7. Commitments and Contingencies

As of September 30, 2012, the Company’s material contractual obligations are as follows (in thousands):



	Total		Remainder of 2012		2013		2014		2015		2016		Thereafter
Contractual obligations (1)
Imputed financing obligation (2)	$	56,181	$	1,682	$	6,825	$	6,994	$	7,165	$	7,345	$	26,170
Leases and other contractual obligations (3)	12,561		5,132		1,818		1,660		1,544		1,049		1,358
Software licenses (4)	2,545		2,106		359		80		—		—		—
Acquisition retention bonuses (5)	40,723		2,770		18,207		18,206		1,540		—		—
Convertible notes	172,500		—		—		172,500		—		—		—
Interest payments related to convertible notes	17,250		4,313		8,625		4,312		—		—		—
Total	$	301,760	$	16,003	$	35,834	$	203,752	$	10,249	$	8,394	$	27,528

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(1)

The above table does not reflect possible payments in connection with uncertain tax benefits of approximately $17.2 million including $8.0 million recorded as a reduction of long-term deferred tax assets and $9.2 million in long-term income taxes payable as of September 30, 2012. As noted below in Note 9, “Income Taxes,” although it is possible that some of the unrecognized tax benefits could be settled within the next 12 months, the Company cannot reasonably estimate the outcome at this time.

(2)

With respect to the imputed financing obligation, the main components of the difference between the amount reflected in the contractual obligations table and the amount reflected on the Condensed Consolidated Balance Sheets are the interest on the imputed financing obligation and the estimated common area expenses over the future periods. Additionally, the amount includes the amended Ohio lease and the amended Sunnyvale lease.


(3)	Leases and other contractual obligations include the Company's current commitment to purchase intellectual property from Elpida Memory, Inc.


(4)	The Company has commitments with various software vendors for non-cancellable license agreements generally having terms longer than one year. The above table summarizes those contractual obligations as of September 30, 2012 which are also presented on the Company’s Condensed Consolidated Balance Sheet under current and other long-term liabilities.

(5)

In connection with recent acquisitions, the Company is obligated to pay retention bonuses to certain employees and contractors, subject to certain eligibility and acceleration provisions including the condition of employment. The remaining $33.3 million of Cryptography Research, Inc. ("CRI") retention bonuses payable on June 3, 2013 and 2014 will be paid in cash or stock at the Company’s election. The portion to be paid in 2012 in the table above includes payments to be made to employees who were affected by the restructuring during the third quarter of 2012. See Note 16, "Restructuring Charges" for further details.

Rent expense was approximately $1.3 million and $3.2 million for the three and nine months ended September 30, 2012, respectively. Rent expense was approximately $0.7 million and $2.0 million for the three and nine months ended September 30, 2011, respectively.

Deferred rent of $0.7 million as of September 30, 2012 was included primarily in other long-term liabilities. Deferred rent of $0.5 million as of December 31, 2011 was included primarily in other long-term liabilities.

Indemnification

The Company enters into standard license agreements in the ordinary course of business. Although the Company does not indemnify most of its customers, there are times when an indemnification is a necessary means of doing business. Indemnification covers customers for losses suffered or incurred by them as a result of any patent, copyright, or other intellectual property infringement or any other claim by any third party arising as result of the applicable agreement with the Company. The maximum amount of indemnification the Company could be required to make under these agreements is generally limited to fees received by the Company.

Several securities fraud class actions, private lawsuits and shareholder derivative actions were filed in state and federal courts against certain of the Company’s current and former officers and directors related to the stock option granting actions. As permitted under Delaware law, the Company has agreements whereby its officers and directors are indemnified for certain events or occurrences while the officer or director is, or was serving, at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s term in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has a director and officer insurance policy that reduces the Company’s exposure and enables the Company to recover a portion of future amounts to be paid. As a result of these indemnification agreements, the Company continues to make payments on behalf of primarily former officers and some current officers. As of September 30, 2012, the Company had made cumulative payments of approximately $32.1 million on their behalf, including $0.1 million in the quarter ended September 30, 2012. As of September 30, 2011, the Company had made cumulative payments of approximately $18.4 million on their behalf, including $0.8 million in the quarter ended September 30, 2011. These payments were recorded under costs of restatement and related legal activities in the condensed consolidated statements of operations.