Support.com 2005 Annual Report Download - page 26

New rules and regulations for public companies have increased and may continue to increase our administrative costs.
The Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission
and the Nasdaq National Market, have required changes in corporate governance practices of public companies.
These rules and regulations are increasing our legal and financial compliance costs, and making some activities more time-
consuming and costly. These rules and regulations make it more difficult and more expensive for us to obtain director and officer
liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These
new rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors,
particularly to serve on our audit committee, and qualified executive officers.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 2. PROPERTIES.
Our corporate headquarters are located in Redwood City, California, where we lease approximately 23,600 square feet under a
lease that expires in May 2007. We believe the facilities we are now using are adequate and suitable for our business requirements.
ITEM 3. LEGAL PROCEEDINGS.
Between December 9, 2004 and January 21, 2005, several purported securities class action suits were filed in the United States
District Court for the Northern District of California against the Company, our CEO, Radha R. Basu, and our former CFO, Brian M.
Beattie. These actions were consolidated on March 22, 2005 as In re SupportSoft, Inc. Securities Litigation, Civil Action No.: c 04-
5222 SI. The consolidated complaint alleges generally violations of certain federal securities laws and seeks unspecified damages on
behalf of a class of purchasers of our common stock between January 20, 2004 and October 1, 2004. Plaintiffs allege, among other
things, that defendants made false and misleading statements concerning our business and guidance for the third quarter 2004,
purportedly violating Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On
July 15, 2005, the Court granted our motion to dismiss the Complaint with leave to amend the Complaint. The plaintiffs subsequently
filed a Corrected Amended Complaint on August 19, 2005. On November 21, 2005, the Court denied our motion to dismiss the
Corrected Amended Complaint. Defendants filed their Answer to the Complaint on December 14, 2005 and the case is currently in
discovery. Plaintiffs moved for class certification on February 1, 2006 and a hearing on plaintiffs’ motion is set for April 21,
2006. Defendants intend to vigorously defend themselves against the consolidated lawsuit. While we cannot predict with certainty the
outcome of the litigation, we believe that we have meritorious defenses to such claims.
On December 19, 2005, a purported derivative shareholder complaint was filed in the Superior Court of the State of California
for the County of San Mateo captioned White v. Vase et al., No. Civ. 451677. This complaint pursues claims—derivatively and on
behalf of the Company as a nominal defendant—against certain of the Company’s directors and former directors: Radha R. Basu,
Manuel Diaz, Kevin C. Eichler, Edward S. Russell and James Thanos. The derivative complaint alleges, among other things, that the
director-defendants harmed the Company by making or permitting the Company to make false and misleading statements between
January 20, 2004 and October 1, 2004 concerning the Company’s business and guidance for the third quarter 2004 and by purportedly
exposing the Company to liability for securities fraud in violation of their fiduciary duties. Defendants demurrered to the Complaint
on February 2, 2006. A hearing date for the demurrers has not yet been set.
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