Common Stock held by non-affiliates of the registrant, based upon the closing price per share of registrant’s Common Stock on June 30, 2015, as reported by The NASDAQ Stock Market LLC, is approximately $86,674,835.

The registrant met the “accelerated filer” requirements as of the end of its fiscal year pursuant to Rule 12b-2 of the Securities Exchange Act of 1934, as amended. However, pursuant to Rule 12b-2 and SEC Release No. 33-8876, the registrant (as a smaller reporting company transitioning to the larger reporting company system based on its public float as of June 30, 2015) is not required to satisfy the larger reporting company requirements until its first Quarterly Report on Form 10-Q for the 2016 fiscal year and thus is eligible to check the “Smaller Reporting Company” box on the cover of this Annual Report on Form 10-K.

The number of shares of the registrant’s Common Stock outstanding as of February 25, 2016 was 26,593,994.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Mattersight’s Proxy Statement for its 2016 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days after the end of Mattersight’s fiscal year, are incorporated herein by reference into Part III where indicated; provided, that if such Proxy Statement is not filed with the Securities and Exchange Commission within 120 days after the fiscal year end covered by this Annual Report on Form 10-K, an amendment to this Annual Report on Form 10-K shall be filed no later than the end of such 120-day period.

TABLE OF CONTENTS

PART I

Item		Page

Item 1.	Business	1
Item 1A.	Risk Factors	4
Item 1B.	Unresolved Staff Comments	10
Item 2.	Properties	10
Item 3.	Legal Proceedings	10
Item 4.	Mine Safety Disclosures	10

	PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	10
Item 6.	Selected Financial Data	13
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	26
Item 8.	Financial Statements and Supplementary Data	27
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	60
Item 9A.	Controls and Procedures	60
Item 9B.	Other Information	61

	PART III

Item 10.	Directors, Executive Officers and Corporate Governance	62
Item 11.	Executive Compensation	63
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	63
Item 13.	Certain Relationships and Related Transactions, and Director Independence	64
Item 14.	Principal Accounting Fees and Services	64

	PART IV

Item 15.	Exhibits and Financial Statement Schedules	65
Signatures		66
Exhibit Index		I-1

PART I

Item 1.

Business.

Overview

Mattersight Corporation (together with its subsidiaries and predecessors, “Mattersight,” “we,” “us,” or the “Company”) is a leader in behavioral analytics and a pioneer in personality-based software products. Using a stack of innovative, patented applications, including predictive behavioral routing, performance management, quality assurance, and predictive analytics (collectively, “Behavioral Analytics”), Mattersight analyzes and predicts customer behavior based on the language exchanged between agents and customers during brand interactions. These insights are then used to facilitate more effective and effortless customer conversations, which, in turn, drive increased customer satisfaction and retention, employee engagement, and operating efficiency. Mattersight’s analytics are based on millions of proprietary algorithms and the application of unique behavioral models. Mattersight’s solutions have influenced hundreds of millions of shorter, more satisfying customer interactions for leading companies in the healthcare, insurance, financial services, technology, telecommunications, cable, utilities, education, hospitality, and government industries.

The Company’s multi-channel technology captures the unstructured data of voice interactions (conversations), related customer and employee data, and employee desktop activity, and applies millions of proprietary algorithms against those interactions. Each interaction contains hundreds of attributes that get scored and ultimately detect patterns of behavior or business process that provide the transparency and predictability necessary to enhance revenue, improve the customer experience, improve efficiency, and predict and navigate outcomes. Adaptive across industries, programs, and industry-specific processes, the Company’s Behavioral Analytics offerings enable its clients to drive measurable economic benefit through the improvement of contact center performance, customer satisfaction and retention, fraud reduction, and streamlined back office operations. Specifically, through its Behavioral Analytics offerings, Mattersight helps its clients:

Identify optimal customer/employee behavioral pairing for call routing;

Identify and understand customer personality;

Automatically measure customer satisfaction and agent performance on every analyzed call;

Improve rapport between agent and customer;

Reduce call handle times while improving customer satisfaction;

Identify opportunities to improve self-service applications;

Improve cross-sell and up-sell success rates;

Improve the efficiency and effectiveness of collection efforts;

Measure and improve supervisor effectiveness and coaching;

Improve agent effectiveness by analyzing key attributes of desktop usage;

Predict likelihood of customer attrition;

Predict customer satisfaction and Net Promoter Scores® without customer surveys;

Predict likelihood of debt repayment;

Predict likelihood of a sale or cross-sell; and

Identify fraudulent callers and improve authentication processes.

Mattersight’s mission is to help brands have more effective and effortless conversations with their customers. Using a suite of innovative personality-based software applications, Mattersight can analyze and predict customer behavior based on the language exchanged during service and sales interactions. The Company operates a highly scalable, flexible, and adaptive application platform to enable clients to implement and operate these applications.

Types of Revenue

Through the sale of its services featuring these applications, the Company generates the following types of revenue:

Subscription Revenue

Subscription revenue consists of revenue derived from Mattersight’s Behavioral Analytics service offerings, including predictive behavioral routing, performance management, quality assurance, predictive analytics, and marketing managed services revenue derived from the performance of services on a continual basis.

Subscription revenue is based on a number of factors, such as the number of users to whom the Company provides one or more of its Behavioral Analytics offerings, the type and number of Behavioral Analytics offerings deployed to the client, and in some cases, the number of hours of calls analyzed during the relevant month of the subscription period. Subscription periods generally range from three to five years after the go-live date or, in cases where the Company contracts with a client for a short-term pilot of a Behavioral Analytics offering prior to committing to a longer subscription period, if any, the subscription or pilot periods generally range from three to twelve months after the go-live date. This revenue is recognized over the applicable subscription period as the service is performed for the client.

Other Revenue

Other revenue consists of deployment revenue, professional services revenue, and reimbursed expenses revenue.

Deployment revenue consists of planning, deployment, and training fees derived from Behavioral Analytics contracts. These fees, which are considered to be installation fees related to Behavioral Analytics subscription contracts, are deferred until the installation is complete and are then recognized over the applicable subscription or pilot period. Installation costs incurred are deferred up to an amount not to exceed the amount of deferred installation revenue and additional amounts that are recoverable based on the contractual arrangement. These costs are included in prepaid expenses and other long-term assets. Such costs are amortized over the subscription period. Costs in excess of the foregoing revenue amount are expensed in the period incurred.

Professional services revenue primarily consists of fees charged to the Company’s clients to provide post-deployment follow-on consulting services, which include custom data analysis, the implementation of enhancements, and training, as well as fees generated from the Company’s operational consulting services. The professional services are performed for the Company’s clients on a fixed-fee or time-and-materials basis. Revenue is recognized as the services are performed, with performance generally assessed on the ratio of actual hours incurred to-date compared with the total estimated hours over the entire term of the contract.

Reimbursed expenses revenue includes billable costs related to travel and other out-of-pocket expenses incurred while performing services for the Company’s clients. An equivalent amount of reimbursable expenses is included in total cost of other revenue.

Business Segments

The Company operates in a single business segment, focused primarily on Behavioral Analytics. Financial information concerning our business segment is included in “Financial Statements and Supplementary Data” Part II, Item 8 of this Annual Report on Form 10-K.

International Operations

The Company’s services are currently delivered to clients in the United States, however prior to November 2015, the Company had also delivered services to a client in the United Kingdom. The Company’s revenue is and has been recognized in the Company’s U.S. entity. The Company’s long-lived assets are and have been predominately located in the United States and consist of equipment, software, furniture and fixtures, and leasehold improvements (net of accumulated depreciation and amortization).

Methods of Distribution

Our subscription and other revenue are generated by direct contractual relationships with our clients.

Intellectual Property Rights

General

Our ability to protect our software, methodologies, and other intellectual property is important to our success and our competitive position. We view as proprietary the software (including source code), algorithms, analyses, and other ideas, concepts, and developments that we create in order to provide, improve, and enhance our service offerings, as well as the work product we create in the course of providing services for clients. We seek to protect our intellectual property rights in these developments and work product by relying on a combination of patent, copyright, trademark, and trade secret law, and confidentiality and non-disclosure agreements with our employees and third parties.

Patents

As of December 31, 2015, we held twenty-two U.S. patents and one European patent and have applied for over twenty additional patents. These patents cover a broad range of our analytics capabilities, including methods for analyzing language to assess customer personality, routing customers based on personality in real time, optimizing routing to improve agent performance, and analyzing data to improve employee performance. Our issued patents will expire between 2025 and 2034.

Trademarks

We have obtained U.S. federal trademark registration for the MATTERSIGHT word mark and our tagline “The Chemistry of Conversation”. We believe that the registration of the MATTERSIGHT word mark and tagline in the United States is material to our operations.

Licenses

A majority of our clients require that we grant to them licenses in and to the intellectual property rights associated with the work product we create in the course of providing services. In some cases, our clients require assignment of ownership in the intellectual property rights to such work product, typically where such work product incorporates their confidential information or would provide them some competitive advantage in their industry. Absent an agreement to the contrary, each assignment of ownership in intellectual property rights would result in our inability to reuse the relevant work product with other clients. As a result, it is our practice to retain the rights in the underlying core intellectual property on which such work product is based, including methodologies, workplans, and software, as well as residual know-how. If we are unable to retain such rights, it is our policy to obtain from our clients a broad license to sell service offerings using such work product to other clients.

Seasonality

We typically experience modest increases in revenue and earnings from our healthcare clients during the fourth quarter due to annual healthcare enrollment periods and increased claims processing at year-end. Any other seasonal impact to our revenue and earnings is limited, as a significant portion of our revenue is earned through our Behavioral Analytics subscription services, which is a recurring annual revenue stream.

Clients

During fiscal year 2015, our five and ten largest clients accounted for 73% and 89% of our total revenue, respectively. During fiscal year 2014, our five and ten largest clients accounted for 75% and 91% of our total revenue, respectively. During fiscal year 2013, our five and ten largest clients accounted for 69% and 90% of our total revenue, respectively. In fiscal year 2015, there were three clients that accounted for 10% or more of total revenue: United HealthCare Services, Inc.; Progressive Casualty Insurance Company; and CVS Caremark Corporation, which accounted for 31%, 15%, and 13% of total revenue, respectively. In fiscal year 2014, there were three clients that accounted for 10% or more of total revenue: United HealthCare Services, Inc.; Progressive Casualty Insurance Company; and Health Care Service Corporation, which accounted for 25%, 20%, and 11% of total revenue, respectively. In fiscal year 2013, there were four clients that accounted for 10% or more of total revenue: Vangent, Inc.; Progressive Casualty Insurance Company; Allstate Insurance Company; and United HealthCare Services, Inc., which accounted for 21%, 15%, 13%, and 11% of total revenue, respectively. For fiscal years 2015, 2014, and 2013, nine, seven, and nine clients, respectively, each accounted for over $1 million of total revenue. See “Note Two—Summary of Significant Accounting Policies” of the “Notes to Consolidated Financial Statements” included in Part II Item 8 of this Annual Report on Form 10-K.

Competition

Although we view the manner in which we provide Behavioral Analytics, and its benefits, to be unique, we nonetheless operate in a highly competitive and rapidly changing market and compete with a variety of organizations that offer services that may be viewed as similar to ours. These competitive organizations include data analytics solutions providers, voice recording and voice analytic services providers and software licensors, call routing solution providers, and strategic consulting firms. We believe that few competitors offer the full range and depth of services that we can provide, but they may compete with us on individual factors such as expertise, price, or capacity.

Many of our competitors have longer operating histories, more clients, longer relationships with their clients, greater brand or name recognition, and significantly greater financial, technical, marketing, and public relations resources than we do. As a result, our competitors may be in a better position to respond quickly to new or emerging technologies and changes in client requirements. They may also develop and promote their products and services more effectively than we do. New market entrants also pose a threat to our business. Existing or future competitors may develop or offer solutions that are comparable or superior to ours at a lower price.

Environmental Issues

There are no known material compliance issues regarding the Company with any Federal, state, or local environmental regulations.

Employees

As of December 31, 2015, we employed 241 persons, none of whom is represented by a union. We consider our employee relations to be good.

Available Information and Other

Our principal internet address is www.Mattersight.com . Our Annual, Quarterly, and Current Reports on Forms 10-K, 10-Q, and 8-K, and any amendments thereto, as well as the Forms 3, 4, and 5 beneficial ownership reports filed with respect to our stock, are made available free of charge on our website as soon as reasonably practicable after the reports have been filed with, or furnished to, the Securities and Exchange Commission (“SEC”). However, the information found on our website is not part of this or any other report filed by us with the SEC. These reports may also be obtained at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Information regarding the operation of the SEC’s public reference room may be obtained by calling the SEC at (800) SEC-0330. The SEC also maintains a website at www.sec.gov that contains reports, proxy statements, and other information regarding SEC registrants, including Mattersight.

Mattersight was incorporated in Delaware in May 1999. Our executive office is currently located at 200 W. Madison Street, Suite 3100, Chicago, Illinois 60606 and our main telephone number is (877) 235-6925.

Item 1A.

Risk Factors

There are a number of risks and uncertainties that could adversely affect our business and our overall financial performance. In addition to the matters discussed elsewhere in this Annual Report on Form 10-K, we believe the more significant of such risks and uncertainties include the following:

We have not realized an operating profit in sixteen years and there is no guarantee that we will realize an operating profit in the foreseeable future.

As of December 31, 2015, we had an accumulated deficit of $242.1 million. We expect to continue to use cash and incur operating expenses to support our growth, including costs associated with recruiting, training, and managing our sales force, costs to develop and acquire new technology, and promotional costs associated with reaching new clients. These investments, which typically are made in advance of revenue, may not yield an offsetting increase in revenue. As a result of these factors, our future revenue and income potential is uncertain. Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress our value and could impair our ability to raise capital, expand our business, maintain our product development efforts, diversify our product offerings, or continue our operations. A decline in our value could also cause you to lose all or part of your investment.

Our financial results are subject to significant fluctuations because of many factors, any of which could adversely affect our stock price.

In some future periods, our operating results may be below the expectations of public market analysts and investors. In this event, the price of our publicly-traded securities may fall. Our revenue and operating results may vary significantly due to a number of factors, many of which are not in our control. We may incur an impairment of goodwill and long-lived assets if our financial results are adversely impacted by these factors and we continue to incur financial losses or our stock price declines. These factors include:

Our ability to continue to grow our revenue and meet anticipated growth targets;

Our ability to maintain our current relationships, and develop new relationships, with clients, service providers, and business partners;

Unanticipated cancellations or deferrals of, or reductions in the scope of, our major Behavioral Analytics contracts;

The length of the sales cycle associated with our solutions;

Our ability to successfully introduce new, and upgrade our existing, service offerings for clients;

Our ability to respond effectively to competition;

The mix of our service offerings sold in any period;

The cost and potential outcomes of litigation, which could have a material adverse effect on our business;

Future accounting pronouncements or changes in our accounting policies; and

General economic conditions.

If we are unable to address these risks, our business, results of operations, and prospects could suffer.

We depend on a limited number of clients for a significant portion of our revenue, and the loss of a significant client or a substantial decline in the size or scope of deployments for a significant client, could have a material adverse effect on our business.

We derive, and expect to continue to derive for the foreseeable future, a significant portion of our total revenue from a limited number of clients. See “Clients” in Part I Item 1 and “Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II Item 7 of this Annual Report on Form 10-K for more information on the portion of our total revenue derived from these clients. To the extent that any significant client uses less of our services or terminates its relationship with us, as may occur as clients respond to conditions affecting their own businesses, our total revenue could decline substantially and that could significantly harm our business. In addition, because a high percentage of our revenue is dependent on a relatively small number of clients, delayed payments by a few of our larger clients could result in a reduction of our available cash, which in turn may cause fluctuation in our Days Sales Outstanding.

We depend on good relations with our clients, and any harm to these good relations may materially and adversely affect our business and our ability to compete effectively.

To attract and retain clients, we depend to a large extent on our relationships with our clients and our reputation for high quality analytics and related services. If a client is not satisfied with our services, it may be damaging to our reputation and business. Any defects or errors in our services or solutions or failure to meet our clients’ expectations could result in:

Delayed or lost revenue;

Obligations to provide additional services to a client at a reduced fee or at no charge;

Negative publicity, which could damage our reputation and adversely affect our ability to attract or retain clients; and

Claims for damages against us, regardless of our responsibility for such failure.

If we fail to meet our contractual obligations with our clients, then we could be subject to legal liability or loss of clients. Although our contracts include provisions to limit our exposure to legal claims related to the services and solutions we provide, these provisions may not protect us, or protect us sufficiently, in all cases.

We must maintain our reputation and expand our name recognition to remain competitive.

We believe that establishing and maintaining a good reputation and brand name is critical for attracting and expanding our targeted client base and we are investing substantially in marketing in order to expand our name recognition in the marketplace for our services and solutions. If potential clients do not know the types of solutions we provide, or if our reputation is damaged, then we may become less competitive or lose our market share. Promotion and enhancement of our name and brand will depend largely on both the efficacy of our relatively nascent marketing efforts and our success in providing high quality services, software, and solutions, neither of which can be assured.

Our clients use our solutions for critical applications. If clients do not perceive our solutions to be effective or of higher quality than those available from our competitors, or if our solutions result in errors, defects, or other performance problems, then our brand name and reputation could be materially and adversely affected, we could lose potential sales and existing customers, including through early termination of our contracts, our ability to operate our business may be impaired, and our business may suffer.

Our industry is very competitive and, if we fail to compete successfully, our market share and business will be adversely affected.

We operate in a highly competitive and rapidly changing market and compete with a variety of organizations that offer services that may be viewed as similar to ours. These competitive organizations include data analytics solutions providers, voice recording and voice analytic service providers and software licensors, call routing solution providers, and strategic consulting firms. We compete with these organizations on factors such as expertise, price, and capacity.

Many of our competitors have longer operating histories, more clients, longer relationships with their clients, greater brand or name recognition, more registered patents, and significantly greater financial, technical, marketing, and public relations resources than we do. As a result, our competitors may be in a better position to respond quickly to new or emerging technologies and changes in client requirements. They may also develop and promote their products and services more effectively than we do. New market entrants also pose a threat to our business. Existing or future competitors may develop or offer solutions that are comparable or superior to ours at a lower price.

In addition, if one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adversely affect our ability to compete effectively. We may also lose clients that merge with or are acquired by companies using a competitor's offering or an internally-developed tool. If we cannot compete successfully against our current and future competitors, our business may be harmed.

We must keep pace with the rapid rate of innovation in our industry in order to build our business.

The data analytics market, and particularly behavioral analytics, is relatively new and rapidly evolving. Our future business depends in part upon continued growth in the acceptance and use of Behavioral Analytics by our current and prospective clients. Their acceptance and usage in turn may depend upon factors such as: the actual or perceived benefits of adoption of Behavioral Analytics and related methodologies and technologies, including the predictability of a meaningful return on investment, cost efficiencies, or other measurable economic benefits; the actual or perceived reliability, scalability, ease of use, and access to such new technologies and methodologies; and the willingness to adopt new business methods. Furthermore, our future growth depends on our continuing ability to innovate in the field of data analytics and to incorporate emerging industry standards.

We cannot assure that we will be successful in anticipating or responding to these challenges on a timely or competitive basis or at all, or that our ideas and solutions will be successful in the marketplace. In addition, new or disruptive technologies and methodologies by our competitors may make our service or solution offerings uncompetitive. Any of these circumstances could significantly harm our business and financial results.

Because our services and solutions are sophisticated, we must devote significant time and effort to our sales and installation processes, with significant risk of loss if we are not successful.

Because our services and solutions are not simple, mass-market items with which our potential clients are already familiar, it is necessary for us to devote significant time and effort to the process of educating our potential clients about the benefits and value of our services and solutions as part of the sales process. In addition, because our services and solutions are sophisticated and in most cases are not readily usable by clients without our assistance in integration and configuration, training, and/or analysis, we must devote significant time during the installation and subscription process in order to ensure that our services and solutions are successfully deployed. These efforts increase the time and difficulty of completing transactions, make it more difficult to efficiently deploy our limited resources, and create risk that we will have invested in an opportunity that ultimately does not come to fruition. If we are unable to demonstrate the benefits and value of our services and solutions to clients and efficiently convert our sales leads into successful sales and installations, our results of operations may be adversely affected.

The unauthorized disclosure of the confidential customer data that we maintain could result in a significant loss of business and subject us to substantial liability.

In providing Behavioral Analytics, we record and analyze telephone calls and other interactions between our clients’ call center and back office agents and their customers. These interactions may contain numerous references to highly sensitive confidential or personally-identifiable data of the customers of our clients, and many of our clients are required to comply with Federal and state laws concerning privacy and security, such as the Health Insurance Portability and Accountability Act of 1996 and the Gramm-Leach-Bliley Act of 1999. In addition, we have made certain contractual commitments to our clients regarding this confidential data.

In light of the highly-confidential information that we record and maintain, our clients require that we agree not to limit our liability in the event of a security breach resulting in the loss of, or unauthorized access to, personally-identifiable or other confidential data. As a result, the disclosure or loss of such data despite the extensive precautions we undertake could result in the considerable diminution of our business and prospects and could subject us to substantial liability.

In addition, the laws, regulations, and industry standards governing these matters are changing rapidly. It is possible that the resources we devote to comply with such laws, regulations, and industry standards, and our clients’ particular requirements, could increase materially. In our contracts, we generally agree to indemnify our clients for expenses and liabilities resulting from unauthorized access to or disclosure of confidential data, such as those arising from data breach notification requirements. These indemnity obligations are generally not subject to contractual limitations on liability. As a result, the amount of liability we could incur in connection with these indemnity obligations could exceed the revenue we receive from the client under the applicable contract.

Our financial results could be adversely affected by economic and political conditions and the effects of these conditions on our clients’ businesses and levels of business activity.

Economic and political conditions in the United States affect our clients’ businesses and the markets they serve. A severe and/or prolonged economic downturn or a negative or uncertain political climate could adversely affect our clients’ financial conditions and the levels of business activity of our clients and the industries we serve. This may reduce demand for our services or depress pricing of those services and have a material adverse effect on our results of operations. In addition, these economic conditions may cause our clients to delay payments for services we have provided to them, resulting in a negative impact to our cash flow. If we are unable to successfully anticipate changing economic and political conditions, then we may be unable to effectively plan for and respond to those changes, and our business could be negatively affected.

We rely heavily on our senior management team for the success of our business.

Given the highly specialized nature of our services, senior management must have a thorough understanding of our service offerings as well as the skills and experience necessary to manage the organization. If one or more members of our senior management team leaves and we cannot replace them with a suitable candidate quickly, then we could experience difficulty in managing our business properly, and this could harm our business prospects, client relationships, employee morale, and results of operations.

Our ability to recruit talented professionals and retain our existing professionals is critical to the success of our business.

We believe that our success depends substantially on our ability to attract, train, motivate, and retain highly skilled management, strategic, technical, product development, data analysis, and other key professional employees. Our business straddles the information-technology and data analytics services industries, which are people-intensive and face shortages of qualified personnel, especially those with specialized skills or experience. We compete with other companies to recruit and hire from this limited pool, particularly in Austin, Texas, the location of our research and development team, and in Chicago, Illinois, the location of our data science and analytics teams.

If we cannot hire and retain qualified personnel, or if a significant number of our current employees should leave, and we have difficulty replacing such persons, then we could potentially suffer the loss of client relationships or new business opportunities and our business could be seriously harmed. In addition, there is no guarantee that the employee and client non-solicitation and non-competition agreements we have entered into with our senior professionals would deter them from departing us for our competitors or that such agreements would be upheld and enforced by a court or other arbiter across all jurisdictions where we engage in business.

We have a limited ability to protect our intellectual property rights, which are important to our success and competitive position.

Our ability to protect our software, algorithms, databases, methodologies, and other intellectual property is important to our success and our competitive position. We view as proprietary the software (including source code), algorithms, databases, analysis, and other ideas, concepts, and developments that we create in order to provide, improve, and enhance our service offerings, as well as the work product we create in the course of providing services for clients. We seek to protect our intellectual property rights in these developments and work product by applying for patents, copyrights, and trademarks, as appropriate, as well as by enforcing applicable trade secret laws and contractual restrictions on scope of use, disclosure, copying, reverse engineering, and assignment.

Despite our efforts to protect our intellectual property rights from unauthorized use or disclosure, others may attempt to disclose, obtain, or use our rights. The steps we take may not be adequate to prevent or deter infringement or other misappropriation of our intellectual property rights. In addition, we may not detect unauthorized use of, or take timely and effective actions to enforce and protect, our intellectual property rights. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights or alleging that we infringe the counterclaimant's own intellectual property. Third parties may challenge the validity or ownership of our intellectual property, and these challenges could cause us to lose our rights, in whole or in part, to our intellectual property or narrow the scope of our rights such that they no longer provide meaningful protection.

We may be required to obtain licenses from others to refine, develop, market, and deliver current and new services and solutions. There can be no assurance that we will be able to obtain any of these licenses on commercially reasonable terms or at all, or that rights granted by these licenses ultimately will be valid and enforceable.

If we fail to meaningfully protect our intellectual property, our business, brand, operating results, and financial condition could be materially harmed.

Others could claim that our services, products, or solutions infringe upon their intellectual property rights or violate contractual protections.

We or our clients may be subject to claims that our services, products, or solutions, or the products of our software providers or other alliance partners, infringe upon the intellectual property rights of others. Any such infringement claims may result in substantial costs, divert management attention and other resources, harm our reputation, and prevent us from offering some services, products, or solutions. A successful infringement claim against us could materially and adversely affect our business.

In our contracts with clients, we agree to indemnify our clients for expenses and liabilities resulting from claimed infringement by our services, products, or solutions, in most cases excluding third-party components, of the intellectual property rights of others. In some instances, the amount of these indemnity obligations may be greater than the revenue we receive from the client under the applicable contract. In addition, we may develop work product in connection with specific projects for our clients. Although our contracts with our clients generally provide that we retain the ownership rights to our work product, it is possible that clients may assert rights to, and seek to limit our ability to resell or reuse, our work product. Furthermore, in some cases we assign to clients the copyright and, at times, other intellectual property rights, in and to some aspects of the software, documentation, or other work product developed for these clients in connection with these projects, which limits our ability to resell or reuse this intellectual property.

Increasing government regulation could cause us to lose clients or impair our business.

We are subject not only to laws and regulations applicable to businesses generally, but we are also subject to certain U.S. and foreign laws and regulations applicable to our service offerings, including, but not limited to, those related to data privacy and security, electronic commerce, and call recording. Laws and regulations enacted in the United States, both at the state and federal level, as well as significant new rules issued with respect thereto, impose substantial requirements relating to the privacy and security of personal data, as well as the reporting of breaches with respect to personal data. Legislation that may be enacted in the future may add further requirements in these and other areas. In addition, we may be affected indirectly by legislation that impacts our existing and prospective clients, who may pass along to us by contract their legal obligations in these and other areas. Any such laws and regulations therefore could affect our existing business relationships or prevent us from obtaining new clients.

It may be difficult for us to access debt or equity markets to meet our financial needs.

In the event, for any reason, we need to raise additional funds in the future, through public or private debt or equity financings, such funds may not be available or may not be available on terms favorable to us. Additionally, the terms of our credit facility with Silicon Valley Bank limits our ability to enter into a public or private debt financing. The failure by us to obtain such financing, if needed, may have a material adverse effect upon our business, financial condition, results of operations, and prospects.

The market price of our common stock is likely to be volatile and could subject us to litigation.

The trading price of our common stock has been, and is likely to continue to be, volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition, the trading prices of the securities of technology companies in general have been highly volatile, and the volatility in market price and trading volume of securities is often unrelated or disproportionate to the financial performance of the companies issuing the securities. In addition to the factors discussed in this "Risk Factors" section and elsewhere in this Annual Report on Form 10-K, factors affecting the market price of our common stock include:

actual or anticipated changes in our earnings or fluctuations in our operating results or in the expectations of securities analysts;

price and volume fluctuations in the overall stock market from time to time;

significant volatility in the market price and trading volume of comparable companies;

changes in the market perception of behavioral and personality-based software products generally or in the effectiveness of our solutions in particular;

announcements of technological innovations, new products, strategic alliances, or significant agreements by us or by our competitors;

litigation involving us;

investors' general perception of us;

changes in general economic, industry, and market conditions and trends; and

recruitment or departure of key personnel.

In addition, if the market for technology stocks or the stock market in general experiences uneven investor confidence, the market price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. The market price of our common stock might also decline in reaction to events that affect other companies within, or outside, our industry even if these events do not directly affect us. Some companies that have experienced volatility in the trading price of their stock have been the subject of securities class action litigation. If we are the subject of such litigation, it could result in substantial costs and a diversion of our management's attention and resources from our business.

Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gains and you may never receive a return on your investment.

You should not rely on an investment in our common stock to provide dividend income. We have not declared or paid cash dividends on our common stock to date. In addition, the terms of our credit facility with Silicon Valley Bank, and any future debt agreements may, preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. Investors seeking cash dividends should not purchase our common stock.

We identified a material weakness in our internal control over financial reporting, and our business and stock price may be adversely affected if we do not adequately address this weakness or if we have other material weaknesses or significant deficiencies in our internal control over financial reporting in the future.

As described in our Management’s Annual Report on Internal Control O ver Financial Reporting at Item 9A of this Annual Report on Form 10-K, we identified a material weakness in our internal control over financial reporting as of December 31, 2015. The existence of this or one or more other material weaknesses or significant deficiencies could result in errors in our financial statements, and substantial costs and resources may be required to rectify any internal control deficiencies. If we cannot produce reliable financial reports, investors could lose confidence in our reported financial information, the market price of our stock could decline significantly, we may be unable to obtain additional financing to operate and expand our business and our business and financial condition could be harmed.

Our operating results may be negatively affected if we are required to collect sales tax or other transaction taxes on all or a portion of sales in jurisdictions where we are currently not collecting and reporting tax.

We have historically collected sales and other transaction taxes as required. Current economic and political conditions make sales and other transaction tax laws in many state, local, and foreign jurisdictions subject to reassessment and change. If a taxing authority were to successfully assert that we have not properly collected sales or other transaction taxes, or if sales or other transaction tax laws or the interpretation thereof were to change, and we were unable to enforce the terms of our contracts with customers that give us the right to reimbursement for assessed sales taxes, we could incur significant tax liabilities. Increased taxability of our products and services could increase our administrative costs, discourage clients from purchasing our products and services, or otherwise substantially harm our business and results of operations.

Item 1B.

Unresolved Staff Comments.

Not applicable.

Item 2.

Properties.

Our principal physical properties employed in our business consist of our leased office facilities in Chicago, Illinois; Edina, Minnesota; and Austin, Texas. Our executive offices are located at 200 West Madison Street, Suite 3100, Chicago, Illinois 60606. The initial lease term for this property, which became effective on July 1, 2015, terminates on July 31, 2022. The lease includes one five-year renewal option.

Our total employable space is approximately 44,000 square feet. We do not own any real estate. We believe that our leased facilities are appropriate for our current business requirements.

Item 3.

Legal Proceedings.

From time to time, the Company has been subject to legal claims arising in connection with its business and the results of these claims, when they arise, cannot be predicted with certainty. There are no asserted claims against the Company that, in the opinion of management, if adversely decided, would have a material effect on the Company’s business, financial position, results of operations, or prospects.

Item 4.

Mine Safety Disclosures

Not applicable.

PART II.

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.

Our common stock, par value $0.01 per share (“Common Stock”), is traded on the NASDAQ Global Market under the symbol MATR. The following table sets forth, for the periods indicated, the quarterly high and low sales prices of our Common Stock on the NASDAQ Global Market.

	High		Low
Fiscal Year 2015
Fourth Quarter	$	8.10	$	6.25
Third Quarter		8.00		5.59
Second Quarter		7.49		5.56
First Quarter		7.50		4.75
Fiscal Year 2014
Fourth Quarter	$	6.62	$	5.01
Third Quarter		6.25		4.41
Second Quarter		7.21		4.66
First Quarter		7.85		4.75

There were approximately 108 owners of record of Common Stock as of February 25, 2016. The last reported sale price of the Common Stock on the NASDAQ Global Market on February 25, 2016 was $4.24.

See “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” included in Part III Item 12 of this Annual Report on Form 10-K for more information about securities authorized for issuance under our various compensation plans.

Sale of Unregistered Securities

On June 4, 2014, Partners for Growth IV, L.P. (“PfG”) elected to partially exercise a warrant by exchanging 57,196 of its total 129,032 shares of Common Stock issuable upon exercise of the warrant through a cashless exercise on the terms provided in the applicable warrant agreement. As a result, the Company issued 35,862 shares of Common Stock to PfG on June 4, 2014, and 71,836 shares of Common Stock remained issuable upon exercise of the warrant as of June 4, 2014. On September 29, 2015, PfG fully exercised its remaining warrant through a cashless exercise on the terms provided in the applicable warrant agreement. As a result, the Company issued 46,689 shares of Common Stock to PfG, in full settlement of the warrant.

On June 4, 2014, PfG Equity Investors, LLC elected to partially exercise a warrant by exchanging 4,945 of its total 10,322 shares of Common Stock issuable upon exercise of the warrant through a through a cashless exercise on the terms provided in the applicable warrant agreement. As a result, the Company issued 3,100 shares of Common Stock to PfG Equity Investors, LLC on June 4, 2014 and 5,377 shares of Common Stock remained issuable upon exercise of the warrant as of June 4, 2014. On September 29, 2015, PfG Equity Investors, LLC fully exercised its remaining warrant through a cashless exercise on the terms provided in the applicable warrant agreement. As a result, the Company issued 3,495 shares of Common Stock to PfG Equity Investors, LLC, in full settlement of the warrant.

The shares of Common Stock issued upon exercise of the warrants were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities law and were issued pursuant to Section 3(a)(9) of the Securities Act.

Stock Performance Graph

The following graph compares the cumulative total stockholder return on Common Stock with the cumulative total return of (i) a peer group of other publicly-traded information-technology consulting companies selected by the Company (the “Peer Group Index”), and (ii) the NASDAQ Global Market Index. Cumulative total stockholder return is based on the period from January 1, 2011 through the Company’s fiscal year end on Thursday, December 31, 2015. The comparison assumes that $100 was invested on January 1, 2011 in each of Mattersight Common Stock, the Peer Group Index, and the NASDAQ Global Market Index, and that any and all dividends were reinvested.

Comparative Cumulative Total Return for Mattersight Corporation,

Peer Group Index, and NASDAQ Global Market Index

	1/1/11		12/31/11		12/31/12		12/31/13		12/31/14		12/31/15
Mattersight Common Stock	$	100.00	$	72.66	$	77.66	$	74.84	$	97.66	$	102.50
Peer Group Index ⁽¹⁾		100.00		94.61		94.89		125.31		163.46		147.77
NASDAQ Global Market Index		100.00		100.62		116.97		166.27		188.90		200.15

(1)	The Peer Group Index consists of Verint Systems, Inc. and Nice Systems Limited.

Repurchase of Equity Securities

The following table provides information relating to the Company’s repurchase of shares of its Common Stock in the fourth quarter of 2015. These repurchases reflect shares withheld upon vesting of restricted stock to satisfy tax-withholding obligations.

Period	Total Number of Shares Purchased		Average Price Paid Per Share
October 1, 2015 – October 31, 2015		—	$	—
November 1, 2015 – November 30, 2015		17,087	$	7.09
December 1, 2015 – December 31, 2015		—	$	—
Total		17,087	$	7.09

Dividends

Historically, we have not paid cash dividends on our Common Stock, and we do not expect to do so in the future. Under the terms of its certificate of designations, our 7% Series B Convertible Preferred Stock (the “Series B Stock”) accrues dividends at a rate of 7% per year, payable semi-annually in January and July if declared by the Company’s Board of Directors. If not declared, unpaid dividends are cumulative and accrue at the rate of 7% per annum. The Board of Directors did not declare a dividend payment on the Series B Stock, which was accrued, for each of the dividend periods from July 1, 2012 through December 31, 2015 (the aggregate amount of these dividends was approximately $2.1 million). Payment of future dividends on the Series B Stock will be determined by the Company’s Board of Directors based on the Company’s outlook and macroeconomic conditions.

The amount of each dividend accrual would decrease by any conversions of the Series B Stock into Common Stock, as Series B Stock conversions require us to pay accrued but unpaid dividends at the time of conversion. Conversions of Series B Stock became permissible at the option of the holder after June 19, 2002. For further discussion see “Liquidity and Capital Resources” included in Part II, Item 7 of th is Annual Report on Form 10-K.

During fiscal year 2012, the Company repurchased 19,758 shares of Series B Stock and paid accrued and unpaid dividends of two thousand dollars in connection with such purchase.

Equity Compensation Information

See Part III, Item 12 of this Annual Report on Form 10-K for information regarding shares of Common Stock that may be issued under the Company’s existing equity compensation plans.

Item 6.

Selected Consolidated Financial Data.

The following tables summarize our selected consolidated financial data. This information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the Consolidated Financial Statements of the Company and notes thereto, which are included elsewhere in this Annual Report on Form 10-K. The selected consolidated financial data in this section is not intended to replace the Consolidated Financial Statements of the Company and the notes thereto. Our historical results are not necessarily indicative of our future results.

	(In thousands, except per share data) ⁽¹⁾
	December 31, 2015			December 31, 2014			December 31, 2013			December 31, 2012			December31, 2011
Total revenue	$	39,912		$	30,319		$	34,494		$	33,863		$	29,095
Loss from continuing operations	$	(15,681	)	$	(14,232	)	$	(11,172	)	$	(15,470	)	$	(10,560	)
Net (loss) income available to common stockholders	$	(16,269	)	$	(14,821	)	$	(11,761	)	$	(15,881	)	$	10,553
Basic loss from continuing operations per share	$	(0.70	)	$	(0.74	)	$	(0.70	)	$	(1.01	)	$	(1.29	)
Total assets	$	40,402		$	32,078		$	30,749		$	31,362		$	49,265
Long-term obligations	$	8,900		$	3,990		$	4,473		$	3,605		$	4,437
Series B Stock	$	8,388		$	8,406		$	8,411		$	8,411		$	8,521
Capital leases	$	3,433		$	2,813		$	2,832		$	2,305		$	2,823

(1)	See “Note One—Description of Business” and “Note Two—Summary of Significant Accounting Policies” of the “Notes to Consolidated Financial Statements” included in Part II Item 8 of this Annual Report on Form 10-K for business discussion.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the “Selected Financial Data” and the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.

Overview

We are a leader in behavioral analytics and a pioneer in personality-based software products. Using a stack of innovative, patented applications, Mattersight analyzes and predicts customer behavior based on the language exchanged between agents and customers during brand interactions. These insights are then used to facilitate more effective and effortless customer conversations, which, in turn, drive increased customer satisfaction and retention, employee engagement, and operating efficiency.

Key Metrics

We regularly review the following key metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, and make strategic decisions.

ACV Bookings. We calculate the annual contract value (“ACV”) of new incremental bookings based on the estimated subscription r evenue and other revenue for a customer contract executed in the quarter, actual growth in the account beyond the original booking, and any committed future growth . We regularly review ACV bookings on a rolling four quarter basis and also review the percentage of ACV bookings generated by new customers. Our management uses this as a measure of the effectiveness of our sales and marketing investment, and as a proxy for future revenue growth.

Annualized Revenues in Deployment. We calculate the annualized revenues in deployment as the ACV bookings for which we have not yet recognized revenue because the services are still in the process of being deployed to the customer. Once the services go live for a particular contract, the amount of annualized revenues in deployment for that contract moves to annualized revenues. Our management uses this as a measure of the average time to deploy our bookings and as a proxy for future revenue growth.

Annualized Book of Business . We calculate t he annualized book of busin ess as the sum of our quarterly revenue (annualized) and our annualized revenue in deployment. Our management uses this as a proxy for future revenue growth.

Gross Margin. We calculate gross margin as the difference between our total revenue and the total cost of revenue, divided by total revenue, expressed as a percentage. Our management uses this as a measure of the efficiency of our service delivery organization.

Performance Highlights

The following table presents our performance on the key metrics for the periods presented:

	For the Fiscal Year Ended 2015
	(in millions, except percentage data)
	1 ^st Quarter			2 ^nd Quarter			3 ^rd Quarter			4 ^th Quarter			Year
ACV Bookings	$ 3.1			$ 5.8			$ 6.9				$ 7.0		$22.7
Rolling 4 Quarters ACV Bookings	$17.1				$19.0		$22.6			$22.7			$22.7
% of Rolling 4 Quarters ACV Bookings generated by new customers		27	%		46	%		42	%		50	%		50	%
Annualized Revenues in Deployment	$ 8.1				$10.0		$11.7			$15.1			$15.1
Annualized Book of Business	$45.3				$49.0		$53.6			$56.6			$56.6
Gross Margin		72	%		73	%		76	%		72	%		73	%

Change in Presentation

During fiscal year 2015, Mattersight reclassified certain expenses, which had been previously reported within selling, marketing and development, to distinguish between (i) research and development and (ii) sales and marketing expenses.

Beginning in fiscal year 2015, Mattersight began to report subscription revenue (which consists of Behavioral Analytics subscrip tion revenue and marketing managed services revenue) and other revenue (which consists of deployment revenue, professional services revenue, CRM services revenue, and reimbursed expenses revenue). Previously, in fiscal year 2014, Mattersight reported Behav ioral Analytics revenue (which consisted of subscription revenue, deployment revenue, and professional services revenue) and other revenue (which consisted of CRM services revenue and marketing managed services revenue). Reimbursed expenses revenue was rep orted separately.

The Company believes the revised presentation provides a clearer understanding of the Company’s business and revenue streams. The changes in presentation did not have an impact on the Company’s total revenue, total cost of revenue, or total operating expenses. There was no change to the Company’s significant accounting policies. Revenue and expense classifications for fiscal year 2014 and 2013 have been revised to conform to the Company’s current presentation.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to the costs and timing of completion of client projects, our ability to collect accounts receivable, and the ability to realize our net deferred tax assets, contingencies, and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

The fiscal year-end dates referenced herein for fiscal years 2015, 2014, and 2013 are December 31, 2015, December 31, 2014, and December 31, 2013, respectively.

We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

Subscription Revenue

Other Revenue

Other revenue consists of deployment revenue, professional services revenue, and reimbursed expenses revenue.

Unearned Revenue

Payments received for Behavioral Analytics contracts in excess of the amount of revenue recognized for these contracts are recorded as unearned revenue until the applicable revenue recognition criteria are met.

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from clients not paying for unpaid or disputed invoices for contractual services provided. Additional allowances may be required if the financial condition of our clients deteriorates.

Stock Warrants

In accordance with ASC 480-10, Distinguishing Liabilities from Equity , the Company classified certain warrants to purchase Common Stock that do not meet the requirements for classification as equity, as liabilities. Such liabilities are initially recorded at fair value with subsequent changes in fair value recorded as a component of gain or loss on warrant liability on the consolidated statements of operations in each reporting period. Fair value of the warrants was measured using a Monte Carlo option pricing model. See “Note Eighteen—Stock Warrants” of the “Notes to Consolidated Financial Statements” included in Part II Item 8 of this Annual Report on Form 10-K.

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period. Determining fair value of stock-based awards at the grant date requires certain assumptions. The Company uses historical information as the basis for the selection of expected life, expected volatility, expected dividend yield assumptions, and anticipated forfeiture rates. The risk-free interest rate is selected based on the yields from U.S. Treasury Strips with a remaining term equal to the expected term of the options being valued.

Goodwill

Goodwill is tested annually for impairment or more frequently if an event or circumstance indicates that an impairment loss may have been incurred. In performing our annual impairment test, we first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill. If it is concluded that this is the case for the reporting unit, we perform a detailed quantitative assessment using a two-step test approach. In the first step, the fair value of the reporting unit is compared with its carrying value. If the fair value exceeds the carrying value, then goodwill is not impaired and no further testing is performed. The second step is performed if the carrying value exceeds the fair value. The implied fair value of the reporting unit’s goodwill must be determined and compared with the carrying value of the goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then an impairment loss equal to the difference will be recorded. The Company currently operates in a single business segment or reporting unit.

In 2015, after completing our annual qualitative review, we concluded that it was not more likely than not that the carrying value of our reporting unit exceeded its fair value. Accordingly, we concluded that further quantitative analysis and testing was not required, and no goodwill impairment charge was required.

There has been no impairment identified as a result of the annual reviews of goodwill as of December 31, 2015 and December 31, 2014. The carrying value of goodwill was $1.0 million as of December 31, 2015 and December 31, 2014.

Intangible Assets

Intangible assets reflect costs related to patent and trademark applications, marketing managed services customer relationships, and the purchase of certain intellectual property rights in 2015. The costs related to patent and trademark applications and the purchase of certain intellectual property are amortized over 120 months. The other intangible assets are fully amortized. The original cost of intangible assets as of December 31, 2015 and December 31, 2014 was $6.7 million and $3.4 million, respectively. Accumulated amortization of intangible assets was $3.4 million as of December 31, 2015 and was $2.8 million as of December 31, 2014. Currently, amortization expense of intangible assets is expected to be $0.5 million annually.

Income Taxes

We have recorded income tax valuation allowances on our net deferred tax assets to account for the unpredictability surrounding the timing of realization of our U.S. and non-U.S. net deferred tax assets due to continuing operating losses. The valuation allowances may be reversed at a point in time when management determines realization of these tax assets has become more likely than not, based on a return to or achieving predictable levels of profitability.

The Company uses an asset and liability approach for financial accounting and reporting of income taxes. Deferred income taxes are provided when tax laws and financial accounting standards differ with respect to the amount of income for the year, the basis of assets and liabilities and for tax loss carryforwards. The Company does not provide U.S. deferred income taxes on earnings of U.S. or foreign subsidiaries, which are expected to be indefinitely reinvested.

The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Significant judgment is used to determine the likelihood of the benefit. There is additional guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods, and disclosure requirements.

Other Significant Accounting Policies

For a description of the Company’s other significant accounting policies, see “Note Two—Summary of Significant Accounting Policies” of the “Notes to Consolidated Financial Statements” included in Part II Item 8 of this Annual Report on Form 10-K.

