Rosetta Stone 2013 Annual Report Download - page 96
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Table of Contents
The Company maintains a defined contribution 401(k) Plan (the "Plan"). The Company matches employee contributions to the Plan up to 4% of their
compensation that vest immediately. The Company recorded expenses for the Plan totaling $1.9 million, $1.6 million, and $1.4 million for the years ended
December 31, 2013, 2012 and 2011, respectively.
The Company leases copiers, parking spaces, buildings, a warehouse and office space under operating lease and site license arrangements, some of
which contain renewal options. Building, warehouse and office space leases range from 12 months to 89 months. Certain leases also include lease renewal
options.
The following table summarizes future minimum operating lease payments as of December 31, 2013 and the years thereafter (in thousands):
Periods Ending December 31,
2014
$ 6,342
2015
5,049
2016
4,439
2017
4,140
2018
3,926
$23,896
Total expenses under operating leases were $7.1 million, $9.5 million and $13.5 million during the years ended December 31, 2013, 2012 and 2011
respectively.
The Company accounts for its leases under the provisions of ASC topic 840, ("ASC 840"), and subsequent amendments,
which require that leases be evaluated and classified as operating leases or capital leases for financial reporting purposes. Certain operating leases contain rent
escalation clauses, which are recorded on a straight-line basis over the initial term of the lease with the difference between the rent paid and the straight-line rent
recorded as either a deferred rent asset or liability depending on the calculation. Lease incentives received from landlords are recorded as deferred rent liabilities
and are amortized on a straight-line basis over the lease term as a reduction to rent expense.
On December 28, 2006 the Company entered into an agreement to license software from a vendor for incorporation in software products that the
Company is developing. The agreement required a one-time, non-refundable payment of $0.3 million, which was expensed in full as research and development
costs during 2006 because the products into which the licensed software were to be incorporated had not yet reached technological feasibility. In addition, the
agreement specifies that, in the event the software is incorporated into specified Company software products, royalties will be due at a rate of 20% of sales for
those products up to an additional amount totaling $0.4 million. There were no additional royalty payments made under this agreement in 2013, 2012 or 2011.
The Company has agreements with certain of its executives and key employees which provide guaranteed severance payments upon termination of their
employment without cause.
In April 2010, a purported class action lawsuit was filed against the Company in the Superior Court of the State of California, County of Alameda for
damages, injunctive relief and restitution in the matter of Michael Pierce, Patrick Gould,
F-31