8. Commitments and Contingencies

Office Leases

The Company has a lease for its headquarters space in Waltham, Massachusetts (the “Lease”) that is effective through September 2022 with one ten-year extension option. The Lease includes space the Company is currently occupying as well as space that will be made available at various points in time during the term, starting in 2013.

The Company leases office space for a sales and support office in Colorado under a lease agreement effective through April 2019 with three three-year extension options. The Company also leases small amounts of general office space in Florida, New York, California and the United Kingdom under lease agreements that expire at various dates through 2017.

Lease incentives, payment escalations and rent holidays specified in the lease agreements are accrued or deferred as appropriate such that rent expense per square foot is recognized on a straight-line basis over the terms of occupancy.

At March 31, 2013, the Company had both prepaid rent and accrued rent balances related to its office leases. The prepaid rent balance was $1,696 at March 31, 2013, of which $456 was included in prepaid expenses and other current assets and $1,240 was included in other assets. The accrued rent balance was $2,242 at March 31, 2013, of which $323 was included in accrued expenses and $1,919 was included in other long-term liabilities. At December 31, 2012, the Company had both prepaid rent and accrued rent balances related to its office leases. The prepaid rent balance was $1,725 at December 31, 2012, of which $302 was included in prepaid expenses and other current assets and $1,423 was included in other assets. The accrued rent balance was $2,154 at December 31, 2012, of which $282 was included in accrued expenses and $1,872 was included in other long-term liabilities.

Total rent expense under office leases was $1,970 and $1,513 for the three months ended March 31, 2013 and 2012, respectively.

As of March 31, 2013, future minimum lease payments under noncancelable office leases are as follows:


Remainder of 2013	$	4,970
2014		7,686
2015		8,655
2016		9,688
2017		9,436
Thereafter		40,087

Total	$	80,522

Subsequent to March 31, 2013, the Company signed a new lease in New York, New York with a term through October 2018. Contractual obligations will increase by an additional $161, $656, $676, $696, $717 and $614 for the years ending December 31, 2013, 2014, 2015, 2016, 2017 and 2018, respectively, as a result of this agreement.

Third-Party Hosting Agreements

The Company has agreements with two vendors to provide specialized space and equipment and related services from which the Company hosts its software applications.

Payment escalations and rent holidays specified in these agreements are accrued or deferred as appropriate such that rent expense per square foot is recognized on a straight-line basis over the terms of occupancy. At March 31, 2013 and December 31, 2012, the Company had both prepaid rent and accrued rent balances related to its hosting agreements. At March 31, 2013, the Company had prepaid rent of $1,024, of which $253 was included in prepaid expenses and other current assets and $771 was included in other assets. The accrued rent balance of $150 at March 31, 2013 was included in other long-term liabilities. At December 31, 2012, the Company had prepaid rent of $1,120, of which $259 was included in prepaid expenses and other current assets and $861 was included in other assets and accrued rent of $138 which was included in other long-term liabilities. Total rent expense under hosting agreements was $1,007 and $906 for the three months ended March 31, 2013 and 2012, respectively.

The agreements include payment commitments that expire at various dates through mid-2017. As of March 31, 2013, future minimum payments under the agreements are as follows:


Remainder of 2013	$	2,902
2014		3,624
2015		3,734
2016		3,844
2017		775

Total	$	14,879

Vendor Commitments

As of March 31, 2013, the Company had issued both cancellable and non-cancellable purchase orders to various vendors and entered into contractual commitments with various vendors totaling $22,502 related primarily to marketing programs and other non-marketing goods and services to be delivered over the next twelve months.

Letters of Credit and Restricted Cash

As of March 31, 2013 and December 31, 2012, the Company maintained a letter of credit totaling $1,300 and $750, respectively, for the benefit of the landlord of the Company’s corporate headquarters lease. The landlord can draw against the letter of credit in the event of default by the Company. The Company was required to maintain a cash balance of at least $1,300 and $750 as of March 31, 2013 and December 31, 2012, respectively, to secure the letter of credit. These amounts were classified as restricted cash in the balance sheet at March 31, 2013 and December 31, 2012.