Forward-Looking Statements

Statements in this Annual Report on Form 10-K that are not historical facts are “forward-looking statements” and are made pursuant to the safe harbor provisions of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements, which may be identified by use of words such as “plan,” “may,” “might,” “believe,” “expect,” “intend,” “could,” “would,” “should,” and other words and terms of similar meaning, in connection with any discussion of our prospects, financial statements, business, financial condition, revenues, results of operations, or liquidity, involve risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. In addition to other factors and matters contained or incorporated in this document, important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements include, without limitation, those noted under “Risk Factors” included in Part I Item 1A of this Annual Report on Form 10-K for the year ended December 31, 2015, including the following:

Uncertainties associated with the attraction of, and the ability to execute contracts with, new clients, the continuation of existing, and execution of new, engagements with existing clients, the conversion of free pilots to paid subscription contracts, and the timing of related client commitments;

Reliance on a relatively small number of clients for a significant percentage of our revenue;

Risks involving the variability and predictability of the number, size, scope, cost, and duration of, and revenue from, client engagements;

Management of the other risks associated with complex client projects and new service offerings, including execution risk; and

Management of growth and development of, and introduction of, new service offerings.

We cannot guarantee any future results, levels o f activity, performance, or achievements. The statements made in this Annual Report on Form 10-K represent our views as of the date of this report, and it should not be assumed that the statements made in this Report remain accurate as of any future date. Moreover, we assume no obligation to update forward-looking statements, except as may be required by law. In light of Regulation FD, it is our policy not to comment on earnings, financial guidance, or operations other than through press releases, publicly announced conference calls, or other means that will constitute public disclosure for purposes of Regulation FD.

Business Outlook

Based on research from third-party analysts, we believe the call center industry is ripe for disruption and innovation. We believe what the call center was designed to accomplish and how it was measured are parts of an outdated mode of business that is disconnected from the needs of today’s consumer. In fact, research from the CEB suggests that any call center interaction is four times more likely to drive customer disloyalty. Given a rise in self-service, these interactions are only becoming more complex and fraught with greater risk.

Through Behavioral Analytics, we seek to provide our clients with personality-based software applications that mitigate the complexity and reduce the risk of these call center interactions. According to Gartner, Inc., there were six million call center seats in North America in 2015, and less than 1% of this market is penetrated by personality-based software applications. We believe that we are uniquely positioned to capitalize on this opportunity. Our strategy to increase revenue and capture market share includes the following elements:

Drive new bookings growth and increase operating leverage;

Leverage a “land & expand” model, focused on personality-based routing as the catalyst for new client acquisition;

Cross-sell coaching, quality assurance, and analytic products after delivering a routing solution;

Continue to invest in innovative linguistic models and behavioral science;

Expand our sales and marketing capacity; and

Test the applicability of our proprietary personality-based software applications with clients outside of the call center industry.

Our personality-based software applications, which have been developed through substantial investment over the past decade, are deeply embedded into our clients’ infrastructure and workflows. Our long-term client relationships are made up largely of multi-year contracts with high contract renewal rates. Our aspiration is that our “land & expand” model, focused on our routing product, will continue to accelerate the acquisition of new clients.

Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014

Revenue

Our total revenue increased $9.6 million, or 32%, to $39.9 million in fiscal year 2015, from $30.3 million in fiscal year 2014. The $9.6 million increase in total revenue in fiscal year 2015 was primarily due to the increased subscription fees associated with the conversion of several Behavioral Analytics deployments to the subscription phase of the contract, as well as expansion of user counts in our existing client base.

Subscription revenue increased by $9.7 million, or 37%, to $36.1 million in fiscal year 2015, from $26.4 million in fiscal year 2014. The $9.7 million increase in subscription revenue in fiscal year 2015 was primarily due to the increased subscription fees associated with the conversion of several Behavioral Analytics deployments to the subscription phase of the contract, as well as expansion of user counts in our existing client base.

Other revenue decreased by $0.1 million, or 3%, to $3.8 million in fiscal year 2015, from $3.9 million in fiscal year 2014.

The Company’s top five clients accounted for 73% of total reve nue in fiscal year 2015 and 75% of total revenue in fiscal year 2014. The top ten clients accounted for 89% of total revenue in fiscal year 2015 and 91% of total revenue in fiscal year 2014. In both fiscal year 2015 and 2014, three clients each accounted f or 10% or more of total revenue. In fiscal year 2015, United HealthCare Services, Inc., Progressive Casualty Insurance Company, and CVS Caremark Corporation accounted for 31%, 15%, and 13% of total revenue, respectively. In fiscal year 2014, United HealthC are Services, Inc., Progressive Casualty Insurance Company, and HealthCare Service Corporation accounted for 25%, 20%, and 11% of total revenue, respectively. Higher concentration of revenue with a single client or a limited group of clients creates increa sed revenue risk if one of these clients significantly reduces its demand for our services.

Total Cost of Revenue, Exclusive of Depreciation and Amortization

Total cost of revenue primarily consists of labor costs, including salaries, fringe benefits, and incentive compensation, royalties, and other client-related third-party outside services. Total cost of revenue excludes depreciation and amortization.

Cost of subscription revenue was $8.1 million, or 22% of subscription revenue, in fiscal year 2015, compared with $6.8 million, or 26% of subscription revenue, in fiscal year 2014. The $1.3 million increase in cost was primarily due to increased revenue and incremental personnel costs. The favorable decrease in percentage was primarily due to better leverage of our cost structure supporting our subscription clients.

Cost of other revenue remained unchanged at $2.6 million in both fiscal years 2015 and 2014.

Research and Development

Research and development expenses consist primarily of salaries, incentive compensation, commissions, and employee benefits for product development personnel. The personnel costs included in this item are net of any labor costs directly related to the generation of revenue, which are represented in total cost of revenue.

Research and development expenses increased $1.4 million, or 11%, to $13.9 million in fiscal year 2015 from $12.5 million in fiscal year 2014. The $1.4 million increase was primarily due to higher compensation and outside services costs.

Sales and Marketing

Sales and marketing expenses consist primarily of salaries, incentive compensation, commissions, and employee benefits for business development, account management, and marketing.

Sales and marketing expenses increased $4.7 million, or 51%, to $13.8 million in fiscal year 2015 from $9.1 million in fiscal year 2014. The increase was primarily due to higher compensation and marketing costs.

General and Administrative

General and administrative expenses consist primarily of salaries, incentive compensation, and employee benefits for administrative personnel, as well as facilities costs, a provision for uncollectible amounts, and costs for our corporate technology infrastructure and applications.

General and administrative expenses increased $2.6 million, or 28%, to $11.7 million in fiscal year 2015 from $9.1 million in fiscal year 2014. The $2.6 million increase was due to higher compensation, and recruiting and legal expenses.

Depreciation and Amortization

Depreciation and amortization increased $1.5 million, or 47%, to $4.5 million in fiscal year 2015, from $3.0 million in fiscal year 2014. The increase was due to higher capital expenditures and losses on fixed asset disposals in 2015.

Amortization of Intangibles

Amortization of intangibles increased $0.4 million, to $0.5 million in fiscal year 2015 from $0.1 million in fiscal year 2014. The $0.4 million increase was due to the purchase of certain intellectual property rights.

Operating Loss

Primarily as a result of the factors described above, we experienced an operating loss of $15.1 million in fiscal year 2015, compared with an operating loss of $13.0 million in fiscal year 2014.

Interest and Other Expense, Net

Interest and other expense decreased $0.5 million, or 46%, to $0.6 million of expense in fiscal year 2015 compared with $1.1 million of expense in fiscal year 2014. The decrease was primarily related to a 2014 $0.5 million write-off of deferred financing fees in connection with the termination of our PfG Credit Facility (see “Note Nine—Short-Term Debt” of the “Notes to Consolidated Financial Statements” included in Part II Item 8 of this Annual Report on Form 10-K) effective August 14, 2014.

Change in Fair Value of Warrant Liability

The fair value of warrant liability decreased less than $0.1 million in fiscal year 2015 and increased $0.1 million in fiscal year 2014.

Income Tax Provision

The income tax provision was less than $0.1 million in fiscal years 2015 and 2014. As of December 31, 2015 and 2014, total net deferred tax assets of $75.8 million and $71.0 million, respectively, were fully offset by a valuation allowance. The level of uncertainty in predicting when we will achieve profitability, sufficient to utilize our net U.S. and non-U.S. operating losses and realize our remaining deferred tax assets, requires that an income tax valuation allowance be recognized in the financial statements.

Net Loss Available to Common Stockholders

We reported net loss available to holders of Common Stock of $16.3 million in fiscal year 2015, compared with net loss available to holders of Common Stock of $14.8 million in fiscal year 2014. Accrued dividends to holders of Series B Stock were $0.6 million in fiscal years 2015 and 2014. In fiscal year 2015, there was a net loss of $0.70 per share on a basic and diluted basis, compared with a net loss of $0.74 per share on a basic and diluted basis in fiscal year 2014.

Year Ended December 31, 2014 Compared with the Year Ended December 31, 2013

Revenue

Our total revenue decreased $4.2 million, or 12%, to $30.3 million in fiscal year 2014, from $34.5 million in fiscal year 2013. The $4.2 million decrease in total revenue in fiscal year 2014 was primarily due to the expiration of our contract with Vangent, Inc. on December 31, 2013.

Subscription revenue was $26.4 million in fiscal year 2014 and $28.6 million in fiscal year 2013. The $2.2 million, or 8%, decrease in subscription revenue in fiscal year 2014 was also primarily due to the expiration of our contract with Vangent, Inc. on December 31, 2013.

Other revenue decreased by $2.0 million, to $3.9 million in fiscal year 2014, from $5.9 million in fiscal year 2013. This decrease in revenue was primarily due to the expiration of our contract with Vangent, Inc. on December 31, 2013.

The Company’s top five clients accounted for 75% of total revenue in fiscal year 2014 and 69% of total revenue in fiscal year 2013. The top ten clients accounted for 91% of total revenue in fiscal year 2014 and 90% of total revenue in fiscal year 2013. In fiscal year 2014, three clients each accounted for 10% or more of total revenue and in fiscal year 2013 four clients each accounted for 10% or more of total revenue. In fiscal year 2014, United HealthCare Services, Inc., Progressive Casualty Insurance Company, and HealthCare Service Corporation accounted for 25%, 20%, and 11% of total revenue, respectively. In fiscal year 2013, Vangent, Inc., Progressive Casualty Insurance Company, Allstate Insurance Company, and United HealthCare Services, Inc., accounted for 21%, 15%, 13%, and 11% of total revenue, respectively. Higher concentration of revenue with a single client or a limited group of clients creates increased revenue risk if one of these clients significantly reduces its demand for our services.

Total Cost of Revenue, Exclusive of Depreciation and Amortization

Cost of subscription revenue was $6.8 million, or 26% of Subscription revenue, in fiscal year 2014, compared with $7.1 million, or 25% of Subscription revenue, in fiscal year 2013. The favorable decrease in cost was primarily due to (i) improved productivity i n our Delivery organization resulting in lower compensation costs, (ii) better leveraging of the cost structure supporting our subscription clients, and (iii) the decline in revenue.

Cost of other revenue was $2.6 million, or 65% of other revenue in fiscal year 2014, compared with $3.9 million, or 67% of other revenue, in fiscal year 2013.

Research and Development

Research and development expenses increased $1.4 million, or 13%, to $12.5 million in fiscal year 2014 from $11.1 million in fiscal year 2013. The $1.4 million increase was primarily due to higher compensation and outside services costs.

Sales and Marketing

Sales and marketing expenses consist primarily of salaries, incentive compensation, commissions, and employee benefits for business development, account management, and marketing.

Sales and marketing expenses decreased $1.5 million, or 15%, to $9.1 million in fiscal year 2014 from $10.6 million in fiscal year 2013. The decrease was primarily due to lower compensation expense.

General and Administrative

General and administrative expenses increased $0.3 million, or 4%, to $9.1 million in fiscal year 2014 from $8.8 million in fiscal year 2013. The $0.3 million increase was due to higher compensation expense.

Severance and Related Costs

There were no severance and related costs in fiscal year 2014. In fiscal year 2013, there was $0.2 million of expense, which was related to severance and related costs for the elimination of one position.

Depreciation and Amortization

Depreciation and amortization decreased $0.4 million, or 12%, to $3.0 million in fiscal year 2014 from $3.4 million in fiscal year 2013. The decrease was due to capital lease disposals and assets that became fully depreciated near the end of the second and third quarters of 2014.

Amortization of Intangibles

Amortization of intangibles remained unchanged at $0.1 million in fiscal years 2014 and 2013.

Operating Loss

Primarily as a result of the factors described above, we experienced an operating loss of $13.0 million in fiscal year 2014, compared with an operating loss of $10.8 million in fiscal year 2013.

Interest and Other Expense, Net

Interest and other expense was $1.1 million of expense in fiscal year 2014 compared with $0.5 million of expense in fiscal year 2013. The increase was primarily related to a $0.5 million write-off of deferred financing fees in connection with the termination, effective August 14, 2014, of the Loan and Security Agreement dated August 19, 2013, entered into by the Company, together with its wholly-owned subsidiaries Mattersight Europe Holding Corporation and Mattersight International Holding, Inc., as co-borrowers, and Partners for Growth IV, L.P.

Change in Fair Value of Warrant Liability

The change in fair value of warrant liability was an expense of $0.1 million in fiscal years 2014 and 2013. Changes in our common stock price are the main driver in calculating the fair value of our outstanding warrants.

Income Tax (Provision) Benefit

The income tax provision was less than $0.1 million in fiscal year 2014 and the tax benefit was $0.2 million in fiscal year 2013. The income tax benefit in fiscal year 2013 was due to a favorable tax ruling on a previously accrued income tax liability. As of December 31, 2014 and 2013, total net deferred tax assets of $71.0 million and $67.6 million, respectively, were fully offset by a valuation allowance. The level of uncertainty in predicting when we will achieve profitability, sufficient to utilize our net U.S. and non-U.S. operating losses and realize our remaining deferred tax assets, requires that an income tax valuation allowance be recognized in the financial statements.

Net Loss Available to Common Stockholders

We reported net loss available to holders of Common Stock of $14.8 million in fiscal year 2014 compared with net loss available to holders of Common Stock of $11.8 million in fiscal year 2013. Accrued dividends to holders of Series B Stock were $0.6 million in both fiscal years 2014 and 2013. In fiscal year 2014, there was net loss of $0.74 per share on a basic and diluted basis, compared with net loss of $0.70 per share on a basic and diluted basis in fiscal year 2013.

Liquidity and Capital Resources

Introduction

Our principal capital requirements are to fund working capital needs, capital expenditures for Behavioral Analytics and infrastructure requirements, and other revenue generation and growth investments. As of December 31, 2015, our principal capital resources consisted of our cash and cash equivalents balance of $15.4 million, which includes $0.1 million in foreign bank accounts.

The increase in cash during fiscal year 2015 was primarily from proceeds of $15.9 million, net of fees, received from the sale of 2,728,712 shares of Common Stock pursuant to the Common Stock Purchase Agreement executed by the Company on July 22, 2015. The increase was partially offset by the net loss before non-cash items, payment of Company bonuses, capital lease principal payments, capital expenditures, the acquisition of treasury stock, an increase in accounts receivable and a decrease in unearned revenue.

The increase in cash during fiscal year 2014 was primarily from proceeds received from the sale of the 2014 Shares pursuant to the 2014 Purchase Agreement of $11.1 million, net of fees, partially offset by the net loss before non-cash items, payment of Company bonuses, capital lease principal payments, capital expenditures, the acquisition of treasury stock, and an increase in accounts receivable.

Cash Flows from Operating Activities

Net cash used in operating activities during fiscal year 2015 was $6.4 million compared with cash used of $6.9 million during fiscal year 2014. During fiscal year 2015, net cash used in operating activities consisted primarily of the net loss before non-cash items of $5.3 million and a decrease in unearned revenue of $2.4 million, partially offset by other favorable net working capital changes of $1.4 million.

Net cash used in operating activities during fiscal year 2014 was $6.9 million compared with cash of $1.6 million during fiscal year 2013. During fiscal year 2014, net cash used in operating activities consisted primarily of the net loss before non-cash items of $6.8 million and an increase in accounts receivable.

Days Sales Outstanding (“DSO”) was 41 days at December 31, 2015, compared with 38 days at December 31, 2014, an increase of three days. Because a high percentage of our revenue is dependent on a relatively small number of clients, delayed payments by a few of our larger clients could result in a reduction of our available cash, which in turn may cause fluctuation in our DSO. We do not expect any significant collection issues with our clients; see “Accounts Receivable Customer Concentration” for addi tional information on cash collections.

Cash Flows from Investing Activities

The Company used $5.8 million and $1.0 million of cash in investing activities during fiscal years 2015 and 2014, respectively.

Capital expenditures during fiscal year 2015 were primarily related to the purchase of computer hardware and software in addition to a one-time investment in relocating our corporate headquarters. Capital expenditures during fiscal year 2014 were primarily related to the purchase of computer hardware and software. We currently expect capital expenditures of between $2.0 million and $2.5 million for fiscal year 2016.

Cash Flows from Financing Activities

Net cash provided by financing activities was $13.4 million during fiscal year 2015 compared with cash provided by financing activities of $8.8 million during fiscal year 2014. Net cash proceeds of $13.4 million during fiscal year 2015 were primarily attributable to proceeds of $15.9 million, net of fees, received from the sale of 2,728,712 shares of Common Stock (the “Shares”) in a registered direct offering pursuant to a definitive Common Stock Purchase Agreement executed July 22, 2015 (the “2015 Purchase Agreement”), partially offset by (i) $2.1 million of principal payments under our capital lease obligations and (ii) $0.9 million of cash used to acquire treasury stock to meet employee tax obligations associated with the Company’s stock-based compensation programs.

Net cash proceeds of $8.8 million, during fiscal year 2014 were primarily attributable to proceeds of $11.1 million, net of fees, from the sale of the 2014 Shares pursuant to the 2014 Purchase Agreement, partially offset by (i) $1.7 million of principal payments under our capital lease obligations and (ii) $0.8 million of cash used to acquire treasury stock to meet employee tax obligations associated with the Company’s stock-based compensation programs.

Historically, we have not paid cash dividends on our Common Stock, and we do not expect to do so in the future. Under the terms of its certificate of designations, our Series B Stock accrues dividends at a rate of 7% per year, payable semi-annually in January and July if declared by the Company’s Board of Directors. If not declared, unpaid dividends are cumulative and accrue at the rate of 7% per annum. The Board of Directors did not declare a dividend payment on the Series B Stock, which was accrued, for each of the dividend periods from July 1, 2012 through December 31, 2015 (the aggregate amount of these dividends was approximately $2.1 million). During fiscal year 2012, the Company’s Board of Directors declared a cash dividend of $0.1785 per share on the Series B Stock for the dividend period January 1, 2012 through June 30, 2012. The dividend payment of $0.3 million was paid on July 2, 2012. Payment of future dividends on the Series B Stock will be determined by the Company’s Board of Directors based on the Company’s outlook and macroeconomic conditions. The amount of each dividend accrual will be decreased by any conversions of the Series B Stock into Common Stock, as such conversions require the Company to pay accrued but unpaid dividends at the time of conversion. Conversions of Series B Stock are permissible at the option of the holder.

The Company expects to acquire between $0.1 million and $0.2 million of treasury stock during the first quarter of 2016 to meet employee tax obligations associated with the Company’s stock-based compensation programs.

Liquidity

Our near-term capital resources consist of our current cash balance, together with anticipated future cash flows, financing from capital leases, and our revolving line of credit (see “Credit Facility” below). Our balance of cash and cash equivalents was $15.4 million as of December 31, 2015.

We anticipate that our current unrestricted cash resources, together with operating revenue, capital lease financing, and our line of credit with Silicon Valley Bank, should be sufficient to satisfy our short-term working capital and capital expenditure needs for the next twelve months. Management will continue to assess opportunities to maximize cash resources by actively managing our cost structure and closely monitoring the collection of our accounts receivable. If, however, our operating activities, capital expenditure requirements, or net cash needs differ materially from current expectations due to uncertainties surrounding the current capital market, credit and general economic conditions, competition, or the termination of a large client contract, then there is no assurance that we would have access to additional external capital resources on acceptable terms.

Credit Facility

On March 10, 2015, the Company entered into a Second Amended and Restated Loan and Security Agreement with Silicon Valley Bank (the “SVB Credit Facility”). The SVB Credit Facility provides for, among other things, a maximum credit limit of $15 million, a term through March 10, 2017, and an interest rate of prime plus 1.25%. The SVB Credit Facility additionally provides for an annual commitment fee of $0.1 million and an early termination fee of 1.0% in the first year of its term, and 0.25% thereafter, prior to maturity. The Company has a zero balance outstanding under the SVB Credit Facility as of December 31, 2015. The Company was in compliance with all of its debt covenants under the SVB Credit Facility as of December 31, 2015.

The SVB Credit Facility imposes various restrictions on the Company, including usual and customary limitations on the ability of the Company or any of its subsidiaries to incur debt and to grant liens upon their assets, and prohibits certain consolidations, mergers, and sales and transfers of assets by the Company and its subsidiaries. The SVB Credit Facility includes usual and customary events of default for facilities of this nature (with customary grace periods, as applicable) and provides that, upon the occurrence of an event of default, payment of all amounts payable under the SVB Credit Facility may be accelerated and/or the lenders’ commitments may be terminated. In addition, upon the occurrence of certain insolvency or bankruptcy related events of default, all amounts payable under the SVB Credit Facility will automatically become immediately due and payable, and the lenders’ commitments will automatically terminate.

See “Note Nine—Short-Term Debt” of the “Notes to Consolidated Financial Statements” included in Part II Item 8 of this Annual Report on Form 10-K.

Accounts Receivable Customer Concentration

As of December 31, 2015, two clients, United HealthCare Services, Inc., and CVS Caremark Corporation, accounted for 46% and 19% of total gross accounts receivable, respectively. Of these amounts, we have collected 96% from United HealthCare Services, Inc., and 47% from CVS Pharmacy, Inc., through February 22, 2016. Of the total December 31, 2015 gross accounts receivable, we have collected 67% as of February 22, 2016. Because we have a high percentage of our revenue dependent on a relatively small number of clients, delayed payments by a few of our larger clients could result in a reduction of our available cash.

Capital Lease Obligations

Capital lease obligations were $3.4 million as of December 31, 2015 and $2.8 million as of December 31, 2014. We are a party to capital lease agreements with leasing companies to fund our on-going equipment requirements. We expect to incur new capital lease obligations of between $1.5 million to $2.0 million for fiscal year 2016 as we continue to expand our investment in the infrastructure for Behavioral Analytics.

Contractual Obligations

Cash will be required for operating leases and non-cancellable purchase obligations, as well as various commitments reflected as liabilities on our balance sheet as of December 31, 2015. These commitments are as follows:

(In millions) Contractual Obligations	Total		Less Than 1 Year		1 – 3 Years		3 – 5 Years		More Than 5 Years
Letters of credit	$	3.3	$	3.3	$	—	$	—	$	—
Operating leases		6.4		1.3		2.1		1.7		1.3
Capital leases		3.8		2.1		1.7		—		—
Purchase obligations		4.7		3.0		1.7		—		—
Total	$	18.2	$	9.7	$	5.5	$	1.7	$	1.3

Letters of Credit

The amounts set forth in the chart above reflect standby letters of credit issued as collateral for capital leases. Specifically, these amounts reflect the face amount of these letters of credit that expire in each period presented.

Leases

The amounts set forth in the chart above reflect future principal, interest, and executory costs of the leases entered into by the Company for technology and office equipment, as well as office and data center space. Liabilities for the principal portion of the capital lease obligations are reflected on our balance sheet as of December 31, 2015 and December 31, 2014.

Purchase Obligations

Purchase obligations include $3.8 million of commitments reflected as liabilities on our balance sheet as of December 31, 2015, as well as $0.9 million of non-cancellable obligations to purchase goods or services in the future. Purchase obligations include $1.5 million of commitments reflected as liabilities on our balance sheet as of December 31, 2014, as well as $0.6 million of non-cancellable obligations to purchase goods or services in the future.

Off-Balance Sheet Arrangements

During fiscal years 2015, 2014, and 2013, we did not have any relationships with unconsolidated financial partnerships, such as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842).” The pronouncement is intended to improve financial reporting of leasing transactions. The ASU affects any entity that enters into a lease (as that term is defined in the ASU) with certain specified scope exemptions. The ASU will require organizations that lease assets referred to as “lessees” to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The pronouncement will be effective for the Company in fiscal year 2019. The Company is currently evaluating the impact on the consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740).” The pronouncement simplifies the presentation of deferred income taxes and requires that deferred income tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The pronouncement is effective for reporting periods beginning after December 15, 2016 and interim periods within those annual periods. The adoption of ASU 2015-17 is not expected to have an impact on the Company’s consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-05, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40).” The pronouncement was issued to provide guidance concerning accounting for fees in a cloud computing arrangement. The pronouncement is effective for reporting periods beginning after December 15, 2015. The adoption of ASU 2015-05 is not expected to have a material impact on the Company’s consolidated financial statements.

In November 2014, FASB issued ASU No. 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity (“ASU 2014-16”). ASU 2014-16 does not change the current criteria in GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required, but clarifies how current GAAP should be interpreted in the evaluation of the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share, reducing existing diversity in practice. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

In August 2014, FASB issued ASU No. 2014-15: Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). The update sets forth a requirement for management to evaluate whether there are conditions and events that raise substantial doubt about an entity’s ability to continue as a going concern, a responsibility that did not previously exist in GAAP. The amendment s included in this update require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (i) provide a defin ition of the term “substantial doubt”, (ii) require an evaluation every reporting period, including interim periods, (iii) provide principles for considering the mitigating effect of management’s plans, (iv) require certain disclosures when substantial dou bt is alleviated as a result of consideration of management’s plans, (v) require an express statement and other disclosures when substantial doubt is not alleviated, and (vi) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 will be effective for the Company in fiscal year 2016. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

In May 2014, FASB issued ASU 2014-09: Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The guidance sets forth a new five-step revenue recognition model that replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. ASU 2014-09 provides alternative methods of initial adoption and is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Early adoption is not permitted prior to December 15, 2016. The Company is currently evaluating the impact that this standard will have on the Company’s consolidated financial statements.

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk.

Historically, we have not experienced material fluctuations in our results of operations due to foreign currency exchange rate changes. We do not currently engage, nor is there any plan to engage, in hedging foreign currency risk.

We also have interest rate risk with respect to changes in variable interest rates on our revolving line of credit, and our cash and cash equivalents and capital leases. Interest on the line of credit is currently based on either Silicon Valley Bank’s prime rate, which varies in accordance with prevailing market conditions. A change in interest rate impacts the interest expense on the line of credit and cash flows. This interest rate risk will not have a material impact on our financial position or results of operations.

Item 8.

Financial Statement s and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF MATTERSIGHT CORPORATION

		Page
Financial Statements:
Report of Grant Thornton LLP Independent Registered Public Accounting Firm		28

Consolidated Balance Sheets — as of December 31, 2015 and December 31, 2014		31

Consolidated Statements of Operations — for the fiscal years ended 2015, 2014, and 2013		32

Consolidated Statements of Comprehensive Loss — for the fiscal years ended 2015, 2014, and 2013		33

Consolidated Statements of Cash Flows — for the fiscal years ended 2015, 2014, and 2013		34

Consolidated Statements of Changes in Stockholders’ Equity — for the fiscal years ended 2015, 2014, and 2013		35

Notes to Consolidated Financial Statements		36

Financial Statement Schedule:

Schedule II-Valuation and Qualifying Accounts — for the fiscal years ended 2015, 2014, and 2013		59

REPORT OF IN DEPENDENT REGIST ERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Mattersight Corporation

We have audited the accompanying consolidated balance sheets of Mattersight Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015. Our audits of the basic consolidated financial statements included the financial statement schedule listed in the index appearing under Schedule II – Valuation of Qualifying Accounts. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mattersight Corporation and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 11, 2016, expressed an adverse opinion.

/s/ GRANT THORNTON LLP

Chicago, IL

March 11, 2016

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Mattersight Corporation

We have audited the internal control over financial reporting of Mattersight Corporation Company (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting in Item 9A (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment.

There is the absence of review of user modifications performed by Mattersight employees in the information technology environment and lack of segregation of duties within financial accounting relating to subscription revenue, in conjunction with insufficient documentation of compensating controls, aggregates to a material weakness.

In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), consolidated balance sheets of Mattersight Corporation and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015. The material weakness identified above was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2015 consolidated financial statements, and this report does not affect our report dated March 11, 2016, which expressed unqualified opinion on those financial statements

We do not express an opinion or any other form of assurance on the section titled “Remediation of Material Weakness in Internal Control Over Financial Reporting” within Management’s Report on Internal Control Over Financial Reporting.

/s/ GRANT THORNTON LLP

Chicago, IL

March 11, 2016

MATTERSIGHT CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	December 31, 2015			December 31, 2014
ASSETS:
Current Assets:
Cash and cash equivalents	$	15,407		$	14,238
Receivables, net		4,863			3,460
Prepaid expenses		4,582			4,449
Other current assets		235			236
Total current assets		25,087			22,383
Equipment and leasehold improvements, net		8,523			4,657
Goodwill		972			972
Intangibles, net		3,353			571
Other long-term assets		2,467			3,495
Total assets	$	40,402		$	32,078
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current Liabilities:
Accounts payable	$	1,223		$	1,183
Accrued compensation and related costs		2,761			2,241
Unearned revenue		6,378			7,859
Capital leases		1,819			1,637
Other current liabilities		1,796			2,549
Total current liabilities		13,977			15,469
Long-term unearned revenue		1,597			2,532
Long-term capital leases		1,614			1,176
Other long-term liabilities		5,689			282
Total liabilities		22,877			19,459
Series B convertible preferred stock, $0.01 par value; 5,000,000 shares authorized and designated; 1,644,768 and 1,648,185 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively, with a liquidation preference of $10,443 and $9,877 at December 31, 2015 and December 31, 2014, respectively		8,388			8,406
Stockholders’ Equity:
Preferred stock, $0.01 par value; 35,000,000 shares authorized; none issued and outstanding		—			—
Common stock, $0.01 par value; 50,000,000 shares authorized; 27,636,853 and 24,046,977 shares issued at December 31, 2015 and December 31, 2014, respectively; and 25,849,876 and 22,324,093 outstanding at December 31, 2015 and December 31, 2014, respectively		276			240
Additional paid-in capital		264,212			243,282
Accumulated deficit		(242,085	)		(226,404	)
Treasury stock, at cost, 1,786,977 and 1,722,884 shares at December 31, 2015 and December 31, 2014, respectively		(9,239	)		(8,879	)
Accumulated other comprehensive loss		(4,027	)		(4,026	)
Total stockholders’ equity		9,137			4,213
Total liabilities and stockholders’ equity	$	40,402		$	32,078

See accompanying notes to consolidated financial statements.

MATTERSIGHT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	For the Fiscal Years Ended December 31,
	2015			2014			2013
Revenue:
Subscription revenue	$	36,091		$	26,372		$	28,610
Other revenue		3,821			3,947			5,884
Total revenue		39,912			30,319			34,494
Operating expenses:
Cost of subscription revenue		8,072			6,820			7,107
Cost of other revenue		2,604			2,579			3,932
Total cost of revenue, exclusive of depreciation and amortization shown below:		10,676			9,399			11,039
Research and development		13,891			12,545			11,112
Sales and marketing		13,754			9,102			10,648
General and administrative		11,705			9,140			8,782
Severance and related costs		—			—			154
Depreciation and amortization		4,450			3,022			3,450
Amortization of intangibles		492			106			66
Total operating expenses		54,968			43,314			45,251
Operating loss		(15,056	)		(12,995	)		(10,757	)
Interest and other expense, net		(590	)		(1,090	)		(534	)
Change in fair value of warrant liability		3			(124	)		(125	)
Loss before income taxes		(15,643	)		(14,209	)		(11,416	)
Income tax (provision) benefit		(38	)		(23	)		244
Net loss		(15,681	)		(14,232	)		(11,172	)
Dividends related to Series B convertible preferred stock		(588	)		(589	)		(589	)
Net loss available to common stockholders	$	(16,269	)	$	(14,821	)	$	(11,761	)
Per share of common stock:
Basic net loss available to common stockholders	$	(0.70	)	$	(0.74	)	$	(0.70	)
Diluted net loss available to common stockholders	$	(0.70	)	$	(0.74	)	$	(0.70	)
Shares used to calculate basic net loss per share		23,264			19,923			16,722
Shares used to calculate diluted net loss per share		23,264			19,923			16,722
Stock-based compensation is included in individual line items above:
Total cost of revenue	$	255		$	181		$	267
Research and development		1,075			1,326			1,821
Sales and marketing		1,330			696			1,615
General and administrative		2,742			1,975			1,872
Severance and related costs		—			—			29

See accompanying notes to consolidated financial statements.

MATTERSIGHT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

	For the Fiscal Years Ended December 31,
	2015			2014			2013
Net loss	$	(15,681	)	$	(14,232	)	$	(11,172	)
Other comprehensive loss:
Effect of currency translation		(1	)		7			6
Comprehensive net loss	$	(15,682	)	$	(14,225	)	$	(11,166	)

See accompanying notes to consolidated financial statements.

MATTERSIGHT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	For the Fiscal Years Ended December 31,
	2015			2014			2013
Cash Flows from Operating Activities:
Net loss	$	(15,681	)	$	(14,232	)	$	(11,172	)
Adjustments to reconcile net loss from continuing operations to net cash (used in) provided by operating activities:
Depreciation and amortization		4,942			3,128			3,516
Stock-based compensation		5,402			4,178			5,575
Severance and related costs		—			—			29
Change in fair value of warrant liability		(3	)		124			125
Other		—			—			2
Changes in assets and liabilities:
Receivables		(1,403	)		(1,076	)		184
Prepaid expenses		(623	)		(85	)		739
Other assets		910			192			(112	)
Accounts payable		(29	)		352			(29	)
Accrued compensation and related costs		520			397			509
Unearned revenue		(2,416	)		310			1,854
Other liabilities		1,992			(222	)		330
Total Adjustments		9,292			7,298			12,722
Net cash (used in) provided by operating activities		(6,389	)		(6,934	)		1,550
Cash Flows from Investing Activities:
Capital expenditures		(4,917	)		(766	)		(1,233	)
Intangible assets		(921	)		(251	)		(239	)
Net cash used in investing activities		(5,838	)		(1,017	)		(1,472	)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock, net		15,942			11,138			5,621
Proceeds from line of credit		15,000			7,000			2,400
Repayments from line of credit		(15,000	)		(7,000	)		(6,096	)
Principal payments under capital lease obligations		(2,116	)		(1,701	)		(2,117	)
Acquisition of treasury stock, net		(874	)		(797	)		(1,055	)
Proceeds from stock compensation and employee stock purchase plans, net		453			165			138
Proceeds from issuance of stock warrants		—			—			4
Net cash provided by (used in) financing activities		13,405			8,805			(1,105	)
Effect of exchange rate changes on cash and cash equivalents		(9	)		(8	)		—
Increase (decrease) in cash and cash equivalents		1,169			846			(1,027	)
Cash and cash equivalents, beginning of period		14,238			13,392			14,419
Cash and cash equivalents, end of period	$	15,407		$	14,238		$	13,392
Non-Cash Investing and Financing Transactions:
Capital lease obligations incurred	$	2,737		$	1,692		$	2,973
Capital equipment purchased on credit		2,737			1,692			2,973
Fair value of warrants classified as liability		—			380			785
Fair value of intellectual property purchase liability		1,958			—			—
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	314		$	266		$	403

See accompanying notes to consolidated financial statements.

MATTERSIGHT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except share data)

	Common Stock Issued
	Shares			Amount			Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Compre- hensive Loss			Total Stock- holders’ Equity
Balance, December 31, 2012		18,407,848		$	184		$	216,667		$	(201,000	)	$	(7,027	)	$	(4,039	)	$	4,785
Proceeds from issuance of common stock, net		1,538,462			15			5,606			—			—			—			5,621
Issuance of common stock for option awards exercised		4,498			—			16			—			—			—			16
Issuance of common stock related to employee stock programs		728,761			7			1,812			—			—			—			1,819
Amortization/forfeitures of unearned compensation		(213,664	)		(1	)		4,525			—			—			—			4,524
Purchase of treasury shares		—			—			—			—			(1,055	)		—			(1,055	)
Series B convertible preferred stock conversions		79			—			1			—			—			—			1
Series B convertible preferred stock dividend		—			—			(589	)		—			—			—			(589	)
Other comprehensive gain		—			—			—			—			—			6			6
Net loss		—			—			—			(11,172	)		—			—			(11,172	)
Balance, December 31, 2013		20,465,984		$	205		$	228,038		$	(212,172	)	$	(8,082	)	$	(4,033	)	$	3,956
Proceeds from issuance of common stock, net		2,891,566			29			11,109			—			—			—			11,138
Issuance of common stock for option awards exercised		2,914			—			14			—			—			—			14
Issuance of common stock for warrants exercised		86,366			1			528			—			—			—			529
Issuance of common stock related to employee stock programs		643,706			5			189			—			—			—			194
Amortization/forfeitures of unearned compensation		(44,496	)		—			3,988			—			—			—			3,988
Purchase of treasury shares		—			—			—			—			(797	)		—			(797	)
Series B convertible preferred stock conversions		937			—			5			—			—			—			5
Series B convertible preferred stock dividend		—			—			(589	)		—			—			—			(589	)
Other comprehensive gain		—			—			—			—			—			7			7
Net loss		—			—			—			(14,232	)		—			—			(14,232	)
Balance, December 31, 2014		24,046,977		$	240		$	243,282		$	(226,404	)	$	(8,879	)	$	(4,026	)	$	4,213
Proceeds from issuance of common stock, net		2,728,712			27			15,915			—			—			—			15,942
Issuance of common stock for option awards exercised		41,750			—			282			—			—			—			282
Issuance of common stock for warrants exercised		50,184			1			377			—			—			—			378
Issuance of common stock related to employee stock programs		819,632			8			263			—			—			—			271
Amortization/forfeitures of unearned compensation		(53,819	)		—			5,178			—			—			—			5,178
Purchase of treasury shares		—			—			—			—			(874	)		—			(874	)
Reissuance of treasury shares		—			—			(514	)		—			514			—			—
Series B convertible preferred stock conversions		3,417			—			17			—			—			—			17
Series B convertible preferred stock dividend		—			—			(588	)		—			—			—			(588	)
Other comprehensive (loss)		—			—			—			—			—			(1	)		(1	)
Net loss		—			—			—			(15,681	)		—			—			(15,681	)
Balance, December 31, 2015		27,636,853		$	276		$	264,212		$	(242,085	)	$	(9,239	)	$	(4,027	)	$	9,137

See accompanying notes to consolidated financial statements.

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except share and per share data)

Note One — Description of Business

Identify optimal customer/employee behavioral pairing for call routing;

Identify and understand customer personality;

Automatically measure customer satisfaction and agent performance on every analyzed call;

Improve rapport between agent and customer;

Reduce call handle times while improving customer satisfaction;

Identify opportunities to improve self-service applications;

Improve cross-sell and up-sell success rates;

Improve the efficiency and effectiveness of collection efforts;

Measure and improve supervisor effectiveness and coaching;

Improve agent effectiveness by analyzing key attributes of desktop usage;

Predict likelihood of customer attrition;

Predict customer satisfaction and Net Promoter Scores ^® without customer surveys;

Predict likelihood of debt repayment;

Predict likelihood of a sale or cross-sell; and

Identify fraudulent callers and improve authentication processes.

Note Two — Summary of Significant Accounting Policies

Fiscal Year-End

The fiscal year-ends presented are fiscal years 2015, 2014, and 2013, respectively.

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Consolidation

The consolidated financial statements include the accounts of Mattersight and all of its subsidiaries. All significant intercompany transactions have been eliminated.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those amounts.

Change in Presentation

Beginning in fiscal year 2015, Mattersight began to report subscription revenue (which consists of Behavioral Analytics subscription revenue and marketing managed services revenue) and other revenue (which consists of deployment revenue, professional services revenue, CRM services revenue, and reimbursed expenses revenue). Previously, in fiscal year 2014, Mattersight reported Behavioral Analytics revenue (which consisted of subscription revenue, deployment revenue, and professional services revenue) and other revenue (which consisted of CRM services revenue and marketing managed services revenue). Reimbursed expenses revenue was reported separately.

Revenue Recognition

Subscription Revenue

Other Revenue

Other revenue consists of deployment revenue, professional services revenue, and reimbursed expenses revenue.

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Professional services revenue primarily consists of fees charged to the Company’s clients to provide post-deployment follow-on consulting services, which inclu de custom data analysis, the implementation of enhancements, and training, as well as fees generated from the Company’s operational consulting services. Professional services are performed for the Company’s clients on a fixed-fee or time-and-materials basi s. Revenue is recognized as the services are performed, with performance generally assessed on the ratio of actual hours incurred to-date compared with the total estimated hours over the entire term of the contract.

Total Cost of Revenue, Exclusive of Depreciation and Amortization

If the Company’s estimates indicate that a contract loss will occur, then a loss provision is recorded in the period in which the loss first becomes probable and can be reasonably estimated.

Research and Development

Sales and Marketing

Sales and marketing expenses consist primarily of salaries, incentive compensation, commissions, and employee benefits for business development, account management, and marketing.

General and Administrative

General and administrative expenses consist primarily of salaries, incentive compensation, and employee benefits for administrative personnel, as well as facilities costs, a provision for uncollectible amounts, and costs for the Company’s corporate technology infrastructure and applications.

Loss Per Common Share

The per common share basic net loss available to holders of the Company’s Common Stock, par value $0.01 per share (“Common Stock”), has been computed by dividing the net loss available to holders of Common Stock for each period presented by the weighted average shares outstanding. The per common share diluted loss available to holders of Common Stock has been computed by dividing the net loss available to holders of Common Stock by the weighted average shares outstanding plus the dilutive effect of Common Stock equivalents, which is primarily related to our 7% Series B Convertible Preferred Stock (“Series B Stock”), using the “treasury stock” method. In periods in which there was a loss, the dilutive effect of Common Stock equivalents is not included in the diluted loss per share calculation as it was antidilutive.

Fair Value of Financial Instruments

The carrying values of current assets and liabilities approximated their fair values as of December 31, 2015 and December 31, 2014. Fair value is an exit price and establishes a three-tier valuation hierarchy for ranking the quality and reliability of the information used to determine fair values. The first tier, Level 1, uses quoted market prices in active markets for identical assets or liabilities. Level 2 uses inputs, other than quoted market prices for identical assets or liabilities in active markets, which are observable either directly or indirectly. Level 3 uses unobservable inputs in which there are little or no market data, and requires the entity to develop its own assumptions. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash and Cash Equivalents

The Company considers all highly liquid investments readily convertible into known amounts of cash (with original purchased maturities of three months or less) to be cash equivalents.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents, which includes foreign bank accounts, and receivables. Cash and cash equivalents consist of money market funds and deposits with high credit quality financial institutions. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation insurance limit. Accounts in the United States are insured by the Federal Deposit Insurance Corporation up to $250,000. At December 31, 2015, the Company had non-interest-bearing cash and interest-bearing money market balances in excess of federally insured limits by $13.7 million. The Company’s receivables are derived from billings to clients located primarily in the United States and are denominated in U.S. dollars. For fiscal year 2015, there were three clients that accounted for 10% or more of total revenue: United HealthCare Services, Inc.; Progressive Casualty Insurance Company; and CVS Caremark Corporation, which accounted for 31%, 15%, and 13% of total revenue, respectively. For fiscal year 2014, there were three clients that accounted for 10% or more of total revenue: United HealthCare Services, Inc.; Progressive Casualty Insurance Company; and Health Care Service Corporation; which accounted for 25%, 20%, and 11% of total revenue, respectively. For fiscal year 2013, there were four clients that accounted for 10% or more of total revenue: Vangent, Inc.; Progressive Casualty Insurance Company; Allstate Insurance Company; and United HealthCare Services, Inc., which accounted for 21%, 15%, 13%, and 11% of total revenue, respectively. As of December 31, 2015, two clients, United HealthCare Services, Inc. and CVS Caremark Corporation, accounted for 46% and 19% of total gross accounts receivable, respectively. As of December 31, 2014, two clients, United HealthCare Services, Inc. and CVS Pharmacy, Inc. accounted for 41% and 19% of total gross accounts receivable, respectively.

Equipment and Leasehold Improvements

Computers, software, furniture, and equipment are carried at cost and depreciated on a straight-line basis over their estimated useful lives. Leasehold improvements are amortized over the lesser of the useful life or the lease term. The useful life for computers and software is between one and three years. For enterprise software applications where a longer useful life is deemed appropriate, five years is used. For furniture and equipment, a useful life of five years is used. Maintenance and repair costs are expensed as incurred. The cost and related accumulated depreciation of assets sold or disposed of are eliminated from the respective accounts and the resulting gain or loss is included in the statements of operations. The carrying value of equipment and leasehold improvements is only reviewed if a triggering event occurs to assess recoverability based on future undiscounted cash flows. An impairment loss, if any, would be measured as the excess of the carrying value over the fair value. There was a triggering event as of December 31, 2015 and December 31, 2014; however no impairment was required to be recognized.

The Company accounts for software developed for internal use in accordance with the guidance provided under ASC Topic 350, Intangibles – Goodwill and Other , which addresses accounting for the costs of computer software developed or obtained for internal use. As such, costs incurred that relate to the planning and post-implementation phases of development are expensed. Costs incurred during the application development stage are capitalized and amortized over the asset’s estimated useful life, which is generally three to five years.

The Company leases certain equipment using both capital leases and operating leases. Assets leased under capital leases are recorded at the present value of future lease payments and depreciated on a straight line basis. All capital leases are for terms of twenty-four, thirty, or thirty-six months.

Goodwill

Goodwill is tested annually for impairment or more frequently if an event or circumstance indicates that an impairment loss may have been incurred. In performing our annual impairment test, we first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill. If it is concluded that this is the case, we perform a detailed quantitative assessment using a two-step test approach. In the first step, the fair value of the reporting unit is compared with its carrying value. If the fair value exceeds the carrying value, then goodwill is not impaired and no further testing is performed. The second step is performed if the carrying value exceeds the fair value. The implied fair value of the reporting unit’s goodwill must be determined and compared with the carrying value of the goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then an impairment loss equal to the difference will be recorded. The Company currently operates in a single business segment or reporting unit.

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In fiscal year 2015, after completing our annual qualitative review, we concluded that it was not more likely than not that the carrying value of our reporting unit exceeded its fair value. Accordingly, we concluded that further qu antitative analysis and testing was not required, and no goodwill impairment charge was required.

