Support.com 2005 Annual Report Download - page 61

SUPPORTSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
June 1, 2003. At a court conference on March 4, 2004, plaintiffs’ executive committee advised the court that the negotiators for
plaintiffs and issuers have agreed on the terms of the settlement. During mid-2004, the plaintiffs moved for preliminary approval of
the proposed settlement. After full briefing and argument, on February 15, 2005, the court issued an opinion preliminarily approving
the proposed settlement, contingent upon modifications being made to one aspect of the proposed settlement — the proposed “bar
order”. At a further conference on April 13, 2005, the court set a further schedule for submission of documents concerning the form
and substance of class notice, and tentatively set a Rule 23 public hearing on the fairness of the proposed settlement for January 9,
2006. On August 31, 2005, the court issued an order preliminarily approving the settlement and setting a public hearing on its fairness
for April 24, 2006 (the postponement from January 2006 to April 2006 was because of difficulties in mailing the required notice to
class members). On October 27, 2005, the court issued an order making some minor changes to the form of notice to be sent to class
members. On January 17, 2006, the court issued an order modifying the preliminarily settlement approval order to extend the time
within which notice must be given to the class, which time had expired on January 15, 2006. While we cannot predict with certainty
the outcome of the litigation or whether the settlement will be approved, we believe that the claims against us and our officers are
without merit.
We are also subject to other routine legal proceedings, as well as demands, claims and threatened litigation, that arise in the
normal course of our business. The ultimate outcome of any litigation is uncertain, and either unfavorable or favorable outcomes
could have a material negative impact. Regardless of outcome, litigation can have an adverse impact on SupportSoft because of
defense costs, diversion of management resources and other factors.
6. Restructuring Obligations and Other Charges
In the fourth quarter of 2005, SupportSoft’s management performed a review of its business operations and realigned its
resources and go-to-market strategies to help maximize future revenue opportunities. As a result of this business review, the Company
implemented a restructuring plan that included the termination of 27 employees and closure of various offices worldwide. All of the
employees were terminated as of December 31, 2005. As a result of the restructuring plan, the Company recorded a restructuring
charge of $645,000 for severance costs and lease termination-related costs during the fourth quarter of 2005. Restructuring expenses
included in the 2005 Consolidated Statement of Income were $76,000 for cost of services, $67,000 for research and development,
$407,000 for sales and marketing and $95,000 general and administrative.
The following table summarizes activity associated with the restructuring and related expenses incurred for the year ended
December 31, 2005 (in thousands):
Severance (1) Facilities (2) Total
Restructuring costs $456 $189 $645
Cash payments (346) (34) (380)
Restructuring obligations, December 31, 2005 $110 $155 $265
(1) Severance costs include those expenses related to severance pay and related employee benefit obligations.
59
(2) Facilities costs include obligations under non-cancelable leases for facilities that we will no longer occupy, as well as
penalties associated with early terminations of leases and disposal of fixed assets. The related leases are short term in
nature expiring in less than one year. No sublease income has been included.