Contingent Consideration

The former shareholders of SinglePlatform are eligible to receive consideration of up to $22,500, which is contingent upon the achievement of certain revenue targets achieved through June 30, 2014, measured in six month intervals. If such conditions are achieved, the consideration is payable in cash. The Company does not believe the revenue targets will be met. Accordingly, the Company’s accrual for this contingency as of March 31, 2013 and December 31, 2012 was $0.

Indemnification Obligations

The Company enters into standard indemnification agreements with the Company’s channel partners and certain other third parties in the ordinary course of business. Pursuant to these agreements, the Company indemnifies and agrees to reimburse the indemnified party for losses incurred by the indemnified party in connection with certain intellectual property infringement and other claims by any third party with respect to the Company’s business and technology. Based on historical information and information known as of March 31, 2013, the Company does not expect it will incur any significant liabilities under these indemnification agreements.

Legal Matters

On August 7, 2012, two former employees, on behalf of themselves and all other similarly situated individuals (collectively, the “FLSA Plaintiffs”), filed a complaint in the U.S. District Court for the District of Massachusetts that named the Company as a defendant in a lawsuit. The complaint, which was served on the Company on August 9, 2012, alleges that the Company violated the Fair Labor Standards Act and the Massachusetts overtime law with respect to certain current and former sales employees. The FLSA Plaintiffs seek an award for damages in an unspecified amount. The Company and counsel for the FLSA Plaintiffs participated in a court-sanctioned mediation session with an independent mediator in March 2013. As of March 31, 2013, the Company recorded an accrual of $820 related to this matter.

On September 24, 2012, RPost Holdings, Inc., RPost Communications Limited and RMail Limited (collectively, “RPost”) filed a complaint in the U.S. District Court for the Eastern District of Texas that named the Company as a defendant in a lawsuit. The complaint, which was served on the Company on December 26, 2012, alleges that certain elements of the Company’s email marketing technology infringe five patents held by RPost. RPost seeks an award for damages in an unspecified amount and injunctive relief. On February 11, 2013, RPost amended its complaint to name five of the Company’s partners as defendants. Under the Company’s contractual agreements with these partners, the Company is obligated to indemnify them for claims related to patent infringement. The Company has filed a motion to sever and stay the claims against its partners. This litigation is in its very early stages. As a result, neither the ultimate outcome of this litigation nor an estimate of a probable loss or any reasonably possible losses can be assessed at this time. Nevertheless, the Company believes that it has meritorious defenses to any claim of infringement and intends to defend itself vigorously.

On November 14, 2012, the Company filed a complaint in the U.S. District Court for the District of Delaware against Umbanet, Inc. (“Umbanet”) seeking a declaratory judgment that two patents held by Umbanet (the “Umbanet Patents”) are not infringed by a customer’s use of the Company’s email marketing product and that such patents are invalid (the “Delaware Case”). The Company filed the Delaware Case in response to a complaint filed by Umbanet in the U.S. District Court for the District of New Jersey against one of the Company’s customers alleging that the customer’s use of the Company’s email marketing product infringed the Umbanet Patents (the “New Jersey Case”). Umbanet has filed a motion in the Delaware Case seeking to dismiss the complaint or, in the alternative, stay the case pending resolution of the New Jersey Case. The Company filed a motion in the New Jersey Case seeking to stay the case pending resolution of the Delaware Case. These litigation matters are in a very early stage. As a result, neither the ultimate outcome of these matters nor an estimate of a probable loss or any reasonably possible losses can be assessed at this time. Nevertheless, the Company believes that it has meritorious defenses to any claim of infringement and intends to pursue these matters vigorously.

On March 7, 2013, CreateAds LLC (“CreateAds”) filed a complaint in the U.S. District Court for the District of Delaware that named the Company as a defendant in a lawsuit. The complaint, which was served on the Company on March 8, 2013, alleges that certain elements of the Company’s email marketing technology infringe a patent held by CreateAds. CreateAds seeks an award for damages in an unspecified amount and injunctive relief. This litigation is in its very early stages. As a result, neither the ultimate outcome of this matter nor an estimate of a probable loss or any reasonably possible losses can be assessed at this time. Nevertheless, the Company believes that it has meritorious defenses to any claim of infringement and intends to defend itself vigorously.

The Company is from time to time subject to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of its business. While the outcome of these other claims cannot be predicted with certainty, management does not believe that the outcome of any of these other legal matters will have a material adverse effect on the Company’s results of operations, financial condition, or cash flows.