Intangible Assets

Intangible assets reflect costs related to patent and trademark applications, marketing managed services customer relationships and the purchase of certain intellectual property rights in 2015. The costs related to patent and trademark applications and the purchase of certain intellectual property are amortized over 120 months. The other intangible assets are fully amortized. There was an impairment charge of less than $0.1 million for fiscal year 2015 and less than $0.1 million for fiscal year 2014.

	December 31, 2015			December 31, 2014
Gross intangible assets	$	6.7		$	3.4
Accumulated amortization of intangible assets		(3.4	)		(2.8	)
Total	$	3.3		$	0.6

Other Long-Term Assets

Other long-term assets primarily consist of deferred costs and prepaid commissions related to Behavioral Analytics. These costs are recognized over the terms of the respective contracts, which range from three months to five years. Costs included in long-term assets will be recognized over the remaining term of the contracts beyond the first twelve months.

Income Taxes

The Company has recorded income tax valuation allowances on its net deferred tax assets to account for the unpredictability surrounding the timing of realization of its U.S. and non-U.S. net deferred tax assets due to continuing operating losses. The valuation allowances may be reversed at a point in time when management determines realization of these tax assets has become more likely than not, based on a return to or achieving predictable levels of profitability.

Short-Term Debt

On March 10, 2015, the Company entered into a Second Amended and Restated Loan and Security Agreement with Silicon Valley Bank (the “SVB Credit Facility”). The SVB Credit Facility provides for, among other things, a maximum credit limit of $15 million, a term through March 10, 2017, and an interest rate of prime plus 1.25%. The SVB Credit Facility additionally provides for an annual commitment fee of $0.1 million and an early termination fee of 1.0% in the first year of its term and 0.25% thereafter, prior to maturity. There was less than $0.1 million of interest expense for fiscal years 2015 and 2014. The borrowing interest rate for fiscal year 2015 was 4.5%. The Company was in compliance with all of its debt covenants under the SVB Credit Facility as of December 31, 2015. The Company has no outstanding balance under the SVB Credit Facility as of December 31, 2015.

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Effective as of August 14, 2014, the Company provided written notice of its voluntary termination of the Loan and Security Agreement entered into by the Company, together with its wholly-o wned subsidiaries Mattersight Europe Holding Corporation and Mattersight International Holding, Inc., as co-borrowers, and Partners for Growth IV, L.P. (“PfG”) on August 19, 2013 (the “PfG Credit Facility”). At the time of termination, there were no amount s outstanding under the PfG Credit Facility and no penalties were incurred or paid by the Company in connection with the termination. In connection with the execution of the PfG Credit Facility, the Company granted to PfG, certain affiliates of PfG, and Si licon Valley Bank, warrants to purchase shares of Common Stock (collectively, the “PfG Warrants”). See “Note Eighteen—Stock Warrants” for additional information.

For more information relating to the terms of the Credit Facility, see “Note Nine—Short-Term Debt” of the “Notes to Consolidated Financial Statements” included in Part II Item 8 of this Annual Report on Form 10-K.

Unearned Revenue

Payments received for Behavioral Analytics contracts in excess of the amount of revenue recognized for these contracts are recorded as unearned revenue until revenue recognition criteria are met.

Stockholders’ Equity

Stockholders’ equity includes Common Stock issued, additional paid-in capital, accumulated deficit, treasury stock, and accumulated other comprehensive loss. The 1.6 million shares of Series B Stock outstanding as of December 31, 2015 and 2014 are not classified as permanent equity or a liability in the accompanying balance sheets. These shares of Series B Stock are conditionally redeemable and do not meet the definition of a mandatorily redeemable financial instrument. The holders of Series B Stock have the ability to initiate a redemption upon the occurrence of certain events that are considered outside the Company’s control.

Foreign Currency Translation

The functional currencies for the Company’s foreign subsidiaries are their local currencies. All assets and liabilities of foreign subsidiaries are translated to U.S. dollars at end of period exchange rates. The resulting translation adjustments are recorded as a component of stockholders’ equity and comprehensive loss. Income and expense items are translated at average exchange rates prevailing during the period. Foreign currency net loss was one thousand dollars for fiscal year 2015, and there were foreign currency net gains of seven thousand and six thousand dollars for fiscal years 2014 and 2013, respectively. These foreign currency transactions from subsidiaries are included in interest and other income within the consolidated statements of operations.

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period. Determining fair value of stock-based awards at the grant date requires certain assumptions. The Company uses historical information as the primary basis for the selection of expected life, expected volatility, expected dividend yield assumptions, and anticipated forfeiture rates. The risk-free interest rate is selected based on the yields from U.S. Treasury Strips with a remaining term equal to the expected term of the options being valued.

Stock Warrants

In accordance with ASC 480-10, Distinguishing Liabilities from Equity , the Company classified certain warrants to purchase Common Stock as liabilities that do not meet the requirements for classification as equity. Such liabilities are initially recorded at fair value with subsequent changes in fair value recorded as a component of gain or loss on warrant liability on the consolidated statements of operations in each reporting period. Fair value of the warrants was measured using a Monte Carlo option pricing model. See “Note Eighteen—Stock Warrants” for additional information.

Segments

The Company operates in a single business segment, focused primarily on Behavioral Analytics.

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Recent Accounting Pronouncements

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740).” The pronouncement simplifies the presentation of deferred income taxes and requires that deferred income tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The pronouncement is effective for reporting periods beginning after December 15, 2016 and interim periods within those annual periods. The adoption of ASU 2015-17 is not expected to have a material impact on the Company’s consolidated financial statements.

In August 2014, FASB issued ASU No. 2014-15: Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern (“ASU 2014-15”). The update sets forth a requirement for management to evaluate whether there are conditions and events that raise substantial doubt about an entity's ability to continue as a going concern, a responsibility that did not previously exist in U.S. GAAP. The amendments included in this update require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (i) provide a definition of the term substantial doubt, (ii) require an evaluation every reporting period, including interim periods, (iii) provide principles for considering the mitigating effect of management’s plans, (iv) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (v) require an express statement and other disclosures when substantial doubt is not alleviated, and (vi) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 will be effective for the Company in fiscal year 2016. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

In May 2014, FASB issued ASU No. 2014-09: Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The guidance sets forth a new five-step revenue recognition model that replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in U.S. GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. ASU 2014-09 provides alternative methods of initial adoption and is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Early adoption is not permitted prior to December 15, 2016. The Company is currently evaluating the impact that this standard will have on the Company’s consolidated financial statements.

Note Three — Severance and Related Costs

Severance costs are comprised primarily of contractual salary and related fringe benefits over the severance payment period. Facility costs include losses on contractual lease commitments, net of estimated sublease recoveries, and impairment of leasehold improvements and certain office assets.

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For fiscal years 2015 and 2014, the Company did not have any expense related to severance and related costs. For fiscal year 2013, the Company recorded $0.2 million of expense related to severance and related costs for the elimination of one position.

For fiscal year 2013, the Company made cash payments of $0.2 million related to severance and related costs

Note Four — Receivables, Net

Receivables consist of the following:

	As of
	December 31, 2015		December 31, 2014
Amounts billed to clients	$	4.2	$	3.3
Unbilled revenue		0.7		0.2
		4.9		3.5
Allowances for doubtful accounts*		—		—
Receivables, net	$	4.9	$	3.5

*	Less than $0.1 million.

Amounts billed to clients represent fees and reimbursable project-related expenses. Unbilled revenue represents fees, project-related expenses, materials, and subcontractor costs performed in advance of billings in accordance with contract terms. Unbilled revenue at December 31, 2015 and December 31, 2014 consists of amounts due from clients and is anticipated to be collected within normal terms. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its clients to make required payments and clients indicating their intention to dispute their obligation to pay for contractual services provided by us. If the financial condition of the Company’s clients were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Note Five — Current Prepaid Expenses

Current prepaid expenses primarily consist of deferred costs and prepaid commissions related to Behavioral Analytics contracts. These costs are recognized over the subscription periods of the respective contracts, generally three to five years after the go-live date or, in cases where the Company contracts with a client for a short-term pilot of a Behavioral Analytics offering prior to committing to a longer subscription period, if any, the subscription or pilot periods generally range from three to twelve months after the go-live date. Costs included in current prepaid expenses will be recognized within the next twelve months.

Current prepaid expenses consisted of the following:

	As of
	December 31, 2015		December 31, 2014
Deferred costs	$	1.6	$	1.4
Prepaid commissions		1.4		1.5
Other		1.6		1.6
Total	$	4.6	$	4.5

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note Six — Equipment and Leasehold Improvements

Equipment and leasehold improvements consist of the following:

	As of
	December 31, 2015			December 31, 2014
Computers and software	$	19.8		$	15.8
Furniture and equipment		0.3			0.5
Leasehold improvements		3.2			1.0
Equipment and leasehold improvements, gross		23.3			17.3
Accumulated depreciation and amortization		(14.8	)		(12.6	)
Equipment and leasehold improvements, net	$	8.5		$	4.7

Depreciation and amortization expense was $4.2 million, $3.0 million, and $3.4 million, for fiscal years 2015, 2014, and 2013, respectively. Assets acquired under capital leases were $2.7 million, $1.7 million, and $3.0 million, in fiscal years 2015, 2014, and 2013, respectively. Depreciation and amortization expense on capital lease assets was $2.2 million, $1.7 million, and $2.2 million, in fiscal years 2015, 2014, and 2013, respectively.

Note Seven — Income Taxes

Loss before income taxes consisted of the following:

	For the Fiscal Years Ended
	2015			2014			2013
United States	$	(15.5	)	$	(14.2	)	$	(11.3	)
Foreign		(0.1	)		—			(0.1	)
Total	$	(15.6	)	$	(14.2	)	$	(11.4	)

The income tax benefit consists of the following:

	For the Fiscal Years Ended
	2015		2014		2013
Current:
Federal	$	—	$	—	$	—
State		—		—		0.2
Foreign		—		—		—
Total current		—		—		0.2
Deferred:
Federal		—		—		—
State		—		—		—
Foreign		—		—		—
Total deferred		—		—		—
Income tax benefit	$	—	$	—	$	0.2

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Total income tax benefit differed from the amount computed by applying the federal statutory income tax rate due to the following:

	For the Fiscal Years Ended
	2015			2014			2013
Federal tax benefit, at statutory rate	$	5.5		$	5.0		$	4.0
State tax benefit, net of federal benefit		0.4			0.4			0.3
Nondeductible expenses		0.1			(0.2	)		(0.1	)
Other		(1.1	)		(0.3	)		(0.1	)
Valuation allowance		(4.9	)		(4.9	)		(3.9	)
Income tax benefit	$	—		$	—		$	0.2

A reconciliation of the gross amounts of unrecognized tax benefits at the beginning and end of the year are as follows:

	For the Fiscal Years Ended
	2015		2014		2013
Balance at beginning of year	$	12.7	$	12.6	$	12.9
Additions based on tax positions related to the current year		—		—		—
Additions for tax positions of prior years		—		0.1		—
Reductions for tax positions of prior years		—		—		(0.3	)
Reductions for tax positions as a result of lapse of statute		—		—		—
Settlements		—		—		—
Balance at end of year	$	12.7	$	12.7	$	12.6

Due to the Company’s net operating loss carryforward position, these unrecognized tax benefits will not impact the Company’s effective tax rate, if recognized. Any change in the amount of unrecognized tax benefits within the next twelve months is not expected to result in a significant impact on the results of operations or the financial position of the Company.

Due to the Company’s net operating loss carryforward position, accrued interest and penalties associated with uncertain tax positions as of December 31, 2015 are not material. Interest and penalties associated with uncertain tax positions are recorded as part of income tax expense.

The statutes of limitation for the Company’s income tax returns after 2001 effectively remain open for examination by the IRS because the net operating loss carryforward from those years can be examined by the IRS for a period of three years after filing the tax return for the year the loss is used.

Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from three to five years. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. The Company and its subsidiaries may have various state and foreign income tax returns for immaterial jurisdictions in the process of examination throughout the reporting period.

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferred tax assets and liabilities comprised the following:

	As of
	December 31, 2015			December 31, 2014
Deferred tax assets:
Net operating loss carryforwards	$	70.8		$	66.2
Other accruals		5.6			4.8
Depreciation and amortization, including goodwill		0.4			0.3
Tax credit carryforward		0.5			0.5
Valuation allowance		(75.8	)		(71.0	)
Total deferred tax assets		1.5			0.8
Deferred tax liabilities:
Prepaid expenses		(1.7	)		(0.9	)
Total deferred tax liabilities		(1.7	)		(0.9	)
Net deferred tax liability	$	(0.2	)	$	(0.1	)

Deferred income taxes are not provided on certain undistributed earnings of foreign subsidiaries that are expected to be permanently reinvested in those companies. These earnings aggregated to an immaterial amount at each of December 31, 2015 and December 31, 2014.

During fiscal year 2002, the Company established a valuation allowance related to deferred tax assets for the U.S. This was in addition to the valuation allowance established in 2001 for non-U.S. deferred tax assets. The Company continues to provide a valuation allowance on significantly all domestic and foreign deferred tax assets as the Company has determined that it is more likely than not that the deferred tax assets in these jurisdictions will not be realized. As of December 31, 2015, net deferred tax assets of $75.8 million were fully offset by a valuation allowance. The Company’s U.S. federal net operating losses (“NOLs”) of $230.4 million and U.S. State NOLs of $119.5 million will expire beginning in 2022 and 2016, respectively. The Company’s non-U.S. NOLs of $1.0 million are subject to various expiration dates beginning in 2016. The Company also carries $0.5 million in Research and Development credit carryforwards that will expire beginning in 2020.

The Company’s ability to utilize its NOLs could become subject to significant limitations under Section 382 of the Internal Revenue Code if the Company were to undergo an ownership change. An ownership change would occur if the stockholders who own or have owned, directly or indirectly, 5% or more of the Company’s Common Stock or are otherwise treated as 5% stockholders under Section 382 and the regulations promulgated thereunder, increase their aggregate percentage ownership of the Company’s stock by more than 50 percentage points over the lowest percentage of the stock owned by these stockholders at any time during the testing period, which is generally the three-year period preceding the potential ownership change. In the event of an ownership change, Section 382 imposes an annual limitation on the amount of taxable income a corporation may offset with NOL carryforwards. Any unused annual limitation may be carried over to later years until the applicable expiration date for the respective NOL carryforwards. The Company has undergone a Section 382 analysis and does not believe there is a limitation on the use of NOLs under Section 382. If a change in ownership is deemed to have occurred during the past three years, then it may be possible that the Company’s NOL carryforward could be subject to limitation under Section 382 for tax return purposes. However, since its NOL carryforward is fully reserved with a valuation allowance, there would be no impact for financial statement purposes from a Section 382 limitation.

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note Eight — Other Long-Term Assets

Other long-term assets primarily consist of deferred costs and prepaid commissions related to Behavioral Analytics. These costs are recognized over the terms of the respective contracts, generally three to five years. Costs included in long-term assets will be recognized over the remaining term of the contracts beyond the first twelve months. Other long-term assets consisted of the following:

	As of
	December 31, 2015		December 31, 2014
Deferred costs	$	0.9	$	1.3
Prepaid commissions		1.2		1.7
Deferred tax asset		0.1		0.1
Other		0.3		0.4
Total	$	2.5	$	3.5

Note Nine — Short-Term Debt

On March 10, 2015, the Company entered into the SVB Credit Facility. The SVB Credit Facility provides for, among other things, a maximum credit limit of $15 million, a term through March 10, 2017, and an interest rate of prime plus 1.25%. The SVB Credit Facility additionally provides for an annual commitment fee of $0.1 million and an early termination fee of 1.0% in the first year of its term and 0.25% thereafter, prior to maturity. There was less than $0.1 million of interest expense in both fiscal year 2015 and 2014. The borrowing interest rate for fiscal year 2015 was 4.5%. The Company was in compliance with all of its debt covenants under the SVB Credit Facility as of December 31, 2015. The Company has no outstanding balance under the SVB Credit Facility as of December 31, 2015.

Effective as of August 14, 2014, the Company provided written notice of its voluntary termination of the PfG Credit Facility. At the time of termination, there were no amounts outstanding under the PfG Credit Facility and no penalties were incurred or paid by the Company in connection with the termination. In connection with the execution of the PfG Credit Facility, the Company granted to PfG, certain affiliates of PfG, and Silicon Valley Bank, warrants to purchase shares of Common Stock (collectively, the “PfG Warrants”). See “Note Eighteen — Stock Warrants” for additional information.

Note Ten — Employee Benefit Plans

The Company’s U.S. employees are eligible to participate in the Mattersight Corporation 401(k) Plan (the “401(k) Plan”) on the first day of the month coinciding with or following their date of hire. The 401(k) Plan allows employees to contribute up to 30% of their eligible compensation and up to 100% of their bonus compensation, subject to IRS statutory limits. For fiscal year 2015, the employer match contribution was $0.4 million. For fiscal years 2014 and 2013, Mattersight suspended the employer matching contributions for U.S. plans.

Note Eleven — Capital Stock and Series B Stock

Under the terms of its Certificate of Incorporation, as amended, the Company’s authorized capital stock consists of (i) 50,000,000 shares of Common Stock, and (ii) 40,000,000 shares of preferred stock (“Preferred Stock”). Under the terms of the Certificate of Designations of 7% Series B Convertible Preferred Stock, the Company designated 5,000,000 shares of the 40,000,000 shares of Preferred Stock as its Series B Stock. 1,644,768 and 1,648,185 shares of Series B Stock were issued and outstanding as of December 31, 2015 and December 31, 2014, respectively.

On July 22, 2015, the Company signed a definitive Common Stock Purchase Agreement (the “2015 Purchase Agreement”) to raise approximately $16.2 million in gross proceeds in a registered direct offering. Under the terms of the 2015 Purchase Agreement, the Company sold 2,728,712 shares of Common Stock (the “Shares”). Of the aggregate 2,728,712 Shares, 2,563,238 were sold to certain investors at a price of $5.93 per share and 165,474 were sold to certain officers and directors (including certain of their affiliates) at a price of $6.11 per share. The Shares represented approximately 12% of the issued and outstanding shares of Common Stock immediately prior to the execution of the 2015 Purchase Agreement. The offering closed on July 23, 2015. The aggregate proceeds that the Company received from the offering, net of fees, were approximately $15.9 million. Proceeds from the offering are being used for general corporate and working capital purposes. Craig-Hallum Capital Group LLC, which acted as the Company’s financial advisor for the offering, received a fee of $0.2 million. The Shares were sold pursuant to a prospectus supplement dated as of

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

July 22, 2015, in connection with a takedown from the Company’s effective shelf registration statement on Form S-3 (File No. 333-202744), which was filed with the SEC on Marc h 13, 2015 and declared effective by the SEC on April 8, 2015.

On July 23, 2014, the Company entered into a Common Stock Purchase Agreement (the “2014 Purchase Agreement”) with certain accredited investors party thereto (the “2014 Purchasers”). Under the terms of the 2014 Purchase Agreement, the Company sold, and the 2014 Purchasers purchased from the Company, 2,891,566 shares of Common Stock (the “2014 Shares”), at a price of $4.15 per share, to certain institutional investors. The 2014 Shares represented 15% of the issued and outstanding shares of Common Stock immediately prior to the execution of the 2014 Purchase Agreement. The offering closed on July 29, 2014. The aggregate gross proceeds, net of fees, that the Company received from the offering were approximately $11.1 million. Craig-Hallum Capital Group LLC, which acted as the sole placement agent for the offering, received a commission equal to 7% of the aggregate purchase price (excluding certain accounts), for an aggregate commission of $0.8 million, and was reimbursed for its out-of-pocket expenses.

On November 26, 2013, the Company entered into a Common Stock Purchase Agreement (the “2013 Purchase Agreement”), with certain accredited investors party thereto (collectively, the “2013 Purchasers”). Under the terms of the 2013 Purchase Agreement, the Company sold, and the 2013 Purchasers purchased from the Company, 1,538,462 shares of Common Stock (the “2013 Shares”), at a price of $3.90 per share. The aggregate gross proceeds the Company received from the offering, net of fees, were approximately $5.6 million. Approximately 39.9% of the 2013 Shares were purchased by directors of the Company, or by their affiliates. Commissions of $0.3 million were paid in connection with the sale of the 2013 Shares.

During fiscal year 2012, the Company announced its intention to commence a tender offer to purchase up to 111,605 shares of Series B Stock at a cash purchase price of $8.60 per share, plus accrued and unpaid dividends. In accordance with the terms and conditions of the tender offer, Mattersight purchased 19,758 shares of its Series B Stock, at a price of $8.71 per share (representing $8.60 per share plus accrued and unpaid dividends), for an aggregate cost of approximately $0.2 million, excluding fees and expenses related to the tender offer. These shares represented approximately 1.2% of the Series B Stock outstanding as of April 13, 2012.

The Series B Stock accrues dividends at a rate of 7% per annum, is entitled to a preference upon liquidation, and is convertible on a one-for-one basis into shares of Common Stock, subject to adjustment for stock splits, stock dividends, and similar actions. The Series B Stock generally votes on a one-for-one basis with the Common Stock, subject to adjustment for certain actions and specified matters as to which the Series B Stock is entitled to a separate class vote.

Note Twelve — Stock-Based Compensation

The Company has two stock-based compensation plans: the Mattersight Corporation 1999 Stock Incentive Plan (the “1999 Plan”) and the Mattersight Corporation Employee Stock Purchase Plan (the “ESPP”).

Under the 1999 Plan, awards of restricted stock, salary replacement, commissions, stock options, and stock appreciation rights may be granted to directors, officers, employees, consultants, independent contractors, and agents of the Company and its subsidiaries. Awards granted under the 1999 Plan are made at the discretion of the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”). If shares or options awarded under the 1999 Plan are not issued due to cancellation of unvested or unexercised options or shares, then those shares or options again become available for issuance under the 1999 Plan. Under the 1999 Plan, on the first day of each fiscal year, the aggregate number of shares available for issuance under the 1999 Plan is automatically increased by an amount equal to 5% of the total number of shares of Common Stock that are outstanding. At the 2008 Annual Meeting of Stockholders, stockholders approved the amendment and restatement of the 1999 Plan to increase the number of shares available for issuance under the 1999 Plan by 1,500,000.

Stock-based compensation expense was $5.4 million, $4.2 million, and $5.6 million, for the fiscal years ended 2015, 2014, and 2013, respectively. The Company recognizes stock compensation expense on a straight-line basis over the vesting period. The Company does not recognize the windfall tax benefit related to the excess tax deduction because the Company currently does not anticipate realizing the tax savings associated with this deduction. The amount of this excess tax deduction was $0.3 million for the fiscal year ended December 31, 2015 and $0 for the fiscal year ended December 31, 2014.

As of December 31, 2015, there were a total of 1,776,903 shares of Common Stock available for future grants under the 1999 Plan and from treasury stock. The Company’s Common Stock is traded on the NASDAQ Global Market under the symbol “MATR”.

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Restricted St ock

Restricted stock awards are shares of Common Stock granted to an individual that do not immediately vest but rather, vest over a period of time. During the vesting period, the holder of granted restricted stock receives all of the benefits of ownership (right to dividends, voting rights, etc.), other than the right to sell or otherwise transfer any interest in the stock. On September 11, 2014, each non-employee director received 10,000 shares of restricted stock, of which 25% vested on November 30, 2014 and the remaining balance vested over the following three quarters. On May 15, 2015, each non-employee director received 10,000 shares of restricted stock, of which 25% vested on May 31, 2015 and the remaining balance will vest over the following three quarters. Commencing in 2015, in addition to the Annual Grant (as defined under the section titled “Stock Options” below), each non-employee director receives 10,000 shares of restricted stock annually, the day after the Company’s annual stockholders’ meeting, which will vest in equal quarterly increments over four quarters.

Restricted stock award activity was as follows for the fiscal years ended December 31, 2013, December 31, 2014, and December 31, 2015:

	Shares			Weighted Average Price
Nonvested balance at December 31, 2012		821,363		$	6.81
Granted		193,661		$	4.52
Vested		(351,137	)	$	6.39
Forfeited		(213,664	)	$	6.62
Nonvested balance at December 31, 2013		450,223		$	6.25
Granted		609,355		$	5.70
Vested		(458,888	)	$	6.12
Forfeited		(44,496	)	$	6.13
Nonvested balance at December 31, 2014		556,194		$	5.76
Granted		825,120		$	6.78
Vested		(493,270	)	$	6.18
Forfeited		(53,819	)	$	6.15
Nonvested balance at December 31, 2015		834,225		$	6.49

	For the Fiscal Years Ended
	2015		2014		2013
Total fair value of restricted stock awards vested	$	3.3	$	2.6	$	1.4
Compensation expense related to restricted stock awards	$	2.3	$	1.7	$	2.1

As of December 31, 2015, there remains $4.0 million of unrecognized compensation expense related to restricted stock awards. These costs are expected to be recognized over a weighted average period of 1.9 years. The Company estimated the forfeiture rate at 3% for fiscal years 2015, 2014, and 2013.

Stock Options

Stock option awards may be in the form of incentive or non-qualified options. Stock options are granted with an exercise price per share equal to the fair market value of a share of the Common Stock on the date of grant, and have a maximum term of 10 years. The stock option terms are set by the Compensation Committee and generally become exercisable over a period of four years. The vesting can begin in equal monthly or quarterly increments over the vesting period.

Each non-employee director, upon commencing service, receives a non-qualified stock option to purchase 50,000 shares of Common Stock that vests ratably over a period of 48 months. Additionally, each non-employee director receives a non-qualified stock option to purchase 10,000 shares of Common Stock, granted annually the day after the Company’s annual stockholders’ meeting (the “Annual Grant”). Stock options granted to non-employee directors have an exercise price per share equal to the fair market value of a share of Common Stock on the grant date, and are exercisable for up to 10 years.

During fiscal year 2015, the Company granted options to purchase a total of 222,625 shares. On February 11, 2015, the Company granted options to purchase a total of 122,625 shares of Common Stock to non-executive employees. The exercise price per

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

share is $6.90, which was the closing price on the NASDAQ Global Market for shares of Common Stock on February 11, 2015, the grant date. Certain of the options vested 6.25% on February 28, 2015, with the balan ce vesting ratably over the following 15 quarters, whereas others vested 25% on February 28, 2016, with the balance vesting ratably over the following 12 quarters. The options expire on February 11, 2025. On May 15, 2015, the non-employee directors receive d options to purchase 70,000 shares of Common Stock. The exercise price per share is $6.13, which was the closing price on the NASDAQ Global Market for shares of Common Stock on May 15, 2015, the grant date. The options vested 25% on May 31, 2015, with the balance vesting ratably over the following three quarters. The options expire on May 15, 2025. On June 15, 2015, one non-executive employee received options to purchase 30,000 shares of Common Stock. The exercise price per share is $6.24, which was the cl osing price on the NASDAQ Global Market for shares of Common Stock on June 15, 2015, the grant date. The options will vest 25% on May 31, 2016, with the balance vesting ratably over the following 12 quarters. The options expire on June 15, 2025.

During the fiscal year 2014, the Company granted options to purchase a total of 654,000 shares of Common Stock to certain employees. On February 12, 2014, one employee received options to purchase a total of 70,000 shares of Common Stock. The exercise price per share was $5.81, which was the closing price on the NASDAQ Global Market for shares of Common Stock on February 12, 2014, the grant date. The options vested 25% on February 28, 2015, and the balance will vest ratably over the following 12 quarters, with a maximum exercise term of 10 years. On April 21, 2014, the Company’s executive officers received options to purchase a total of 225,000 shares of Common Stock. The exercise price per share was $6.38, which was the closing price on the NASDAQ Global Market for shares of Common Stock on April 21, 2014, the grant date. The options vested 6.25% on May 31, 2014, and the balance will vest ratably over the following 15 quarters, with a maximum exercise term of 10 years. On May 9, 2014, certain Company employees received options to purchase a total of 169,500 shares of Common Stock. The exercise price per share was $4.95, which was the closing price on the NASDAQ Global Market for shares of Common Stock on May 9, 2014, the grant date. Certain of the options will vest 6.25% on August 31, 2014, with the balance vesting ratably over the following 15 quarters, whereas others will vest 25% on May 31, 2015, with the balance vesting ratably over the following 12 quarters; all such options have a maximum exercise term of 10 years. On May 16, 2014, the Company’s Board of Directors received options to purchase a total of 70,000 shares of Common Stock. The exercise price per share was $4.99, which was the closing price on the NASDAQ Global Market for shares of Common Stock on May 16, 2014, the grant date. The options will vest 25% on May 31, 2015, and the balance will vest ratably over the following 12 quarters, with a maximum exercise term of 10 years. On August 14, 2014, certain Company employees received options to purchase a total of 19,500 shares of Common Stock. The exercise price per share was $4.88, which was the closing price on the NASDAQ Global Market for shares of Common Stock on August 14, 2014, the grant date. The options vested 6.25% on November 30, 2014, and the balance will vest ratably over the following 15 quarters, with a maximum exercise term of 10 years. On November 5, 2014, one employee received options to purchase a total of 10,000 shares of Common Stock. The exercise price per share was $5.45, which was the closing price on the NASDAQ Global Market for shares of Common Stock on November 5, 2014, the grant date. The options vested 6.25% on November 30, 2014, and the balance will vest ratably over the following 15 quarters, with a maximum exercise term of 10 years. On November 10, 2014, one employee received options to purchase a total of 90,000 shares of Common Stock. The exercise price per share was $5.58, which was the closing price on the NASDAQ Global Market for shares of Common Stock on November 10, 2014, the grant date. The options vested 25% on November 30, 2015, with the balance vesting ratably over the following 12 quarters, with a maximum exercise term of 10 years.

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During fiscal year 2013, options to purchase a total of 467,500 shares of Common Stock were granted. On February 13, 2013, one employee received options to purchase a total of 5,000 shares of Common Stock. The exercise price per share was $4.48, which was the closing price on the NASDAQ Global Market for shares of Common Stock on the grant date. The options vested 25% on February 28, 2014, and the balance will vest ratably over the following 12 quarters, with a maximum exercise term of 10 years. On March 15, 2013, the Company’s executive officers and other employees received options to purchase a total of 342,500 shares of Common Stock. The exercise price per share was $4.69, which was the closing price on the NASDAQ Global Market for shares of Common Stock on the grant date. The options vested 6.25% on May 31, 2013, and the balance will vest ratab ly over the following 15 quarters, with a maximum exercise term of 10 years. On May 17, 2013, options to purchase a total of 70,000 shares of Common Stock were granted to the Company’s Board of Directors. The exercise price per share was $3.80, which was t he closing price on the NASDAQ Global Market for shares of Common Stock on the grant date. The options vested 25% on May 31, 2014, and the balance will vest ratably over the following 12 quarters, with a maximum exercise term of 10 years. On November 6, 20 13, options to purchase a total of 50,000 shares of Common Stock were granted to two employees. The exercise price per share was $4.10, which was the closing price on the NASDAQ Global Market for shares of Common Stock on the grant date. The options vested 6.25% on November 30, 2013, and the balance will vest ratably over the following 15 quarters, with a maximum exercise term of 10 years.

Option activity was as follows for the fiscal years ended December 31, 2013, December 31, 2014, and December 31, 2015:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Weighted Average Fair Value of Option Grants
Outstanding as of December 31, 2012		1,766,236		$	9.03		7.4
Exercisable as of December 31, 2012		1,004,232		$	11.09
Granted		467,500		$	4.49			$	2.68
Exercised		(4,498	)	$	3.47
Forfeited		(215,000	)	$	9.15
Outstanding as of December 31, 2013		2,014,238		$	7.98		7.0
Exercisable as of December 31, 2013		1,204,786		$	9.66
Outstanding intrinsic value at December 31, 2013	$	0.3
Exercisable intrinsic value at December 31, 2013	$	0.1
Granted		654,000		$	5.63			$	3.33
Exercised		(2,914	)	$	5.15
Forfeited		(28,728	)	$	5.85
Outstanding as of December 31, 2014		2,636,596		$	7.42		6.8
Exercisable as of December 31, 2014		1,582,165		$	8.70
Outstanding intrinsic value at December 31, 2014	$	2.1
Exercisable intrinsic value at December 31, 2014	$	1.1
Granted		222,625		$	6.57			$	3.55
Exercised		(59,638	)	$	4.76
Forfeited		(192,166	)	$	7.47
Outstanding as of December 31, 2015		2,607,417		$	7.41		6.0
Exercisable as of December 31, 2015		1,967,825		$	7.97
Outstanding intrinsic value at December 31, 2015	$	2.4
Exercisable intrinsic value at December 31, 2015	$	1.8

	For the Fiscal Years Ended
	2015		2014		2013
Compensation expense related to option awards	$	1.7	$	1.4	$	1.1

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	For the Fiscal Years Ended
	2015		2014		2013
Total fair value of stock options vested	$	1.7	$	1.3	$	1.1
Intrinsic value of stock options exercised		0.1		—		—
Proceeds received from option exercises		0.3		—		—

As of December 31, 2015, there remained $2.0 million of unrecognized compensation expense related to stock options. These costs are expected to be recognized over a weighted average period of 1.7 years. The Company forfeiture rate was not applied as the impact was negligible.

The fair value for options granted during fiscal years 2015, 2014, and 2013 was estimated on the date of grant using a Black Scholes option-pricing model. The Company used the following weighted average assumptions:

	For the Fiscal Years Ended
	2015			2014			2013
Risk-free interest rates		1.03	%		1.4	%		0.7	%
Expected dividend yield		—			—			—
Expected volatility		58	%		65	%		67	%
Expected lives	6.0 years			6.0 years			6.0 years

Historical Company information is the primary basis for the selection of expected life, expected volatility, and expected dividend yield assumptions. The risk-free interest rate is selected based on the yields from U.S. Treasury Strips with a remaining term equal to the expected term of the options being valued.

Other Stock Compensation

Employee Stock Purchase Plan

The ESPP is intended to qualify as an “employee stock purchase plan” under section 423 of the Internal Revenue Code. We adopted the ESPP in 1999 and amended and restated the ESPP in May 2007 and February 2016. Under the ESPP, eligible employees are permitted to purchase shares of Common Stock at below-market prices. The purchase period opens on the first day and ends on the last business day of each calendar quarter. As of December 31, 2015, there remains 174,064 shares available for issuance under ESPP. The shares of Common Stock issued in respect of employee purchases under the ESPP during the fiscal years ended 2015, 2014, and 2013, were as follows:

	For the Fiscal Years Ended
	2015		2014		2013
Shares of common stock issued		41,026		34,351		40,959
Expense related to ESPP (in thousands)	$	61	$	44	$	39

The fair value for ESPP purchases during fiscal years 2015, 2014, and 2013, was estimated using a Black Scholes model. The Company used the following weighted average assumptions:

	For the Fiscal Years Ended
	2015			2014			2013
Risk-free interest rates		0.01	%		0.04	%		0.05	%
Expected dividend yield		—			—			—
Expected volatility		37	%		42	%		46	%
Expected lives	0.25 years			0.25 years			0.25 years

Salary Replacement Program

As approved by the Compensation Committee, the Company reinstated the Salary Replacement Program (the “Program”) for the period from July 1, 2013 through October 1, 2013. Participation was mandatory for any employee whose annual base salary was equal to or greater than $125,000 (each such employee, a “Participant”). Under the Program, Participants received periodic grants of

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

unrestricted Common Stock (subject to Compensation Committee approval of each grant to the executive officers) in exchange for a 25% reduction in the cash salaries otherwise payable to Part icipants. A total of 146,267 shares of Common Stock were granted to Participants during fiscal year 2013. The Company recorded $0.6 million of expense for the Program during fiscal year 2013.

Commissions

The Company paid commissions with shares of unrestricted Common Stock from May 2013 to July 2013. A total of 345,324 shares of unrestricted Common Stock were granted to employees in payment of earned commissions during fiscal year 2013. In connection therewith, the Company recorded $0.5 million of expense during fiscal year 2013.

Note Thirteen — Loss Per Share

The following table sets forth the computation of the loss and shares used in the calculation of basic and diluted loss per share:

	For the Fiscal Years Ended
	2015			2014			2013
Net loss	$	(15.7	)	$	(14.2	)	$	(11.2	)
Dividends related to Series B convertible preferred stock ⁽¹⁾		(0.6	)		(0.6	)		(0.6	)
Net loss available to common stockholders	$	(16.3	)	$	(14.8	)	$	(11.8	)
Per share of Common Stock
Basic/diluted net loss available to common stockholders	$	(0.70	)	$	(0.74	)	$	(0.70	)
Weighted average shares outstanding (basic and diluted) (in millions)		23.3			19.92			16.72
Currently anti-dilutive common stock equivalents ⁽²⁾ (in millions)		2.21			2.02			1.70

(1)	The Company’s Board of Directors did not declare a dividend payment on the Series B Stock, which was accrued, for each of the dividend periods from July 1, 2012 through December 31, 2015 (the aggregate amount of these dividends was approximately $2.1 million).

(2)	In periods in which there was a loss, the effect of Common Stock equivalents, which is primarily related to the Series B Stock, was not included in the diluted loss per share calculation as it was antidilutive.

Note Fourteen — Fair Value Measurements

The Company reports certain assets and liabilities at fair value. Fair value is an exit price and establishes a three-tier valuation hierarchy for ranking the quality and reliability of the information used to determine fair values. The first tier, Level 1, uses quoted market prices in active markets for identical assets or liabilities. Level 2 uses inputs, other than quoted market prices for identical assets or liabilities in active markets, which are observable either directly or indirectly. Level 3 uses unobservable inputs in which there are little or no market data, and requires the entity to develop its own assumptions. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2015 and December 31, 2014:

	Fair Value Measurements at December 31, 2015 Using
	Total carrying value at December 31, 2015		Quoted Prices in Active Markets (Level 1)		Other Observable (Level 2)		Significant Unobservable (Level 3)
Money market fund	$	13.7	$	13.7	$	—	$	—
Warrant liability	$	—	$	—	$	—	$	—

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Fair Value Measurements at December 31, 2014 Using
	Total carrying value at December 31, 2014		Quoted Prices in Active Markets (Level 1)		Other Observable (Level 2)		Significant Unobservable (Level 3)
Money market fund	$	13.7	$	13.7	$	—	$	—
Warrant liability	$	0.4	$	—	$	—	$	0.4

For more information relating to warrant inputs for level 3 liability, see “Note Eighteen—Stock Warrants” of the “Notes to Consolidated Financial Statements” included in Part II Item 8 of this Annual Report on Form 10-K.

The following table represents the activity in the Company’s Level 3 warrants during the fiscal year ended 2015:

(In millions)	Amount
Level 3 warrants, beginning of period, January 1, 2013	$	—
Addition — PfG Warrants, initial fair value		0.6
Change in fair value of warrant liability		0.2
Level 3 warrants, ending balance at December 31, 2013	$	0.8
Change in fair value of warrant liability		0.1
Warrant exercise		(0.5	)
Level 3 warrants, ending balance at December 31, 2014	$	0.4
Change in fair value of warrant liability		—
Warrant exercise		(0.4	)
Level 3 warrants, ending balance at December 31, 2015	$	—

The carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximated their fair values as of December 31, 2015 and December 31, 2014 due to the short-term nature of these instruments.

Note Fifteen — Leases

Capital Leases

The Company acquired $2.7 million and $1.7 million of computer equipment and leasehold improvements using capital leases during fiscal years 2015 and 2014, respectively. These assets were related primarily to investments in Behavioral Analytics. There was $2.2 million, $1.7 million, and $2.2 million, of depreciation on capital leases during fiscal years 2015, 2014, and 2013, respectively. All capital leases are for terms of twenty-four, thirty, or thirty-six months. The liabilities for these capital leases are included in “Other current liabilities” and “Other long-term liabilities” on the balance sheet.

The following is a schedule, by year, of future minimum lease payments under capital leases, together with the present value of the net minimum lease payments as of December 31, 2015:

(In millions)
Year	Amount
2016	$	2.1
2017		1.3
2018		0.5
2019		—
Total minimum lease payments	$	3.9
Less: estimated executory costs		(0.2	)
Net minimum lease payments	$	3.7
Less: amount representing interest		(0.3	)
Present value of minimum lease payments	$	3.4

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Capital leases included in equipment and leasehold improvements (see Note Six):

	As of
	December 31, 2015			December 31, 2014
Computers and software	$	7.3		$	5.7
Accumulated depreciation and amortization		(3.9	)		(2.9	)
Computers and software, net	$	3.4		$	2.8

Capital leases consisted of the following:

	As of
	December 31, 2015		December 31, 2014
Other current liabilities	$	1.8	$	1.6
Other long-term liabilities		1.6		1.2
Total	$	3.4	$	2.8

Operating Leases

The Company leases various office facilities under leases expiring at various dates through July 31, 2022. Additionally, the Company leases various property and office equipment under operating leases, generally under three year terms, expiring at various dates. Certain lease agreements contain escalating rent clauses, which require higher rent payments in future years. The Company expenses rent on a straight-line basis over the term of the lease, including any rent-free periods. In addition, the Company received certain leasehold improvement incentives, and recorded these incentives as deferred rent, which is amortized as a reduction of rent expense over the life of the lease. Net deferred rent on the consolidated balance sheet as of December 31, 2015, 2014, and 2013 was $2.0 million, $0.1 million, and $0.3 million, respectively. Rental expense for all operating leases approximated $1.7 million, $2.0 million, and $1.4 million, for fiscal years ended 2015, 2014, and 2013, respectively.

In March 2015, the Company entered into an operating lease to relocate its corporate headquarters to 200 W. Madison in Chicago. The initial lease term, which became effective on July 1, 2015, terminates on July 31, 2022. The lease includes one five-year renewal option.

Future minimum rental commitments under non-cancelable operating leases with terms in excess of one year are as follows:

Year	Amount
2016	$	1.6
2017		1.3
2018		0.9
2019		0.8
2020		0.9
Thereafter		1.4
Total minimum payments required	$	6.9

Note Sixteen — Other Current Liabilities

	As of
	December 31, 2015		December 31, 2014
Accrued vendor payable	$	0.7		—
Series B convertible preferred stock dividend payable		—		1.5
Warrant liability		—		0.4
Other		1.1		0.6
Total	$	1.8	$	2.5

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note Seventeen — Other Long-Term Liabilities

	As of
	December 31, 2015		December 31, 2014
Series B convertible preferred stock dividend payable	$	2.1	$	—
Intellectual property purchase liability		1.6		—
Deferred tax liability		0.3		0.3
Other		1.7		—
Total	$	5.7	$	0.3

The Series B Stock dividend payable as of December 31, 2014 was $1.5 million and included in other current liabilities.

Note Eighteen — Stock Warrants

During the second half of fiscal year 2013, the Company granted the following warrants: (i) to PfG, a warrant to purchase up to a value of $360,000 or 129,032 shares of Common Stock, (ii) to PfG Equity Investors, LLC, a warrant to purchase up to a value of $28,800 or 10,322 shares of Common Stock, and (iii) to Silicon Valley Bank, a warrant to purchase up to a value of $211,200 or 75,698 shares of Common Stock (collectively, the “PfG Warrants”). The Company received approximately $4,000 in connection with the issuance of the PfG Warrants, which the parties agreed was fair consideration.

On May 20, 2014, Silicon Valley Bank elected to fully exercise its warrant by exchanging 75,698 shares of Common Stock issuable upon exercise of the warrant through a cashless exercise on the terms provided in the applicable warrant agreement. As a result, the Company issued 47,404 shares of Common Stock to Silicon Valley Bank, in full settlement of the warrant.

On June 4, 2014, PfG elected to partially exercise its warrant by exchanging 57,196 of the 129,032 shares of Common Stock issuable upon exercise of the warrant through a cashless exercise on the terms provided in the applicable warrant agreement. As a result, the Company issued 35,862 shares of Common Stock to PfG on June 4, 2014, and the warrant remained exercisable for 71,836 shares of Common Stock as of June 4, 2014. On September 29, 2015, PfG fully exercised its remaining warrant through a cashless exercise on the terms provided in the applicable warrant agreement. As a result, the Company issued 46,689 shares of Common Stock to PfG, in full settlement of the warrant.

On June 4, 2014, PfG Equity Investors, LLC elected to partially exercise its warrant by exchanging 4,945 of the 10,322 shares of Common Stock issuable upon exercise of the warrant through a cashless exercise on the terms provided in the applicable warrant agreement. As a result, the Company issued 3,100 shares of Common Stock to PfG Equity Investors, LLC on June 4, 2014 and warrants remained exercisable for 5,377 shares of Common Stock as of June 4, 2014. On September 29, 2015, PfG Equity Investors, LLC fully exercised its remaining warrant through a cashless exercise on the terms provided in the applicable warrant agreement. As a result, the Company issued 3,495 shares of Common Stock to PfG Equity Investors, LLC, in full settlement of the warrant.

The issuance of the PfG Warrants, and the issuance of shares of Common Stock upon exercise of the PfG Warrants, were not registered under the Securities Act of 1933, as amended, or any state securities law and were issued pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act, Regulation D promulgated thereunder and/or Section 3(a)(9) of the Securities Act. Neither the PfG Warrants nor the shares of Common Stock issued upon exercise of the PfG Warrants may be subsequently offered or sold within the United States absent registration or exemption from such registration requirements and compliance with applicable state laws. The warrant liability as of December 31, 2015 was $0 and as of December 31, 2014 was $0.4 million.

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of the status of the PfG Warrants at December 31, 2015, and the changes during fiscal year 2015, are presented in the following table:

	Date		Shares of Common Stock, par value $0.01, represented by Warrants		Exchange Price	Expiration Date
Outstanding as of December 31, 2013		—		215,064	$2.79, subject to adjustment	August 19, 2018
Granted		—		—
Exercised	May 20, 2014			75,698	$2.79
Exercised	June 4, 2014			62,153	$2.79
Expired		—		—
Outstanding as of December 31, 2014		—		77,213	$2.79, subject to adjustment	August 19, 2018
Exercisable as of December 31, 2014		—		77,213	$2.79, subject to adjustment	August 19, 2018
Granted		—		—
Exercised	September 29, 2015			77,213	$2.79
Expired		—		—
Outstanding as of December 31, 2015		—		—	—		—
Exercisable as of December 31, 2015		—		—	—		—

The fair value of the warrant liability was estimated using the Monte Carlo option pricing model and the following assumptions:

	December 31, 2015	December 31, 2014
Risk-free interest rates	*		1.45	%
Expected dividend yield	*		—
Expected volatility	*		55	%
Expected lives	*	3.6 years
Weighted average grant date fair value	*	$	4.93

*	Not applicable .

