Support.com 2006 Annual Report Download - page 66

SUPPORTSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 5. Commitments and Contingencies (Continued)
additional rent, with an amount equal to its proportionate share, or 27% initially, of the amount exceeding the landlord’s operating
expenses incurred in calendar 2007. The Company issued an unsecured irrevocable standby letter of credit of $400,000 to the landlord
as a security deposit under the lease. If the Company is in material compliance with the lease, the deposit amount may be reduced to
$300,000 on February 1, 2009, $200,000 on February 1, 2010, and $100,000 on February 1, 2011.
Other facility leases. The Company leases its facilities under noncancelable operating lease agreements, which expire at various
dates through 2010. Facility rent expense pursuant to all operating lease agreements was approximately $1.5 million, $1.8 million, and
$1.5 million for the years ended December 31, 2006, 2005, and 2004, respectively.
As of December 31, 2006, minimum payments due under all noncancelable lease agreements including our new headquarters lease
were as follows (in thousands):
Years ending December 31, Operating Leases
2007 $ 1,557
2008 1,011
2009 977
2010 944
2011 805
thereafter 483
Total minimum lease and principal payments $ 5,777
Tax contingencies
We are required to make periodic filings in the states where we are deemed to have a presence for tax purposes. We have
undergone state audits in the past and have paid assessments arising from these audits. To date, such amounts have not been material.
We evaluate estimated losses that could arise from similar assessments in accordance with Statement of Financial Accounting
Standard No. 5, “Accounting for Contingencies.” We consider such factors as the degree of probability of an unfavorable outcome and
the ability to make a reasonable estimate of the amount of loss.
Legal contingencies
Between December 2004 and January 2005, several purported securities class action suits were filed in the United States District
Court for the Northern District of California against us, our former Chief Executive Officer, Radha R. Basu, and our former Chief
Financial Officer, 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 June 1, 2006, this action was certified to proceed as a class action on behalf of all persons
and entities who purchased or otherwise acquired the securities of the Company from January 29, 2004 to October 1, 2004 and who
were allegedly damaged thereby. The case is currently in discovery. A trial date has been set for October 29, 2007. 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. 62
Source: SUPPORTSOFT INC, 10−K, March 16, 2007