Note 7. Restructuring Obligations and Other Charges

In the first quarter of 2009, we implemented a reduction in our workforce and closed certain facilities worldwide in order to reduce our ongoing cost structure. We reduced our workforce by 17 employees, or approximately 6% of our non-agent headcount. All of the affected employees were terminated as of March 31, 2009. As a result, we recorded a restructuring charge of $896,000 in 2009. The restructuring charge was primarily comprised of employee termination costs, professional services costs and facilities impairment costs. Restructuring and impairment expenses included in the consolidated statement of operations totaled $821,000 in discontinued operations and $75,000 in continuing operations, including $6,000 for sales and marketing and $69,000 for general and administrative. As of June 30, 2011, we paid in full the balance of this restructuring obligation, and incurred $65,000 incremental facilities restoration costs related to the final obligations of our facility in the United Kingdom. This expense was recorded in general and administrative. As of December 31, 2011 there was no remaining balance related to this restructuring obligation.

In the second quarter of 2009, we implemented a reduction in our workforce in order to align our ongoing cost structure with the scale of our revenue following the sale of our Enterprise business. We reduced our workforce by 23 employees, or approximately 19% of our non-technology support agent workforce. All of the affected employees were terminated as of June 30, 2009. In addition, we terminated the lease for our Canadian facility, which we had previously impaired as of December 31, 2008. We reversed the remaining impairment balance accrued for this facility's lease payments, in the amount of $219,000. As a result of these actions, we recorded a restructuring charge of approximately $345,000 in the second quarter of 2009. The restructuring charge was primarily comprised of employee terminations costs and professional services costs. Restructuring expenses included in the consolidated statement of operations were $62,000 for cost of service, $187,000 for research and development, $315,000 for sales and marketing and $(219,000) for general and administrative due to the reversal of the Canadian facility lease accrual. As of December 31, 2009, there was no remaining balance related to this restructuring obligation.

In the third quarter of 2009, we ceased using a portion of our headquarters office in order to align our facilities usage with our current size. As a result, we impaired approximately 46% of our Redwood City facility. We recorded a restructuring charge of approximately $1.3 million, which related to the facility impairment and is included in our general and administrative expenses in our consolidated statement of operations. As of December 31, 2011, the remaining balance on this restructuring obligation was $208,000, which we expect to pay through 2012.

In the first quarter of 2011, we implemented a reduction in our work-from-home workforce impacting a group with a specialized skill-set. We reduced our workforce by 21 employees, or less than 4% of our agent headcount. All of the affected employees were terminated as of March 17, 2011. As a result, we recorded a restructuring charge of $37,000 for cost of services in the first quarter of 2011. As of December 31, 2011, there was no remaining balance related to this restructuring obligation. In the third quarter of 2011, we undertook a restructuring of our operations in order to reduce our ongoing cost structure. We reduced our workforce by eight employees, or less than 1% of our headcount. All of the affected employees were terminated as of September 27, 2011. As a result, we recorded a restructuring charge of $368,000 in the third quarter of 2011, of which $55,000 was recorded in cost of services, $310,000 in sales and marketing and $3,000 in general and administrative. As of December 31, 2011, the remaining balance on this restructuring obligation was $2,000, which we expect to pay during the first quarter of 2012.

The following table summarizes activity associated with the restructuring obligation (see also Note 11) and related expenses incurred for the years ended December 31, 2011 and 2010 (in thousands):

	Severance(1)			Facilities(2)			Impairment(3)			Total
Restructuring costs incurred	$	640		$	1,299		$	259		$	2,198
Cash payments		(640	)		(57	)		-			(697	)
Non-cash charges		-			-			(259	)		(259	)
Restructuring obligations, December 31, 2009		-			1,242			-			1,242
Restructuring costs incurred		-			-			-			-
Cash payments		-			(581	)		-			(581	)
Restructuring obligations, December 31, 2010		-			661			-			661
Restructuring costs incurred		405			65			-			470
Cash payments		(403	)		(518	)		-			(921	)
Restructuring obligations, December 31, 2011	$	2		$	208		$	-		$	210

(1)

Severance costs include those expenses related to severance pay and related employee benefit obligations.

(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. No sublease income has been included.

(3)

As part of the restructuring costs included in the table above, the Company wrote-off fixed assets related to the facilities that it will no longer occupy. This was a non-cash charge.