Note Nineteen — Litigation and Other Contingencies

The Company is a party to various agreements, including all client contracts, under which it may be obligated to indemnify the other party with respect to certain matters, including, but not limited to, indemnification against third-party claims of infringement of intellectual property rights with respect to services, software, and other deliverables provided by the Company. These obligations may be subject to various limitations on the remedies available to the other party, including, without limitation, limits on the amounts recoverable and the time during which claims may be made, and may be supported by indemnities given to the Company by applicable third parties. Payment by the Company under these indemnification clauses is generally subject to the other party making a claim that is subject to challenge by the Company. Historically, the Company has not been obligated to pay any claim for indemnification under its agreements, and management is not aware of future indemnification payments that it would be obligated to make.

Under its By-Laws, subject to certain exceptions, the Company has agreed to indemnify its corporate officers and directors for certain events or occurrences while the corporate officer or director is, or was, serving at its request in such capacity or in certain related capacities. The Company has separate indemnification agreements with each of its directors and corporate officers that requires it, subject to certain exceptions, to indemnify them to the fullest extent authorized or permitted by its By-Laws and the Delaware General Corporation Law. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer liability insurance policy that limits its exposure and enables it to recover a portion of any amounts paid under these indemnification agreements. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. The Company had no liabilities recorded for these agreements as of December 31, 2015.

MATTERSIGHT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note Twenty— Quarterly Data (Unaudited)

	For the Fiscal Year Ended 2015
	1st			2nd			3rd			4th			Year
Total revenue	$	9.3		$	9.7		$	10.5		$	10.4		$	39.9
Gross margin	$	6.7		$	7.0		$	8.0		$	7.5		$	29.2
Operating loss	$	(3.7	)	$	(3.4	)	$	(3.8	)	$	(4.2	)	$	(15.1	)
Net loss	$	(3.8	)	$	(3.6	)	$	(3.9	)	$	(4.4	)	$	(15.7	)
Net loss available to common stockholders	$	(4.0	)	$	(3.7	)	$	(4.1	)	$	(4.5	)	$	(16.3	)
Basic net loss per share available to common stockholders	$	(0.18	)	$	(0.17	)	$	(0.17	)	$	(0.18	)	$	(0.70	)
Diluted net loss per share available to common stockholders	$	(0.18	)	$	(0.17	)	$	(0.17	)	$	(0.18	)	$	(0.70	)
Shares used to calculate basic and diluted net loss per share (in millions)		21.88			22.03			24.19			24.96			23.26

	For the Fiscal Year Ended 2014
	1st			2nd			3rd			4th			Year
Total revenue	$	7.0		$	7.3		$	7.7		$	8.3		$	30.3
Gross margin	$	4.8		$	5.0		$	5.3		$	5.8		$	20.9
Operating loss	$	(3.4	)	$	(3.4	)	$	(3.4	)	$	(2.8	)	$	(13.0	)
Net loss	$	(4.0	)	$	(3.3	)	$	(4.1	)	$	(2.8	)	$	(14.2	)
Net loss available to common stockholders	$	(4.1	)	$	(3.4	)	$	(4.3	)	$	(3.0	)	$	(14.8	)
Basic net loss per share available to common stockholders	$	(0.22	)	$	(0.18	)	$	(0.21	)	$	(0.14	)	$	(0.74	)
Diluted net loss per share available to common stockholders	$	(0.22	)	$	(0.18	)	$	(0.21	)	$	(0.14	)	$	(0.74	)
Shares used to calculate basic and diluted net loss per share (in millions)		18.50			18.68			20.79			21.72			19.92

MATTERSIGHT CORPORATION

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

(In millions)

Description of Allowance and Reserves	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Additions Charged to Other Accounts		Deductions		Balance at End of Period
Valuation allowance for doubtful accounts*:
Fiscal year ended December 31, 2015	$	—		—		—		—	$	—
Fiscal year ended December 31, 2014	$	—		—		—		—	$	—
Fiscal year ended December 31, 2013	$	—		—		—		—	$	—
Valuation allowance for deferred tax assets:
Fiscal year ended December 31, 2015	$	71.0		4.8		—		—	$	75.8
Fiscal year ended December 31, 2014	$	67.6		3.4		—		—	$	71.0
Fiscal year ended December 31, 2013	$	63.8		3.8		—		—	$	67.6

*	Less than $0.1 million.

Item 9.

Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure.

Not applicable.

Item 9A.

Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

Based on their evaluation for the period covered by this Annual Report on Form 10-K, Mattersight’s Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2015, the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were not effective. Management identified a material weakness in our internal control over financial reporting related to review of user modifications performed by Mattersight employees in the information technology environment and segregation of duties relating to subscription revenue.

As of the last business day of our second fiscal quarter of 2015 (i.e., June 30, 2015), our public float, as calculated in accordance with Rule 12b-2 under the Exchange Act (“Rule 12b-2”), was greater than $75 million. As such, we will be required to comply with the disclosure provisions applicable to an accelerated filer (as defined in Rule 12b-2) beginning with the filing of our Quarterly Report on Form 10-Q for the first quarter of 2016.

(b) Management’s Annual Report on Internal Control over Financial Reporting

Mattersight’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, under the supervision of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2015 based on the criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on its evaluation, management identified a material weakness in our internal control over financial reporting as of December 31, 2015. Specifically, (i) changes by our employees that affect client user counts were not subject to adequate review and (ii) there was a lack of segregation of duties between reporting and billing of user counts as it relates to subscription revenue. Although there were compensating controls in place, the documentation of these controls was insufficient. As a result of this material weakness, management concluded that, as of the end of the period covered by this report, the Company’s internal control over financial reporting was not effective. However, based on management’s review of user count access activity logs and modifications made to user counts, no errors in financial reporting were identified and no adjustments to our consolidated financial statements as of and for the year ended December 31, 2015 were required to be made.

Remediation of Material Weakness in Internal Control Over Financial Reporting

Subsequent to the discovery of our material weakness, we have changed our internal control process and procedures in an attempt to remediate this material weakness. In particular, we have: (i) implemented a quarterly review and approval of user modifications executed by Mattersight users, as it relates to changes that effect user counts in client portals; (ii) segregated the duties related to reporting and billing user counts as it relates to subscription revenue; and (iii) enhanced the documentation of compensating controls based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We believe these actions have strengthened our internal control over financial reporting and will address the material weakness identified as of December 31, 2015. However, the material weakness cannot be remediated fully until the remediation processes have been in operation for a period of time and successfully tested.

Grant Thornton LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in this Annual Report on Form 10-K and, as part of its audit, has issued its report, included herein, on the effectiveness of our internal control over financial reporting. See “Report of Grant Thornton LLP Independent Registered Public Accounting Firm” on page 28, which is incorporated herein by reference.

(d) Changes in Internal Control over Financial Reporting

Other than the actions and implementation measures described above, there has been no change in Mattersight’s internal control over financial reporting that occurred during the period covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, Mattersight’s internal control over financial reporting.

Item 9B.

Other Information.

Not applicable.

PART III

Item 10.

Directors, Executive Officers and Corporate Governance.

For information about our corporate Directors and the committees of our Board of Directors, see the captions “Election of Directors” and “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement to be filed by Mattersight for its 2016 Annual Meeting of Stockholders, which is incorporated herein by reference in response to this item.

The following table includes the name, age (as of March 3, 2016), and current position of each of our executive officers.

Name	Age	Current Position
Kelly D. Conway*	59	President and Chief Executive Officer
Christopher J. Danson	48	Executive Vice President and Chief Technology Officer
Richard M. Dresden	47	Executive Vice President of Sales
David R. Gustafson	38	Executive Vice President and Chief Operating Officer
Sheau-ming K. Ross	39	Vice President and Chief Financial Officer

*	Member of the Board of Directors

Except as required by individual employment agreements between executive officers and the Company, there exists no arrangement or understanding between any executive officer and any other person pursuant to which such executive officer was elected. Each executive officer serves until his or her removal or resignation.

The principal business experience of the executive officers for at least the last five years is as follows:

Kelly D. Conway has served as the President and Chief Executive Officer and a Director of the Company, which was spun out of Technology Solutions Company (“TSC”) in 2000, since its incorporation in May 1999. Mr. Conway joined TSC in November 1993 as Senior Vice President, assumed the position of Executive Vice President in July 1995, and became Group President in October 1998. Prior to joining TSC, Mr. Conway served as a Partner in the management consulting firm of Spencer, Shenk and Capers and also held various positions, including President and Chief Executive Officer, with Telcom Technologies, a manufacturer of automatic call distribution equipment.

Christopher J. Danson has been Executive Vice President and Chief Technology Officer since August 2015, prior to which he served as Executive Vice President of Delivery since February 2012 and Vice President of Delivery since June 2011. Prior to these roles, Mr. Danson served as Vice President of ICS and CRM Delivery since January 2005. His responsibilities over at least the past five years have included executive leadership of the business and technical delivery functions, which encompasses product development, rules and analytics development/tuning, data centers, security, training and adoption, service delivery management, support operations and business intelligence. In total, Mr. Danson has spent over 20 years with the Company, having spent the first seven years of his tenure with TSC.

Richard M. Dresden joined the Company as its Executive Vice President of Sales in February 2014. In this role, Mr. Dresden has responsibility for developing the Company’s sales strategy, go-to-market initiatives, and revenue growth, and expanding the Company’s customer base. From June 2009 until joining Mattersight, Mr. Dresden was a Vice President at Savvis (which was acquired by Centurylink, Inc.) and the Head of Sales for the Financial Services vertical where he managed a sales team of over 50 people and drove significant revenue and bookings growth. Mr. Dresden was the founding executive for Savvis’ ITO (IT outsourcing) division where he recruited and managed the cross-functional team to launch the business unit.

David R. Gustafson has served as the Company’s Executive Vice President and Chief Operating Officer since August 2015. Mr. Gustafson was Executive Vice President of Products and Marketing during the period from July 2013 through August 2015 (during which period he served as interim Chief Financial Officer from March 2015 to July 2015), Executive Vice President of Product and Customer Operations during the period from May 2012 to June 2013, and Vice President of Marketing and Product Management during the period from February 2012 through May 2012. Mr. Gustafson also served as Vice President of BA Business Delivery during the period from September 2008 through May 2012. Mr. Gustafson has responsibility for product management, product delivery, implementation services, service delivery, customer success, and the Company’s behavioral and data science teams. In total, Mr. Gustafson has spent over 15 years at Mattersight.

Sheau-ming K. Ross joined the Company as its Vice President and Chief Financial Officer of the Company in July 2015. In this role, Ms. Ross is responsible for finance and accounting functions for Mattersight. Pri or to joining Mattersight, Ms. Ross was Chief Financial Officer of EPAY Systems, a SaaS company in the workforce management space. Prior to EPAY Systems, she served as Chief Financial Officer for Silver Chalice, a next generation digital sports media comp any. Previously, Ms. Ross worked for twelve years in various financial leadership positions for the Tribune Company, including Chief Financial Officer for Chicago’s WGN-TV, CLTV, and WGN Radio, as well as WGN America, a nationally distributed basic cable a nd satellite television channel. Ms. Ross also previously worked in the strategy, corporate development and corporate venture capital groups at Tribune Company. She started her career in investment banking at Credit Suisse Group.

The Company maintains a code of ethical business conduct (the “Code of Conduct”) applicable to all of our directors, officers, and other employees, including our Chief Executive Officer and Chief Financial Officer (who serves as our principal financial officer) and Vice President of Financial Reporting (who serves as our principal accounting officer). The Code of Conduct addresses ethical conduct, SEC disclosure, legal compliance, and other matters as contemplated by Section 406 of the Sarbanes-Oxley Act of 2002. A copy of the Code of Conduct is available on our website at www.Mattersight.com. We will make a copy of it available to any person, without charge, upon written request to Mattersight Corporation, 200 W. Madison Street, Suite 3100, Chicago, Illinois 60606, Attn: Corporate Secretary. To the extent permitted by applicable rules of the NASDAQ Global Market, we intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendments to or waivers of the Code of Conduct for our Chief Executive Officer or Chief Financial Officer by posting such information on our website.

Item 11.

Executive Compensation.

The information under “Executive Compensation,” and “Director Compensation” in the Proxy Statement to be filed by the Company for its 2016 Annual Meeting of Stockholders is incorporated herein by reference in response to this item.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information under the heading “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement to be filed by the Company for its 2016 Annual Meeting of Stockholders is incorporated herein by reference in response to this item.

The following table shows, as of December 31, 2015, information regarding outstanding awards under all compensation plans of the Company (including individual compensation arrangements) under which equity securities of the Company may be delivered:

Plan Category	Shares of Common Stock to be Issued Upon Exercise of Outstanding Options and Rights ^{(a) (1)}		Weighted Average Exercise Price of Outstanding Options and Rights(b)		Shares of Common Stock Remaining Available for Future Issuance Under Compensation Plans (excluding securities reflected in column ^{(a) (c) (2)}
Equity compensation plans approved by security holders		2,607,417	$	7.41		1,950,967	⁽³⁾
Equity compensation plans not approved by security holders ⁽⁴⁾		—	$	—		—
Total		2,607,417	$	7.41		1,950,967	⁽⁵⁾

(1)

E xcludes purchase rights currently accruing under the ESPP. Purchase periods under the ESPP are three-month periods, beginning on the first business day of and ending on the last business day of each quarter. Eligible employees may purchase shares of our Co mmon Stock at a price equal to 85% of the lower of (i) the fair market value of our Common Stock on the first day of a purchase period or (ii) the fair market value of our Common Stock on the last day of a purchase period .

(2)

All of the securities available for future issuance listed herein may be issued other than upon the exercise of outstanding options, or similar rights. All of these shares are available for an award in the form of restricted stock, bonus stock, or similar awards under the Company’s applicable equity compensation plans.

(3)

Consists of 1,776,903 shares Common Stock reserved for issuance under the 1999 Plan and 174,064 shares of Common Stock reserved for issuance under the ESPP. The Company’s 1999 Plan and ESPP have both been approved by the Company’s stockholders. The 1999 Plan includes an “automatic increase” feature whereby, as of the first day of each fiscal year, the number of shares of Common Stock available for awards, other than incentive stock options, automatically increases by an amount equal to 5% of the number of shares of Common Stock then outstanding.

(4)	There are currently no equity compensation plans that have not been approved by the Company’s stockholders.

(5)	Does not include shares of restricted Common Stock held by employees, of which 834,225 shares were issued and outstanding as of December 31, 2015, which are included in the amount of issued and outstanding shares.

Item 13.

Certain Relationships and Related Transactions, and Director Independence.

The information under the heading “Board Leadership and Corporate Governance—Transactions with Related Persons” in the Proxy Statement to be filed by Mattersight for its 2016 Annual Meeting of Stockholders is incorporated herein by reference in response to this item.

Item 1 4.

Principal Accounting Fees and Services.

The information under the caption “Principal Accounting Fees and Services” in the Proxy Statement to be filed by the Company for its 2016 Annual Meeting of Stockholders is incorporated herein by reference in response to this item.

PART IV

Item 15.

Exhibits and Financial Statement Schedules.

(a)	Documents filed as part of this report:

(1)

Financial Statements.

The consolidated financial statements filed as part of this report are listed and indexed under Item 8 of this Annual Report on Form 10-K and such list is incorporated herein by reference.

(2)

Financial Statement Schedule.

The financial statement schedule filed as part of this report is listed and indexed under Item 8 of this Annual Report on Form 10-K and is incorporated herein by reference. We have omitted financial statement schedules other than that listed under Item 8 because such schedules are not required or applicable.

(3)

Exhibits.

The list of exhibits filed with or incorporated by reference into this report is contained in the Exhibit Index to this report on Page I-1, which is incorporated herein by reference.

SIGNA TURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on March 11, 2016.

MATTERSIGHT CORPORATION

By		/ S / K ELLY D. C ONWAY
		Kelly D. Conway
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant in the capacities indicated on March 11, 2016.

Name		Capacity

/ S / K ELLY D. C ONWAY		Director, President and Chief Executive Officer (Principal Executive Officer)
Kelly D. Conway

*		Chairman of the Board and Director
Tench Coxe		Chairman of the Board and Director

*		Director
Philip R. Dur		Director

*		Director
Henry J. Feinberg		Director

*		Director
John T. Kohler		Director

*		Director
David B. Mullen		Director

*		Director
Michael J. Murray		Director

*		Director
John C. Staley		Director

/s/ Sheau-ming K. Ross		Vice President and Chief Financial Officer (Principal Financial Officer)
Sheau-ming K. Ross

/S/ Glenn H. Polson		Vice President of Financial Reporting (Principal Accounting Officer)
Glenn H. Polson

*By:		/ S / Sheau-ming K. Ross
		Sheau-ming K. Ross, Attorney-in-Fact

EXHIBIT INDEX

We are including as exhibits to this Annual Report on Form 10-K certain documents that we have previously filed with the SEC as exhibits, and we are incorporating such documents as exhibits herein by reference from the respective filings identified in parentheses below. The management contracts and compensatory plans or arrangements required to be filed as exhibits to this Annual Report on Form 10-K pursuant to Item 14(c) are those listed below as Exhibits and noted by an asterisk.

Exhibit No.		Description of Exhibit

3(i).1		Certificate of Incorporation of Mattersight Corporation, as amended (filed as Exhibit 3.1 to Amendment No. 1 to Mattersight’s Registration Statement on Form S-1 (Registration No. 333-94293) as filed February 1, 2000 (the “S-1”)).

3(i).2		Certificate of Amendment to Mattersight Corporation’s Certificate of Incorporation effective December 19, 2001 (filed as Exhibit 3.3 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended December 29, 2001).

3(i).3		Certificate of Amendment to Mattersight Corporation’s Certificate of Incorporation effective December 19, 2001 (filed as Exhibit 3.4 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended December 29, 2001).

3(i).4		Certificate of Amendment to Mattersight Corporation’s Certificate of Incorporation effective May 31, 2011 (filed on May 31, 2011 as Exhibit 3.1 to Mattersight Corporation’s Current Report on Form 8-K).

3(ii).1		By-Laws of Mattersight Corporation (filed as Exhibit 3.2 to the S-1).

3(ii).2		Amendment to By-Laws of Mattersight Corporation (filed on November 16, 2007 as Exhibit 3.1 to Mattersight Corporation’s Current Report on Form 8-K).

4.1		Certificate of Designations of Series A Junior Participating Preferred Stock of Mattersight Corporation (included as Exhibit 4.2 to Amendment No. 1 to Mattersight Corporation’s Registration Statement on Form 8-A (File No. 0-27975) filed with the SEC on March 24, 2000).

4.2		Certificate of Increase of Series A Junior Participating Preferred Stock of Mattersight Corporation, filed December 19, 2001 (filed as Exhibit 3.5 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended December 29, 2001).

4.3		Certificate of Designations of 7% Series B Convertible Preferred Stock of Mattersight Corporation, filed December 19, 2001 (filed as Exhibit 3.6 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended December 29, 2001).

4.4		Certificate of Adjustment dated January 10, 2002 (filed as Exhibit 4.3 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended December 29, 2001).

4.5		Form of Common Stock Certificate (incorporated by reference to Exhibit No. 4.1 to Mattersight Corporation’s Registration Statement on Form S-1/A filed on August 8, 2006).

4.6		Current Form of Common Stock Certificate (adopted as of December 3, 2013) (filed as Exhibit 4.6 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended December 30, 2013).

10.1*		Mattersight Corporation 1999 Stock Incentive Plan (Conformed Copy as Amended through November 5, 2014) (filed as Exhibit 10.1 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014.

10.2*+		Mattersight Corporation 1999 Employee Stock Purchase Plan (as Amended and Restated effective February 16, 2016).

10.3*		Form of Restricted Stock Award Agreement between applicable participant and Mattersight Corporation (filed as Exhibit 10.23 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended January 1, 2005).

10.4*+		Current Form of Restricted Stock Award Agreement between applicable participant and Mattersight Corporation.

I-1

Exhibit No.		Description of Exhibit

10.5*		Form of Installment Stock Award Agreement between applicable participant and Mattersight Corporation (filed as Exhibit 10.24 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended January 1, 2005).

10.6*		Form of Option Award Agreement between applicable participant and Mattersight Corporation (filed as Exhibit 10.8 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended December 30, 2006).

10.7*+		Current Form of Option Award Agreement between applicable participant and Mattersight Corporation.

10.8		Second Amended and Restated Loan and Security Agreement between Silicon Valley Bank, Mattersight Corporation, Mattersight Europe Holding Corporation, and Mattersight International Holding, Inc., dated March 10, 2015 (filed as Exhibit 10.23 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014).

10.9*		Form of Common Stock Purchase Agreement dated November 26, 2013 by and between Mattersight Corporation and the purchasers named therein (filed on November 27, 2013 as Exhibit 10.1 to Mattersight Corporation’s Current Report on Form 8-K).

10.10		Form of Common Stock Purchase Agreement dated July 23, 2014 by and between Mattersight Corporation and the purchasers named therein (filed on July 24, 2014 as Exhibit 10.1 to Mattersight Corporation’s Current Report on Form 8-K).

10.11*		Form of Purchase Agreement dated July 22, 2015 by and between Mattersight Corporation and the purchasers named therein (filed on July 23, 2015 as Exhibit 10.1 to Mattersight Corporation’s Current Report on Form 8-K).

10.12*		Current Form of Indemnification Agreement entered into between Mattersight Corporation and participant (filed as Exhibit 10.12 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended December 31, 2012).

10.13*		Second Amended and Restated Employment Agreement, effective as of April 19, 2011 between Kelly D. Conway and Mattersight Corporation (filed as Exhibit 10.3 to Mattersight Corporation’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2011).

10.14*		First Amendment to Second Amended and Restated Employment Agreement, dated March 17, 2015, between Kelly D. Conway and Mattersight Corporation (filed as Exhibit 10.1 to Mattersight Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015).

10.15*		Amended and Restated Executive Employment Agreement, effective as of September 8, 2008, between Christopher J. Danson and Mattersight Corporation (filed as Exhibit 10.31 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended December 27, 2008).

10.16*		Executive Employment Agreement, effective as of May 23, 2012, between David R. Gustafson and Mattersight Corporation (filed as Exhibit 10.22 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended December 31, 2012).

10.17*		First Amendment to Executive Employment Agreement, dated July 1, 2013, between David R. Gustafson and Mattersight Corporation (filed on July 3, 2013 as Exhibit 10.1 to Mattersight Corporation’s Current Report on Form 8-K).

10.18*		Second Amendment to Executive Employment Agreement, dated August 8, 2013, between David R. Gustafson and Mattersight Corporation (filed on August 13, 2013 as Exhibit 10.1 to Mattersight Corporation’s Current Report on Form 8-K).

10.19*		Executive Employment Agreement, effective as of February 10, 2014, between Richard Dresden and Mattersight Corporation (filed as Exhibit 10.26 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended December 30, 2013).

10.20*		First Amendment to Executive Employment Agreement, dated November 24, 2014, between Richard Dresden and Mattersight Corporation (filed as Exhibit 10.19 to Mattersight Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014).

10.21*		Executive Employment Agreement between Mattersight Corporation and Sheau-ming Ross effective July 6, 2015 (filed on July 7, 2015 as Exhibit 10.1 to Mattersight Corporation’s Current Report on Form 8-K).

10.22+		Lease Agreement, effective as of March 20, 2015, between MEPT 200 WEST MADISON LLC and Mattersight Corporation.

I-2

Exhibit No.		Description of Exhibit

10.23+		Summary of Director Compensation.

10.24+		Summary of 2016 Executive Officer Compensation.

21.1+		Subsidiaries of Mattersight Corporation.

23.1+		Consent of Grant Thornton LLP.

24.1+		Power of Attorney from Tench Coxe, Director.

24.2+		Power of Attorney from Philip R. Dur, Director.

24.3+		Power of Attorney from Henry J. Feinberg, Director.

24.4+		Power of Attorney from John T. Kohler, Director.

24.5+		Power of Attorney from Michael J. Murray, Director.

24.6+		Power of Attorney from John C. Staley, Director.

24.7+		Power of Attorney from David B. Mullen, Director.

31.1+		Certification of Kelly D. Conway under Section 302 of the Sarbanes-Oxley Act of 2002.

31.2+		Certification of Sheau-ming K. Ross under Section 302 of the Sarbanes-Oxley Act of 2002.

32.1+		Certification of Kelly D. Conway and Sheau-ming K. Ross under Section 906 of the Sarbanes-Oxley Act of 2002.

101+**		The following financial information from the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, is formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets as of December 31, 2015 and December 31, 2014; (ii) Consolidated Statements of Operations for the fiscal years ended December 31, 2015, December 31, 2014, and December 31, 2013; (iii) Consolidated Statements of Comprehensive Loss for the fiscal years ended December 31, 2015, December 31, 2014, and December 31, 2013; (iv) Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2015, December 31, 2014, and December 31, 2013; (v) Consolidated Statements of Changes in Stockholders’ Equity for the fiscal years ended December 31, 2015, December 31, 2014, and December 31, 2013; (vi) notes to the Consolidated Financial Statements; and (vii) Financial Statement Schedule II.

+	Filed herewith.

*	Represents a management contract or compensatory plan or arrangement.

**	The XBRL information is filed herewith.

I-3

Exhibit 10.2

MATTERSIGHT CORPORATION

1999 EMPLOYEE STOCK PURCHASE PLAN

(as Amended and Restated as of February 17, 2016)

1. Purpose . The purpose of the Mattersight Corporation 1999 Employee Stock Purchase Plan (the "Plan") is to provide employees of Mattersight Corporation, a Delaware corporation (the "Company"), and its Subsidiary Companies (as defined in Section 15) added incentive to remain employed by such companies and to encourage increased efforts to promote the best interests of such companies by permitting eligible employees to purchase shares of the common stock, par value $0.01, of the Company ("Common Stock") at below-market prices. The Plan is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). The Company and its Subsidiary Companies are sometimes hereinafter called individually a "Participating Company" or collectively the "Participating Companies."

2. Eligibility . Participation in the Plan shall be open to each employee of the Participating Companies (a) who has been employed by the Participating Companies for at least three months, (b) whose customary employment by the Participating Companies is greater than 20 hours per week; and (c) whose customary employment by the Participating Companies is at least five months in any calendar year (each an "Eligible Employee") or any of its subsidiaries. No right to purchase Common Stock hereunder shall accrue under the Plan in favor of any person who is not an Eligible Employee as of the first day of a Purchase Period (as defined in Section 4). Notwithstanding anything contained in the Plan to the contrary, no Eligible Employee shall acquire a right to purchase Common Stock hereunder (i) if, immediately after receiving such right, such employee would own 5% or more of the total combined voting power or value of all classes of stock of the Company or any Subsidiary Company (including any stock attributable to such employee under Section 424(d) of the Code), or (ii) if for a given calendar year such right would permit such employee's aggregate rights to purchase stock under all employee stock purchase plans of the Company and its Subsidiary Companies or Parent Corporation (which aggregate rights are exercisable during such calendar year) to accrue at a rate which exceeds $25,000 of fair market value of such stock for such calendar year, all determined in the manner provided by Section 423(b)(8) of the Code and the rules and regulations thereunder. In addition, the number of shares of Common Stock which may be purchased by any Eligible Employee during any Purchase Period shall not exceed 1,500, subject to adjustment pursuant to Section 14.

3. Effective Date of Plan . The Plan was adopted by the Company’s Board of Directors (the "Board") on October 21, 1999, and thereafter approved by the stockholders of the Company. The Plan became effective on February 16, 2000 (the "Effective Date").

4. Purchase Periods . The "Purchase Periods" shall be successive three-month periods, each of which shall begin on the first business day of a calendar quarter and end on the last business day of such calendar quarter.

5. Basis of Participation .

(a) Each Eligible Employee shall be entitled to enroll in the Plan as of the first day of any Purchase that begins on or after such employee becomes an Eligible Employee and shall be considered a Participant in the Plan thereafter (a "Participant"), until this Plan or the Participant’s participation in the Plan is terminated in accordance with the terms hereof.

(i) To enroll in the Plan, an Eligible Employee shall execute and deliver a payroll deduction authorization (the "Authorization") to the Participating Company that is the employee's employer (the “Employer”), or its designated agent, in the time and manner specified by the Committee. The Authorization shall become effective on the first day of the Purchase Period commencing after the execution and delivery of such Authorization. Each Authorization shall direct that payroll deductions be made by the Employer for each payroll period during which the employee is a Participant in the Plan. The amount of each payroll deduction specified in an Authorization for each such payroll period shall be a whole percentage amount or a whole dollar amount, as determined by the Committee, in either case not to exceed 15%, or such lesser percentage as may be determined by the Committee, of the Participant's current regular wage or salary (before withholding or other deductions) paid to him or her by any of the Participating Companies.

(ii) Payroll deductions (and any other amount paid under the Plan) shall be made for each Participant in accordance with his or her Authorization until his or her participation in the Plan terminates or the Plan terminates, all as hereinafter provided.

(iii) A Participant may change the amount of his or her payroll deduction by filing a new Authorization with the Company or its designated agent, which shall become effective on the first day of the Purchase Period commencing after the execution and delivery of such Authorization. No other changes shall be permitted, except that a Participant may elect to terminate his or her participation in the Plan as provided in Section 8.

(iv) Payroll deductions shall be credited to a purchase account established on the books of the Company on behalf of each Participant (a "Purchase Account").

(b) The Committee may, in its discretion, establish additional procedures whereby Eligible Employees may participate in the Plan by means other than payroll deduction, including, but not limited to, delivery of funds by Participants in a lump sum or automatic charges to Participants' bank accounts. Such other methods of participating shall be subject to such rules and conditions as the Committee may establish. The Committee may at any time amend, suspend to terminate any participation procedures established pursuant to this paragraph without prior notice to any Participant or Eligible Employee.

6. Purchase Price . The purchase price (the "Purchase Price") per share of Common Stock hereunder for any Purchase Period shall be 85% of the lesser of (i) the Fair Market Value (as defined in Section 15) of a share of Common Stock on the first day of such Purchase Period and (ii) the Fair Market Value of a share of Common Stock on the last day of such Purchase Period, unless, prior to the beginning of such Purchase Period, the Committee shall determine otherwise (subject to the limitations contained in clause (iii) of Section 9(c)). If such determination results in a fraction of one cent, the Purchase Price shall be increased to the next higher full cent. In no event shall the Purchase Price be less than the par value of the Common stock.

7. Purchase and Issuance of Shares .

(a) At the end of each Purchase Period, the amount in each Participant's Purchase Account will be applied to the purchase from the Company of the number of shares of Common Stock determined by dividing such amount by the Purchase Price for such Purchase Period. The Common Stock purchased by each Participant shall be considered to be issued and outstanding to his or her credit as of the close of business on the last day of each Purchase Period. The total number of shares of Common stock purchased by all Participants during each Purchase Period shall be issued, as of the last day in such Purchase Period, to each Participant’s account with E*TRADE (or any successor thereto). Stock certificates will not be issued for the shares purchased. Rather, the Company will cause its transfer agent to maintain a book entry for the shares in each Participant’s name.

(b) No interest shall accrue at any time for any amount credited to a Purchase Account of a Participant. After the close of each Purchase Period, a report will be sent to each Participant stating the entries made to his or her Purchase Account, the number of shares of Common Stock purchased, and the applicable Purchase Price.

8. Termination of Participation .

(a) A Participant may elect at any time to terminate his or her participation in the Plan, provided written notice of such termination is received by the Company prior to the last business day of the Purchase Period for which such termination is to be effective. The termination notice shall specify the Participant’s preferred disposition of the balance in his or her Purchase Account. Specifically, the Participant may elect (i) for the Company to promptly deliver to such Participant cash in an amount equal to the balance in his or her Purchase Account on the date of such termination (the “Final Balance”) or (ii) to authorize a purchase using the Final Balance, which shall be effected by the Company in accordance with Section 7 hereof, at the end of the Purchase Period in which the notice of termination was received.

(b) If the Participant dies, terminates his or her employment with the Participating Companies for any reason, or otherwise ceases to be an Eligible Employee (including, without limitation, as a result of a Participating Company ceasing to be a Subsidiary Company), his or her participation in the Plan shall immediately terminate. Upon such terminating event, the Company shall promptly deliver to such Participant or his or her legal representative, as the case may be, cash in an amount equal to the balance to his or her credit in his or her Purchase Account, if any, on the date of such termination.

9. Termination or Amendment of the Plan .

(a) The Company, by action of the Board or the Committee, may terminate the Plan at any time. Notice of termination shall be given to all Participants, but any failure to give such notice shall not impair the effectiveness of the termination.

(b) Without any action being required, the Plan will terminate in any event when the maximum number of shares of Common stock to be sold under the Plan (as provided in Section 13) has been purchased. Such termination shall not impair any rights which under the Plan shall have vested on or prior to the date of such termination. If at any time the number of shares remaining available for purchase under the Plan is not sufficient to satisfy all then-outstanding purchase rights, the Board may determine an equitable basis of apportioning available shares among all Participants consistent with Section 423 of the Code.

(c) The Board or the Committee may amend the Plan from time to time in any respect for any reason; provided. however , no such amendment shall (i) materially adversely affect any purchase rights outstanding under the Plan during the Purchase Period in which such amendment is to be effected, (ii) unless approved by the stockholders of the Company, increase the maximum number of shares of Common Stock that may be purchased under the Plan, (iii) decrease the Purchase Price of the shares of Common Stock for any Purchase Period below the lesser of 85% of the Fair Market Value thereof on the first day of such Purchase Period and 85% of the Fair Market Value thereof on the last day of such Purchase Period, (iv) unless approved by the stockholders of the Company, change the class of employees eligible to participate in the Plan, or (v) adversely affect the qualification of the Plan under Section 423 of the Code.

(d) Upon termination of the Plan, cash in an amount equal to the balance, if any, of each Participant in his or her Purchase Account, shall be promptly distributed to such Participant.

10. Non-Transferability . Rights acquired under the Plan are not transferable and may be exercised only by a Participant.

11. Stockholder's Rights . No Eligible Employee or Participant shall by reason of the Plan have any rights of a stockholder of the Company until and to the extent he or she shall acquire shares of Common stock as herein provided.

12. Administration of the Plan .

(a) The Plan shall be administered by the Compensation Committee of the Board (the "Committee"), provided that the Board may otherwise appoint (i) the entire Board or (ii) a committee consisting of two or more members of the Board, to act as the Committee. In addition to the power to amend or terminate the Plan pursuant to Section 9, the Committee shall have full power and ·authority to: (A) interpret and administer the Plan and any instrument or agreement entered into under the Plan; (B) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (C) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan. Decisions of the Committee shall be final, conclusive and binding upon all persons, including the Company, any Participant and any other employee of the Company. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings.

(b) The Plan shall be administered so as to ensure all Participants have the same rights and privileges as required by Section 423(b)(5) of the Code.

13. Maximum Number of Shares . The maximum number of shares of Common Stock that may be purchased under the Plan is 500,000, subject, however, to adjustment as hereinafter set forth. Shares of Common Stock sold hereunder may be treasury shares, authorized, and unissued shares, or a combination thereof.

14. Adjustment . In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off, or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a regular cash dividend, the maximum number and class of securities that may be purchased under this Plan, the maximum number and class of securities that may be purchased by any Eligible Employee during any Purchase Period, and the Purchase Price per security, shall be appropriately adjusted by the Committee. The decision of the Committee regarding any such adjustment shall be final, binding, and conclusive. If any such adjustment would result in a fractional security being available under this Plan, such fractional security shall be disregarded.

15. Miscellaneous .

(a) Except as otherwise expressly provided herein, any Authorization, election, notice, or document under the Plan from an Eligible Employee or Participant shall be delivered to the Company, the Participating Company that is the employer of such Eligible Employee, or their designated agents and, subject to any limitations specified in the Plan, shall be effective when so delivered.

(b) The term "business day" shall mean any day other than Saturday, Sunday, or a legal holiday recognized by the Participating Corporation for which the Participant is employed.

(d) The term “Fair Market Value” shall mean the closing transaction price of a share of Common Stock as reported by The NASDAQ Stock Market or the principal national securities exchange on which the Common Stock is then traded, on the date that such value is being determined, or, if there shall be no reported transactions for such date, on the next preceding date that transactions were reported; provided, however, that if the Fair Market Value for any date cannot be so determined, Fair Market Value shall be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion, shall at such time deem appropriate.

(e) The term "Parent Corporation" shall mean any corporation that is, or becomes, a parent corporation of the Company (within the meaning of Section 424(e) of the Code).

(f) The term "Subsidiary Companies" shall mean all corporations that are, or become, subsidiary corporations (within the meaning of Section 424(f) of the Code) and of which the Company is the common parent.

(g) The Plan, and the Company's obligation to sell and deliver Common Stock hereunder, shall be subject to all applicable federal, state, and foreign laws, rules and regulations, and to such approval by any regulatory or governmental agency as may, in the opinion of counsel for the Company, be required.

16. Change in Control .

(a) In order to maintain the Participants' rights in the event of any Change in Control of the Company, as hereinafter defined, upon such Change in Control, the then-current Purchase Period shall thereupon end, and all Participants' Purchase Accounts shall be applied to purchase shares of Common Stock pursuant to Section 7, and the Plan shall immediately thereafter terminate.

(b) "Change in Control" for the purposes hereof means the occurrence of any of the following events:

(i) the acquisition by any individual, entity, or group (a "Person"), including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 35% or more of either (A) the then‑outstanding shares of Common Stock of the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of Directors (the "Outstanding Company Voting Securities"); excluding, however, the following: (1) any acquisition directly from the Company (excluding any acquisition resulting from the exercise of an exercise, conversion, or exchange privilege, unless the security being so exercised, converted, or exchanged was acquired directly from the Company); (2) any acquisition by the Company; (3) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary Corporation; or (4) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 16(b); provided further, that for purposes of clause (2) above, if any Person (other than the Company or any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company) shall become the beneficial owner of 35% or more of the Outstanding Company Common Stock or 35% or more of the Outstanding Company Voting Securities by reason of an acquisition by the Company, and such Person shall, after such acquisition by the Company, become the beneficial owner of any additional shares of the Outstanding Company Common Stock or any additional Outstanding Company Voting Securities and such beneficial ownership is publicly announced, such additional beneficial ownership shall constitute a Change in Control;

(ii) individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board; provided that any individual who becomes a Director of the Company subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by the vote of at least a majority of the Directors then comprising the Incumbent Board, shall be deemed a member of the Incumbent Board; and provided further, that any individual who was initially elected as a Director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board, shall not be deemed a member of the Incumbent Board;

(iii) approval by the stockholders of the Company of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Corporate Transaction"); excluding, however, a Corporate Transaction pursuant to which (A) all or substantially all of the individuals or entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of Common Stock and the combined voting power of the outstanding securities entitled to vote generally in the election of Directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or indirectly) in substantially the same proportions relative to each other as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (other than the Company, any employee benefit plan (or related trust) sponsored or maintained by the Company or a Subsidiary Corporation, the corporation resulting from such Corporate Transaction, and any Person who beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, 35% or more of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) will beneficially own, directly or indirectly, 35% or more of, respectively, the outstanding shares of Common Stock or the combined voting power of the outstanding securities entitled to vote generally in the election of Directors of the corporation resulting from such Corporate Transaction and (C) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the Board of Directors of the corporation resulting from such Corporate Transaction; or

(iv) approval by the stockholders of the Company of a plan of complete liquidation or dissolution of the Company.

Exhibit 10.4

RESTRICTED STOCK AWARD

Mattersight Corporation, a Delaware corporation (the “Company”), hereby grants to the individual whose name appears below (the “Participant”), pursuant to the provisions of the Mattersight Corporation 1999 Stock Incentive Plan (the “Plan”), a Restricted Stock Award (this “Award”) of shares of its Common Stock, $0.01 par value per share (the “Restricted Shares”), as set forth below but only upon and subject to the terms and conditions set forth herein, in the Plan, and in Annex I hereto.

All terms and conditions set forth in Annex I and the Plan are deemed to be incorporated herein in their entirety. All capitalized terms used in this Award and not otherwise defined herein have the respective meanings assigned to them in Annex I or the Plan.

Participant’s Name:

Number of Restricted Shares Subject to Award:

Date of Award Grant (“Award Date”):

Vesting Provisions:

The Participant’s Restricted Shares will become vested as follows: [_________________________].

General:

This Award is subject to the provisions of the Plan, and will be interpreted in accordance therewith. In the event of a discrepancy between this Award, or any other material describing this Award or the Restricted Shares awarded hereunder, and the actual terms of the Plan, the Plan will govern in all respects. A copy of the Plan is available upon request by contacting the General Counsel and Corporate Secretary at the Company’s Chicago, Illinois office.

IN WITNESS WHEREOF, this Award has been executed as of the Award Date set forth above.

Mattersight Corporation

By:
		Kelly D. Conway
Its:		President and Chief Executive Officer


Page 1	Restricted Stock Award

Annex I

Restricted Stock Award

1. Meaning of Certain Terms. As used herein, the following terms have the meanings set forth below. “Board” means the Company’s Board of Directors. “Code” means the Internal Revenue Code of 1986, as amended. References to this “Award”, the “Restricted Shares”, and “herein” are deemed to include the Restricted Stock Award and this Annex I to the Restricted Stock Award taken as a whole. This Annex I and the Restricted Stock Award are deemed to be one and the same instrument. The term “employment” shall have the meanings set forth in Section 1.2 of the Plan. Other capitalized terms used herein without definition shall have the respective meanings set forth in the Restricted Stock Award or the Plan, as appropriate.

2. Stock Certificates. Stock certificates will not be issued for the Restricted Shares. Rather, the Company will cause its transfer agent to maintain a book entry for the Restricted Shares in the Participant’s name. The Restricted Shares will be maintained in a book entry until they are either forfeited or vested. The Participant’s right to receive this Award hereunder is contingent upon the Participant’s execution and delivery to the Company of all stock powers or other instruments of assignment (including a power of attorney), each endorsed in blank with a guarantee of signature if deemed necessary or appropriate by the Company, which would permit transfer to the Company of all or a portion of the Restricted Shares in the event such Restricted Shares are forfeited in whole or in part. The Company, or its transfer agent, will release the Restricted Shares, as and when provided by Section 4 hereof.

3. Rights as Stockholder. On and after the Award Date, and except to the extent provided in Section 8 hereof, the Participant will be entitled to all of the rights of a stockholder with respect to the Restricted Shares, including the right to vote the Restricted Shares, the right to receive dividends and other distributions payable with respect to the Restricted Shares, and the right to participate in any capital adjustment applicable to all holders of Common Stock; provided, however, that a distribution with respect to shares of Common Stock, other than a regular cash dividend, will be deposited with the Company and will be subject to the same restrictions as the Restricted Shares. If the Participant forfeits any rights he or she may have under this Award, the Participant shall, on the day following the event of forfeiture, no longer have any rights as a stockholder with respect to the forfeited portion of the Restricted Shares or any interest therein (or with respect to any Restricted Shares not then vested), and the Participant shall no longer be entitled to receive dividends on such stock or vote the Restricted Shares as of any record date occurring thereafter.

4. Terms and Conditions of Distribution. The Company, or its transfer agent, will transfer the vested portion of the Restricted Shares to a brokerage account established by the Company on behalf of the Participant as soon as practicable after the Restricted Shares become vested. If the Participant dies before the Company has distributed any portion of vested Restricted Shares, the Company will transfer that portion of the vested Restricted Shares to a brokerage account established by the Company on behalf of the beneficiary designated by the Participant on a form provided by the Company for this purpose. If the Participant failed to designate a beneficiary, the Company will distribute certificates for the Restricted Shares in accordance with the Participant’s will or, if the Participant did not have a will, the Restricted Shares will be distributed in accordance with the laws of descent and distribution. The Company will distribute certificates for any undistributed portion of vested Restricted Shares no later than six months after the Participant’s death.

The Committee (as defined in Section 7 hereof) may require the Participant, or the alternate recipient identified in the preceding paragraph, will be required to satisfy any potential federal, state, local or other tax withholding liability. Such liability must be satisfied at the time the Restricted Shares become “substantially vested” (as defined in the regulations issued under Section 83 of the Code). In order to satisfy the withholding, the Company shall withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value, determined as of the Tax Date in an amount necessary to satisfy the amount of applicable taxes required to be withheld; provided, however, that in the event the Participant is subject to Section 16 of the Exchange Act, the Committee may require that the method of satisfying such an obligation be in compliance with Section 16 and the rules and regulations thereunder.

The Company will not make any distribution under this Section 4 before the first date any portion of the Restricted Shares may be distributed to the Participant without penalty or forfeiture under federal or state laws or regulations governing short swing trading of securities. In determining whether a distribution would result in such a penalty or forfeiture, the Company and the Committee may rely upon information reasonably available to them or upon representations of the Participant’s legal or personal representative.


Page 2	Restricted Stock Award

5. No Right to Continue Employment or Service. Nothing in the Plan or this Award will be construed as creating any right in the Participant to continued employment or service with the Company, or as altering or amending the existing terms and conditions of the Participant ’ s employment or service.

6. Nontransferability. No interest of the Participant or any designated beneficiary in or under this Award will be assignable or transferable by voluntary or involuntary act or by operation of law, other than as set forth in Section 4 hereof. Distribution of Restricted Shares will be made only to the Participant; or, if the Committee has been provided with evidence acceptable to it that the Participant is legally incompetent, the Participant’s personal representative; or, if the Participant is deceased, to the designated beneficiary or other appropriate recipient in accordance with Section 4 hereof. The Committee may require personal receipts or endorsements of a Participant’s personal representative, designated beneficiary, or designated alternate recipient. Any effort to otherwise assign or transfer the rights under this Award will be wholly ineffective, and will be grounds for termination by the Committee of all rights of the Participant and his or her beneficiary in and under this Award.

7. Administration. The Compensation Committee of the Board of Directors of the Company (the “Committee”) has the authority to manage and supervise the administration of the Plan. The Participant’s rights under this Award are expressly subject to the terms and conditions of the Plan, including any required continued shareholder approval of the Plan, and to any guidelines the Committee adopts from time to time that are not inconsistent with the Plan.

8. Interpretation; Governing Law. Any interpretation by the Committee of the terms and conditions of the Plan, this Award, or any guidelines adopted as described in Section 7 hereof will be final. This Award and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the Code or the laws of the United States, will be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to the principles of conflicts of law, to the extent such principles would result in the application of another state’s laws.

9. Binding Effect. This Award will be binding upon and will inure to the benefit of the Company and the Participant and their respective heirs, executors, administrators, legal representatives, successors, and assigns.

