10.

Commitments and Contingencies

Litigation

From time to time, the Company has been, is or may in the future be a defendant in various legal actions arising in the normal course of business. The Company records a provision for a liability when it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated.

Reis and certain subsidiaries have purchased insurance with respect to construction defect and completed operations at its past real estate development projects. Reis and certain subsidiaries have, from time to time, been exposed to various claims associated with the development, construction and sale of condominium units, single family homes or lots. Claims related to dissatisfaction by homeowners and homeowners associations with the construction of condominiums, homes and amenities by the Company and/or the Company’s developer partners in any condominium or subdivision development, or other matters, may result in litigation costs, remediation costs, warranty expenses or settlement costs which could be material to the Company’s reportable discontinued operating income (loss), or its consolidated financial position or cash flows. It would not have any effect on the Company’s income from continuing operations.

Reis, Inc. and two of its subsidiaries (GP LLC and Wellsford Park Highlands Corp. (“WPHC”) (collectively, including Reis, Inc., the “Reis Defendants”)) were the subject of a suit brought by the GP HOA at the Company’s former 259-unit Gold Peak condominium project outside of Denver, Colorado. This suit was filed in District Court in Douglas County, Colorado on October 19, 2010, seeking monetary damages (not quantified at the time) relating to design and construction defects at the Gold Peak project. Tri-Star, the construction manager/general contractor for the project (not affiliated with the Company) and two former senior officers of the Company (Jeffrey H. Lynford, who was also previously a director of the Company, and David M. Strong) were also named as defendants in the suit. In October 2011, experts for the GP HOA delivered a report alleging a cost to repair of approximately $19,000,000. Trial commenced on February 21, 2012 and a jury rendered its verdict on March 13, 2012 finding Reis and GP LLC jointly and severally liable for an aggregate of $18,200,000, plus other costs of approximately $756,000. The jury also found Tri-Star liable as the construction manager/general contractor of the project.

On June 20, 2012, following denial of all of the defendants’ post-trial motions, Reis, GP LLC and WPHC reached a settlement with the GP HOA, providing for a total payment of $17,000,000. Of this amount, $5,000,000 was paid on August 3, 2012 and the remaining $12,000,000 was paid on October 15, 2012, in accordance with the settlement terms. In reaching the decision to settle, the Company’s management and Board considered, among other factors: (1) the amount of the settlement versus the potential for an ultimately greater judgment after appeal, including additional costs and post-judgment interest; (2) the benefits of the clarity of settling the case at this time versus continuing uncertainty; and (3) the strong cash flow generation of Reis Services’s core business.

In connection with the development of Gold Peak, the Company purchased a commercial general liability “WRAP” insurance policy from a predecessor of ACE Westchester (“ACE”) covering the Company (including its subsidiaries) and its former officers, Tri-Star and Tri-Star’s subcontractors. The Company took the position that a total of $9,000,000 (and possibly $12,000,000) of coverage was available for the GP HOA’s claims. ACE took the position that only $3,000,000 of coverage (including defense costs) was provided. The Company filed suit against ACE in District Court in Douglas County, Colorado on January 18, 2012, to cover the GP HOA’s claims, bad faith and other related causes of action. In particular, the Company took the position that the GP HOA’s claims could have been settled for $12,000,000 or less prior to the trial. On November 20, 2014, the Colorado District Court determined that the WRAP policy provided $3,000,000 of coverage and this amount had been eroded by defense costs.

Additionally, the Company made claims against other additional insurance companies under policies maintained by the Company, including the Company’s directors’ and officers’ insurance policy, and against the Company’s former insurance broker. On November 20, 2014, the Colorado District Court determined that the directors’ and officers’ insurance policy had no obligation to the Company for the asserted claims. Separately, on November 20, 2014, a motion for summary judgment by the insurance broker was denied by the Colorado District Court. The Company also brought separate claims against Tri-Star, the Tri-Star subcontractors, the architect and a third party inspector relating to those parties’ actions on the Gold Peak project.

In April 2015, default judgments were entered in the Company’s favor against two subcontractors aggregating approximately $1,218,000; however, the Company believes receipt of such amounts is remote as those entities appear either to be bankrupt or have no assets to satisfy the judgments. There is no financial statement impact related to these default judgments.

In June 2015, the Company entered into settlement agreements with ACE, Tri-Star, certain of the Tri-Star subcontractors and the architect. As a result, a previously scheduled trial for October 2015 was vacated. In July 2015, the Company entered into a settlement agreement with the former insurance broker. As a result, a previously scheduled trial for July 2015 was vacated.

In September 2015, after consideration of a possible appeal of the November 20, 2014 Colorado District Court’s ruling, the Company entered into a settlement agreement with the insurance company related to the directors’ and officers’ insurance policy.

The Company entered into a tolling agreement with the law firm that represented the Reis Defendants in the trial with the GP HOA in September 2013. The tolling agreement postponed the running of the limitation period for the claims by the Company against the law firm related to the GP HOA trial. In November 2015, the Company entered into a settlement agreement with the law firm that represented the Reis Defendants in the GP HOA trial.

In December 2015, after the consideration of risks and costs associated with a pending arbitration proceeding, the Company entered into a settlement agreement with the third party inspector.

As of December 31, 2015, the Company entered into the final settlement agreement related to its Gold Peak recovery efforts, bringing closure to this process. In summary, recovery efforts from the fourth quarter of 2012 through December 31, 2015 have resulted in cash collections aggregating approximately $5,658,000. During the years ended December 31, 2015, 2014 and 2013, the Company had litigation recoveries of approximately $4,839,000, $26,000 and $80,000, respectively, from multiple insurance carriers, trial attorneys, an insurance broker and other responsible parties involved in the design, development, construction and supervision of the Gold Peak project. Such amounts are included in income (loss) from discontinued operations on the consolidated statements of operations.

The Company is not a party to any other litigation that could reasonably be foreseen to be material to the Company.

Other Operating Commitments

At December 31, 2015, the Company is a tenant under three operating leases, two of which are for office space in Midtown Manhattan, New York, both of which expire in September 2016, and a third for office space in White Plains, New York, which expires in June 2023. Rent expense was approximately $2,207,000, $2,082,000 and $1,893,000 for the years ended December 31, 2015, 2014 and 2013, respectively, which includes base rent plus other charges including, but not limited to, real estate taxes and maintenance costs in excess of base year amounts. In connection with one lease, the Company provided a letter of credit through a bank, to the lessor. The letter of credit requirement is approximately $212,000 which is collateralized by a certificate of deposit issued by that bank. The certificate of deposit is included in restricted cash and investments in the consolidated balance sheets at December 31, 2015 and 2014 (see Note 4).

Future minimum lease payments under operating leases at December 31, 2015 are as follows:


For the Year Ended December 31,	Amount

2016	$	1,680,000
2017		926,000
2018		1,069,000
2019		1,092,000
2020		1,107,000
Thereafter		2,780,000

Total	$	8,654,000

The Company has a defined contribution savings plans pursuant to Section 401 of the Internal Revenue Code. The Company matches contributions up to 2% of employees’ salaries, as then defined, for 2015, 2014 and 2013 (calculated as 50% of the employee’s contribution, capped at 4% of the employee’s salary). The Company made contributions to this plan of approximately $259,000, $231,000 and $203,000 for the years ended December 31, 2015, 2014 and 2013, respectively.