Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

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Commitments and Contingencies
12 Months Ended
Dec. 31, 2011
Commitments and Contingencies [Abstract]  
Commitments and Contingencies
8. Commitments and Contingencies
Lease Commitments
We lease office space and equipment under capital and operating leases that expire at various times through 2016. We recognize lease expense for these leases on a straight-line basis over the lease terms.
The assets under capital lease are as follows:
                 
    December 31,  
    2011     2010  
    (in thousands)  
Data processing and communications equipment
  $ 5,655     $ 5,666  
Software
    5,903       5,903  
 
           
 
    11,558       11,569  
Less: Accumulated depreciation and amortization
    (11,298 )     (9,610 )
 
           
Assets under capital lease, net
  $ 260     $ 1,959  
 
           
Aggregate annual rental commitments at December 31, 2011, under operating leases with initial or remaining non-cancelable lease terms greater than one year and capital leases are as follows:
                 
            Operating  
    Capital Leases     Leases  
    (in thousands)  
2012
  $ 65     $ 6,593  
2013
          6,149  
2014
          5,529  
2015
          5,444  
2016
          4,198  
Thereafter
           
 
           
Total Minimum lease payments
  $ 65     $ 27,913  
 
           
Less amount representing average interest at 4.5%
             
 
             
 
    65          
Less current portion
    (65 )        
 
             
Long-term portion
  $          
 
             
Rent expense was $7.4 million, $6.5 million and $5.1 million for the years ended December 31, 2011, 2010 and 2009, respectively.
Guarantor Arrangements
We have agreements whereby we indemnify our officers and directors for certain events or occurrences while the officer or director is or was serving at our request in such capacity. The term of the indemnification period is for the officer or director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have a director and officer insurance policy that limits our exposure and enables us to recover a portion of any future amounts paid. As a result of our insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal. Accordingly, we had no liabilities recorded for these agreements as of December 31, 2011 or 2010.
In the ordinary course of our business, we enter into standard indemnification provisions in our agreements with our customers. Pursuant to these provisions, we indemnify our customers for losses suffered or incurred in connection with third-party claims that our products infringed upon any U.S. patent, copyright, trademark or other intellectual property right. Where applicable, we generally limit such infringement indemnities to those claims directed solely to our products and not in combination with other software or products. With respect to our products, we also generally reserve the right to resolve such claims by designing a non-infringing alternative, by obtaining a license on reasonable terms, or by terminating our relationship with the customer and refunding the customer’s fees.
The potential amount of future payments to defend lawsuits or settle indemnified claims under these indemnification provisions is unlimited in certain agreements; however, we believe the estimated fair value of these indemnity provisions is minimal, and, accordingly, we had no liabilities recorded for these agreements as of December 31, 2011 or 2010.
Litigation
From time to time, in the normal course of our business, we are a party to litigation matters and claims. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict and our view of these matters may change in the future as the litigation and events related thereto unfold. We expense legal fees as incurred. Insurance recoveries associated with legal costs incurred are recorded when they are deemed probable of recovery. We record a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. An unfavorable outcome in any legal matter, if material, could have an adverse effect on our operations, financial position, liquidity and results of operations.
On January 24, 2011, Yardi Systems, Inc. (“Yardi”) filed a lawsuit in the U.S. District Court for the Central District of California against RealPage, Inc. and DC Consulting, Inc. and filed a First Amended Complaint on August 12, 2011. On March 28, 2011, we filed an answer and counterclaims, on May 18, 2011, we filed amended counterclaims, on September 2, 2011, we filed Second Amended Counterclaims and on September 12, 2011, we filed an answer to Yardi’s First Amended Complaint. Yardi has also filed a pending motion to dismiss several of our counterclaims which we have opposed. On February 13, 2012, the Court denied Yardi’s motion with respect to all claims except for a portion of one of our claims for intentional interference with contract, as to which dismissal was granted. Accordingly, RealPage will move forward with its claims against Yardi. We currently expect trial in this case to be scheduled for late September 2012. We intend to defend this case and pursue our counterclaims vigorously. It is not possible to predict the outcome of this case, and as such, we have not recorded a contingent liability as we do not believe an unfavorable outcome is probable or reasonably estimated as of December 31, 2011.
We are involved in other litigation matters not listed above but we do not consider the matters to be material either individually or in the aggregate at this time. Our view of the matters not listed may change in the future as the litigation and events related thereto unfold.