10. Amendment and Waiver. The provisions of this Award may be amended or waived only with the prior written consent of the Company and the Participant, and no course of conduct or failure or delay in enforcing the provisions of this Award will affect the validity, binding effect or enforceability of this Award.


Page 3	Restricted Stock Award

1999 Stock Incentive Plan

Exhibit 10.7

Mattersight Corporation

Non-Statutory

Stock Option Agreement

Mattersight Corporation, a Delaware corporation (the “Company”), hereby grants to the individual whose name appears below (the “Optionholder”), pursuant to the provisions of the Mattersight Corporation 1999 Stock Incentive Plan (the “Plan”), an option to purchase from the Company (the “Option”) such number of shares of its Common Stock, $0.01 par value (“Stock”), as set forth below at the price per share set forth below, but only upon and subject to the terms and conditions set forth herein, in the Plan, and in Annex I hereto. The Option is a non-statutory stock option, which means it is not intended to qualify as an “incentive stock option” under Code Section 422.

All terms and conditions set forth in Annex I and the Plan are deemed to be incorporated herein in their entirety. All capitalized terms used in this Agreement and not otherwise defined herein have the respective meanings assigned to them in Annex I or the Plan.

Optionholder’s Name:

Number of Shares

Subject to Option:

Exercise Price

Per Share:

Date of Option Grant

(“Option Date”):

Exercise Provisions:

The Option will become exercisable as follows: [___________________].

General:

This Agreement is subject to the provisions of the Plan, and will be interpreted in accordance therewith. In the event of a discrepancy between this Agreement, or any other material describing this Agreement or the Option awarded hereunder, and the actual terms of the Plan, the Plan will govern in all respects. A copy of the Plan is available upon request by contacting the General Counsel and Corporate Secretary at the Company’s Chicago, Illinois office.

IN WITNESS WHEREOF, this Agreement has been executed as of the Option Date set forth above.

Mattersight Corporation

By:
		Kelly D. Conway
Its:		President & Chief Executive Officer

- 1 -

1999 Stock Incentive Plan

Annex I

Stock Option Agreement

1. Meaning of Certain Terms . As used herein, the following terms have the meanings set forth below. “Board” means the Company’s Board of Directors. “Code” means the Internal Revenue Code of 1986, as amended. References to this “Agreement,” the “Option” and “herein” are deemed to include the Stock Option Agreement and this Annex I to Stock Option Agreement taken as a whole. This Annex I and the Stock Option Agreement are deemed to be one and the same instrument. The term “employment” shall have the meanings set forth in Section 1.4 of the Plan. Other capitalized terms used herein without definition shall have the respective meanings set forth in the Stock Option Agreement or the Plan, as appropriate.

2. Time and Manner of Exercise of Option .

2.1. Term and Termination of Option . The maximum term of the Option will be the date that is ten (10) years after the Option Date (the “Expiration Date”). The Option will terminate, to the extent not exercised or earlier terminated pursuant to the terms of this Agreement, on its Expiration Date. Notwithstanding any other term of this Agreement, in no event may the Option be exercised, in whole or in part, after the Expiration Date or its earlier termination.

2.2. Exercisability of Option . The Option will become exercisable on the date or dates as set forth in this Agreement.

2.3. Manner of Exercise . The Option may be exercised in whole or in part by the Optionholder in the manner described in or established by the Committee pursuant to Section 2.1(c) of the Plan.

2.4 Tax Withholding. The Company will be entitled to withhold, or secure payment from the Optionholder in lieu of withholding, the amount of any Federal, state, local, or other withholding taxes due upon exercise of the Option, in accordance with Section 6.9 of the Plan.

3. Miscellaneous Provisions .

3.1. Option Confers No Rights as Stockholder . Neither the Optionholder nor any other person has or will have any rights as a security holder of the Company or any successor with respect to any shares of Common Stock or other securities which are or become subject to the Option hereunder unless and until the Optionholder becomes a holder of record with respect to such shares of Common Stock or other securities following proper exercise of the Option.

3.2. Option Confers No Rights to Continue Employment or Service . In no event will the granting of the Option or its acceptance by the Optionholder confer upon the Optionholder any right to continued employment or service with the Company or any subsidiary or affiliate of the Company, or affect in any manner the right of the Company, or its subsidiary or affiliate, to terminate the employment or service of the Optionholder at any time without liability hereunder.

3.3. Designation as Nonqualified Stock Option . The Option is hereby designated as a non-statutory stock option and shall not constitute an “incentive stock option” within the meaning of section 422 of the Code; this Agreement will be interpreted and treated consistently with such designation.

3.4. Decisions of the Committee . Subject to Section 1.3 of the Plan, the Committee has the right to resolve all questions which may arise in connection with the Option or its exercise. Any interpretation, determination or other action made or taken by the Committee regarding the Plan or this Agreement shall be final, binding, and conclusive.

3.5. Non-transferability . Except as and to the extent otherwise expressly permitted by Section 6.8 of the Plan, the Option may not be transferred, assigned, or pledged.

3.6 Conformity with Plan. The Option is intended to conform in all respects with, and is subject to all applicable provisions of, the Plan, which is incorporated herein by reference. In the event of any discrepancy between the Option, or a document that describes or explains the Option, and the Plan, the Plan will govern in all respects.

3.7. Successors . This Agreement will be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who acquire any rights under Section 6.8 of the Plan.

- 2 -

1999 Stock Incentive Plan

3.8. Notices . All notices, requests , or other communications relating to the exercise of this Option (including, without limitation, the “ cashless exercise ” thereof or tax withholdings relating thereto) will be made in writing in such form and substance, and provided in accordance with such procedures, as may be prescribed by the Committee from time to time and then in effect. Any other notices, requests , or other communications provided for in this Agreement will be made in writing either (1) by actual delivery to the party entitled thereto, or (2) by mailing in the U.S. mails, postage prepaid, to the last known address of the party entitled thereto. Any such other notices will be deemed to be received, in case (1), on the date of its actual receipt by the party entitled thereto and, in case (2), three (3) days after the date of its mailing.

3.9. Governing Law . This Agreement, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the Code or the laws of the United States, will be governed by the laws of the State of Delaware and construed in accordance therewith, without giving effect to principles of conflicts of laws, to the extent such principles would result in the application of another state’s laws.

- 3 -

Exhibit 10.22

LEASE

THIS LEASE (this “ Lease ”) is made as of March 20, 2015, by and between

“ Landlord ”

MEPT 200 WEST MADISON LLC, a Delaware limited liability company

and

“ Tenant ”

MATTERSIGHT CORPORATION, a Delaware corporation

TABLE OF CONTENTS

SECTION 1: DEFINITIONS				1
Access Laws				1
Additional Rent				1
Base Rent				1
Brokers				1
Building				1
Business Day				1
Claims				1
Commencement Date				1
Estimated Operating Costs Allocable to the Premises				1
Events of Default				1
Governmental Agency				1
Governmental Requirements				1
Green Agency Rating				1
Hazardous Substance(s)				2
Holidays				2
Land				2
Landlord				2
Landlord’s Agents				2
Lease Memorandum				2
Lease Security Deposit				2
Lease Term				2
Lender				2
Manager				2
Manager’s Address				2
Operating Costs				2
Operating Costs Allocable to the Premises				2
Permitted Use				2
Plans and Specifications				2
Possession Date				2
Prepaid Rent				2
Premises				2
Prime Rate				2
Property Taxes				2
Punch List Work				3
Restrictions				3
Substantial Completion				3
Telecommunication Facilities				3
Telecommunication Services				3
Tenant				3
Tenant Alterations				3
Tenant Improvement Allowance				3
Tenant Improvements				3
Tenant’s Agents				3

Tenant’s Pro Rata Share		3
Year		3

SECTION 2: PREMISES AND TERM		3
2.1.	Lease of Premises	3
2.2.	Lease Term	3
2.3.	Condition of Premises	4
2.4.	Intentionally omitted	4
2.5.	Tenant Improvements	4
2.6.	Lease Memorandum	4
2.7.	Use and Conduct of Business	4
2.8.	Compliance with Governmental Requirements and Rules and Regulations	5
2.9.	Relocation	5

SECTION 3: BASE RENT, ADDITIONAL RENT AND OTHER SUMS PAYABLE UNDER LEASE		5
3.1.	Payment of Rental	5
3.2.	Base Rent	5
3.3.	Lease Security Provisions	5
3.4.	Additional Rent	7
3.5.	Utilities	10
3.6.	Holdover	11
3.7.	Late Charge	11
3.8.	Default Rate	11

SECTION 4: MANAGEMENT AND LEASING PROVISIONS		11
4.1.	Maintenance and Repair by Landlord	11
4.2.	Maintenance and Repair by Tenant	11
4.3.	Common Areas/Security	12
4.4.	Tenant Alterations	13
4.5.	Tenant’s Work Performance	13
4.6.	Surrender of Possession	14
4.7.	Removal of Property	14
4.8.	Access	14
4.9.	Damage or Destruction	15
4.10.	Condemnation	15
4.11.	Parking	16
4.12.	Indemnification	16
4.13.	Tenant Insurance	16
4.14.	Landlord’s Insurance	17
4.15.	Waiver of Subrogation	17
4.16.	Assignment and Subletting by Tenant	18
4.17.	Assignment by Landlord	19
4.18.	Estoppel Certificates and Financial Statements	19
4.19.	Modification for Lender	20
4.20.	Hazardous Substances	20
4.21.	Access Laws	20
4.22.	Quiet Enjoyment	21
4.23.	Signs	21
4.24.	Subordination	21
4.25.	Brokers	22
4.26.	Limitation on Recourse	22
4.27.	Construction Liens	22
4.28.	Personal Property Taxes	22

SECTION 5: DEFAULT AND REMEDIES		22
5.1.	Events of Default	22
5.2.	Remedies	23
5.3.	Right to Perform	24
5.4.	Landlord’s Default	24


SECTION 6: MISCELLANEOUS PROVISIONS		25
6.1.	Notices	25
6.2.	Attorney’s Fees and Expenses	25
6.3.	No Accord and Satisfaction	25
6.4.	Successors; Joint and Several Liability	25
6.5.	Choice of Law	25
6.6.	No Waiver of Remedies	25
6.7.	Offer to Lease	26
6.8.	Force Majeure	26
6.9.	Landlord’s Consent	26
6.10.	Severability; Captions	26
6.11.	Interpretation	26
6.12.	Incorporation of Prior Agreement; Amendments	26
6.13.	Authority	26
6.14.	Time of Essence	26
6.15.	Survival of Obligations	26
6.16.	Consent to Service	26
6.17.	Landlord’s Authorized Agents	26
6.18.	Waiver of Jury Trial	27
6.19.	Tenant Certification	27
6.20.	Addenda	27

LIST OF EXHIBITS

Rider
Exhibit A	Drawing Showing Location of the Premises	1
Exhibit B	Tenant’s Work	1
Exhibit C	Form of Lease Memorandum	1
Exhibit D	Rules and Regulations	1
Exhibit E	Letter of Credit Criteria	1
Exhibit F	Janitorial Specifications	1
Exhibit G	Approved Form of Letter of Credit	2

iii

SECTION 1: DEFINITIONS

Access Laws : The Americans With Disabilities Act of 1990 (including the Americans with Disabilities Act Accessibility Guidelines for Building and Facilities) and all other Governmental Requirements relating to the foregoing.

Additional Rent : Defined in Section 3.4.

Base Rent : The monthly amount of Base Rent and the portion of the Lease Term during which such monthly amount of Base Rent is payable shall be determined from the following table. For convenience and ease of reference, the annual rental rate for the computation of Base Rent and the annual Base Rent are also set forth in tabular form with the annual Base Rent equaling the monthly Base Rent installment multiplied by twelve. In the case of any conflict or inconsistency between the Monthly Base Rent installment and the other illustrative figures set forth in tabular form or in any computations utilizing such figures, the monthly Base Rent installment so specified shall be controlling and conclusive.


Applicable Portion of Lease Term		Rate Per Rentable Sq. Ft./ Annum	Annual Base Rent	Monthly Base Rent Installment (Annual ÷ 12)
Beginning	Ending	Rate Per Rentable Sq. Ft./ Annum	Annual Base Rent	Monthly Base Rent Installment (Annual ÷ 12)
Commencement Date	7/31/16	$21.00	$462,357.00	$38,529.75
8/1/16	7/31/17	$21.52	$473,915.88	$39,492.99
8/1/17	7/31/18	$22.06	$485,763.84	$40,480.32
8/1/18	7/31/19	$22.61	$497,907.84	$41,492.32
8/1/19	7/31/20	$23.18	$510,355.56	$42,529.63
8/1/20	7/31/21	$23.76	$523,114.44	$43,592.87
8/1/21	7/31/22	$24.35	$536,192.28	$44,682.69

Notwithstanding the foregoing, all Base Rent and Additional Rent shall be abated pursuant to Paragraph 1 of the Rider .

Brokers: Tenant was represented in this transaction by Jones Lang LaSalle Midwest LLC, a licensed real estate broker (“Tenant’s Broker”). Landlord was represented in this transaction by Transwestern Commercial Services Illinois, L.L.C., a licensed real estate broker (“Landlord’s Broker”).

Building : The building located on the Land at 200 West Madison Street, Chicago, Illinois and containing approximately 928,040 rentable square feet.

Business Day : Calendar days, except for Saturdays and Sundays and holidays when banks are closed in Washington, D.C.

Claims : An individual and collective reference to any and all claims, demands, damages, injuries, losses, liens, liabilities, penalties, fines, lawsuits, actions, other proceedings and expenses (including attorneys’ fees and expenses incurred in connection with the proceeding whether at trial or on appeal).

Commencement Date : The earlier of (i) August 1, 2015 or (ii) the date that Tenant first occupies all or a portion of the Premises for the conduct of business therein.

Estimated Operating Costs Allocable to the Premises : Defined in Section 3.4.6.

Events of Default : One or more of those events or states of facts defined in Section 5.1.

Governmental Agency : The United States of America, the state in which the Land is located, any county, city, district, municipality or other governmental subdivision, court or agency or quasi-governmental agency having jurisdiction over the Land and any board, agency or authority associated with any such governmental entity, including the fire department having jurisdiction over the Land.

Governmental Requirements : Any and all statutes, ordinances, codes, laws, rules, regulations, orders and directives of any Governmental Agency as now or later amended.

Green Agency Rating : Any one or more of the following ratings, as same may be in effect or amended or supplemented from time to time: The U.S. EPA’s Energy Star® rating and/or Design to Earn Energy Star, the Green Building Initiative’s Green Globes™ for Continued Improvement of Existing Buildings (Green Globes™-CIEB), the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) rating system, LEED EBOM (existing buildings operations and maintenance) and any applicable substitute third party or government mandated rating system, as the same may be in effect or amended or supplemented from time to time.

Hazardous Substance(s) : Asbestos, PCBs, petroleum or petroleum-based chemicals or substances, urea formaldehyde or any chemical, material, element, compound, solution, mixture, substance or other matter of any kind whatsoever which is now or later defined, classified, listed, designated or regulated as hazardous, toxic or radioactive by any Governmental Agency.

Holidays : New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

Land : The land upon which the Building is located in Cook County, Illinois.

Landlord : The entity named on the first page of this Lease, or its successors and assigns as provided in Section 4.17 (“Assignment by Landlord”).

Landlord’s Agents : The trustee of and consultants and advisors to the Landlord and employees of the foregoing.

Lease Memorandum : Defined in Section 2.6.

Lease Security Deposit : The letter of credit delivered by Tenant to Landlord as described in Section 3.3 (“Lease Security Provisions”).

Lease Term : Commencing on the Commencement Date and ending on July 31, 2022.

Lender : Defined in Section 5.4 (“Landlord’s Default”).

Manager : Transwestern Commercial Services Illinois, L.L.C., or its replacement as specified by written notice from Landlord to Tenant.

Manager’s Address : 200 West Madison Street, Suite 1130, Chicago, Illinois 60606, which address may be changed by written notice from Landlord to Tenant.

Operating Costs : Defined in Section 3.4.6.

Operating Costs Allocable to the Premises : Defined in Section 3.4.6.

Permitted Use : General business office uses including providing full service office space to third parties in accordance with Section 4.16.9 below, so long as such use is consistent with Governmental Requirements and with first-class buildings of the same or similar use as the Building located in the metropolitan area in which the Building is located.

Plans and Specifications : Those certain plans and specifications for the Tenant Improvements to be prepared by Tenant and approved by Landlord pursuant to Exhibit B .

Possession Date : The date of this Lease.

Prepaid Rent : $64,968.50 to be applied toward Base Rent and Additional Rent for the eighth (8 ^th ) full calendar month of the Lease Term.

Premises : The portion of the 31 ^st floor of the Building designated as Suite 3100, depicted on the plan attached as Exhibit A and agreed by Landlord and Tenant for all purposes under this Lease to consist of approximately 22,017 rentable square feet. The number of rentable square feet shall be final, conclusive and controlling.

Prime Rate : Defined in Section 3.8 (“Default Rate”).

Property Taxes : (a) Any form of ad valorem real or personal property tax or assessment imposed by any Governmental Agency on the Land, Building, related improvements or any personal property owned by Landlord and located in the common areas of the Building or otherwise used to maintain the Building and its common areas; (b) any other form of tax or assessment, license fee, license tax, tax or excise on rent or any other levy, charge, expense or imposition made or required by any Governmental Agency on any interest of Landlord in such Land, Building, related improvements or personal property; (c) any fee for services charged by any Governmental Agency for any services such as fire protection, street, sidewalk and road maintenance, refuse collection, school systems or other services provided or formerly provided to property owners and residents within the general area of the Land; (d) any governmental impositions allocable to or measured by the area of any or all of such Land, Building, related improvements or personal property or the amount of any base rent, additional rent or other sums payable under any lease for any or all of such Land, Building,

related improvements or personal property; (e) any gross receipts or other excise tax allocable to, measured by or a function of any one or more of the matters referred to in clause (d); (f) any impositions by any Governmental Agency on any transaction evidenced by a lease of any or all of such Land, Building, related improvements or personal property or charge with respect to any document to which Landlord is a party creating or transferring an interest or an estate in any or all of such Land, Building, related improvements or personal property; and (g) any increase in any of the foregoing based upon construction of improvements or change of ownership of any or all of such Land, Building, related improvements or personal property. Property Taxes shall not include taxes on Landlord’s net income, license, franchise, gift, transfer, excise, capital stock, estate, succession or inheritance taxes or penalties or interest on the late payment of Property Taxes. In the event that Landlord obtains a refund of Property Taxes paid by Landlord, then Landlord shall refund to Tenant Tenant’s Pro Rata Share of such refund (after deducting expenses and reasonable attorney fees incurred in obtaining the refund), and if this Lease shall have terminated, Landlord shall send such refund to Tenant’s last known address.

Punch List Work : Minor items of repair, correction, adjustment or completion as such phrase is commonly understood in the construction industry in the metropolitan area in which the Land is located.

Restrictions : Any covenants, conditions and restrictions applicable to the Land which have been disclosed to Tenant.

Substantial Completion : The date that the Tenant Improvements have been completed substantially in accordance with Exhibit B, subject to Punch List Work.

Telecommunication Facilities : Equipment, facilities, apparatus and other materials utilized for the purpose of electronic telecommunication, including cable, switches, wires, conduit, sleeves and distributed antenna systems.

Telecommunication Services : Services associated with electronic telecommunications, whether in a wired or wireless mode. Basic voice telephone services are included within this definition.

Tenant : The person or entity(ies) named on the first page of this Lease.

Tenant Alterations : Defined in Section 4.4.

Tenant Improvement Allowance : The maximum amount to be provided by Landlord for the cost of Tenant Improvements as set forth in Exhibit B.

Tenant Improvements : Those alterations or improvements to the Premises as appear and are depicted in the Plans and Specifications.

Tenant’s Agents : Any and all officers, partners, contractors, subcontractors, consultants, licensees, agents, concessionaires, subtenants, servants, employees, customers, guests, invitees or visitors of Tenant.

Tenant’s Pro Rata Share : 2.372% based upon the ratio of 22,017 rentable square feet in the Premises to 928,040 rentable square feet in the Building, which shall be final, conclusive and controlling during the Lease Term for all purposes, subject however, to adjustment to reflect any changes in the floor area of the Premises or the Building provided that such changes are not caused solely by a re-measurement of the Premises or Building by Landlord.

Year : A calendar year commencing January 1 and ending December 31 or that portion of the calendar year within the Lease Term.

SECTION 2: PREMISES AND TERM

2.1 Lease of Premises . Landlord leases the Premises to Tenant, and Tenant leases the Premises from Landlord, upon the terms and conditions set forth in this Lease; provided, that any space within the walls of the Premises or above the ceiling of the Premises used for shafts, pipes, conduits, ducts, electrical or other utilities or Building facilities, as well as access thereto through the Premises for the purposes of installation, operation, maintenance, inspection, repair and replacement are reserved to Landlord and are excluded from the Premises.

2.2 Lease Term . The Lease Term shall be for the period stated in the definition of that term, unless earlier terminated as provided in this Lease, provided, however, Landlord shall deliver possession of the Premises to Tenant on the Possession Date, and from and after such date, Tenant shall have the right to enter the Premises to construct the Tenant Improvements and shall be subject to all of the terms and conditions of this Lease except that Tenant shall not be obligated to pay Base Rent or Additional Rent until the Commencement Date (subject to abatement pursuant to Paragraph 1 of the Rider). Landlord acknowledges that the installation of Tenant’s furniture, trade fixtures and equipment in the Premises may occur prior to the Commencement Date.

2. 3 Condition of Premises . Tenant expressly acknowledges that it has inspected the Premises, knows the condition thereof and that it is leasing the Premises in their present “as is” condition, except that prior to the Commencement Date, Landlord agrees at its expense to repair and/or replace all missing window blinds in the Premises. Except for such window blinds, Landlord shall not be required to rework, remodel or recondition the Premises in any manner whatsoever for Tenant’s use and occupancy thereof. No warranties or representations are made or have been made by Landlord or its agents and representatives that are not expressly set forth herein.

2.4 Intentionally omitted .

2.5 Tenant Improvements . Tenant shall complete the construction of the Tenant Improvements pursuant to the provisions of Exhibit B. All Tenant Improvements, regardless of which party constructed or paid for them, shall become the property of Landlord and shall remain upon and be surrendered with the Premises upon the expiration or earlier termination of this Lease except as otherwise provided herein.

2.6 Lease Memorandum . At Landlord’s election and request after the Commencement Date, Tenant shall execute a Lease Memorandum in the form attached hereto as Exhibit C . In no event shall the Lease Memorandum be recorded.

2.7 Use and Conduct of Business .

2.7.1 The Premises are to be used only for the Permitted Use, and for no other business or purpose without the prior consent of Landlord. Landlord represents and warrants that to Landlord’s actual knowledge, there are no Governmental Requirements or Restrictions applicable to the Premises which would prohibit or materially interfere with Tenant’s use of the Premises for the Permitted Use. Landlord makes no representation or warranty as to the suitability of the Premises for Tenant’s intended use. Tenant shall, at its own cost and expense, obtain and maintain any and all licenses, permits, and approvals necessary or appropriate for its use, occupation and operation of the Premises for the Permitted Use. Tenant’s inability to obtain or maintain any such license, permit or approval necessary or appropriate for its use, occupation or operation of the Premises shall not relieve it of its obligations under this Lease, including the obligation to pay Base Rent and Additional Rent.

2.7.2 No act shall be done in or about the Premises that is unlawful or that will increase the existing rate of insurance on any or all of the Land or Building. Tenant shall not commit or allow to be committed or exist: (a) any waste upon the Premises; (b) any public or private nuisance; or (c) any act or condition which disturbs the quiet enjoyment of any other tenant in the Building, violates any of Landlord’s contracts affecting any or all of the Land or Building of which Tenant has been given notice (provided that such contracts do not prohibit or materially interfere with the Permitted Use of the Premises), or creates or contributes to any work stoppage, strike, picketing, labor disruption or dispute, interferes in any material respect with the business of Landlord or any other tenant in the Building or with the rights or privileges of any contractors, subcontractors, licensees, agents, concessionaires, subtenants, servants, employees, customers, guests, invitees or visitors or any other persons lawfully in and upon the Land or Building.

2.7.3 Tenant shall not, without the prior consent of Landlord, use any apparatus, machinery, device or equipment in or about the Premises which will cause any substantial noise or vibration or, except for Supplemental Utilities Equipment under Section 3.5.4, any increase in the normal consumption level of electric power. If any of Tenant’s apparatus, machinery, devices or equipment should disturb the quiet enjoyment of any other tenant in the Building, then Tenant shall provide, at its sole cost and expense, adequate insulation or take other such action, including removing such apparatus, machinery, devices or equipment, as may be necessary to eliminate the disturbance. No food or beverage dispensing machines shall be installed by Tenant in the Premises without the prior written consent of Landlord, other than coffee makers, microwave ovens, toasters, toaster ovens, refrigerators and vending machines for the exclusive use of Tenant and its employees and invitees.

2.7.4 Tenant acknowledges that the Building is certified under a Green Agency Rating and is or may be operated pursuant to Landlord’s sustainable building practices, as the same may be in effect or modified from time to time (“Landlord’s Sustainability Practices”). Landlord’s Sustainability Practices address, without limitation, whole-building operations and maintenance issues including chemical use; indoor air quality; energy efficiency; water efficiency; recycling programs; exterior maintenance programs; and systems upgrades to meet green building energy, water, indoor air quality and lighting performance standards. Tenant shall use commercially reasonable efforts to conform to and comply with Landlord’s Sustainability Practices which are specified in writing to Tenant (and Tenant acknowledges that Landlord may incorporate into its sustainability practices any and all practices which it is required to adopt or implement in order to maintain a Green Agency Rating for the Building) provided that (i) such compliance does not impose material out-of-pocket costs on Tenant, (ii) Tenant shall not be required to replace any fixtures (such as lighting fixtures), equipment or machinery then existing in the Premises, and (iii) such compliance measures do not materially and adversely affect Tenant’s use and enjoyment of the Premises for the Permitted Use. Further, notwithstanding anything to the contrary contained herein or elsewhere in this Lease, Landlord agrees that it shall not withhold consent to any Tenant Improvements (including, without limitation, Tenant’s supplemental HVAC system as set forth in Section 3.5.4 below) or Tenant Alterations which require Landlord’s

consent hereunder because such Tenant Improvements or Tenant Alterations do not comply with Landlord’s Sustainability Practices, provided, however, Landlord may withhold consent if such Tenant Improvement or Tenant Alteration may cause the loss of the existing or any subsequent Green Agency Rating for the Building, and in no event shall Tenant do or permit anything to be done in the Premises may cause the loss of the existing or any subsequent Green Agency Rating for the Building. Except as set forth in the immediately two (2) preceding sentences, Tenant’s failure to conform to or comply with Landlord’s Sustainability Practices shall not constitute an Event of Default under this Lease, shall not entitle Landlord to exercise any rights or remedies set forth in the Lease, and shall not result in the forfeiture or recapture of any rent abatement or any other concessions, rights, options or privileges provided or granted by Landlord to Tenant in this Lease. Landlord and Tenant agree that if Landlord determines that Tenant has violated or failed to conform to or comply with Landlord’s Sustainability Practices, Landlord shall send Tenant a written notice which describes specifically such failure or violation, and the parties shall cooperate in good faith to remedy the same. Nothing contained herein shall require Tenant to obtain LEED for Commercial Interiors certification or any other Green Agency Rating in connection with the Tenant Improvements so long as the installation of the Tenant Improvements does not cause Landlord to lose the Green Agency Rating for the Building. Further, in the event that Landlord has approved Tenant’s plans and specifications for the Tenant Improvements or any Tenant Alterations and Tenant constructs the same in accordance with the approved plans and specifications, then Landlord shall have no grounds to claim a violation of Tenant’s obligations under this paragraph.

2.7.5 Tenant covenants and agrees, at its sole cost and expense, (a) to comply with all Governmental Requirements regarding the collection, sorting, separation, and recycling of garbage, trash, rubbish and other refuse (collectively, “trash”); (b) to comply with all Governmental Requirements applicable to recycling; (c) to sort and separate its trash and recycling into such categories as are provided by Governmental Requirements; (d) that each separately sorted category of trash and recycling shall be placed in separate receptacles located in the Premises as directed by Landlord; (e) that Landlord reserves the right to refuse to collect or accept from Tenant any waste that is not separated and sorted as required by Governmental Requirements, and to require Tenant to arrange for such collection at Tenant’s sole cost and expense, utilizing a contractor reasonably satisfactory to Landlord; and (f) that Tenant shall pay all costs, expenses, fines, penalties or damages that may be imposed by a Governmental Agency on Landlord or Tenant by reason of Tenant’s failure to comply with the provisions of this paragraph. Nothing contained herein shall require Tenant to transport typical office trash and garbage outside of the Premises, but Tenant shall be responsible for the removal of construction debris and other refuse that is not generated by normal business office operations.

2.8 Compliance with Governmental Requirements and Rules and Regulations . Tenant shall comply with all Governmental Requirements and Restrictions relating to its use, occupancy and operation of the Premises and shall observe such reasonable, non-discriminatory rules and regulations as may be adopted and published by Landlord from time to time for the safety, care and cleanliness of the Premises and the Building, and for the preservation of good order in the Building and for the administration and management of the Building(the “Rules and Regulations”), provided such Rules and Regulations shall not materially and adversely affect Tenant’s rights under this Lease. Current Rules and Regulations are attached to this Lease as Exhibit D .

2.9 Relocation . [Intentionally omitted]

SECTION 3: BASE RENT, ADDITIONAL RENT AND OTHER SUMS PAYABLE UNDER LEASE

3.1 Payment of Rental . Tenant agrees to pay Base Rent, Additional Rent and any other sum due under this Lease (“ Rent ”) to Landlord without demand, deduction, credit, adjustment or offset (except as specifically provided herein), of any kind or nature, in lawful money of the United States when due under this Lease, at the offices of Manager at Manager’s Address, or to such other party or at such other place as Landlord may from time to time designate in writing.

3.2 Base Rent . On execution of this Lease by Tenant, Tenant shall pay to Landlord the amount specified in the definition of Prepaid Rent for the month specified in the definition of that term. Tenant agrees to pay to Landlord the monthly installments of Base Rent, without demand and in advance, on or before the first day of each calendar month of the Lease Term commencing on the Commencement Date subject to abatement pursuant to Paragraph 1 of the Rider. The monthly Base Rent installment for any partial month at the beginning or end of the Lease Term shall be prorated. Base Rent for any partial month at the beginning of the Lease Term shall be paid by Tenant on the Commencement Date. (See Paragraph 1 of the Rider .)

3.3 Lease Security Provisions

3.3.1 As security for the full and faithful payment of all sums due under this Lease and the full and faithful performance of every covenant and condition of this Lease to be performed by Tenant, Tenant shall be required to deliver a letter of credit in the amount of $425,000.00 in favor of Landlord. The letter of credit initially delivered pursuant to this paragraph and all substitutions, replacements and renewals of it, must be consistent with and shall satisfy all the requirements in the letter of credit criteria made Exhibit E . If a letter of credit has been delivered to and accepted by Landlord at or before the full execution of this Lease, it shall be deemed to satisfy the criteria appearing in Exhibit E . Landlord agrees that the Letter of Credit issued by Silicon

Valley Bank in the form attached hereto as Exhibit G satisfies all such requirements in this Paragraph 3.3.1. The term “ Letter of Credit ” shall mean and refer to a letter of credit conforming to this subparagraph. If a Letter of Credit has not been delivered to and accepted by Landlord on or before the full execution of this Lease, Tenant shall deliver a Letter of Credit to Landlord within five (5) Business Days from the full execution of this Lease. Pending delivery of the Letter of Credit, Landlord may defer payment of the Tenant Improvement Allowance. Timely delivery of the Letter of Credit shall, at Landlord’s election, be treated as a condition subsequent to the effectiveness of this Lease such that this Lease shall be voidable by Landlord by notice to Tenant if timely delivery of the Letter of Credit does not occur or be treated by Landlord as an Event of Default. If Landlord elects to treat the failure to deliver the Letter of Credit in a timely manner as an Event of Default, Landlord may pursue all available rights and remedies, including the right to specific performance and the right to attach assets of Tenant.

3.3.2 Notwithstanding anything to the contrary contained herein, provided (a) no Event of Default has occurred and is then continuing, and (b) Tenant has not within the prior twelve (12) month period been in monetary default under this Lease beyond applicable cure periods, then (i) the amount of the Letter of Credit shall be reduced to $297,500.00 on August 1, 2018; (ii) the amount of the Letter of Credit shall be reduced to $208,250.00 on August 1, 2019; (iii) the amount of the Letter of Credit shall be reduced to $145,775.00 on August 1, 2020; and (iv) the amount of the Letter of Credit shall be reduced to $102,000.00 on August 1, 2021. Tenant agrees that there shall be no reduction in the Letter of Credit pursuant to the terms and provisions of this Section 3.3.2, until Landlord notifies the issuer of the Letter of Credit, in writing, to reduce the amount of the Letter of Credit. No later than twenty (20) days after Tenant’s written request pursuant to the terms and provisions of this Section 3.3.2 (but in no event prior to August 1 of the applicable year), Landlord agrees to promptly notify the issuer of any authorized reduction in the amount of the Letter of Credit pursuant to the foregoing provisions.

3.3.3 Landlord may draw on the Letter of Credit, in whole or in part at Landlord’s election, without advance notice to Tenant at any time or from time to time on or after the occurrence of any Event of Default, if Tenant, or anyone in possession of the Leased Premises through Tenant, holds over after the expiration or earlier termination of this Lease, Landlord is given notice by the issuer of the Letter of Credit that it is terminating the Letter of Credit, a confirming bank gives notice to Landlord that it will cease to act in that capacity, the Letter of Credit expires on a specified date by its terms and is not renewed or replaced at least thirty (30) days in advance of its expiration date or to the extent permitted by law, in the event any bankruptcy, insolvency, reorganization or any other debtor creditor proceeding is instituted by or against Tenant.

3.3.4 Landlord may apply any sum drawn on the Letter of Credit to amounts owing to Landlord under this Lease in such order and priority as Landlord elects in its absolute discretion. If any of the proceeds drawn on the Letter of Credit are not applied immediately to sums owing to Landlord under this Lease, Landlord may retain any such excess proceeds as a cash Lease Security Deposit for application, at Lender’s election, to future sums owing to Landlord under this Lease, in such order and priority as Landlord elects in its absolute discretion. Tenant shall, within fifteen (15) days after Landlord’s demand, restore the amount of the Letter of Credit drawn so that the Letter of Credit is restored to the original amount of the Letter of Credit. If Tenant does not restore the Letter of Credit to its original amount within the required time period, such non restoration shall be considered an Event of Default.

3.3.5 Additionally, Landlord’s draw and application of all or any portion of the proceeds of the Letter of Credit shall not impair any other rights or remedies provided under this Lease or under applicable law and shall not be construed as a payment of liquidated damages. If Tenant shall have fully complied with all of the covenants and conditions of this Lease, the Letter of Credit shall be returned to the issuer or, if Landlord has drawn on the Letter of Credit, the remaining proceeds of the Letter of Credit which are in excess of sums due the Landlord shall be repaid to Tenant, without interest, within thirty (30) Business Days after the expiration or termination of the Lease Term and delivery of possession of the Leased Premises to Landlord in accordance with this Lease.

3.3.6 On any request by Landlord made during the Lease Term, Tenant shall cooperate in accomplishing any reasonable modification of the Letter of Credit requested by Landlord provided such modification is at no cost to Tenant. If the Letter of Credit in the possession of Landlord or Landlord’s Agents should be lost, mutilated, stolen or destroyed, Tenant shall cooperate in obtaining the issuance of a replacement at no cost to Tenant.

3.3.7 Tenant shall not assign or grant any security interest in the Letter of Credit and any attempt to do so shall be void and of no effect.

3.3.8 In the event of a sale or transfer of Landlord’s estate or interest in the Land and Building, Landlord shall have the right to transfer the Letter of Credit to the vendee or the transferee, Tenant shall pay any transfer fees charged by the issuing bank and upon Landlord’s delivery of the original Letter of Credit to the vendee or the transferee, Landlord shall thereafter be considered released by Tenant from all liability for the return of the Letter of Credit. Tenant shall cooperate in effecting such transfer.

3.3.9 No mortgagee or purchaser of any or all of the Building at any foreclosure proceeding brought under the provisions of any mortgage shall (regardless of whether the Lease is at the time in question subordinated to the lien of any mortgage) be liable to Tenant or any other person for any or all amounts drawn against the Letter of Credit (or any other or additional Lease Security Deposit or other payment made by Tenant under the provisions of this Lease), unless Landlord has actually delivered it in cash to such mortgagee or purchaser, as the case may be.

3.4 Additional Rent . Definitions of certain terms used in this paragraph are set forth in Section 3.4.6 below. Tenant agrees to pay to Landlord additional rent as computed in this paragraph (individually and collectively the “ Additional Rent ”):

3.4.1 Estimated Operating Costs . Tenant shall pay to Landlord as Additional Rent one-twelfth (1/12) of the Estimated Operating Costs Allocable to the Premises. This sum shall be paid in advance on or before the first day of each calendar month of the Lease Term. Landlord shall furnish Tenant a written statement of Estimated Operating Costs Allocable to the Premises in advance of the commencement of each Year. If such written statement is furnished after the commencement of the Year (or as to the first Year during the Lease Term, after the Commencement Date), Tenant shall also make a retroactive lump-sum payment to Landlord equal to the monthly payment amount multiplied by the number of months during the Year (or as to the first Year during the Lease Term, after the Commencement Date) for which no payment was paid. Notwithstanding the foregoing, Landlord reserves the right, from time to time during each Year to revise the Estimated Operating Costs Allocable to the Premises and upon notice to Tenant of such revision, Tenant shall adjust its payment to Landlord under this subparagraph 3.4.1 accordingly. (See Paragraph 1 of the Rider .)

3.4.2 Actual Costs . As soon as practical after the close of each Year (but in any event within one hundred twenty (120) days after the close of each Year subject to extension on account of force majeure), Landlord shall deliver to Tenant a written statement setting forth the Operating Costs Allocable to the Premises during the preceding Year. If such Operating Costs Allocable to the Premises for any Year exceed the Estimated Operating Costs Allocable to the Premises paid by Tenant to Landlord pursuant to subparagraph 3.4.1 for such Year, Tenant shall pay the amount of such excess to Landlord within twenty (20) Business Days after receipt of such statement by Tenant. If such statement shows the Operating Costs Allocable to the Premises to be less than the Estimated Operating Costs Allocable to the Premises paid by Tenant to Landlord pursuant to subparagraph 3.4.1, then the amount of such overpayment shall be paid by Landlord to Tenant within twenty (20) Business Days following the date of such statement or, at Landlord’s option, shall be credited towards the installment(s) of Additional Rent next coming due from Tenant.

3.4.3 Determination . The determination of Operating Costs Allocable to the Premises shall be made by Landlord.

3.4.4 Operating Cost Audit . Landlord shall maintain records concerning estimated and actual Operating Costs Allocable to the Premises for no less than twelve (12) months following the period covered by the statement or statements furnished Tenant, after which time Landlord may dispose of such records. Provided that Tenant is not then in default of its obligation to pay Base Rent, Additional Rent or other payments required to be made by it under this Lease and provided that Tenant is not otherwise in default under this Lease, Tenant may, at Tenant’s sole cost and expense, cause a Qualified Person (defined below) to inspect Landlord’s records. Such inspection, if any, shall be conducted no more than once each Year, during Landlord’s normal business hours within ninety (90) calendar days after receipt of Landlord’s written statement of Operating Costs Allocable to the Premises for the previous year, upon first furnishing Landlord at least twenty (20) calendar days prior written notice. All information obtained in connection with Tenant’s inspection and audit shall be held in strict confidence and shall not be revealed to any other tenant of the Building or to any third party except as may be required to be disclosed in connection with litigation between Landlord and Tenant arising out of this Lease. Any errors disclosed by the review shall be promptly corrected by Landlord; provided, however, that if Landlord in good faith disagrees with any such claimed errors, Landlord shall have the right to cause another review to be made by an auditor of Landlord’s choice. In the event the results of the review of records (taking into account, if applicable, the results of any additional review caused by Landlord) reveal that Tenant has overpaid obligations for a preceding period, the amount of such overpayment shall be credited against Tenant’s subsequent installment of Base Rent, Additional Rent or other payments due to Landlord under the Lease. In the event that such results show that Tenant has underpaid its obligations for a preceding period, the amount of such underpayment shall be paid by Tenant to Landlord with the next succeeding installment obligation of estimated Operating Costs Allocable to the Premises. If the actual Operating Costs Allocable to the Premises for any given Year were improperly computed and if the actual Operating Costs Allocable to the Premises are overstated by more than 5%, Landlord shall reimburse Tenant for the cost of its audit. Notwithstanding the foregoing, if within thirty (30) days after notification from Landlord of the results of Landlord’s review, Tenant gives written notice to Landlord that the determination of any items in Operating Costs has not been resolved to the reasonable satisfaction of Tenant, then the dispute of such item(s) only shall be submitted to an independent certified public accountant (“CPA”) mutually acceptable to the parties whose decision shall be binding on the parties. If Landlord and Tenant are unable to agree on a CPA, then each party shall appoint a CPA and the two (2) CPAs shall jointly appoint a CPA to resolve such dispute. Landlord and Tenant agree to divide equally all fees of the CPA with respect to any such dispute, provided, however, if the decision of the CPA results in the actual Operating Costs Allocable to the Premises being overstated by more than 5%, Landlord shall pay the reasonable fees of the CPA.

3. 4 .5 End of Term . If this Lease shall terminate on a day other than the last day of a Year, (a) Landlord shall estimate the Operating Costs Allocable to the Premises for such Year predicated on the most recent reliable information available to Landlord; (b) the amount determined under clause (a) of this sentence shall be prorated by multiplying such amount by a fraction, the numerator of which is the number of days within the Lease Term in such Year and the denominator of which is 360; (c) if the clause (b) amount exceeds the Estimated Operating Costs Allocable to the Premises paid by Tenant for the last Year in the Lease Term, then Tenant shall pay the excess to Landlord within ten (10) Business Days after Landlord’s delivery to Tenant of a statement for such excess; and (d) if the Estimated Operating Costs Allocable to the Premises paid by Tenant for the last Year in the Lease Term exceeds the clause (b) amount, then Landlord shall refund to Tenant the excess within the ten (10) Business Day period described in clause (c) if Tenant is not then in default of any of its obligations under this Lease. Landlord’s and Tenant’s obligations under this paragraph shall survive the expiration or other termination of this Lease.

3.4.6 Definitions . Each underlined term in this subparagraph shall have the meaning set forth next to that underlined term:

Estimated Operating Costs Allocable to the Premises : Landlord’s written estimate of Operating Costs Allocable to the Premises for a Year to be given by Landlord to Tenant pursuant to Section 3.4.1.

Operating Costs : All expenses paid or incurred by Landlord for maintaining, operating, owning and repairing any or all of the Land, Building, Premises, related improvements, and the personal property used in conjunction with such Land, Building, Premises and related improvements. Included are all expenses paid or incurred by Landlord for: (a) utilities, including electricity, water, gas, sewers, fire sprinkler charges, refuse collection, Telecommunication Services, cable television, steam, heat, cooling or any other similar service and which are not payable directly by tenants in the Building; (b) supplies; (c) cleaning, painting and janitorial services (including window washing), landscaping and landscaping maintenance (including irrigating, trimming, mowing, fertilizing, seeding and replacing plants), snow removal and other services; (d) security services, if any; (e) insurance premiums and applicable insurance deductible payments by Landlord (not to exceed $50,000.00 per occurrence); (f) management fees (not to exceed three and one-half percent (3.5%) of the total revenues collected by Landlord from Tenant and other tenants of the Building); (g) Property Taxes (if any portion of such Property Taxes is charged on an accrual basis, for purposes of this Lease the Property Taxes payable during the calendar year shall be included in such year’s Operating Costs), tax consultant fees and expenses, and reasonable costs of protesting, reducing or appealing Property Taxes; (h) compensation (including employment taxes and fringe benefits) of all persons and business organizations to the extent of their performance of duties in connection with any service, repair, maintenance, replacement or improvement or other work included in this subparagraph; (i) license, permit and inspection fees; (j) assessments and special assessments due to deed restrictions, declarations or owners associations or other means of allocating costs of a larger tract of which the Land is a part; (k) rental of any machinery or equipment; (l) audit fees and accounting services related to the Building, and charges for the computation of the rents and charges payable by tenants in the Building (but only to the extent the cost of such fees and services are in addition to the cost of the management fee); (m) the cost of maintenance, repairs or replacements; (n) charges under maintenance and service contracts; (o) reasonable legal fees and other expenses of legal or other dispute resolution proceedings; (p) maintenance and repair of the roof and roof membranes, (q) costs incurred by Landlord for compliance with any and all Governmental Requirements, including Access Laws, enacted after the Possession Date, and costs incurred by Landlord to increase the efficiency of any electrical, mechanical or other system servicing the Building or the Landlord, provided, that if any of the foregoing costs are capital in nature, then the same shall be amortized as set forth in item (w) below; (r) elevator service and repair, if any; (s) business taxes and license fees; (t) the cost of insurance endorsements or insurance policies purchased in order to repair, replace and/or recommission the Building for re-certification pursuant to a Green Agency Rating (or, in the event the Building has not achieved certification under a Green Agency Rating, such insurance that is purchased in order to facilitate the restoration or rebuilding of the Building after a casualty so as to achieve such certification) or to support achieving energy and carbon reduction targets; (u) the cost of maintaining, managing, reporting, commissioning, and recommissioning the Building or any part thereof that was designed and/or built to be sustainable and conform with a Green Agency Rating, and all costs of applying, reporting and commissioning the Building or any part thereof to seek certification under a Green Agency Rating provided that Landlord shall not apply for such certification more often than commercially reasonable for comparable buildings; (v) any other expense or charge which in accordance with generally accepted accounting and management principles would be considered an expense of maintaining, operating, owning or repairing the Building; and (w) the amortization of costs of capital improvements, repairs or replacements to the Building or the Land (A) to the extent of the reduction in Operating Costs reasonably anticipated to result from such work over the useful life of such improvements, repair or replacement, or (B) to upgrade, improve or enhance life/safety conditions in the Building, or (C) which are required under any Governmental Requirements which were not applicable to the Building or the Land as of the Commencement Date, amortized with interest at the Prime Rate plus two (2) percentage points over the estimated useful life of such improvement, repair or replacement as reasonably determined by Landlord. As used herein, “commissioning” and “recommissioning” mean the quality assurance process that seeks to analyze and improve a building’s operations and maintenance procedures to enhance overall building performance.

Exclusions from Operating Costs : Notwithstanding anything to the contrary contained herein, Operating Costs shall not include any of the following: (i) ground rent; (ii) interest and amortization of funds borrowed by Landlord for items other than capital improvements; (iii) leasing commissions and advertising and space planning expenses incurred in procuring tenants; (iv) salaries, wages, or other compensation paid to officers or executives of Landlord in their capacities as officers and executives; (v) costs of repairs, replacements or other work occasioned by fire, windstorm or other casualty, or the exercise by Governmental Agencies of the right of eminent domain, to the extent of any proceeds of insurance received by Landlord; (vi) leasing commissions, attorney fees, costs, disbursements and other expenses incurred by Landlord or its agents in connection with negotiations for leases with tenants, other occupants or prospective tenants or other occupants of the Building, and similar costs incurred in connection with disputes with and/or enforcement of any leases with tenants, other occupants, or prospective tenants or other occupants of the Building; (vii) “tenant allowances,” “tenant concessions” and other costs or expenses (including permit, license and inspection fees) incurred in completing, fixturing, furnishing, renovating or otherwise improving, decorating or redecorating space for tenants or other occupants of the Building, including space planning/interior design fees for same; (viii) costs of correcting defects, including any allowance for same, in the construction of the Building (including latent defects) or equipment used therein, except that conditions resulting from ordinary wear and tear and not occasioned by construction defects shall not be deemed defects for purposes of this category; (ix) depreciation; (x) costs of a capital nature, except as provided for in item (w) above; (xi) costs in connection with services (including electricity) or other benefits of a type which are not standard for the Building and which are not available to Tenant without specific charge therefor, but which are provided to another tenant or occupant of the Building, whether or not such other tenant or occupant is specifically charged therefor by Landlord; (xii) services, items and benefits for which Tenant or any other tenant or occupant of the Building specifically reimburses Landlord (other than Tenant’s pro rata contribution to Operating Costs) or for which Tenant or any other tenant or occupant of the Building pays third persons; (xiii) penalties for late payment by Landlord provided that the failure of Tenant to make any payment or perform any obligation of Tenant under this Lease is not the cause of such penalty; (xiv) payments of principal, finance charges or interest on debt or amortization on any mortgage, deed of trust or other debt, and rental payments under any ground or underlying lease or leases (except to the extent the same may be made to pay or reimburse or may be measured by, real estate taxes); (xv) except for the management fee and as otherwise expressly provided in this Section, Landlord’s general overhead and general administrative expenses (individual, partnership or corporate, as the case may be) not directly related to the management of the Building and not chargeable to Operating Costs of the Building in accordance with generally accepted accounting principles consistently applied; (xvi) compensation paid to clerks, attendants or other persons in commercial concessions (such as a snack bar, restaurant or newsstand), if any, operated by Landlord or any subsidiary or affiliate of Landlord; (xvii) advertising and promotional expenses; (xviii) contributions to charitable organizations; (xix) costs or fees relating to the defense of Landlord’s title to or interest in the Building; and (xx) payments in respect of profit to parties related to Landlord for supplies or materials to the extent that the cost of such supplies or materials exceed the cost that would have been paid had such supplies or materials been provided by parties unaffiliated with the Landlord on a competitive basis.

Gross-Up Provision : If less than one hundred percent (100%) of the net rentable area of the Building is occupied by tenants at all times during any Year, then Landlord shall make an appropriate adjustment to any components of Operating Costs which vary due to changes in occupancy levels (including, but not limited to, janitorial, water, sanitary sewer and other common utilities and common services in the Building but not Property Taxes) for such Year employing sound accounting and management principles to determine the Operating Costs that would have been incurred by Landlord had one hundred percent (100%) of the Building been occupied at all times during such Year by tenants, and the amount so determined shall be deemed to be the Operating Costs for such Year. Notwithstanding the foregoing, this Gross-Up Provision shall not operate to permit Landlord to collect more than the actual costs that Landlord actually incurs for the items adjusted pursuant to this Gross-Up Provision.

Operating Costs Allocable to the Premises : The product of Tenant’s Pro Rata Share times Operating Costs.

Qualified Person : An accountant or other person experienced in accounting for income and expenses of office projects, who is engaged solely by Tenant on terms which do not entail any compensation based or measured in any way upon any savings in Additional Rent or reduction in Operating Costs Allocable to the Premises achieved through the inspection process described in this subparagraph.

3.4.7 Tenant’s Costs . Tenant agrees to reimburse or pay Landlord within twenty (20) Business Days after invoice from Landlord for (a) any cleaning expenses incurred by Landlord, including carpet cleaning, garbage and trash removal expenses, over and above the normal cleaning provided by Landlord, if any, or due to the presence of a lunchroom or kitchen or food or beverage dispensing machines within the Premises, (b) any expense incurred by Landlord for usage in the Premises of heating, ventilating and air conditioning services, elevator services, electricity, water, janitorial services, or any other services or utilities over and above the normal usage for the Premises, (c) any expense incurred by Landlord relating to or arising out of the usage by Tenant or Tenant’s Agents of the public or common areas of the Building or Land, or any of the equipment contained therein, which usage is

over and above the normal usage for such public or common areas or equipment, and (d) any other direct out-of-pocket expense incurred by Landlord on Tenant’s behalf. Landlord’s invoice shall contain reasonable detail of the services, and upon request of Tenant, Landlord shall provide Tenant reasonable back-up materials.

3.4.8 Payments Deemed Additional Rent . Any sums payable under this Lease pursuant to this paragraph or otherwise shall be Additional Rent and, in the event of nonpayment of such sums, Landlord shall have the same rights and remedies with respect to such nonpayment as it has with respect to nonpayment of the Base Rent due under this Lease.

3.5 Utilities .

3.5.1 Landlord shall have the right from time to time to select the company or companies providing electricity, gas, fuel, one or more categories of Telecommunication Services and any other utility services to the Building. Landlord reserves the right to change electricity providers for the Building at any time and to purchase green or renewable energy provided that the rates of such providers are competitively bid. Electrical services will be supplied by Landlord to a panel box designated for each floor of the Building. Tenant shall contract directly and pay for separately metered electricity, Telecommunication Services, other separately metered utilities used on or from the Premises together with any taxes, penalties, surcharges or similar charges relating to such utilities. The cost of water, sewer, gas, sprinkler and any other utility service not separately metered to the Premises shall be an Operating Cost under this Lease.

3.5.2 Tenant acknowledges that space on the Building rooftop and in Building risers, equipment rooms and equipment closets is limited. If Tenant requires Telecommunication Services for the Premises other than from the provider or providers of Telecommunication Services selected by Landlord and whose Telecommunication Facilities are installed in or about the Building or on the rooftop of the Building, provision for alternate or supplemental Telecommunication Services or Telecommunication Facilities shall be made in a by a separate license agreement to be negotiated and executed by such provider and Landlord. Unless otherwise required by law, neither Tenant, nor a provider of Telecommunication Services to Tenant, in the future shall be entitled to locate or install Telecommunication Facilities in, on or about the Building without (a) first obtaining Landlord’s advance, written consent which shall not be unreasonably withheld, and (b) the advance execution by Landlord and Tenant of a satisfactory agreement granting a license to Tenant for such purposes and setting forth the scope, the additional rent, if any, royalties and the other terms and conditions of that license, and (c) Tenant negotiating and obtaining the right, if any is required, to bring such Telecommunication Facilities across public or private property to an approved entry point to the Building. The agreement referred to in clause (b) of the previous sentence shall be incorporated in and become part of this Lease. Any future application by Tenant for permission to locate or install Telecommunication Facilities shall (1) be in such form and shall be accompanied by such supporting information as the Landlord may require, (2) be subject to such procedures, regulations and controls as the Landlord may specify and (3) be accompanied by such payment as the Landlord may reasonably request to reimburse Landlord for its costs of evaluating and processing the application and in negotiating and preparing the agreement described earlier in this subparagraph. Notwithstanding anything to the contrary contained herein, Landlord consents to Tenant installing a Sprint Ethernet Access system (the “SPA Ethernet”) in the Premises pursuant to an agreement between Sprint and one of the internet service providers servicing the Building and in accordance with terms and conditions for the use of the Building risers and equipment rooms and closets determined by the Building’s riser manager. Tenant shall pay all costs and charges in connection with the installation and use of the SPA Ethernet, but Landlord shall not impose any charges payable to Landlord therefor.

3.5.3 Except as expressly set forth in this paragraph, Landlord shall in no case be liable or in any way be responsible for damages or loss to Tenant arising from the failure of, diminution of or interruption in electrical power, natural gas, fuel, Telecommunication Services, sewer, water, or garbage collection services, other utility service or building service of any kind to the Premises (a “Building Service”). In the event of such failure, diminution or interruption, Landlord shall use commercially reasonable efforts to restore such service to the Premises. Notwithstanding the foregoing, if (i) any Building Service is interrupted for more than three (3) consecutive Business Days as a result of the negligence or willful misconduct of Landlord, its agents or contractors or a failure in facilities, equipment or systems owned by Landlord and within Landlord’s reasonable control; (ii) Tenant promptly gives Landlord notice of such interruption; (iii) such interruption does not result from the negligent or willful act or omission of Tenant or Tenant’s Agents, or from any failure of Tenant to comply with any term or condition of this Lease; and (iv) such interruption renders any portion of the Premises unusable or inaccessible by Tenant in the conduct of its business or materially disrupts Tenant’s operations at the Premises, then Base Rent and Additional Rent shall abate with respect to the portion of the Premises rendered unusable or inaccessible from the fourth (4 ^th ) Business Day after Landlord’s receipt of Tenant’s notice until such time as the interrupted Building Service is restored.

3.5.4 Tenant shall not install any supplemental HVAC, space heaters or other utilities or energy-intensive equipment (“ Supplemental Utilities Equipment ”) in the Premises without Landlord’s prior written consent. Landlord hereby consents to the installation by Tenant of an up to five (5) ton supplemental HVAC system in the computer room of the Premises as part of the Tenant Improvements pursuant to the provisions of Exhibit B . Tenant shall be responsible, at its sole cost and expense, for the installation,

maintenance and repair of the Supplemental Utilities Equipment, and, at Landlord’s election, shall remove the same from the Premises upon the expiration or termination of the Lease Term at Tenant’s sole cost and expense. Tenant agrees that it will maintain and repair any Supplemental Utilities Equipment and major components thereof in first-class condition. Tenant shall, at its sole cost and expense, enter into a regularly scheduled preventative maintenance/service contract with a maintenance contractor or the seller of any such Supplemental Utilities Equipment, and upon Landlord’s request, Tenant shall provide Landlord with reasonable evidence of such maintenance and repair. Upon Landlord’s request, at reasonable times and upon prior notice to Tenant (except in the event of an emergency, where no notice is required), Landlord shall have the right to inspect, on not less than a monthly basis, the Supplemental Utilities Equipment and major components provided Landlord shall use commercially reasonable efforts to minimize Landlord’s interference with Tenant’s business. Tenant shall not permit any Supplemental Utilities Equipment to disturb or interfere with any of the Building’s systems or any other tenant in the Building. Notwithstanding anything contained herein to the contrary, in the event that Tenant installs any Supplemental Utilities Equipment in the Premises by Tenant which has not been approved by Landlord in accordance with the terms of this Lease, then Landlord may require Tenant to remove the same at Tenant’s sole cost and Tenant shall be responsible to Landlord for any damage caused to the Premises or the Building in connection therewith.

3.5.5 Upon request by Landlord, Tenant shall submit to Landlord electricity consumption data and costs in a format reasonably acceptable to Landlord, provided that Tenant shall not be responsible for incurring any out-of-pocket cost in connection with the submission of such reports.

3.6 Holdover . Tenant is not authorized to hold over beyond the expiration or earlier termination of the Lease Term. Tenant shall be deemed a month-to-month tenant during any holdover. During a holdover tenancy, (a) for the first month, Tenant shall pay to Landlord 150% of the rate of Base Rent in effect on the expiration or termination of the Lease Term plus all Additional Rent and other sums payable under this Lease, and (b) for the second and each subsequent month, Tenant shall pay to Landlord 200% of the rate of Base Rent in effect on the expiration or termination of the Lease Term plus all Additional Rent and other sums payable under this Lease, and in any event Tenant shall be bound by all of the other covenants and conditions specified in this Lease, so far as applicable to a month-to-month tenancy. If the Landlord does not consent to the Tenant’s remaining in possession, Landlord shall have all the rights and remedies provided for by law and this Lease, including the right to recover consequential damages suffered by Landlord in the event of Tenant’s wrongful refusal to relinquish possession of the Premises. Notwithstanding the foregoing, no consequential damages may be recovered by Landlord arising out of Tenant’s holdover for the first thirty (30) days after the termination of the Lease Term.

3.7 Late Charge . If Tenant fails to make any payment of Base Rent, Additional Rent or other amount when due under this Lease, a late charge is immediately due and payable by Tenant equal to five percent (5%) of the amount of any such payment. Landlord and Tenant agree that this charge compensates Landlord for the administrative costs caused by the delinquency. The parties agree that Landlord’s damage would be difficult to compute and the amount stated in this paragraph represents a reasonable estimate of such damage. Assessment or payment of the late charge contemplated in this paragraph shall not excuse or cure any Event of Default or breach by Tenant under this Lease or impair any other right or remedy provided under this Lease or under law.

3.8 Default Rate . Any Base Rent, Additional Rent or other sum payable under this Lease which is not paid when due shall bear interest at a rate equal to the lesser of: (a) the published prime or reference rate then in effect at a national banking institution designated by Landlord (the “Prime Rate”), then in effect, plus four (4) percentage points, or (b) the maximum rate of interest per annum permitted by applicable law (the “Default Rate”), but the payment of such interest shall not excuse or cure any Event of Default or breach by Tenant under this Lease or impair any other right or remedy provided under this Lease or under law.

SECTION 4: MANAGEMENT AND LEASING PROVISIONS

4.1 Maintenance and Repair by Landlord . Subject to Section 4.9 (“ Damage or Destruction ”) and Section 4.10 (“ Condemnation ”), Landlord shall maintain the public and common areas of the Building in reasonably good order, condition and repair comparable to the condition of other first-class buildings in the Chicago central business district. Landlord shall make such repairs thereto as become necessary after obtaining actual knowledge of the need for such repairs. All repair costs shall be included in Operating Costs (to the extent permitted under Section 3.4 above), except for damage occasioned by the act or omission of Tenant or Tenant’s Agents which, subject to Section 4.15, shall be paid for entirely by Tenant upon demand by Landlord. In the event any or all of the Building becomes in need of maintenance or repair which Landlord is required to make under this Lease, Tenant shall promptly give written notice to Landlord, and Landlord shall commence such maintenance or repairs within a reasonable time after Landlord’s receipt of such notice.

4.2 Maintenance and Repair by Tenant . Except as is expressly set forth as Landlord’s responsibility pursuant to Section 4.1 (“ Maintenance and Repair by Landlord ”) and Section 4.3.3(c) below, Tenant shall at Tenant’s sole cost and expense keep, clean and maintain the Premises in good condition and repair, including interior painting, plumbing and utility fixtures and installations, carpets and floor coverings, all interior wall surfaces and coverings (including tile and paneling), interior windows,

exterior and interior doors, roof penetrations and membranes in connection with any Tenant installations on the roof, light bulb replacement (which bulbs and fixtures shall comply with Landlord’s Sustainability Practices and shall be reported to Landlord in a format reasonably acceptable to Landlord) and interior preventative maintenance. Subject to the limitations set forth in Section 2.7.4 above, Tenant shall use commercially reasonable efforts to perform all maintenance and repairs in compliance with Landlord’s Sustainability Practices, as the same may be in effect or amended or supplemented from time to time. If Tenant fails to maintain or repair the Premises in accordance with this paragraph, then Landlord may, but shall not be required to, enter the Premises upon two (2) Business Days prior written notice to Tenant (or immediately without any notice in the case of an emergency) to perform such maintenance or repair at Tenant’s sole cost and expense. Tenant shall pay to Landlord the actual and reasonable cost of such maintenance or repair plus a ten percent (10%) administration fee within ten (10) Business Days of written demand from Landlord.

4.3 Common Areas/Security .

4.3.1 The common areas of the Building shall be subject to Landlord’s sole management and control. Without limiting the generality of the immediately preceding sentence, Landlord reserves the exclusive right as it deems necessary or desirable to install, construct, remove, maintain and operate lighting systems, facilities, improvements, equipment, Telecommunication Facilities and signs on, in or to all parts of the common areas; change the number, size, height, layout, or locations of walks, driveways and truckways or parking areas now or later forming a part of the Land or Building; make alterations or additions to the Building or common area; close temporarily all or any portion of the common areas to make repairs, changes or to avoid public dedication; grant easements to which the Land will be subject; replat, subdivide, or make other changes to the Land; place or relocate or cause to be placed or located utility lines and Telecommunication Facilities through, over or under the Land and Building; and use or permit the use of all or any portion of the roof of the Building. Landlord reserves the right to relocate parking areas and driveways and to build additional improvements in the common areas so long as Tenant’s Parking Ratio is maintained and provided that there shall continue to be reasonable access to the Premises.

4.3.2 Except as set forth herein, Landlord shall provide a 24-hour manned security desk in the lobby of the Building provided that Landlord may cease providing manned security and implement technological advances to such security service consistent with comparable Class A office building in the Chicago central business district, and Landlord shall have no liability to Tenant for failure of such service to prevent personal injury or property damage or any other loss suffered by Tenant or Tenant’s Agents. In addition, Landlord agrees to secure all exterior entryways to the Building using commercially reasonable methods used by comparable Class A buildings in the Chicago central business district. Tenant recognizes that any security services provided by Landlord will be for the sole benefit of Landlord and the protection of Landlord’s property, and provided that Landlord fulfills its obligations set forth in the two (2) immediately preceding sentences, under no circumstances shall Landlord be responsible for, and Tenant waives any rights with respect to, Landlord providing security or other protection for Tenant or Tenant’s Agents or property in, on or about the Premises, Land or Building. Landlord acknowledges that the operation of Tenant’s business in the Premises requires compliance with certain confidentiality and security policies and procedures imposed by applicable state and federal laws (“Tenant’s Security Requirements”), and accordingly, Tenant may, at its sole cost and expense, install, establish and maintain security services (“Tenant’s Security Services”) within the Premises; provided that , (i) Tenant’s Security Services (including any apparatus, facilities, equipment or people utilized in connection with the provision of such security services) comply with Governmental Requirements, (ii) Tenant’s Security Services installed, established or maintained by Tenant must not affect or impact any portion of the Building or the Land other than the Premises and shall not prevent Landlord from exercising its rights as provided in Section 4.8 (“ Access ”), (iii) Tenant’s Security Services are installed and maintained by a professional security contractor, and (iv) Tenant has informed Landlord in writing of Tenant’s Security Requirements. Tenant’s rights under this subparagraph are subject to all the obligations, limitations and requirements as set forth in Section 4.4 (“ Tenant Alterations ”) and Section 4.5 (“ Tenant’s Work Performance ”).

4.3.3 Subject to force majeure and the terms of Section 3.5.3 above, Landlord shall furnish the following services to Tenant, the cost of which shall be included in Operating Costs to the extent permitted herein (except to the extent to be paid entirely by Tenant as hereinafter provided):

(a) HVAC service shall be provided to the Premises Monday through Friday from 8:00 a.m. to 6:00 p.m. and Saturday from 8:00 a.m. to 1:00 p.m., except Holidays, to provide a temperature, in Landlord’s reasonable judgment, for comfortable occupancy of the Premises under normal business operations and in the absence of the use of equipment which affects the temperature or humidity which would otherwise be maintained in the Premises. Nothing contained herein shall restrict the operation of Tenant’s supplemental HVAC system at all necessary times.

(b) Hot and cold water in common with other tenants for lavatory purposes from the regular Building supply.

(c) Cleaning and janitorial services for the Building and the Premises exclusively by contractors approved by Landlord in accordance with the Janitorial Specifications attached to this Lease as Exhibit F . Except with the written consent of Landlord, no person or persons other than those approved by Landlord shall be employed by Tenant or permitted to enter the Building for the purpose of cleaning the same. Cleaning and janitorial services shall be provided Monday through Friday except Holidays. Tenant shall not cause any unnecessary labor by carelessness or indifference to the good order and cleanliness of the Premises. Landlord shall not in any way be responsible to any Tenant for any loss of property on the Premises, however occurring, or for any damage to any Tenant’s property by the janitor, any of Landlord’s Agents or any other person. Notwithstanding anything to the contrary contained herein, Landlord shall direct the janitorial service for the Building to take appropriate actions to comply with Tenant’s Security Requirements of which Tenant has provided written notice to Landlord.

(d) Access to condenser water for Tenant’s use in connection with the operation of Tenant’s supplemental HVAC equipment. Tenant shall pay Landlord’s standard charge for condenser water within thirty (30) days after receipt of Landlord’s bill therefor. As of the date hereof, Landlord’s charge for condenser water is $12.31 per ton per month, subject to adjustment from time to time during the Lease Term.

4.4 Tenant Alterations . After Tenant’s construction of the Tenant Improvements, Tenant shall not make any alterations, additions or improvements in or to the Premises, or make changes to locks on doors, or add, disturb or in any way change any floor covering, wall covering, fixtures, plumbing, wiring or Telecommunication Facilities (individually and collectively “ Tenant Alterations ”), without first obtaining the consent of Landlord. Notwithstanding the foregoing, Landlord’s consent to Tenant Alterations shall not be required if (i) the same do not affect any structural element or the exterior appearance of the Building, change the general nature or character thereof, affect the mechanical, life/safety or other common utilities or facilities maintained by Landlord in the Building or require Landlord to make any alterations or additions to the Building, (ii) the cost of any of the foregoing Tenant Alterations, together with all such Tenant Alterations during the prior twelve (12) month period, does not exceed $50,000.00, and (iii) Tenant gives Landlord at least ten (10) days prior notice of any such work. Landlord agrees that Landlord’s consent shall not be required for the installation of Tenant’s furniture, trade fixtures or equipment in the Premises (and the same shall not be deemed to be Tenant Alterations) if the same do not affect the structure of the Building, affect the mechanical, life/safety or other common facilities and systems of the Building, require Landlord to make any alterations to the Building or a permit from the City of Chicago. Further, Landlord’s consent to Tenant Alterations shall not be unreasonably withheld if the same do not affect the structure or exterior appearance of the Premises or the Building, change the general nature or character thereof, affect the mechanical, life/safety or other common utilities or facilities maintained by the Landlord in the Building or require Landlord to make any alterations or additions to the Building. Tenant shall deliver to Landlord full and complete plans and specifications for any proposed Tenant Alterations which require Landlord’s consent, and all such work shall be performed by Tenant at Tenant’s expense. Tenant shall pay to Landlord all reasonable costs incurred by Landlord for any architecture, engineering, supervisory and/or legal services in connection with any Tenant Alterations, including, without limitation, Landlord’s review of the plans and specifications for the Tenant Alterations. Without limiting the generality of the foregoing, Landlord may require Tenant, at Tenant’s sole cost and expense, to obtain and provide Landlord with proof of insurance coverage in forms, amounts and by companies reasonably acceptable to Landlord. Should Tenant make any alterations without Landlord’s prior written consent (if required), or without satisfaction of any conditions established by Landlord, Landlord shall have the right, in addition to and without limitation of any right or remedy Landlord may have under this Lease, at law or in equity, to require Tenant to remove some or all of Tenant Alterations, or at Landlord’s election, Landlord may remove such Tenant Alterations and restore the Premises at Tenant’s expense. Subject to the provisions of Section 2.7.4, Tenant shall use commercially reasonable efforts to ensure that all Tenant Alterations will be performed in accordance with Landlord’s Sustainability Practices, as the same may be in effect or amended or supplemented from time to time. Nothing contained in this paragraph or Section 4.5 (“ Tenant’s Work Performance ”) shall be deemed a waiver of the provisions of Section 4.27 (“ Construction Liens ”).

4.5 Tenant’s Work Performance . All Tenant Alterations shall be performed by contractors approved in advance in writing by Landlord pursuant to one or more construction contracts in form and content approved in advance in writing by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. Approval shall be subject to Landlord’s reasonable discretion and shall include a requirement that the prime contractor and the respective subcontractors of any tier performing the Tenant Alterations: (a) be parties to, and bound by, a collective bargaining agreement with a labor organization affiliated with the Building and Construction Trades Council of the AFL-CIO applicable to the geographic area in which the Building is located and to the trade or trades in which the work under the contract is to be performed and (b) employ only members of such labor organizations to perform work within their respective jurisdictions. With the prior written approval of Landlord which may be withheld in Landlord’s sole and absolute discretion, in the preceding sentence a project labor agreement may be substituted in place of a collective bargaining agreement, and an independent, nationally recognized labor organization may be substituted in place of a labor organization affiliated with the Building and Construction Trades Council of the AFL-CIO. Tenant’s contractors, workers and suppliers shall work in harmony with and not interfere with workers or contractors of Landlord or other tenants of Landlord. If Tenant’s contractors, workers or suppliers do, in the opinion of Landlord, cause such disharmony or interference, Landlord’s consent to the continuation of such work may be withdrawn upon written notice to Tenant. All Tenant Alterations shall be (1) completed in accordance with the plans

and specifications approved by Landlord; (2) completed in accordance with all Governmental Requirements; (3) carried out promptly in a good and workmanlike manner; (4) of all new materials; and (5) free of defect in materials and workmanship. Tenant shall pay for all damage to the Premises, Building and Land caused by Tenant or Tenant’s Agents. Tenant shall indemnify, defend and hold harmless Landlord and Landlord’s Agents from any Claims arising as a result of the Tenant Alterations or any defect in design, material or workmanship of any Tenant Alterations.

4.6 Surrender of Possession . Tenant shall, at the expiration or earlier termination of this Lease, surrender and deliver the Premises to Landlord in as good condition as existed after Tenant’s completion of the Tenant Improvements or as later improved, reasonable use and ordinary wear and tear and casualty excepted, and free from all tenancies or occupancies by any person.

4.7 Removal of Property . On or before the expiration or earlier termination of this Lease, Tenant shall remove its trade fixtures, personal property, office supplies and office furniture and equipment from the Premises, and Tenant shall repair all damage caused by or resulting from such removal. All other property in the Premises and any Tenant Alterations (including, wall-to-wall carpeting, paneling, wall covering, lighting fixtures and apparatus or any other article affixed to the floor, walls, ceiling or any other part of the Premises or Building) shall become the property of Landlord and shall remain upon and be surrendered with the Premises; provided, however, at Landlord’s sole election, Tenant shall, at Tenant’s sole cost and expense, remove (i) all low-voltage wiring installed in the Premises, and (ii) all (or such portion as Landlord shall designate) of the Tenant Improvements and/or Tenant Alterations which constitute “specialty items” (such as raised flooring, supplemental HVAC equipment and systems, decorative water features and the like) of which Landlord informed Tenant in writing at the time of Landlord’s review of Tenant’s plans and drawings and Landlord’s consent to the Tenant Improvements and/or Tenant Alterations, as the case may be, or which Tenant installed in the Premises without Landlord’s consent, and in each case, Tenant shall repair any damages resulting from such removal and return the Premises to the same condition as existed prior to such installation or work, reasonable wear and tear excepted. Tenant waives all rights to any payment or compensation for such Tenant Improvements and/or Tenant Alterations (including Telecommunication Facilities). If Tenant shall fail to remove any of its property from the Premises, Building or Land which Tenant is required to remove at the expiration or earlier termination of this Lease or when Landlord has the right of re-entry, Landlord may, at its option, remove and store such property at Tenant’s expense without liability for loss of or damage to such property, such storage to be for the account and at the expense of Tenant. Tenant shall pay all documented out-of-pocket costs incurred by Landlord within thirty (30) days after demand for such payment. If Tenant fails to pay the cost of storing any such property, Landlord may, at its option, after it has been stored for a period of twenty (20) Business Days or more, sell or permit to be sold, any or all such property at public or private sale (and Landlord may become a purchaser at such sale), in such manner and at such times and places as Landlord in its sole discretion may deem proper, without notice to Tenant, and Landlord shall apply the proceeds of such sale: first , to the cost and expense of such sale, including reasonable attorney’s fees actually incurred; second , to the payment of the costs or charges for storing any such property; third , to the payment of any other sums of money which may then be or later become due Landlord from Tenant under this Lease; and, fourth , the balance, if any, to Tenant.

4.8 Access . Tenant shall permit Landlord and Landlord’s Agents to enter into the Premises with one (1) Business Day’s notice (which may be oral, provided however, except in case of emergency in which case no notice shall be required), for the purpose of inspecting the same or for the purpose of repairing, altering or improving the Premises or the Building. Landlord’s notice shall specify the purpose of Tenant’s entry, and any such entry shall comply with Tenant’s Security Requirements and shall be subject to reasonable coordination with a representative of Tenant, who may accompany and/or monitor any activities of Landlord or Landlord’s Agents in the Premises. Nothing contained in this paragraph shall be deemed to impose any obligation upon Landlord not expressly stated elsewhere in this Lease. When reasonably necessary, Landlord may temporarily close Building or Land entrances, Building doors or other facilities, without liability to Tenant by reason of such closure and without such action by Landlord being construed as an eviction of Tenant or as relieving Tenant from the duty of observing or performing any of the provisions of this Lease, provided that Landlord shall use commercially reasonable efforts to afford Tenant access to the Premises, subject to Governmental Requirements, and to restore Tenant’s full access to the Premises. Landlord shall have the right to enter the Premises with one (1) Business Day notice (which may be oral) during the last nine (9) months of the Lease Term for the purpose of showing the Premises to prospective tenants, and any such entry shall comply with Tenant’s Security Requirements of which Tenant has informed Landlord in accordance with Section 4.3.2 above. Tenant shall give written notice to Landlord at least twenty (20) Business Days prior to vacating the Premises and shall arrange to meet with Landlord for a joint inspection of the Premises prior to vacating. In the event of Tenant’s failure to give such notice or arrange such joint inspection, Landlord’s inspection at or after Tenant’s vacating the Premises shall be conclusively deemed correct for purposes of determining Tenant’s responsibility for repairs and restoration. Landlord shall not be liable for the consequences of admitting by passkey, or refusing to admit to the Premises, any persons authorized by Tenant for entry to the Premises. (See Paragraph 4 of the Rider .)

4.9 Damage or Destruction .

4.9.1 If the Premises are damaged by fire, earthquake or other casualty, Tenant shall promptly give written notice thereof to Landlord. Within ninety (90) days after (i) the date of receipt of such notice from Tenant or (ii) such earlier date that Landlord is aware of the damage which affects the Premises together with the Common Areas or other portions of the Building (hereinafter referred to as a “Damage Notice Date”), Landlord shall notify Tenant in writing of its reasonable estimate of the time necessary to repair the damage and whether Landlord has elected to make such repair. If Landlord reasonably estimates that the damage can be repaired in accordance with the then-existing Governmental Requirements within two hundred seventy (270) days after the Damage Notice Date and if there are sufficient insurance proceeds available to repair such damage, then Landlord shall promptly commence and thereafter proceed with reasonable diligence to restore the Premises to substantially the condition which existed prior to the damage and this Lease shall not terminate. If, in Landlord’s reasonable estimation, the damage cannot be repaired within such two hundred seventy (270) day period or if there are insufficient insurance proceeds available to repair such damage, Landlord may elect in its absolute discretion to either: (a) terminate this Lease or (b) restore the Premises to substantially the condition which existed prior to the damage and this Lease will continue. If Landlord restores the Premises under this Section 4.9, then Landlord shall use commercially reasonable efforts to proceed toward completion of the restoration and (1) the Lease Term shall be extended for the time required to complete such restoration, and (2) Landlord shall not be required to repair or restore Tenant Improvements, Tenant Alterations (including Telecommunication Facilities), or any or all furniture, fixtures, equipment, inventory, improvements or other property which was in or about the Premises at the time of the damage and was not owned by Landlord, and Tenant shall be responsible for the restoration and repair of such items. Base Rent and Additional Rent due under this Lease after the occurrence of the damage and during any reconstruction period under this Section 4.9.1 and Sections 4.9.2, 4.9.3 and 4.9.4 below shall be abated in proportion to the floor area of the Premises which is not usable for the Permitted Use. Tenant agrees to look to the provider of Tenant’s insurance for coverage for the loss of Tenant’s use of the Premises and any other related losses or damages incurred by Tenant during any reconstruction period. Notwithstanding anything to the contrary contained herein, in the event that Landlord estimates that the repair of the damage cannot be substantially completed (except for such Punch List Work which does not materially interfere with Tenant’s business operations in the Premises) within two hundred seventy (270) days after a Damage Notice Date or Landlord does not elect to repair the damage, then Tenant, at its option, may cancel and terminate this Lease by giving written notice which is received by Landlord on or before the thirtieth (30th) day after Tenant has received Landlord’s notice. Further, in the event that Landlord has not substantially completed the repair and restoration of the Premises (except for such Punch List Work which does not materially interfere with Tenant’s business operations in the Premises) within two hundred seventy (270) days after a Damage Notice Date, subject to extension on account of force majeure, then Tenant, at its option, may cancel and terminate this Lease upon thirty (30) days written notice to Landlord if the repair and restoration have not been substantially completed within such thirty (30) day period. If Tenant elects to exercise the option to terminate as set forth in this Paragraph, Tenant shall be released from all of its liabilities and obligations hereunder accruing from and after the date of termination, but Tenant shall remain liable for the payment of Rent and other charges (to the extent the same are not abated as provided herein) and the performance of the terms and provisions of this Lease due and owing or accrued up to and including the date of termination.

4.9.2 If the Building is damaged by fire, earthquake or other casualty and more than fifty percent (50%) of the Building is rendered untenantable, without regard to whether the Premises are affected by such damage, Landlord may in its absolute discretion and without limiting any other options available to Landlord under this Lease or otherwise, elect to terminate this Lease by notice in writing to Tenant within forty (40) Business Days after the occurrence of such damage if Landlord is also terminating the leases of other tenants in the Building who are similarly situated to Tenant. Such notice shall be effective twenty (20) Business Days after receipt by Tenant unless a later date is set forth in Landlord’s notice.

4.9.3 Notwithstanding anything contained in this Lease to the contrary, if there is damage to the Premises or Building and the holder of any indebtedness secured by a mortgage or deed of trust covering any such property requires that the insurance proceeds be applied to such indebtedness or if the insurance proceeds are otherwise inadequate to complete the repair of the damages to the Premises, the Building or both, then Landlord shall have the right to terminate this Lease by delivering written notice of termination to Tenant within fifteen (15) Business Days after Landlord is notified of such requirement.

4.9.4 Notwithstanding the foregoing, if the Premises or the Building are wholly or partially damaged or destroyed within the final twelve (12) months of the Lease Term, Landlord may, at its option, elect to terminate this Lease upon written notice to Tenant within thirty (30) days following such damage or destruction. Further, in the event that the Premises are damaged or destroyed within the final twelve (12) months of the Least Term and such damage would require more than thirty (30) Business Days to repair, then Tenant may, at its option, terminate this Lease by written notice to Landlord within thirty (30) days following such damage of destruction.

4.10 Condemnation . If all of the Premises, or such portions of the Building as may be required for the Tenant’s reasonable use of the Premises, are taken by eminent domain or by conveyance in lieu thereof, this Lease shall automatically terminate as of the date the physical taking occurs, and all Base Rent, Additional Rent and other sums payable under this Lease shall be paid to that date

provided that Tenant is permitted to occupy the Premises until such date. If any material part of the Building is sold or taken (whether or not the Premises are affected), Landlord shall have the right to terminate this Lease as of the date possession is transferred to the acquiring authority upon giving written notice thereof to Tenant, and the rent payable hereunder shall be apportioned accordingly. In case of taking of a part of the Premises or a portion of the Building not required for the Tenant’s reasonable use of the Premises, then this Lease shall continue in full force and effect and the Base Rent shall be equitably reduced based on the proportion by which the floor area of the Premises is reduced, such reduction in Base Rent to be effective as of the date the physical taking occurs provided that Tenant is permitted to occupy the portion of the Premises taken until such date. Notwithstanding anything contained herein to the contrary, if a portion of the Premises is taken but the remainder thereof is not, in Tenant’s reasonable business judgment, adequate for Tenant’s continued operations in the Premises, then Tenant shall have the right to terminate this Lease by giving Landlord written notice of termination within thirty (30) days after the date possession is transferred to the acquiring authority. Additional Rent and all other sums payable under this Lease shall not be abated but Tenant’s Pro Rata Share may be redetermined as equitable under the circumstances. Landlord reserves all rights to damages or awards for any taking by eminent domain relating to the Premises, Building, Land and the unexpired term of this Lease. Tenant assigns to Landlord any right Tenant may have to such damages or award and Tenant shall make no claim against Landlord for damages for termination of its leasehold interest or interference with Tenant’s business. Tenant shall have the right, however, to claim and recover from the condemning authority compensation for any loss to which Tenant may be entitled for Tenant’s moving expenses or other relocation costs; provided that , such expenses or costs may be claimed only if they are awarded separately in the eminent domain proceedings and not as a part of the damages recoverable by Landlord.

4.11 Parking . [Intentionally omitted]

4.12 Indemnification .

4.12.1 Tenant shall indemnify, defend and hold harmless Landlord and Landlord’s Agents from and against any and all Claims, arising in whole or in part out of (a) the possession, use or occupancy of the Premises or the business conducted in the Premises by Tenant or Tenant’s Agents, (b) any act, omission or negligence of Tenant or Tenant’s Agents, or (c) any breach or default under this Lease by Tenant, except to the extent any such Claim results from the negligence or willful misconduct of Landlord or Landlord’s Agents.

4.12.2 Landlord shall indemnify, defend and hold harmless Tenant and Tenant’s Agents from and against any and all Claims to the extent the same arises out of (a) any occurrence in the common areas of the Building to the extent the same results from the negligence or intentional misconduct of the Landlord or Landlord’s Agents, or (b) any breach or default under this Lease by Landlord.

4.12.3 Except as specified in the next sentence, neither Landlord nor Landlord’s Agents shall, to the extent permitted by law, have any liability to Tenant, or to Tenant’s Agents, for any Claims arising out of any cause whatsoever, including repair to any portion of the Premises; interruption in or interference with the use of the Premises or any equipment therein; any accident or damage resulting from any use or operation by Landlord, Tenant or any person or entity of heating, cooling, electrical, sewerage or plumbing equipment or apparatus or Telecommunication Facilities; termination of this Lease by reason of damage to the Premises or Building; fire, robbery, theft, vandalism, mysterious disappearance or a casualty of any kind or nature; actions of any other tenant of the Building or of any other person or entity; inability to furnish any service required of Landlord as specified in this Lease; or leakage in any part of the Premises or the Building from rain, ice or snow, or from drains, pipes or plumbing fixtures in the Premises or the Building. Landlord shall be responsible only for Claims arising solely out of the negligence or willful misconduct of Landlord in failing to repair or maintain the Building as required by this Lease (“ Maintenance and Repair by Landlord ”); but in no event shall Landlord’s responsibility extend to any interruption to Tenant’s business or any indirect or consequential losses suffered by Tenant or Tenant’s Agents or extend beyond Landlord’s responsibility as set forth in Section 3.5 (“ Utilities ”) when that paragraph is applicable. The obligations of this paragraph shall be subject to Section 4.15 (“ Waiver of Subrogation ”).

4.13 Tenant Insurance .

4.13.1 Tenant shall, throughout the Lease Term, at its own expense, keep and maintain in full force and effect the following policies, each of which shall be endorsed as needed to provide that the insurance afforded by these policies is primary and that all insurance carried by Landlord is strictly excess and secondary and shall not contribute with Tenant’s liability insurance:

(a) A policy of commercial general liability insurance, including a contractual liability endorsement covering Tenant’s obligations under Section 4.12 (“ Indemnification ”), insuring against claims of bodily injury and death or property damage or loss with a combined single limit at the Commencement Date of this Lease of not less than One Million Dollars ($1,000,000.00) per occurrence/Two Million Dollars ($2,000,000.00) annual aggregate, which limit shall be reasonably increased during the Lease Term at Landlord’s request to reflect both increases in liability exposure arising from inflation as well as from

changing use of the Premises or changing legal liability standards, which policy shall be payable on an “occurrence” rather than a “claims made” basis, and which policy names Landlord, Manager, Bentall Kennedy (U.S.) Limited Partnership and, at Landlord’s request, Landlord’s mortgage lender(s) or investment advisors, as additional insureds;

(b) A special form policy of property insurance (which was formerly called “all risk”) covering Tenant Improvements, Tenant Alterations (including Telecommunication Facilities), and any and all furniture, fixtures, equipment, inventory, improvements and other property in or about the Premises which is not owned by Landlord, for one hundred percent (100%) of the then current replacement cost of such property;

(c) Business interruption insurance in an amount sufficient to cover costs, damages, lost income, expenses, Base Rent, Additional Rent and all other sums payable under this Lease, should any or all of the Premises not be usable for a period of up to twelve (12) months;

(d) A policy of worker’s compensation insurance as required by applicable law and employer’s liability insurance with limits of no less than One Million Dollars ($1,000,000.00); and

(e) A policy of comprehensive automobile liability insurance, including loading and unloading, and covering owned, non-owned and hired vehicles, with limits of no less than One Million Dollars ($1,000,000.00) per occurrence.

(f) An excess umbrella liability policy with a limit of not less than Five Million Dollars ($5,000,000.00) on a form at least as broad as the underlying policies.

4.13.2 All insurance policies required under this paragraph shall be with companies reasonably approved by Landlord and each policy shall provide that it is not subject to cancellation, lapse or reduction in coverage except after thirty (30) days’ written notice to Landlord. Tenant shall deliver to Landlord and, at Landlord’s request Landlord’s mortgage lender(s), prior to the Commencement Date and from time to time thereafter, certificates evidencing the existence and amounts of all such policies.

4.13.3 If Tenant fails to acquire or maintain any insurance or provide any certificate required by this paragraph, Landlord may, but shall not be required to, obtain such insurance or certificates and the costs associated with obtaining such insurance or certificates shall be payable by Tenant to Landlord on demand.

4.14 Landlord’s Insurance . Landlord shall, throughout the Lease Term, keep and maintain in full force and effect:

(a) A policy of commercial general liability insurance, insuring against claims of bodily injury and death or property damage or loss with a combined single limit at the Commencement Date of not less than Two Million Dollars ($2,000,000.00) per occurrence and Five Million Dollars ($5,000,000.00) in the aggregate, which policy shall be payable on an “occurrence” rather than a “claims made” basis;

(b) A special form policy of property insurance (what was formerly called “all risk”) covering the Building and Landlord’s personal property, if any, located on the Land in the amount of one hundred percent (100%) of the then current replacement value of such property; and

(c) Landlord may, but shall not be required to, maintain other types of insurance as Landlord deems appropriate, including but not limited to, property insurance coverage for earthquakes and floods in such amounts as Landlord deems appropriate. Such policies may be “blanket” policies which cover other properties owned by Landlord.

4.15 Waiver of Subrogation . Notwithstanding anything in this Lease to the contrary, Landlord and Tenant hereby each waive and release the other from any and all Claims or any loss or damage that may occur to the Land, Building, Premises, or personal property located therein, by reason of fire or other casualty regardless of cause or origin, including the negligence or misconduct of Landlord, Tenant, Landlord’s Agents or Tenant’s Agents, to the extent covered by insurance carried or required to be carried by a party hereto even though such loss might have been occasioned by the negligence or willful acts or omissions of Landlord, Landlord’s Agents, or Tenant or Tenant’s Agents. Landlord and Tenant shall each notify their insurance carriers, subject to the terms of their individual policies, of this waiver of subrogation and have such policies endorsed, as necessary, to prevent invalidation of any of the coverage provided by such insurance policy by reason of such mutual waiver. For the purpose of the foregoing waiver, the amount of any deductible shall be deemed covered by, and recoverable by the insures under, the insured policy to which such deductible relates.

4.16 Assignment and Subletting by Tenant .

4.16.1 Tenant shall not have the right to assign, transfer, mortgage or encumber this Lease in whole or in part, nor sublet the whole or any part of the Premises, nor allow the occupancy of all or any part of the Premises by another, without first obtaining Landlord’s consent, which consent shall not be unreasonably withheld, conditioned or delayed in accordance with this paragraph. Notwithstanding any permitted assignment or subletting, Tenant shall at all times remain directly, primarily and fully responsible and liable for the payment of all sums payable under this Lease and for compliance with all of its other obligations as tenant under this Lease. Landlord’s acceptance of Base Rent, Additional Rent or any other sum from any assignee, sublessee, transferee, mortgagee or encumbrance holder shall not be deemed to be Landlord’s approval of any such conveyance. Upon the occurrence of an Event of Default, if the Premises or any part of the Premises are then subject to an assignment or subletting, Landlord may, at its option, collect directly from such assignee or subtenant all rents becoming due to Tenant under such assignment or sublease and apply such rents against any sums due to Landlord from Tenant under this Lease. No such collection shall be construed to constitute a novation or release of Tenant from the further performance of Tenant’s obligations under this Lease. Landlord’s right of direct collection shall be in addition to and not in limitation of any other rights and remedies provided for in this Lease or at law. Tenant makes an absolute assignment to Landlord of such assignments and subleases and any rent, Lease Security Deposits and other sums payable under such assignments and subleases as collateral to secure the performance of the obligations of Tenant under this Lease, provided, however, that until the occurrence of an Event of Default, Tenant shall have the license to collect any amounts or sums payable under any sublease.

4.16.2 In the event Tenant desires to assign this Lease or to sublet all or any portion of the Premises, Tenant shall give written notice of such desire to Landlord setting forth the name of the proposed subtenant or assignee, the proposed term, the nature of the proposed subtenant’s or assignee’s business to be conducted on the Premises, the rental rate, and any other particulars of the proposed subletting or assignment that Landlord may reasonably request. Without limiting the preceding sentence, Tenant shall also provide Landlord with: (a) such financial information as Landlord may request concerning the proposed subtenant or assignee, including recent financial statements certified as accurate and complete by a certified public accountant and by the president, managing partner or other appropriate officer of the proposed subtenant or assignee (provided, however, if the proposed subtenant or assignee is a publicly traded company, Landlord shall rely solely on publicly available financial information); (b) proof satisfactory to Landlord that the proposed subtenant or assignee will immediately occupy and thereafter use the entire Premises (or any sublet portion of the Premises) for the remainder of the Lease Term (or for the entire term of the sublease, if shorter) in compliance with the terms of this Lease; and (c) a copy of the proposed sublease or assignment or letter of intent. Tenant shall pay to Landlord, upon Landlord’s demand therefor, Landlord’s reasonable attorneys’ fees incurred in the review of such documentation and in documenting Landlord’s consent (not to exceed $2,500.00 per occurrence), plus an administrative fee of $500.00 as Landlord’s fee for processing such proposed assignment or sublease. Receipt of such fee shall not obligate Landlord to approve the proposed assignment or sublease.

4.16.3 In determining whether to grant or withhold consent to a proposed assignment or sublease, Landlord may consider, and weigh, any factor it deems relevant, in its reasonable discretion. Without limiting what may be construed as a factor considered by Landlord, Tenant agrees that any one or more of the following will be proper grounds for Landlord’s disapproval of a proposed assignment or sublease:

(a) The proposed assignee or subtenant does not, in Landlord’s good faith commercially reasonable judgment, have sufficient financial worth (taking into account Tenant’s continuing liability hereunder) to insure full and timely performance under this Lease or the Sublease, as the case may be;

(b) Subject to Section 4.16.2(a) with respect to any publicly traded entity, Landlord has received insufficient evidence of the financial worth or creditworthiness of the proposed assignee or subtenant to make the determination set forth in clause (a);

(c) Landlord has had prior negative leasing experience with the proposed assignee or subtenant or an affiliate or, in Landlord’s reasonable judgment, the proposed assignee or subtenant is engaged in a business, or the Premises or any part of the Premises will be used in a manner, that is not in keeping with the then standards of the Building, or that is not compatible with the businesses of other tenants in the Building, or that is inappropriate for the Building, or that will violate any negative covenant as to use contained in any other lease of space in the Building;

(d) The use of the Premises by the proposed assignee or subtenant will not be permitted under the Permitted Use;

(e) Tenant is in default beyond applicable notice and grace periods of any obligation of Tenant under this Lease, or an Event of Default by Tenant has occurred under this Lease on three (3) or more occasions during the twenty-four (24) months preceding the date that Tenant shall request such consent; or

(f) Landlord has had written negotiations with the proposed assignee or subtenant, in the six (6) months preceding Tenant’s request, regarding the leasing of space by such proposed assignee or subtenant in the Building.

(g) The proposed assignee or subtenant has a proposed use or operation in the Premises which may or will cause the Building or any part thereof to not conform with the standards for certification of the Building by a Green Agency Rating.

4.16.4 Within fifteen (15) Business Days after Landlord’s receipt of all required information to be supplied by Tenant pursuant to this paragraph, Landlord shall notify Tenant of Landlord’s approval, disapproval or conditional approval of any proposed assignment or subletting. Landlord shall have no obligation to respond unless and until all required information has been submitted. In the event Landlord approves of any proposed assignment or subletting, Tenant and the proposed assignee or sublessee shall execute and deliver to Landlord an assignment (or subletting) and assumption agreement in form and content reasonably satisfactory to Landlord.

4.16.5 If Tenant is not a publicly traded company, any transfer, assignment or hypothecation of any of the stock or interest in Tenant, or the assets of Tenant, or any other transaction, merger, reorganization or event, however constituted, which (a) results in fifty percent (50%), or more of such stock, interest or assets going into different ownership, or (b) is a subterfuge denying Landlord the benefits of this paragraph, shall be deemed to be an assignment within the meaning and provisions of this paragraph and shall be subject to the provisions of this paragraph.

4.16.6 If Landlord consents to any assignment or sublease and Tenant receives rent or any other consideration, either initially or over the term of the assignment or sublease, in excess of the Base Rent and Additional Rent (or, in the case of a sublease of a portion of the Premises, in excess of the Base Rent paid by Tenant on a square footage basis under this Lease), Tenant shall pay to Landlord fifty percent (50%) of such excess after deducting therefrom all of Tenant’s reasonable costs and expenses incurred in connection with the assignment or sublease including, without limitation, brokerage commissions, and the costs of all leasing concessions including rent abatement and Tenant Improvement Allowance.

4.16.7 [Intentionally omitted]

4.16.8 Notwithstanding any contrary provision in the previous subparagraphs of this paragraph, Landlord’s consent shall not be required for an assignment or subletting of the Premises to (i) an affiliate or wholly-owned subsidiary of the Tenant or a reorganized entity under which no change of ownership has occurred, (ii) an entity resulting from a merger or consolidation by or into Tenant, or (iii) an entity which acquires all or substantially all of Tenant’s stock or assets (each of the foregoing is hereinafter referred to as a “Permitted Transferee”), provided that (a) Tenant shall not be released of its obligations under this Lease; (b) a proposed assignee has delivered to Landlord satisfactory evidence of financial worth (less goodwill) equal to or greater than that of Tenant as of the proposed date of the transfer (provided, however, if the proposed subtenant or assignee is a publicly traded company, no additional financial information shall be required other than financial information which is publicly available); (c) no Event of Default then exists; (d) the use of the Premises by the proposed assignee or subtenant constitutes a Permitted Use; (e) Tenant shall notify Landlord of a proposed transfer as soon as reasonably possible (and in no event later than the effective date thereof), and such notice shall include information establishing the relationship between Tenant and the transferee; (f) any assignee of the Lease shall expressly assume all of Tenant’s obligations and liabilities hereunder to thereafter be performed without releasing Tenant; (g) any sublease shall by its terms be expressly subordinate to all of the terms, covenants and conditions of this Lease; and (h) Tenant shall deliver to Landlord on or prior to the effective date an executed copy of the documents effecting the transfer of this Lease.

4.17 Assignment by Landlord . Landlord shall have the right to transfer and assign, in whole or in part, its rights and obligations under this Lease and in any and all of the Land or Building. If Landlord sells or transfers any or all of the Building, including the Premises, Landlord and Landlord’s Agents shall, upon consummation of such sale or transfer, be released automatically from any liability relating to obligations or covenants under this Lease to be performed or observed after the date of such transfer, and in such event, Tenant agrees to look solely to Landlord’s successor-in-interest with respect to such liability; provided that, as to the Lease Security Deposit and Prepaid Rent, Landlord shall not be released from liability therefor unless Landlord has delivered (by direct transfer or credit against the purchase price) the Lease Security Deposit or Prepaid Rent to its successor-in-interest.

4.18 Estoppel Certificates and Financial Statements .

4.18.1 Tenant shall, from time to time, upon the written request of Landlord, execute, acknowledge and deliver to Landlord or its designee a written statement stating: (a) the date this Lease was executed and the date it expires; (b) the date Tenant entered into occupancy of the Premises; (c) the amount of monthly Base Rent and Additional Rent and the date to which such Base Rent and Additional Rent have been paid; and (d) certifying that (1) this Lease is in full force and effect and has not been assigned by Tenant, modified, supplemented or amended in any way (or specifying the date of the agreement so affecting this Lease); (2) to Tenant’s knowledge, Landlord is not in breach of this Lease (or, if such a breach is known to Tenant, a description of each such

breach) and that to Tenant’s knowledge no event, omission or condition has occurred which would result, with the giving of notice or the passage of time, in a breach of this Lease by Landlord; (3) this Lease represents the entire agreement between the parties with respect to the Premises; (4) whether or not all required contributions by Landlord to Tenant on account of Tenant Improvements have been received; (5) on the date of execution, to Tenant’s knowledge, whether or not there exist no defenses or offsets which the Tenant has against the enforcement of this Lease by the Landlord; (6) no Base Rent, Additional Rent or other sums payable under this Lease have been paid in advance except for Base Rent and Additional Rent for the then current month and any Prepaid Rent, to the extent not then applied; (7) no security has been deposited with Landlord (or, if so, the amount of such security); (8) it is intended that any Tenant’s statement may be relied upon by a prospective purchaser or mortgagee of Landlord’s interest or an assignee of any such mortgagee; and (9) such other information as may be reasonably requested by Landlord. If Tenant fails to respond within ten (10) Business Days of its receipt of a written request by Landlord as provided in this paragraph, such shall be a breach of this Lease and Tenant shall be deemed to have admitted the accuracy of any information supplied by Landlord to a prospective purchaser, mortgagee or assignee..

4.18.2 If Tenant is not a publicly traded corporation or a subsidiary of a publicly traded corporation, Tenant shall, from time to time (but not more than once in any twelve (12) month period), upon the written request of Landlord, deliver to or cause to be delivered to Landlord or its designee then current financial statements certified as accurate by a certified public accountant or authorized representative of Tenant and prepared in conformance with generally accepted accounting principles for (i) Tenant, (ii) any guarantor of this Lease (if guarantor is not a publicly traded corporation or subsidiary of a publicly traded corporation), and (iii) any successor entity to Tenant by merger or operation of law.

4.19 Modification for Lender . If, in connection with obtaining construction, interim or permanent financing for the Building or Land, Landlord’s lender, if any, shall request reasonable modifications to this Lease as a condition to such financing, Tenant will not unreasonably withhold or delay its consent to such modifications; provided that, such modifications do not increase the obligations of Tenant under this Lease or materially adversely affect Tenant’s rights, remedies or costs under this Lease.

4.20 Hazardous Substances .

4.20.1 Neither Tenant, any of Tenant’s Agents shall store, place, generate, manufacture, refine, handle, or locate on, in, under or around the Land or Building any Hazardous Substance, except for storage, handling and use of reasonable quantities and types of cleaning fluids and office supplies in the Premises in the ordinary course and the prudent conduct of Tenant’s business in the Premises. Tenant agrees that (a) the storage, handling and use of such permitted Hazardous Substances by Tenant and Tenant’s Agents must at all times conform to all Governmental Requirements and to applicable fire, safety and insurance requirements; (b) the types and quantities of permitted Hazardous Substances which are stored in the Premises must be reasonable and appropriate to the nature and size of Tenant’s operation in the Premises and reasonable and appropriate for a first-class building of the same or similar use and in the same market area as the Building; and (c) no Hazardous Substance shall be spilled or disposed of by Tenant or Tenant’s Agents on, in, under or around the Land or Building or otherwise discharged from the Premises or any area adjacent to the Land or Building by Tenant or Tenant’s Agents. In no event will Tenant be permitted to store, handle or use on, in, under or around the Premises any Hazardous Substance which will increase the rate of fire or extended coverage insurance on the Land or Building, unless: (1) such Hazardous Substance and the expected rate increase have been specifically disclosed in writing to Landlord; (2) Tenant has agreed in writing to pay any rate increase related to each such Hazardous Substance; and (3) Landlord has approved in writing each such Hazardous Substance, which approval shall be subject to Landlord’s discretion.

4.20.2 Tenant shall indemnify, defend and hold harmless Landlord and Landlord’s Agents from and against any and all Claims arising out of any breach of any provision of this paragraph, which expenses shall also include reasonable laboratory testing fees, personal injury claims, clean-up costs and environmental consultants’ fees. Tenant agrees that Landlord may be irreparably harmed by Tenant’s breach of this paragraph and that a specific performance action may appropriately be brought by Landlord; provided that , Landlord’s election to bring or not bring any such specific performance action shall in no way limit, waive, impair or hinder Landlord’s other remedies against Tenant.

4.20.3 As of the execution date of this Lease, Tenant represents and warrants to Landlord that, except as otherwise disclosed by Tenant to Landlord, Tenant has no intent to bring any Hazardous Substances on, in or under the Premises except for the type and quantities authorized in Section 4.20.1 above.

4.21 Access Laws .

4.21.1 Tenant agrees to notify Landlord promptly if Tenant receives written notification or otherwise becomes aware of: (a) any condition or situation on, in, under or around the Land or Building which constitutes or allegedly constitutes a violation of any Access Laws or (b) any threatened or actual lien, action or notice that the Land or Building is not in compliance with any Access Laws. If Tenant is responsible for such condition, situation, lien, action or notice under this paragraph, Tenant’s notice to Landlord shall include a statement as to the actions Tenant proposes to take in response to such condition, situation, lien, action or notice.

4.21.2 Tenant shall not alter or permit any assignee or subtenant or any other person to alter the Premises in any manner which would violate any Access Laws or increase Landlord’s responsibilities for compliance with Access Laws, without the prior approval of the Landlord. In connection with any such approval, Landlord may require a certificate of compliance with Access Laws from an architect, engineer or other person acceptable to Landlord. Tenant agrees to pay the reasonable fees incurred by such architect, engineer or other third party in connection with the issuance of such certificate of compliance. Landlord’s consent to any proposed Tenant Alteration shall (a) not relieve Tenant of its obligations or indemnities contained in this paragraph or this Lease or (b) be construed as a warranty that such proposed alteration complies with any Access Law.

4.21.3 Tenant shall be solely responsible for all costs and expenses relating to or incurred in connection with: (a) failure of the Premises to comply with the Access Laws unless such failure exists prior to the Possession Date; and (b) bringing the Building and the common areas of the Building into compliance with Access Laws, if and to the extent such noncompliance arises out of or relates to: (1) Tenant’s use of the Premises, including the hiring of specific employees; (2) any Tenant Alterations to the Premises; or (3) any Tenant Improvements constructed in the Premises by Tenant.

4.21.4 Landlord represents and warrants that as of the date hereof, Landlord has received no notice from any Governmental Agency that the common areas of the Building do not comply with Access Laws. Landlord shall be responsible for all costs and expenses relating to or incurred in connection with bringing the common areas of the Building into compliance with Access Laws, unless such costs and expenses are Tenant’s responsibility as provided in the preceding subparagraph. Any cost or expense paid or incurred by Landlord to bring the Premises or common areas of the Building into compliance with Access Laws which is not Tenant’s responsibility under the preceding subparagraphs shall be amortized over the useful economic life of the improvements (not to exceed ten (10) years) with interest at the Prime Rate plus two (2) percentage points compounded daily, and shall be an Operating Cost for purposes of this Lease.

4.21.5 Tenant agrees to indemnify, defend and hold harmless Landlord and Landlord’s Agents from and against any and all Claims arising out of or relating to any failure of Tenant or Tenant’s Agents to comply with Tenant’s obligations under this paragraph.

4.21.6 The provisions of this paragraph shall supersede any other provisions in this Lease regarding Access Laws, to the extent inconsistent with the provisions of any other paragraphs.

4.22 Quiet Enjoyment . Landlord covenants that Tenant, upon paying Base Rent, Additional Rent and all other sums payable under this Lease and performing all covenants and conditions required of Tenant under this Lease shall and may peacefully have, hold and enjoy the Premises without hindrance or molestation by Landlord subject to the provisions of this Lease.

4.23 Signs . Landlord shall, at no cost to Tenant, (i) install a Building standard sign identifying Tenant at the entrance to the Premises, and (ii) identify Tenant in the electronic lobby directory for the Building in the same manner as the other occupants thereof. Tenant shall not, without Landlord’s prior written consent, install, fix or use any other signs or other notice, picture, placard or poster, or any advertising or identifying media which is visible from the exterior of the Premises.

4.24 Subordination . Tenant subordinates this Lease and all rights of Tenant under this Lease to any mortgage, deed of trust, ground lease or vendor’s lien, or similar instrument which may from time to time be placed upon the Premises (and all renewals, modifications, replacements and extensions of such encumbrances), and each such mortgage, deed of trust, ground lease or lien or other instrument shall be superior to and prior to this Lease provided that the holder of any such mortgage or other such beneficiary or party has agreed in writing to and for the benefit of Tenant not to disturb Tenant’s right to use and occupy the Premises pursuant to the terms of this Lease so long as Tenant is not in default hereunder beyond any applicable notice and cure periods provided in this Lease. Notwithstanding the foregoing, the holder or beneficiary of such mortgage, deed of trust, ground lease, vendor’s lien or similar instrument shall have the right to subordinate or cause to be subordinated any such mortgage, deed of trust, ground lease, vendor’s lien or similar instrument to this Lease or to execute a non-disturbance agreement in favor of Tenant on the standard form utilized by such lender or ground lessor. At the request of Landlord, the holder of such mortgage or deed of trust or any ground lessor, Tenant shall execute, acknowledge and deliver promptly in recordable form any commercially reasonable instrument or subordination agreement that Landlord or such holder may request. Tenant further covenants and agrees that if the lender or ground lessor acquires the Premises as a purchaser at any foreclosure sale or otherwise, Tenant shall recognize and attorn to such party as landlord under this Lease, and shall make all payments required hereunder to such new landlord in accordance with the terms of this Lease, and, upon the request of such purchaser or other successor, execute, deliver and acknowledge documents confirming such attornment. Tenant waives the provisions of any law or regulation, now or hereafter in effect, which may give or purport to give Tenant any right to terminate or otherwise adversely affect this Lease or the obligations of Tenant hereunder in the event that any such foreclosure or termination or other proceeding is prosecuted or completed.

4.25 Brokers . Landlord and Tenant each represent and warrant to the other that it has not dealt with any broker(s) or any other person claiming any entitlement to any commission in connection with this transaction except Landlord’s Broker and Tenant’s Broker. Each party to this Lease shall indemnify, defend and hold harmless the other party from and against any and all Claims asserted against such other party by any real estate broker, finder or intermediary relating to any act of the indemnifying party in connection with this Lease. Landlord agrees to be responsible for the leasing commission due Landlord’s Broker and Tenant’s Broker pursuant to the terms of a separate agreement.

4.26 Limitation on Recourse . Liability with respect to the entry and performance of this Lease by or on behalf of Landlord, however it may arise, shall be asserted and enforced only against Landlord’s estate and equity interest in the Building. Neither Landlord nor any of Landlord’s Agents shall have any personal liability in the event of any claim against Landlord arising out of or in connection with this Lease, the relationship of Landlord and Tenant or Tenant’s use of the Premises. Further, in no event whatsoever shall any Landlord’s Agent have any liability or responsibility whatsoever arising out of or in connection with this Lease, the relationship of Landlord and Tenant or Tenant’s use of the Premises. Any and all personal liability, if any, beyond that which may be asserted under this paragraph, is expressly waived and released by Tenant and by all persons claiming by, through or under Tenant.

4.27 Construction Liens . Tenant shall have no authority, express or implied, to create or place any lien or encumbrance of any kind or nature whatsoever upon, or in any manner to bind, the interest of Landlord or Tenant in the Premises or to charge the rentals payable under this Lease for any Claims in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs. Tenant shall immediately pay or cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed on the Premises on which any lien is or can be validly and legally asserted against its leasehold interest in the Premises or if Tenant desires to contest such lien, Tenant shall either provide an adequate surety bond or insure over the lien with a title insurance company reasonably acceptable to Landlord. Tenant shall indemnify, defend and hold harmless Landlord from any and all Claims arising out of any such asserted Claims. Tenant agrees to give Landlord immediate written notice of any such Claim as soon as Tenant receives notice or otherwise becomes aware of the same.

4.28 Personal Property Taxes . Tenant shall be liable for all taxes levied or assessed against personal property, furniture or trade fixtures placed by Tenant in the Premises. If any such taxes for which Tenant is liable are levied or assessed against Landlord or Landlord’s property and Landlord elects to pay them or if the assessed value of Landlord’s property is increased by inclusion of such personal property, furniture or fixtures and Landlord elects to pay the taxes based on such increase, Tenant shall reimburse Landlord for such taxes paid on Tenant’s personal property, furniture and trade fixtures, upon demand by Landlord.

SECTION 5: DEFAULT AND REMEDIES

5.1 Events of Default .

5.1.1 The occurrence of any one or more of the following events shall constitute a material default and breach of this Lease by Tenant (“ Event of Default ”):

(a) failure by Tenant to make any payment of Base Rent, Additional Rent or any other sum payable by Tenant under this Lease within five (5) Business Days after written notice from Landlord that such payment is past due, provided, however, in the event that Landlord gives Tenant two (2) such notices within any twelve (12) month period, Landlord shall not be required to give such notice thereafter and Tenant shall be in default if Tenant fails to pay any Base Rent, Additional Rent, or any other sum within five (5) Business Days after its due date;

(b) failure by Tenant to observe or perform any covenant or condition of this Lease, other than the making of payments, where such failure shall continue for a period of thirty (30) days after written notice from Landlord; provided, however, that if the nature of Tenant’s default is such that more than twenty (20) Business Days are reasonably required to cure, then Tenant shall have such additional time as may be necessary if Tenant commences such performance within said thirty (30) day period and thereafter diligently proceeds to in fact complete such cure;

(c) the failure of Tenant to surrender possession of the Premises at the expiration or earlier termination of this Lease in the condition required by this Lease;

(d) (1) the making by Tenant of any general assignment or general arrangement for the benefit of creditors; (2) the filing by or against Tenant of a petition in bankruptcy, including reorganization or arrangement, unless, in the case of a petition filed against Tenant, the same is dismissed within forty (40) Business Days; (3) the appointment of a trustee or receiver to take possession of substantially all of Tenant’s assets located in the Premises or of Tenant’s interest in this Lease; (4) any execution, levy, attachment or other process of law against any property of Tenant or Tenant’s interest in this Lease, unless the same is dismissed within forty (40) Business Days; (5) adjudication that Tenant is bankrupt; (6) the making by Tenant of a transfer in fraud of creditors; or (7) the failure of Tenant to generally pay its debts as they become due;

(e) any financial information furnished by or on behalf of Tenant to Landlord in connection with the entry of this Lease is determined to have been materially false or misleading when made or the omission of material financial information regarding Tenant renders the information provided to Landlord misleading; or

(f) a failure of the Tenant to deliver the Letter of Credit within the time period specified in Section 3.3.

5.1.2 If a petition in bankruptcy is filed by or against Tenant, and if this Lease is treated as an “unexpired lease” under applicable bankruptcy law in such proceeding, then Tenant agrees that Tenant shall not attempt nor cause any trustee to attempt to extend the applicable time period within which this Lease must be assumed or rejected.

5.2 Remedies . If any Event of Default occurs, Landlord may at any time after such occurrence, with or without notice or demand except as stated in this paragraph, and without limiting Landlord in the exercise of any right or remedy at law which Landlord may have by reason of such Event of Default, exercise the rights and remedies, either singularly or in combination, as are specified or described in the subparagraphs of this paragraph to the extent permitted under Illinois law.

5.2.1 Landlord may terminate this Lease and all rights of Tenant under this Lease either immediately or at some later date by giving Tenant written notice that this Lease is terminated. If Landlord so terminates this Lease, then Landlord may recover from Tenant the sum of:

(a) the unpaid Base Rent, Additional Rent and all other sums payable under this Lease which have been earned at the time of termination; plus

(b) interest at the Default Rate on the unpaid Base Rent, Additional Rent and all other sums payable under this Lease which have been earned at the time of termination; plus

(c) the amount by which the unpaid Base Rent, Additional Rent and all other sums payable under this Lease which would have been earned after termination until the time of award exceeds the amount of such rental loss, if any, as Tenant affirmatively proves could have been reasonably avoided and interest on such excess at the Default Rate; plus

(d) the amount by which the aggregate of the unpaid Base Rent, Additional Rent and all other sums payable under this Lease for the balance of the Lease Term after the time of award exceeds the amount of such rental loss, if any, as Tenant affirmatively proves could be reasonably avoided, with such difference being discounted to present value at the Prime Rate at the time of award; plus

(e) any other amount necessary to compensate Landlord for the detriment proximately caused by Tenant’s failure to perform Tenant’s obligations under this Lease or which, in the ordinary course of things, would be likely to result from such failure, including, leasing commissions, tenant improvement costs, renovation costs and advertising costs; plus

(f) all such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law.

5.2.2 Landlord shall also have the right, with or without terminating this Lease, to re-enter the Premises and remove all persons and property from the Premises. Landlord may cause property so removed from the Premises to be stored in a public warehouse or elsewhere at the expense and for the account of Tenant.

5.2.3 Landlord shall also have the right, upon termination of this Lease, to accelerate and recover from Tenant the excess of (i) the sum of all unpaid Base Rent, Additional Rent and all other sums payable under the then remaining term of the Lease over (ii) the fair market rental value of the Premises over the remaining term of the Lease after subtracting the costs of reletting (including, without limitation, brokerage fees, legal fees, rent abatements, tenant improvement allowances and other financial incentives and concessions) (determined at the date of such acceleration), discounting such excess amount to present value at the Prime Rate. Landlord’s recovery under this Section 5.2.3 shall not duplicate any amount recovered by Landlord under Section 5.2.1.

5.2.4 If Landlord re-enters the Premises as provided in subparagraph 5.2.2 or takes possession of the Premises pursuant to legal proceedings or through any notice procedure provided by law, then, if Landlord does not elect to terminate this Lease, Landlord may, from time to time, without terminating this Lease, either (a) recover all Base Rent, Additional Rent and all other sums payable under this Lease as they become due or (b) relet the Premises or any part of the Premises on behalf of Tenant for such term or terms, at such rent or rents and pursuant to such other provisions as Landlord, in its sole discretion, may deem advisable, all with the right, at Tenant’s cost, to make alterations and repairs to the Premises and recover any deficiency from Tenant as set forth in subparagraph 5.2.6.

5.2.5 None of the following remedial actions, singly or in combination, shall be construed as an election by Landlord to terminate this Lease unless Landlord has in fact given Tenant written notice that this Lease is terminated: (a) an act by Landlord to maintain or preserve the Premises; (b) any efforts by Landlord to relet the Premises; (c) any repairs or alterations made by Landlord to the Premises; (d) re-entry, repossession or reletting of the Premises by Landlord pursuant to this paragraph; or (e) the appointment of a receiver, upon the initiative of Landlord, to protect Landlord’s interest under this Lease. If Landlord takes any of the foregoing remedial action without terminating this Lease, Landlord may nevertheless at any time after taking any such remedial action terminate this Lease by written notice to Tenant.

5.2.6 If Landlord relets the Premises, Landlord shall apply the revenue from such reletting as follows: first , to the payment of any indebtedness of Tenant to Landlord other than Base Rent, Additional Rent or any other sums payable by Tenant under this Lease; second , to the payment of any cost of reletting (including finders’ fees and leasing commissions); third , to the payment of the cost of any alterations, improvements, maintenance and repairs to the Premises; and fourth , to the payment of Base Rent, Additional Rent and other sums due and payable and unpaid under this Lease. Landlord shall hold and apply the residue, if any, to payment of future Base Rent, Additional Rent and other sums payable under this Lease as the same become due, and shall deliver the eventual balance, if any, to Tenant. Should revenue from letting during any month, after application pursuant to the foregoing provisions, be less than the sum of the Base Rent, Additional Rent and other sums payable under this Lease and Landlord’s expenditures for the Premises during such month, Tenant shall be obligated to pay such deficiency to Landlord as and when such deficiency arises.

5.2.7 Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies provided in this Lease or by law (all such remedies being cumulative), nor shall pursuit of any remedy provided in this Lease constitute a forfeiture or waiver of any Base Rent, Additional Rent or other sum payable under this Lease or of any damages accruing to Landlord by reason of the violation of any of the covenants or conditions contained in this Lease.

5.2.8 Notwithstanding anything to the contrary contained in this Lease, Landlord agrees to use commercially reasonable efforts to mitigate damages in the event of a default hereunder by Tenant, provided, however, (i) Landlord shall have no obligation to solicit or entertain negotiations with any other prospective tenants for the Premises until Landlord obtains full and complete possession of the Premises; (ii) Landlord shall not be obligated to offer the Premises to a prospective tenant when other premises in the Building suitable for that prospective tenant’s use are available; (iii) Landlord shall not be obligated to lease the Premises to a substitute tenant for a rental less than the current fair market rental then prevailing in the Building, nor shall Landlord be obligated to enter into a new lease under other terms and conditions that are unacceptable to Landlord under Landlord’s then current leasing policies for comparable space in the Building; (iv) Landlord shall not be obligated to enter into a lease with any proposed tenant whose use would be incompatible with the operation of the Building as a first class building; and (v) Landlord shall not be obligated to enter into a lease with any proposed substitute tenant which does not have, in Landlord’s reasonable opinion, sufficient financial resources.

5.3 Right to Perform . If Tenant shall fail to pay any sum of money, other than Base Rent or Additional Rent, required to be paid by it under this Lease or shall fail to perform any other act on its part to be performed under this Lease, and such failure shall continue for ten (10) Business Days after notice of such failure by Landlord, or such shorter time if reasonable under emergency circumstances, Landlord may, but shall not be obligated to, and without waiving or releasing Tenant from any obligations of Tenant, make such payment or perform such other act on Tenant’s part to be made or performed as provided in this Lease. Landlord shall have (in addition to any other right or remedy of Landlord) the same rights and remedies in the event of the nonpayment of sums due under this paragraph as in the case of default by Tenant in the payment of Base Rent.

5.4 Landlord’s Default . Landlord shall not be in default under this Lease unless Landlord fails to perform obligations required of Landlord within thirty (30) days after written notice is delivered by Tenant to Landlord and to the holder of any mortgages or deeds of trust (collectively, “ Lender ”) covering the Premises whose name and address shall have theretofore been furnished to Tenant in writing, specifying the obligation which Landlord has failed to perform; provided, however, that if the nature of Landlord’s obligation is such that more than thirty (30) days are required for performance, then Landlord shall not be in default if Landlord or Lender commences performance within such twenty (20) Business Day period and thereafter diligently prosecutes the same to completion. All obligations of Landlord hereunder shall be construed as covenants, not conditions. In the event of any default, breach or violation of Tenant’s rights under this Lease by Landlord, Tenant may exercise any right or remedy available to Tenant under law or equity except as otherwise expressly provided in this Lease. Notwithstanding anything to the contrary contained herein, if, in Tenant’s reasonable judgment, an emergency shall exist which threatens imminent danger to or loss of life or damage to Tenant’s property, Tenant shall use reasonable efforts to contact Landlord and Manager, and if Landlord or Manager fail to commence the cure of such emergency within a reasonable time under the circumstances, then Tenant may cure such emergency. In the event Tenant takes such action, Tenant shall use only those contractors used by Landlord in the Building for work unless such contractors are unavailable due to the “emergency” nature of the work or are unwilling or unable to perform, or timely perform, such work, in which event Tenant may utilize the services of any other qualified, union contractor which normally and regularly performs similar work in

comparable buildings. Promptly following completion of any work taken by Tenant pursuant to this paragraph, Tenant shall deliver to Landlord a detailed invoice of the work completed, the materials used and the costs relating thereto, together with any documentation and/or evidence required by Landlord to document any damage in order to assert a claim by Landlord on the insurance maintained by Landlord. Within thirty (30) days after receipt of such invoice from Tenant along with the required documentation and/or evidence, Landlord shall pay the reasonable out-of-pocket costs incurred by Tenant or deliver a detailed written objection to Tenant of the payment of such invoice or a specific portion of such invoice. Landlord’s written objection to such payment shall set forth with reasonable particularity Landlord’s reasons for its claim that such action did not have to be taken by Landlord pursuant to the terms of this Lease or that the charges are excessive (in which case Landlord shall pay the amount it contends wou ld not have been excessive).

SECTION 6: MISCELLANEOUS PROVISIONS

6.1 Notices . Any notice, request, approval, consent or written communication required or permitted to be delivered under this Lease shall be: (a) in writing; (b) transmitted by personal delivery, express or courier service, United States Postal Service in the manner described below, or electronic means of transmitting written material; and (c) deemed to be delivered on the earlier of the date received or four (4) Business Days after having been deposited in the United States Postal Service, postage prepaid. Such writings shall be addressed to Landlord or Tenant, as the case may be, at the respective designated addresses set forth beneath their signatures, or at such other address(es) as they may, after the execution date of this Lease, specify by written notice delivered in accordance with this paragraph, with copies to the persons at the addresses, if any, designated beneath each party’s signature. Those notices which contain a notice of breach or default or a demand for performance may be sent by any of the methods described in clause (b) above, but if transmitted by personal delivery or electronic means, shall also be sent concurrently by certified or registered mail, return receipt requested.

6.2 Attorney’s Fees and Expenses . In the event either party requires the services of an attorney in connection with enforcing the terms of this Lease, or in the event suit is brought for the recovery of Base Rent, Additional Rent or any other sums payable under this Lease or for the breach of any covenant or condition of this Lease, or for the restitution of the Premises to Landlord or the eviction of Tenant during the Lease Term or after the expiration or earlier termination of this Lease, the non-breaching party shall be entitled to a reasonable sum for attorney’s and paralegal’s fees, expenses and court costs, including those relating to any appeal.

6.3 No Accord and Satisfaction . No payment by Tenant or receipt by Landlord of an amount less than the Base Rent or Additional Rent or any other sum due and payable under this Lease shall be deemed to be other than a payment on account of the Base Rent, Additional Rent or other such sum, nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed an accord and satisfaction, nor preclude Landlord’s right to recover the balance of any amount payable or Landlord’s right to pursue any other remedy provided in this Lease or at law.

6.4 Successors; Joint and Several Liability . Except as provided in Section 4.26 (“ Limitation on Recourse ”) and subject to Section 4.17 (“ Assignment by Landlord ”), all of the covenants and conditions contained in this Lease shall apply to and be binding upon Landlord and Tenant and their respective heirs, executors, administrators, successors and assigns. In the event that more than one person, partnership, company, corporation or other entity is included in the term “ Tenant ”, then each such person, partnership, company, corporation or other entity shall be jointly and severally liable for all obligations of Tenant under this Lease.

6.5 Choice of Law . This Lease shall be construed and governed by the laws of the state in which the Land is located. Tenant consents to Landlord’s choice of venue for any legal proceeding brought by Landlord or Tenant to enforce the terms of this Lease.

6.6 No Waiver of Remedies . The waiver by Landlord or Tenant of any covenant or condition contained in this Lease shall not be deemed to be a waiver of any subsequent breach of such covenant or condition nor shall any custom or practice which may develop between the parties in the administration of this Lease be construed to waive or lessen the rights of Landlord or Tenant, as applicable, to insist on the strict performance by the other of all of the covenants and conditions of this Lease. No act or thing done by any party hereto during the Lease Term shall be deemed an acceptance or a surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid unless made in writing and signed by Landlord. The mention in this Lease of any particular remedy shall not preclude Landlord or Tenant from any other remedy it might have, either under this Lease or at law, nor shall the waiver of or redress for any violation of any covenant or condition in this Lease or in any of the rules or regulations attached to this Lease or later adopted by Landlord, prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. The receipt by Landlord of Base Rent, Additional Rent or any other sum payable under this Lease with knowledge of a breach of any covenant or condition in this Lease shall not be deemed a waiver of such breach. The failure of Landlord to enforce any of the rules and regulations attached to this Lease or later adopted, against Tenant or any other tenant in the Building, shall not be deemed a waiver. Any waiver by Landlord must be in writing and signed by Landlord to be effective.

6.7 Offer to Lease . The submission of this Lease in a draft form to Tenant or its broker or other agent does not constitute an offer to Tenant to lease the Premises. This Lease shall have no force or effect until: (a) it is executed and delivered by Tenant to Landlord; and (b) it is executed and delivered by Landlord to Tenant.

6.8 Force Majeure . In the event that Landlord or Tenant shall be delayed, hindered in or prevented from the performance of any act or obligation required under this Lease by reason of acts of God, strikes, lockouts, labor troubles or disputes, inability to procure or shortage of materials or labor, failure of power or utilities, delay in transportation, fire, vandalism, accident, flood, severe weather, other casualty, Governmental Requirements (including mandated changes in the Plans and Specifications or the Tenant Improvements resulting from changes in pertinent Governmental Requirements or interpretations thereof), riot, insurrection, civil commotion, sabotage, explosion, war, natural or local emergency, acts or omissions of others, including Tenant, or other reasons of a similar or dissimilar nature not solely the fault of, or under the exclusive control of, Landlord or Tenant, as applicable, then performance of such act or obligation shall be excused for the period of the delay and the period for the performance of any such act or obligation shall be extended for the period equivalent to the period of such delay.

6.9 Landlord’s Consent . Unless otherwise provided in this Lease, whenever Landlord’s consent, approval or other action is required under the terms of this Lease, such consent, approval or action shall be subject to Landlord’s judgment or discretion exercised in good faith and shall be delivered in writing.

6.10 Severability; Captions . If any clause or provision of this Lease is determined to be illegal, invalid, or unenforceable under present or future laws, the remainder of this Lease shall not be affected by such determination, and in lieu of each clause or provision that is determined to be illegal, invalid or unenforceable, there shall be added as a part of this Lease a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable. Headings or captions in this Lease are added as a matter of convenience only and in no way define, limit or otherwise affect the construction or interpretation of this Lease.

6.11 Interpretation . Whenever a provision of this Lease uses the term (a) “include” or “including”, that term shall not be limiting but shall be construed as illustrative, (b) “covenant”, that term shall include any covenant, agreement, term or provision, (c) “at law”, that term shall mean as specified in any applicable statute, ordinance or regulation having the force of law or as determined at law or in equity, or both, and (d) “day”, that uncapitalized word shall mean a calendar day. This Lease shall be given a fair and reasonable interpretation of the words contained in it without any weight being given to whether a provision was drafted by one party or its counsel.

6.12 Incorporation of Prior Agreement; Amendments . This Lease contains all of the agreements of the parties to this Lease with respect to any matter covered or mentioned in this Lease, and no prior agreement or understanding pertaining to any such matter shall be effective for any purpose. No provision of this Lease may be amended or added to except by an agreement in writing signed by the parties to this Lease or their respective successors in interest.

6.13 Authority . Each individual executing this Lease on behalf of Tenant represents and warrants to Landlord that he or she is duly authorized to so execute and deliver this Lease and that all corporate actions and consents required for execution of this Lease have been given, granted or obtained. Tenant shall, within ten (10) Business Days after demand by Landlord, deliver to Landlord satisfactory evidence of the due authorization of this Lease and the authority of the person executing this Lease on its behalf.

6.14 Time of Essence . Time is of the essence with respect to the performance of every covenant and condition of this Lease.

6.15 Survival of Obligations . Notwithstanding anything contained in this Lease to the contrary or the expiration or earlier termination of this Lease, any and all obligations of either party accruing prior to the expiration or termination of this Lease shall survive the expiration or earlier termination of this Lease, and either party shall promptly perform all such obligations whether or not this Lease has expired or terminated. Such obligations shall include any and all indemnity obligations set forth in this Lease.

6.16 Consent to Service . Tenant irrevocably consents to the service of process of any action or proceeding at the address of the Premises. Nothing in this paragraph shall affect the right to serve process in any other manner permitted by law.

6.17 Landlord’s Authorized Agents . Notwithstanding anything contained in this Lease to the contrary, including the definition of Landlord’s Agents, the trustee of Landlord and Bentall Kennedy (U.S.) Limited Partnership (the authorized signatory of Landlord) are the only entities authorized to amend, renew or terminate this Lease, to compromise any of Landlord’s claims under this Lease or to bind Landlord in any manner with respect to this Lease. Neither the Manager nor any leasing agent or broker shall be considered an authorized agent of Landlord for such purposes.

6.18 Waiver of Jury Trial . Landlord and Tenant irrevocably waive the respective rights to trial by jury in any action, proceeding or counterclaim brought by either against the other (whether in contract or tort) on any matter arising out of or relating in any way to this Lease, the relationship of Landlord and Tenant or Tenant’s use or occupancy of the Premises.

6.19 Tenant Certification . Tenant certifies that it is not acting, directly or indirectly, for or on behalf of any person, group entity, or nation named as a terrorist, “ Specially Designated National and Blocked Person ”, or other banned or blocked person, group, entity nation, or transaction pursuant to any law, order, rule or regulation that is enforced or administered by the Office of Foreign Assets Control. Tenant is not entering this Lease, directly or indirectly on behalf of, or instigating or facilitating this Lease, directly or indirectly on behalf of, any such person, group, entity or nation.

6.20 Addenda . The provisions, if any, included at the end of this Lease, and any riders and exhibits appended to this Lease, are hereby made a part of this Lease as though set forth in full at this point.

[Signatures on following page]

IN WITNESS WHEREOF, this Lease has been executed on the date set forth above.

LANDLORD:						TENANT:

MEPT 200 WEST MADISON LLC, a Delaware limited liability company						MATTERSIGHT CORPORATION, a Delaware corporation

By:	MEPT Edgemoor REIT LLC, a Delaware limited liability company, its Manager

	By:Bentall Kennedy (U.S.) Limited Partnership, Authorized Signatory

		By:	Bentall Kennedy (U.S.) G.P. LLC, its general partner

			By:	/ S / PAUL A. BONEHAM		By:	/ S / DAVID GUSTAFSON
				Name:	Paul A. Boneham		Name:	David Gustafson
				Title:	EVP		Title:	Interim CFO, EVP of Product and Customer Operations

			By:	/ S / DAVID NIELSEN
				Name:	David Nielsen
				Title:	SVP

Designated Address for Landlord :	Designated Address for Tenant :

c/o Bentall Kennedy (U.S.) Limited Partnership	Prior to the Commencement Date:
Attn: Director - Asset Management 1215 Fourth Avenue, Suite 2400 Seattle, WA 98161-1085 Facsimile: (206) 682-4769		200 S. Wacker Drive, Suite 820 Chicago, IL 60606 Facsimile: (312) 454-3501

and to:	After the Commencement Date:
c/o NewTower Trust Company
Attn: President/MEPT Three Bethesda Metro Center Suite 1600 Bethesda, MD 20814 Facsimile: (240) 235-9961		200 West Madison Street, Suite 3100 Chicago, IL 60606
		Facsimile:

	FEIN:

with a copy to Manager at :
Transwestern Commercial Services Illinois, L.L.C. 200 West Madison Street, Suite 1130 Chicago, IL 60606

RIDER

Mattersight Corporation

1 . Rent Abatement . Notwithstanding anything to the contrary contained in this Lease, the monthly installments of Base Rent payable by Tenant under Section 3.2 of this Lease and all Additional Rent payable by Tenant under Section 3.4 of this Lease shall be abated for the first seven (7) full calendar months of the Lease Term, provided, however, if an uncured Event of Default occurs prior to or during the aforesaid abatement period, then Tenant shall not be entitled to any abatement after the date of such Event of Default.

2. Early Termination . Tenant shall have the option to terminate this Lease effective as of July 31, 2020 (the “Early Termination Date”) upon the following terms and conditions: (i) Tenant may exercise such option to terminate only by written notice (the “Early Termination Notice”) which is received by Landlord on or before October 31, 2019, time being of essence; (ii) in consideration of Landlord’s agreement to terminate this Lease prior to the expiration date of this Lease, Tenant shall pay Landlord an amount (the “Early Termination Fee”) equal to the sum of (x) the Base Rent and reasonably estimated Additional Rent payable by Tenant under this Lease for the three (3) months immediately after the Early Termination Date plus (y) the unamortized portion of the Tenant Improvement Allowance, abated rent and leasing commissions incurred by Landlord in connection with this Lease calculated over the eighty-four (84) month rent period from August 1, 2015 to July 31, 2022 with interest at eight percent (8%) per annum, which amount shall be paid to Landlord concurrently with the Early Termination Notice; (iii) Tenant shall vacate the Premises and surrender possession of the same to Landlord in the condition specified in this Lease no later than 11:59 p.m. on the Early Termination Date; (iv) Tenant’s option hereunder may be exercised and the Lease Term shall be terminated only if no uncured Event of Default then exists; and (v) upon the satisfaction of the foregoing, this Lease shall be terminated and canceled as of the Early Termination Date without further agreement between Landlord and Tenant, provided, however, Tenant shall remain liable for the payment of Rent and other charges and the performance of all of the terms and provisions of this Lease due and owing or accrued up to and including the Early Termination Date. The option granted herein is personal to the Tenant named herein and is not transferable to any assignee (other than a Permitted Transferee) or subtenant hereunder. In the event of any assignment of this Lease (other than a Permitted Transferee), the option granted hereby shall automatically terminate.

3. Option to Extend . Tenant shall have the option to extend the Lease Term for one (1) additional period of five (5) years commencing on the expiration of the initial Lease Term. Such option shall be exercised only by Tenant giving written notice thereof which is received by Landlord on or before October 31, 2021, time being of the essence; provided, however, Tenant shall be entitled to exercise the option to extend granted herein, and the Term shall, in fact, be extended by reason of such exercise, only if this Lease is in full force and effect and no Event of Default exists hereunder. In the event that the Term is in fact extended pursuant to the foregoing, then any such extension shall be upon all of the same terms, covenants, provisions and conditions as contained in this Lease except the annual Base Rent during the extension period shall be adjusted to be the Market Rent (as hereinafter defined) for the Premises but in any event no less than the annual Base Rent payable prior to the adjustment. As used herein, “Market Rent” means the product obtained by multiplying (i) the annual rental rate per square foot then established and prevailing in the Building for new leases or lease renewals or, if no such new lease or lease renewals have been entered into within the twelve (12) month period preceding the date of the determination, then the established and prevailing rental rate per square foot being charged as of such date for comparable space to other tenants in other comparable buildings in the Chicago central business area, all as determined in good faith by Landlord taking into account the term of the lease, the credit of the tenant, the location and use of the premises and available concessions such as tenant improvement allowances and rent abatements; by (ii) the total rentable square feet of floor area contained within the Premises. The Market Rent may increase during the extension period depending on market escalations, conditions and terms determined at the same time as the initial Market Rent. Landlord shall notify Tenant of the Market Rent prior to the date which is nine (9) months before the commencement of the extension period, and Tenant may withdraw its exercise of such option by written notice which is received by Landlord on or before the tenth (10th) Business Day, time being of the essence, after Tenant’s receipt of notice of the Market Rent from Landlord, and in such event, this Lease shall terminate upon the expiration of the then current term. Landlord and Tenant, within thirty (30) days after the request of either, shall execute and deliver a supplemental memorandum confirming the annual Base Rent during the extension period when determined. The rights hereby granted are personal to Tenant named herein and are not transferable to any assignee (other than a Permitted Transferee) or subtenant hereunder. In the event of any assignment of the Lease (other than to a Permitted Transferee) or subletting of more than thirty percent (30%) of the Premises, the rights set forth in this Paragraph shall automatically terminate and shall thereafter be null and void.

4. Access . Landlord agrees to provide Tenant with access to the Premises twenty-four (24) hours per day, seven (7) days per week subject to the terms and provisions of this Lease and any limitation or restrictions resulting from an emergency or other event of force majeure under Section 6.8 of this Lease.

5. Wireless Communication . The parties acknowledge that Landlord has entered into an agreement with Mobilitie Investments III, LLC (“Mobilitie”) pursuant to which Landlord granted Mobilitie the exclusive right to provide wireless voice, data, messaging and other wireless communication services in the Building, and accordingly, Tenant expressly agrees that it shall not install

a multi-carrier neutral host distributed antenna system in the Premises and/or provide any wireless voice, wireless data, wireless messaging or similar type of wireless services pertaining to cellular services now or in the future offered to the public in general using spectrum radio frequencies (“Wireless Communication Services”) provided, however, the foregoing shall not preclude Tenant from constructing a network for the provision of Wireless Communication Services solely within the Premises and solely for the use by Tenant and Tenant’s Agents.

6. Conflict . In the event of a conflict between the terms and provisions of this Rider and the terms and provisions of the remainder of the Lease, the terms and provisions of this Rider shall control and govern.

EXHIBIT A

DRAWING SHOWING LOCATION OF THE PREMISES

EXHIBIT B

tenant’s WORK

1. Prior to start of construction of the Tenant Improvements, Tenant shall submit for Landlord’s review and approval a space plan and final Plans and Specifications for the Tenant Improvements which shall include final mechanical (including heating, ventilating and air conditioning), electrical, plumbing and furniture drawings. If Landlord does not provide Tenant with approval or denial of approval within ten (10) Business Days after Landlord’s receipt of such submission, the same shall be deemed approved. It is expressly understood and agreed that in approving Tenant’s space plan and the final Plans and Specifications, Landlord shall have no liability whatsoever for any defects, errors or omissions in the documentation furnished by it to Tenant or as a result of its approval, nor shall Landlord be deemed to have warranted or represented that the same comply with applicable codes, regulations, ordinances, covenants or restrictions affecting the construction of improvements on the Premises, and Tenant shall have sole responsibility for compliance with all such matters.

2. Prior to start of construction of the Tenant Improvements, Tenant shall submit a list of all architectural and engineering consultants and contractors and subcontractors working on the Tenant Improvements for Landlord’s approval, which approval shall not be unreasonably withheld, conditioned or delayed. All contractors and subcontractors shall employ only union labor and shall meet the requirements of Section 4.5 of the Lease.

3. Prior to the commencement of the Tenant Improvements, Tenant shall submit to Landlord a construction cost breakdown (the “Construction Budget”) for such work certified to by the architect or general contractor employed by Tenant to supervise such work, which breakdown shall show the total cost of such work and all component items thereof.

4. Following Landlord’s approval of the Plans and Specifications, Tenant shall promptly commence and diligently prosecute to completion the Tenant Improvements in good and workmanlike manner, in compliance with all building codes and regulations and the instructions and policies of Landlord, and substantially in accordance with the approved Plans and Specifications and free of construction liens. Tenant shall indemnify Landlord and save Landlord harmless from and against any and all claims, liens, costs and expenses on account of such work. Any development of the Premises other than substantially in accordance with the approved Plans and Specifications shall, at the option of Landlord, constitute a default under the terms, conditions and provisions of this Lease, and Landlord shall be entitled to enjoin such development in addition to all other rights or remedies Landlord may have, it being expressly acknowledged and agreed by the parties that monetary damages would be an inadequate remedy in such event. Tenant shall pay Landlord out of the Tenant Improvement Allowance a supervision fee of two percent (2%) of the hard costs of construction of the Tenant Improvements for Landlord’s supervision and coordination of Tenant’s work to ensure that the same does not adversely affect the Building or Building systems.

5. During construction of the Tenant Improvements, Tenant shall only access the Building via locations previously approved by Landlord during normal working hours unless otherwise approved by Landlord.

6. During construction of the Tenant Improvements, Tenant shall not inconvenience or materially disturb tenants of the Building. Tenant shall ensure all common areas will be free and clear of construction materials and any common areas affected by Tenant’s construction will be cleaned on a daily basis or more often as conditions, in Landlord’s reasonable opinion, require. Tenant shall pay Landlord all reasonable dumpster fees out of the Tenant Improvement Allowance.

7. Prior to start of construction of the Tenant Improvements, all architectural and engineering consultants and all contractors shall submit evidence of commercial general liability insurance with a minimum of $2,000,000 coverage also listing Landlord, Bentall Kennedy (U.S.) Limited Partnership and Manager as additional insureds.

8. Tenant shall be responsible for compliance with all state, federal, and local codes as it pertains to the Tenant Improvements. Tenant shall submit to Landlord copies of all state and local approvals required in connection with the Tenant Improvements.

9. Tenant shall provide temporary construction barriers to control and retain noise, dust, or other materials within the Premises. Tenant agrees to follow all reasonable directives from Landlord if, in Landlord’s opinion, Tenant’s efforts to control the above-mentioned emissions are not adequate. Tenant agrees that all waste, garbage and debris resulting from any work performed by Tenant or Tenant’s contractors or subcontractors shall be removed from the Premises at Tenant’s sole cost and expense.

10. Landlord shall provide Tenant with a Tenant Improvement Allowance of $1,651,275.00 ($75.00 per rentable square foot in the Premises) to pay for the cost of the Tenant Improvements including, without limitation, all hard and soft construction costs, telecommunications equipment and cabling, permit fees, architectural fees, engineering fees, furniture, moving expenses, and other

soft costs. Except for the Tenant Improvement Allowance, Tenant shall be responsible for payment of all hard and soft costs of the Tenant Improvements. Provided there is no Event of Default under this Lease, upon receipt by Landlord of a payment request together with evidence reasonably satisfactory to Landlord of the costs covered by such request and lien waivers from Tenant’s general contractor and all subcontractors pertaining to completed work for which payment is then being requested, Landlord shall pay to Tenant (no more than once a month) an amount equal to the product of (i) the amount of the payment request multiplied by (ii) a fraction, the numerator of which is the Tenant Improvement Allowance and the denominator of which is the total amount of the Construction Budget (but in no event less than the Tenant Improvement Allowance), minus a retainage of ten percent (10%) of the foregoing amount which will be paid to Tenant upon the completion of the Tenant Improvements and receipt by Landlord of final lien waivers from Tenant’s general contractor and all subcontractors involved with Tenant Improvements and evidence reasonably satisfactory to Landlord of the total construction costs. The parties acknowledge and agree that the Tenant Improvement Allowance shall in no event exceed the actual costs for the particular work in question. In the event Landlord has made payment of the Tenant Improvement Allowance to Tenant and this Lease or Tenant’s right of possession of the Premises subsequently terminates as the result of an Event of Default prior to the expiration date hereof, then Tenant shall be required to repay the unamortized portion of the Tenant Improvement Allowance to Landlord, upon demand. In the event that Landlord has made payment of all or a portion of the Tenant Improvement Allowance to Tenant and this Lease or Tenant’s right of possession of the Premises subsequently terminates as a result of an Event of Default prior to the expiration date hereof, then Tenant shall be required to repay Landlord the unamortized portion of the Tenant Improvement Allowance upon demand. Notwithstanding anything to the contrary contained in this Lease, in the event that Tenant has not substantially completed the Tenant Improvements by December 31, 2015, then Landlord shall have no obligation to pay any unused portion of the Tenant Improvement Allowance to Tenant.

11. Upon completion of construction, Tenant shall furnish to Landlord (i) lien waivers from all contractors involved in the construction of Tenant’s Work and (ii) as built plans of the Premises.

EXHIBIT C

FORM OF LEASE MEMORANDUM

MEPT 200 WEST MADISON LLC, a Delaware limited liability company, as Landlord, and ________________________ as Tenant, executed that Lease dated as of __________________, 200__ (the “ Lease ”).

The Lease contemplates that this document shall be delivered and executed as set forth in the paragraph entitled “ Lease Memorandum ”. This Lease Memorandum shall become part of the Lease.

Landlord and Tenant agree as follows:

1. The Commencement Date of the Lease is ______________________________.

2. The end of the Lease Term and the date on which this Lease will expire is ______________________.

3. The Lease is in full force and effect as of the date of this Lease Memorandum. By execution of this Lease Memorandum, Tenant confirms that as of the date of the Lease Memorandum (a) Tenant has no claims against Landlord and (b) Landlord has fulfilled all of its obligations under the Lease required to be fulfilled by Landlord.

4. The Premises consist of approximately __________ rentable square feet.

5. Base Rent: The amount of Base Rent and the portion of the Lease Term during which such Base Rent is payable shall be determined from the following table:

Applicable Portion of Lease Term		Rate Per Rentable Sq. Ft./ Annum	Annual Base Rent	Monthly Base Rent Installment (Annual ÷ 12)
Beginning	Ending	Rate Per Rentable Sq. Ft./ Annum	Annual Base Rent	Monthly Base Rent Installment (Annual ÷ 12)

6. Tenant’s Pro Rata Share is ________________ percent (_________%).

LANDLORD :				TENANT :
				,
MEPT 200 WEST MADISON LLC, a Delaware limited liability company


By:	MEPT Edgemoor REIT LLC, a Delaware limited liability company, its Manager

By:	Bentall Kennedy (U.S.) Limited Partnership, Authorized Signatory

	By:	Bentall Kennedy (U.S.) G.P. LLC, its general partner

		By:		By:
			Name:		Name:
			Its:		Its:

		By:
			Name:
			Its:

EXHIBIT D

RULES AND REGULATIONS

1. No sign, placard, picture, advertisement, name or notice shall be installed or displayed on any part of the outside or inside of the Building or Land without the prior written consent of the Landlord. Landlord shall have the right to remove, at Tenant’s expense and without notice, any sign installed or displayed in violation of this rule. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant by a person chosen by Landlord.

2. If Landlord objects in writing to any curtains, blinds, shades, screens or hanging plants or other similar objects attached to or used in connection with any window or door of the Premises, Tenant shall immediately discontinue such use. No awning shall be permitted on any part of the Premises. Tenant shall not place anything against or near glass partitions or doors or windows which may appear unsightly from outside the Premises.

3. Tenant shall not obstruct any sidewalk, halls, passages, exits, entrances, elevators, escalators, or stairways of the Building. The halls, passages, exits, entrances, elevators, escalators and stairways are not open to the general public. Landlord shall in all cases retain the right to control and prevent access to such areas of all persons whose presence in the judgment of Landlord would be prejudicial to the safety, character, reputation and interest of the Land, Building and the Building’s tenants; provided that, nothing in this Lease contained shall be construed to prevent such access to persons with whom any Tenant normally deals in the ordinary course of its business, unless such persons are engaged in illegal activities. Tenant shall not go upon the roof of the Building.

4. The directory of the Building will be provided exclusively for the display of the name and location of tenants only, and Landlord reserves the right to exclude any other names therefrom.

5. [Intentionally omitted]

6. Landlord will furnish Tenant, free of charge, two (2) keys to each door lock in the Premises. Landlord may make a reasonable charge for any additional keys. Tenant shall not make or have made additional keys, and Tenant shall not alter any lock or install a new additional lock or bolt on any door of its Premises. Tenant, upon the termination of its tenancy, shall deliver to Landlord the keys of all doors which have been furnished to Tenant, and in the event of loss of any keys so furnished, shall pay Landlord therefor.

7. [Intentionally omitted]

8. If Tenant requires Telecommunication Services, computer circuits, burglar alarm or similar services or other utility services, it shall first obtain Landlord’s approval of the construction or installation of such services. Application for such services shall be made in accordance with the procedure prescribed by Landlord in subsection 3.5.2 of the Lease.

9. Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry and which is allowed by Governmental Requirements, provided, however, Tenant shall be permitted to install its IT equipment regardless of weight as long as Tenant’s structural engineer designs a method of mitigating or spreading such load which is approved by Landlord. Heavy objects shall, if reasonably considered necessary by Landlord, stand on such platforms as determined by Landlord to be necessary to properly distribute the weight. Business machines and mechanical equipment belonging to Tenant, which cause noise or vibration that may be transmitted to the structure of the Building or to any space in the Building or to any other tenant in the Building, shall be placed and maintained by Tenant, at Tenant’s expense, on vibration eliminators or other devices sufficient to eliminate noise or vibration. The persons employed to move such equipment in or out of the Building must be reasonably acceptable to Landlord. Landlord will not be responsible for loss of, or damage to, any such equipment or other property from any cause, and all damage done to the Building by maintaining or moving such equipment or other property shall be repaired at the expense of Tenant.

10. Tenant shall not use or keep in the Premises any kerosene, gasoline or inflammable or combustible fluid or material other than those limited quantities permitted by the Lease. Tenant shall not use or permit to be used in the Premises any foul or noxious gas or substance, or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors or vibrations nor shall Tenant bring into or keep in or about the Premises any birds or animals unless required by Governmental Requirements.

11. Tenant shall not use any method of heating or air-conditioning other than that supplied by Landlord.

12. Tenant shall not waste any utility provided by Landlord and agrees to reasonably cooperate fully with Landlord to assure the most effective operation of the Building’s heating and air-conditioning and to comply with any governmental energy-saving rules, laws or regulations of which Tenant has actual notice.

13. Landlord reserves the right, exercisable without notice and without liability to Tenant, to change the name and street address of the Building.

14. Landlord reserves the right to exclude from the Building between the hours of 6 p.m. and 7 a.m. the following day, or such other hours as may be established from time to time by Landlord, and on Sundays and legal holidays, any person unless that person is known to the person or employee in charge of the Building and has a pass or is properly identified. Tenant shall be responsible for all persons for whom it requests passes and shall be liable to Landlord for all acts of such persons. Landlord shall not be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. Landlord reserves the right to prevent access to the Building in case of invasion, mob, riot, public excitement or other commotion by closing the doors or by other appropriate action.

15. Tenant shall close and lock the doors of its Premises and entirely shut off all water faucets or other water apparatus, and electricity, gas or air outlets before Tenant and its employees leave the Premises. Tenant shall be responsible for any damage or injuries sustained by other tenants or occupants of the Building or by Landlord for noncompliance with this rule.

16. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be deposited in them. The expenses of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by Tenant if it or its employees or invitees shall have caused it.

17. Tenant shall not sell, or permit the sale at retail, of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise to the general public in or on the Premises. Tenant shall not make any room-to-room solicitation of business from other tenants in the Building. Tenant shall not use the Premises for any business or activity other than that specifically provided for in the Lease.

18. Except as expressly permitted by the Lease, Tenant shall not install any radio or television antenna, loudspeaker or other device on the roof or exterior walls of the Building. Tenant shall not interfere with radio or television broadcasting or reception from or in the Building or elsewhere. Other than the usual and customary cellular telephones, Tenant shall not install or utilize any wireless Telecommunication Facilities, including antenna and satellite receiver dishes within the Premises or on, in, or about the Building without first obtaining Landlord’s prior written consent and Landlord at its option may require the entry of a supplemental agreement with respect to such construction or installation. Tenant shall comply with all instructions for installation and shall pay or shall cause to be paid the entire cost of such installations. Application for such facilities shall be made in the same manner and shall be subject to the same requirements as specified for Telecommunication Services and Telecommunication Facilities in the paragraph of the Lease entitled “ Utilities ”. Supplemental rules and regulations may be promulgated by Landlord specifying the form of and information to be included with the application and establishing procedures, regulations and controls with respect to the installation and use of such wireless Telecommunication Facilities.

19. Tenant shall not mark, drive nails, screws or drill into the partitions, woodwork or plaster or in any way deface the Premises. Landlord reserves the right to direct electricians as to where and how telephone and telegraph wires are to be introduced to the Premises. Tenant shall not cut or bore holes for wires. Tenant shall not affix any floor covering to the floor of the Premises in any manner except as approved by Landlord. Tenant shall repair any damage resulting from noncompliance with this rule.

20. Tenant may install, maintain or operate upon the Premises any vending machine without the written consent of Landlord provided Tenant notifies Landlord after the installation of any such equipment and Landlord is given the opportunity to inspect said equipment.

21. Canvassing, soliciting and distribution of handbills or any other written material, and peddling in the Building or Land are prohibited, and Tenant shall cooperate to prevent the same.

22. Landlord reserves the right to exclude or expel from the Building and Land any person who, in Landlord’s judgment, is intoxicated, under the influence of liquor or drugs or in violation of any of these Rules and Regulations.

23. Tenant shall store all of its trash and garbage within the Premises. Tenant shall not place in any trash box or receptacle any material which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal. All garbage and refuse disposal shall be made in accordance with directions issued from time to time by Landlord.

24. The Premises shall not be used for lodging or any improper or immoral or objectionable purpose. No cooking shall be done or permitted by Tenant, except that use by Tenant of Underwriters’ Laboratory approved equipment for brewing coffee, tea, hot chocolate and similar beverages and microwaving food shall be permitted; provided that, such equipment and its use is in accordance with all Governmental Requirements.

25. Tenant shall not use in the Premises or in the public halls of the Building any hand truck except those equipped with rubber tires and side guards or such other material-handling equipment as Landlord may approve. Tenant shall not bring any other vehicles of any kind into the Building.

26. Without the prior written consent of Landlord, Tenant shall not use the name of the Building in connection with or in promoting or advertising the business of Tenant except as Tenant’s address.

27. Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency.

28. Tenant assumes any and all responsibility for protecting the Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed.

29. The requirements of Tenant will be attended to only upon appropriate application to the Manager of the Building by an authorized individual. Employees of Landlord are not required to perform any work or do anything outside of their regular duties unless under special instructions from Landlord, and no employee of Landlord is required to admit Tenant to any space other than the Premises without specific instructions from Landlord.

30. Tenant shall not park its vehicles in any parking areas designated by Landlord as areas for parking by visitors to the Building or Land. Tenant shall not leave vehicles in the parking areas overnight nor park any vehicles in the Building parking areas other than automobiles, motorcycles, motor driven or nonmotor driven bicycles or four-wheeled trucks.

31. Landlord may waive any one or more of these Rules and Regulations for the benefit of Tenant or any other tenant, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other person, nor prevent Landlord from thereafter revoking such waiver and enforcing any such Rules and Regulations against any or all of the tenants of the Building.

32. These Rules and Regulations are in addition to, and shall not be construed to in any way modify or amend, in whole or in part, the covenants and conditions of any lease of premises in the Building. If any provision of these Rules and Regulations conflicts with any provision of the Lease, the terms of the Lease shall prevail.

33. Landlord reserves the right to make such other and reasonable Rules and Regulations as, in its judgment, may from time to time be needed for safety and security, the care and cleanliness of the Building and Land, the preservation of good order in the Building and the maintenance or enhancement of the value of the Building as a rental property. Tenant agrees to abide by all the Rules and Regulations stated in this exhibit and any additional rules and regulations which are so made by Landlord.

34. Tenant shall be responsible for the observance of all of the foregoing rules by Tenant and Tenant’s Agents.

EXHIBIT E

LETTER OF CREDIT CRITERIA

1. The letter of credit shall be clean, irrevocable and unconditional.

2. The letter of credit shall be in the amount specified in Section 3.3 of the Lease (“ Lease Security Provisions ”).

3. The letter of credit shall be issued in favor of:

MEPT 200 West Madison LLC

c/o NewTower Trust Company

Three Bethesda Metro Center

Suite 1600

Bethesda, MD 20814

Attn: President

The letter of credit shall be effective immediately on its issuance.

4. The letter of credit must either (a) be issued by a national bank which is a member of the New York Clearing House and which has a banking office dedicated to the administration and payment of letters of credit in a location approved by Landlord or (b) if issued by any bank which is not described in clause (a), be confirmed by a bank described in clause (a). The issuing bank must have been assigned by Standard & Poors Investor Services a Counterparty Credit Rating of BBB+ or better. If clause (b) is applicable, the confirming bank must be assigned by Standard & Poors Investor Services a Counterparty Credit Rating of BBB+, or better. The identity of the issuing bank and of any confirming bank shall be reasonably satisfactory to Landlord.

5. The letter of credit shall have an expiration date no earlier than the first anniversary of the date of its issuance and shall provide for its automatic renewal from year to year unless terminated by the issuing bank by notice to Landlord given not less than sixty (60) days prior to its expiration date. Notice to Landlord shall be in writing, made by (i) United States Postal Service, certified mail, return receipt requested; or (ii) reputable express or courier service. Notice to Landlord shall be addressed to Landlord at its address in paragraph 3 above and to the following parties:

NewTower Trust Company

Multi-Employer Property Trust,

c/o Bentall Kennedy (U.S.) Limited Partnership

Attn: MEPT/Director of Asset Management

1215 Fourth Avenue, Suite 2400

Seattle, WA 98161

and to:

Transwestern Commercial Services Illinois, L.L.C.

200 West Madison Street, Suite 1130

Chicago, IL 60606

The final expiration date of the letter of credit and all renewals of it shall be no earlier than sixty (60) days following the end of the Lease Term.

6. The letter of credit may be drawn at the designated banking office of either the issuer of the letter of credit described in clause (a) of paragraph 4 or, if clause (b) of paragraph 4 is applicable, the confirming bank described in clause (b) of such paragraph 4. The letter of credit shall allow for draws to be made at sight on a draft drawn by the beneficiary of the letter of credit. The draft shall be approved as to form by Landlord. The letter of credit must allow for one draw in the whole amount or multiple partial draws. Landlord shall not be required to deliver any certificate, affidavit or other writing to the issuer expressing the basis for the draw as a condition to any draw.

7. The letter of credit shall be transferable and any applicable transfer fees shall be paid for by Tenant.

8. The letter of credit shall be governed by (a) the International Standby Practices (ISP 98 published by the International Chamber of Commerce) and (b) the United Nations Convention on Independent Guarantees and Standby Letters of Credit. Alternatively, if approved by the lender and if required by either the issuing bank or the confirming bank the Uniform Customs and Practices for Documentary Credits published by the International Chamber of Commerce may be substituted for the Practices referred to in clause (a) to the extent such Customs and Practices are not inconsistent with the criteria in this Exhibit.

9. Issuer shall waive all waiting periods whether under Uniform Commercial Code Section 5-112 or otherwise.

10. The letter of credit shall otherwise be in such form and shall be subject to such requirements as Landlord may reasonably require.

EXHIBIT F

JANITORIAL SPECIFICATIONS

GENERAL CLEANING SPECIFICATIONS

NIGHTLY

General Offices:

All hard surfaced flooring to be swept using approved dustdown preparation.

Empty all waste receptacles and remove wastepaper.

Wash clean all Building water fountains and coolers.

Sweep all private stairways.

WEEKLY

Vacuum all carpeting and rugs.

Wipe clean all brass and other bright work.

Spot clean glass for fingerprints.

QUARTERLY

High dust pictures, frames, charts, graphs and similar wall hangings

Dust all vertical surfaces, such as walls, partitions, doors, door frames and other surfaces not reached in nightly cleaning.

Dust all venetian blinds.

General kitchen cleaning consistent with kitchen cleaning provided to other tenants of the Building.

Nightly cleaning of Common Lavatories (does not include private lavatories):

Sweep and wash floors.

Wash and polish all mirrors, shelves, bright work and enameled surfaces.

Wash and disinfect all basins, bowls and urinals.

Wash all toilet seats.

Hand dust and clean all partitions, tile walls, dispensers and receptacles in lavatories

Empty paper receptacles, remove wastepaper.

Fill toilet tissue holders.

Empty and clean sanitary disposal receptacles.

EXHIBIT G

APPROVED FORM OF LETTER OF CREDIT

IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVBSF_______

DATE:

BENEFICIARY:

MEPT 200 WEST MADISON LLC

C/O NEWTOWER TRUST COMPANY

3 BETHESDA METRO CENTER, SUITE 1600

BETHESDA, MARYLAND 20814

ATTN: PRESIDENT

APPLICANT:

MATTERSIGHT CORPORATION

OPERATING ACCOUNT

200 SOUTH WACKER SUITE 820

CHICAGO IL 60606

AMOUNT: US $425,000.00 (FOUR HUNDRED TWENTY FIVE THOUSAND AND NO/100 U.S. DOLLARS)

EXPIRATION DATE: (ONE YEAR FROM ISSUANCE)

LOCATION: AT OUR COUNTERS IN SANTA CLARA, CALIFORNIA

DEAR SIR/MADAM:

WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVBSF______ IN YOUR FAVOR AVAILABLE BY YOUR DRAFTS DRAWN ON US AT SIGHT IN THE FORM OF EXHIBIT “A” ATTACHED AND ACCOMPANIED BY THE FOLLOWING DOCUMENTS:

1. THE ORIGINAL OF THIS LETTER OF CREDIT AND ALL AMENDMENT(S), IF ANY.

2. BENEFICIARY’S SIGNED STATEMENT STATING AS FOLLOWS:

(A) "THE UNDERSIGNED BENEFICIARY IS ENTITLED TO DRAW UPON THIS LETTER OF CREDIT PURSUANT TO THE TERMS OF THAT LEASE DATED ______________, FOR PREMISES AT 200 WEST MADISON STREET, CHICAGO, ILLINOIS , BETWEEN MATTERSIGHT CORPORATION., AS TENANT, AND MEPT 200 WEST MADISON LLC , AS LANDLORD, AS SUCH LEASE MAY HAVE BEEN MODIFIED OR AMENDED TO DATE. THE UNDERSIGNED BENEFICIARY HEREBY MAKES DEMAND FOR THE PAYMENT OF ________ [INSERT DRAW AMOUNT] UNDER THE LETTER OF CREDIT."

-OR-

(B) "BENEFICIARY HAS RECEIVED A NOTICE FROM SILICON VALLEY BANK THAT LETTER OF CREDIT NUMBER SVBSF00______ WILL NOT BE EXTENDED AND APPLICANT HAS FAILED TO PROVIDE A NEW LETTER OF CREDIT SATISFACTORY TO BENEFICIARY WITHIN 30 DAYS PRIOR TO THE CURRENT EXPIRY DATE."

SUCH STATEMENT SHALL BE CONCLUSIVE AS TO SUCH MATTERS AND WE ACCEPT SUCH STATEMENT AD BINDING AND CORRECT WITHOUT HAVING TO INVESTIGATE OR HAVING TO BE RESPONSIBLE FOR THE ACCURACY, TRUTHFULNESS OR VALIDITY THEREOF OR ANY PART THEREOF AND NOTWITHSTANDING THE CLAIM OF ANY PERSON TO THE CONTRARY.

PAGE 2

ALL THE DETAILS SET FORTH HEREIN IN THIS LETTER OF CREDIT DRAFT IS APPROVED BY APPLICANT. IF THERE IS ANY DISCREPANCY BETWEEN THE DETAILS OF THIS LETTER OF CREDIT DRAFT AND THE LETTER OF CREDIT APPLICATION, BETWEEN APPLICANT AND SILICON VALLEY BANK, THE DETAILS HEREOF SHALL PREVAIL.

___________________________ _______________

Applicant’s Authorized Signature DATE

THE LEASE AGREEMENT MENTIONED ABOVE IS FOR IDENTIFICATION PURPOSES ONLY AND IT IS NOT INTENDED THAT SAID LEASE AGREEMENT BE INCORPORATED HEREIN OR FORM PART OF THIS LETTER OF CREDIT.

PARTIAL DRAWS ARE ALLOWED. THIS LETTER OF CREDIT MUST ACCOMPANY ANY DRAWINGS HEREUNDER FOR ENDORSEMENT OF THE DRAWING AMOUNT AND WILL BE RETURNED TO THE BENEFICIARY WITHIN TEN (10) DAYS AFTER DELIVERY BY BENEFICIARY UNLESS IT IS FULLY UTILIZED.

DRAFT(S) AND DOCUMENTS MUST INDICATE THE NUMBER AND DATE OF THIS LETTER OF CREDIT.

THIS LETTER OF CREDIT SHALL BE AUTOMATICALLY EXTENDED FOR AN ADDITIONAL PERIOD OF ONE YEAR, WITHOUT AMENDMENT, FROM THE PRESENT OR EACH FUTURE EXPIRATION DATE UNLESS AT LEAST SIXTY (60) DAYS PRIOR TO THE THEN CURRENT EXPIRATION DATE WE SEND YOU A NOTICE BY REGISTERED CERTIFIED MAIL , RETURN RECEIPT REQUESTED OR OVERNIGHT COURIER SERVICE TO BENEFICIARY AT ITS ADDRESS ABOVE AND TO THE FOLLOWING PARTIES: NEWTOWER TRUST COMPANY MULTI-EMPLOYER PROPERTY TRUST, C/O BENTALL KENNEDY (U.S.) LIMITED PARTNERSHIP, ATTN: MEPT/DIRECTOR OF ASSET MANAGEMENT, 1215 FOURTH AVENUE, SUITE 2400, SEATTLE, WA 98161 AND TO: TRANSWESTERN COMMERCIAL SERVICES ILLINOIS, L.L.C., 200 WEST MADISON STREET, SUITE 1130, CHICAGO, IL 60606, THAT THIS LETTER OF CREDIT WILL NOT BE EXTENDED BEYOND THE THEN CURRENT EXPIRATION DATE. IN NO EVENT SHALL THIS LETTER OF CREDIT BE AUTOMATICALLY EXTENDED BEYOND [INSERT A FINAL EXPIRATION DATE] WHICH SHALL BE THE FINAL EXPIRATION DATE OF THIS LETTER OF CREDIT.

THIS LETTER OF CREDIT IS TRANSFERABLE BY THE ISSUING BANK AT THE REQUEST OF THE BENEFICIARY ONE OR MORE TIMES BUT IN EACH INSTANCE TO A SINGLE BENEFICIARY AND ONLY IN ITS ENTIRETY UP TO THE THEN AVAILABLE AMOUNT IN FAVOR OF ANY NOMINATED TRANSFEREE ASSUMING SUCH TRANSFER TO SUCH TRANSFEREE WOULD BE IN COMPLIANCE WITH THEN APPLICABLE LAW AND REGULATIONS, INCLUDING BUT NOT LIMITED TO THE REGULATIONS OF THE U.S. DEPARTMENT OF TREASURY AND U.S. DEPARTMENT OF COMMERCE. AT THE TIME OF TRANSFER, THE ORIGINAL LETTER OF CREDIT AND ORIGINAL AMENDMENT(S), IF ANY, MUST BE SURRENDERED TO US TOGETHER WITH OUR LETTER OF TRANSFER DOCUMENTATION (IN THE FORM OF EXHIBIT "B" ATTACHED HERETO). OUR TRANSFER FEE OF ¼ OF 1% OF THE TRANSFER AMOUNT (MINIMUM $250.00) SHALL BE PAID BY THE APPLICANT. ANY TRANSFER OF THIS LETTER OF CREDIT MAY NOT CHANGE THE PLACE OF EXPIRATION OF THE LETTER OF CREDIT FROM OUR ABOVE-SPECIFIED OFFICE. EACH TRANSFER SHALL BE EVIDENCED BY OUR ENDORSEMENT ON THE REVERSE OF THE ORIGINAL LETTER OF CREDIT AND WE SHALL FORWARD THE ORIGINAL LETTER OF CREDIT TO THE TRANSFEREE AFTER THE TRANSFER REQUEST HAS BEEN COMPLETED.

ALL DEMANDS FOR PAYMENT SHALL BE MADE BY PRESENTATION OF THE ORIGINAL APPROPRIATE DOCUMENTS ON A BUSINESS DAY AT OUR OFFICE (THE “BANK’S OFFICE”) AT: SILICON VALLEY BANK, 3003 TASMAN DRIVE, SANTA CLARA, CA 95054, ATTENTION: STANDBY LETTER OF CREDIT NEGOTIATION SECTION OR BY FACSIMILE TRANSMISSION AT: (408) 496-2418 OR (408) 969-6510 ; AND SIMULTANEOUSLY UNDER TELEPHONE ADVICE TO: (408) 654-6274 OR (408) 654-7716, ATTENTION: STANDBY LETTER OF CREDIT NEGOTIATION SECTION WITH ORIGINALS TO FOLLOW BY OVERNIGHT COURIER SERVICE; PROVIDED, HOWEVER, THE BANK WILL DETERMINE HONOR OR DISHONOR ON THE BASIS OF PRESENTATION BY FACSIMILE ALONE, AND WILL NOT EXAMINE THE ORIGINALS.

IF A DEMAND FOR PAYMENT MADE HEREUNDER DOES NOT, IN ANY INSTANCE, CONFORM TO THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT, WE SHALL GIVE YOU PROMPT NOTICE THAT THE PURPORTED NEGOTIATION OF THIS LETTER OF CREDIT WAS NOT EFFECTED IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT, STATING THE REASONS THEREFOR AND THAT WE ARE HOLDING ANY DOCUMENTS AT YOUR DISPOSAL OR ARE RETURNING THEM TO YOU, AS YOU MAY ELECT. UPON BEING NOTIFIED THAT THE PURPORTED NEGOTIATION OF THIS LETTER OF CREDIT WAS NOT EFFECTED IN CONFORMITY WITH THIS LETTER OF CREDIT, YOU MAY ATTEMPT TO CORRECT ANY SUCH NONCONFORMING DEMAND FOR PAYMENT.

THIS LETTER OF CREDIT SETS FORTH IN FULL THE TERMS OF OUR UNDERTAKING AND SUCH UNDERTAKING SHALL NOT IN ANY WAY BE MODIFIED, AMENDED, OR AMPLIFIED BY REFERENCE TO ANY DOCUMENT(S),

PAGE 3

___________________________ _______________

Applicant’s Authorized Signature DATE

INSTRUMENT(S), CONTRACT(S), OR AGREEMENT(S) REFERRED TO HEREIN OR IN WHICH THIS LETTER OF CREDIT RELATES, AND ANY SUCH REFERENCE SHALL NOT BE DEEMED TO INCORPORATE HEREIN BY REFERENCE ANY DOCUMENT(S), INSTRUMENT(S), CONTRACT(S), OR AGREEMENT(S).

WE HEREBY AGREE WITH THE BENEFICIARY THAT THE DRAFTS DRAWN UNDER AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT SHALL BE DULY HONORED UPON PRESENTATION TO US ON OR BEFORE THE EXPIRATION DATE OF THIS LETTER OF CREDIT.

IF ANY INSTRUCTIONS ACCOMPANYING A DRAWING UNDER THIS LETTER OF CREDIT REQUEST THAT PAYMENT IS TO BE MADE BY TRANSFER TO YOUR ACCOUNT WITH ANOTHER BANK, WE WILL ONLY EFFECT SUCH PAYMENT BY FED WIRE TO A U.S. REGULATED BANK, AND WE AND/OR SUCH OTHER BANK MAY RELY ON AN ACCOUNT NUMBER SPECIFIED IN SUCH INSTRUCTIONS EVEN IF THE NUMBER IDENTIFIES A PERSON OR ENTITY DIFFERENT FROM THE INTENDED PAYEE.

THIS LETTER OF CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES (ISP98), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. . 590.

_____[BANK USE] ________ _____[BANK USE]_____________

AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE

PAGE 4

___________________________ _______________

Applicant’s Authorized Signature DATE

EXHIBIT "A"


DATE:			REF. NO.

AT SIGHT OF THIS DRAFT


PAY TO THE ORDER OF		US$

US DOLLARS _____________________________________________________________________

_________________________________________________________________________________

DRAWN UNDER SILICON VALLEY BANK, SANTA CLARA, CALIFORNIA, STANDBY

LETTER OF CREDIT NUMBER NO. _______________________ DATED ___________________

TO:	SILICON VALLEY BANK
	3003 TASMAN DRIVE
	SANTA CLARA, CA 95054	(BENEFICIARY'S NAME)



		Authorized Signature

GUIDELINES TO PREPARE THE DRAFT

1.	DATE: ISSUANCE DATE OF DRAFT.

2.	REF. NO.: BENEFICIARY'S REFERENCE NUMBER, IF ANY.

3.	PAY TO THE ORDER OF: NAME OF BENEFICIARY AS INDICATED IN THE L/C (MAKE SURE BENEFICIARY ENDORSES IT ON THE REVERSE SIDE).

4.	US$: AMOUNT OF DRAWING IN FIGURES.

5.	US DOLLARS: AMOUNT OF DRAWING IN WORDS.

6.	LETTER OF CREDIT NUMBER: SILICON VALLEY BANK'S STANDBY L/C NUMBER THAT PERTAINS TO THE DRAWING.

7.	DATED: ISSUANCE DATE OF THE STANDBY L/C.

8.	BENEFICIARY'S NAME: NAME OF BENEFICIARY AS INDICATED IN THE L/C.

9.	AUTHORIZED SIGNATURE: SIGNED BY AN AUTHORIZED SIGNER OF BENEFICIARY.

IF YOU NEED FURTHER ASSISTANCE IN COMPLETING THIS DRAFT, PLEASE CALL OUR L/C PAYMENT SECTION AT 408-654-6274 OR 408-654-7716 OR 408-654-7127 OR 408-654-3035.

PAGE 5

___________________________ _______________

Applicant’s Authorized Signature DATE

EXHIBIT “B”

DATE:

TO: SILICON VALLEY BANK

3003 TASMAN DRIVE RE: IRREVOCABLE STANDBY LETTER OF CREDIT

SANTA CLARA, CA 95054 NO. ISSUED BY

ATTN:INTERNATIONAL DIVISION. SILICON VALLEY BANK, SANTA CLARA

STANDBY LETTERS OF CREDIT L/C AMOUNT:

GENTLEMEN:

FOR VALUE RECEIVED, THE UNDERSIGNED BENEFICIARY HEREBY IRREVOCABLY TRANSFERS TO:

(NAME OF TRANSFEREE)

(ADDRESS)

ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY TO DRAW UNDER THE ABOVE LETTER OF CREDIT UP TO ITS AVAILABLE AMOUNT AS SHOWN ABOVE AS OF THE DATE OF THIS TRANSFER.

BY THIS TRANSFER, ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY IN SUCH LETTER OF CREDIT ARE TRANSFERRED TO THE TRANSFEREE. TRANSFEREE SHALL HAVE THE SOLE RIGHTS AS BENEFICIARY THEREOF, INCLUDING SOLE RIGHTS RELATING TO ANY AMENDMENTS, WHETHER INCREASES OR EXTENSIONS OR OTHER AMENDMENTS, AND WHETHER NOW EXISTING OR HEREAFTER MADE. ALL AMENDMENTS ARE TO BE ADVISED DIRECT TO THE TRANSFEREE WITHOUT NECESSITY OF ANY CONSENT OF OR NOTICE TO THE UNDERSIGNED BENEFICIARY.

THE ORIGINAL OF SUCH LETTER OF CREDIT IS RETURNED HEREWITH, AND WE ASK YOU TO ENDORSE THE TRANSFER ON THE REVERSE THEREOF, AND FORWARD IT DIRECTLY TO THE TRANSFEREE WITH YOUR CUSTOMARY NOTICE OF TRANSFER.

SINCERELY,

	SIGNATURE
(BENEFICIARY’S NAME)	AUTHENTICATED
	The name(s), title(s), and signature(s) conform to that/those on file with us for the company and the signature(s) is/are authorized to execute this instrument. We further confirm that the company has been identified applying the appropriate due diligence and enhanced due diligence as required by BSA and all its subsequent amendments.

(SIGNATURE OF BENEFICIARY)


(NAME AND TITLE)



		(Name of Bank)


		(Address of Bank)

PAGE 6

___________________________ _______________

Applicant’s Authorized Signature DATE

Exhibit 10.23

Summary of Director Compensation

Directors who are not employees of Mattersight or any of its subsidiaries (“Non-Employee Directors”) receive a fixed annual fee for their contributions to the board of directors, the amount of which is calculated for each director based on the following assumptions:

$1,500 per board meeting (assuming four per year) plus an additional $500 per meeting for the Chairman of Board;

$2,000 per Audit Committee meeting (assuming eight per year) plus an additional $500 per meeting for the Audit Committee chairman;

$2,000 per Compensation Committee meeting (assuming four per year) plus an additional $500 per meeting for the Compensation Committee chairman; and

$2,000 per Nominating and Corporate Governance Committee meeting (assuming three per year) plus an additional $500 per meeting for the Nominating and Corporate Governance Committee chairman.

The Company also reimburses directors for their travel-related expenses incurred in attending meetings of the board of directors and its committees; however, Mattersight has adopted the practice of holding meetings of the board of directors and its committees by video conference, thereby minimizing the need to reimburse for these expenses.

In addition to meeting attendance fees, Non-Employee Directors are eligible to receive, under the Mattersight Corporation 1999 Stock Incentive Plan (the “1999 Plan”): (i) an option to purchase 50,000 shares of Mattersight Common Stock, $.01 par value (“Common Stock”) upon commencement of service as a director (an “Initial Grant”); and (ii) an option to purchase 10,000 shares of Common Stock on the day after each annual meeting of stockholders during which such service continues (an “Annual Grant”).

Stock options granted to Non-Employee Directors have an exercise price per share equal to the fair market value of a share of Common Stock on the grant date and a maximum term of ten years. Each Initial Grant vests ratably over a period of 48 months from the end of the month following the grant date. Each Annual Grant will vest 25% on May 31 ^st of the year following the grant date, with the remaining balance vesting over the following three quarters.

In addition to the foregoing options, at its February 2009 meeting, as ratified by Unanimous Written Consent, the board of directors agreed to an additional grant of stock options under the 1999 Plan. Each Non-Employee Director received an option to purchase 50,000 shares of Common Stock. These stock options have an exercise price per share equal to the fair market value of a share of Common Stock on the grant date, which was February 18, 2009, and a maximum term of ten years. These options are fully vested.

By unanimous written consent effective September 11, 2014, each of the Company’s Board of Directors received 10,000 shares of restricted Common Stock, which are fully vested. Commencing in 2015, in addition to the Annual Grant, each non-employee director will receive 10,000 shares of restricted Common Stock annually, the day after the Company’s annual stockholders’ meeting, which will vest in equal quarterly increments over four quarters.

Exhibit 10.24

Summary of 2016 Executive Officer Compensation

The following shows the 2016 annual salary for each of Mattersight’s current executive officers:

Kelly D. Conway, President and Chief Executive Officer:	$	360,000
Christopher J. Danson, Executive Vice President and Chief Technology Officer:	$	305,000
Richard M. Dresden, Executive Vice President of Sales:	$	275,000
David R. Gustafson, Executive Vice President and Chief Operating Officer:	$	305,000
Sheau-ming K. Ross, Vice President and Chief Financial Officer:	$	265,000

Each of these executive officers have target bonus percentages as set forth in their employment agreements with Mattersight and modified with approval of the Compensation Committee of our Board of Directors from time to time. Additional information concerning the compensation of these executive officers is set forth in the Proxy Statement on Form 14A filed by Mattersight Corporation with the Securities and Exchange Commission.

Exhibit 21.1

MATTERSIGHT SUBSIDIARIES

Name of Company	Jurisdiction of Incorporation

Mattersight Europe Holding Corporation	Delaware
Mattersight International Holding, Inc.	Illinois
Mattersight (Netherlands) B.V.	Netherlands
Mattersight (Canada) Corporation	Canada
Mattersight (Deutschland) GmbH	Germany
Mattersight (UK) Limited	England & Wales
Mattersight Corporation (Australia) Pty. Ltd.	Australia

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports dated March 11, 2016, with respect to the consolidated financial statements, schedule and internal control over financial reporting included in the Annual Report of Mattersight Corporation and subsidiaries on Form 10-K for the year ended December 31, 2015. We consent to the incorporation by reference of said reports in the Registration Statements of Mattersight Corporation on Form S-3 (File Nos. 333-193146 effective February 6, 2014, 333-198091 effective August 25, 2014, and 333-202744 effective April 8, 2015) and Form S-8 (File Nos. 333-96473 effective February 9, 2000, 333-30374 effective February 14, 2000, 333-68540 effective August 28, 2001, 333-101031 effective November 6, 2002, 333-143114 effective May 21, 2007, 333-150671 effective May 6, 2008, 333-172187 effective February 11, 2011, and 333-194543 effective March 13, 2014).

/s/ GRANT THORNTON LLP

Chicago, Illinois

March 11, 2016

Exhibit 24.1

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Mattersight Corporation, a Delaware corporation (the “Company”), hereby constitutes and appoints each of Kelly D. Conway, Sheau-ming K. Ross, and Christine R. Carsen signing singly, as the undersigned’s true and lawful attorney-in-fact and agent, with full powers of substitution and re-substitution, to:

(a) execute for and in the name of the undersigned, in any and all capacities, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as well as any and all amendments thereto on Form 10-K/A deemed necessary, appropriate, or desirable (collectively, the “Form 10-K”), pursuant to the Securities Exchange Act of 1934 and the rules thereunder;

(b) file the Form 10-K, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission and any stock exchange or market or similar authority on which the Company’s Common Stock is listed for trading and any other governmental or regulatory authority, and otherwise to act for him and on his behalf in connection therewith; and

(c) take any other action of any type whatsoever in connection with the foregoing which, in the opinion of such attorney-in-fact, may be required, appropriate, or desirable to be done in the exercise of any of the rights and powers herein granted, as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all that such attorney-in-fact, or such attorney-in-fact’s substitute or substitutes, shall lawfully do or cause to be done by virtue of this Power of Attorney and the rights and powers herein granted.

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney as of this 16th day of February 2016.

/s / Tench Coxe

Signature

Tench Coxe

Printed Name

Exhibit 24.2

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney as of this 17th day of February 2016.

/s / Philip Dur

Signature

Philip Dur

Printed Name

Exhibit 24.3

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney as of this 9th day of February 2016.

/s / Henry Feinberg

Signature

Henry Feinberg

Printed Name

Exhibit 24.4

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney as of this 17th day of February 2016.

/s / John Kohler

Signature

John Kohler

Printed Name

Exhibit 24.5

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney as of this 16th day of February 2016.

/s / Michael J. Murray

Signature

Michael J. Murray

Printed Name

Exhibit 24.6

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney as of this 17th day of February 2016.

/s / John Staley

Signature

John Staley

Printed Name

Exhibit 24.7

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney as of this 17th day of February 2016.

/s / David B. Mullen

Signature

David B. Mullen

Printed Name

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Kelly D. Conway, certify that:

1. I have reviewed this Annual Report on Form 10-K of Mattersight Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of the internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 11, 2016

By		/s/ K ELLY D. C ONWAY
		Kelly D. Conway
		President & Chief Executive Officer

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Sheau-ming K. Ross, certify that:

1. I have reviewed this Annual Report on Form 10-K of Mattersight Corporation;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 11, 2016

By		/s/ SHEAU-MING K. ROSS
		Sheau-ming K. Ross
		Vice President and Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Annual Report on Form 10-K of Mattersight Corporation (the “Company”) for the Year ended December 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Kelly D. Conway, as Chief Executive Officer of the Company, and Sheau-ming K. Ross, as Chief Financial Officer of the Company, hereby certify, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 11, 2016

/s/ KELLY D. CONWAY

Kelly D. Conway

President & Chief Executive Officer

/s/ SHEAU-MING K. ROSS

Sheau-ming K. Ross

Vice President and Chief Financial Officer

This certification shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934. In addition, this certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.