DBTK » Topics » Note G - Commitments and Contingencies

This excerpt taken from the DBTK 10-K filed Mar 30, 2007.
Note G — Commitments and Contingencies
[1] Leases:
In September 2001, the Company entered into a lease agreement for its offices in New Jersey which expires in 2011. The Company entered into a lease during 2001 for its office in Indiana which expires in 2010. In March 2003, the Company entered into a sublease agreement for an office in Massachusetts which expired in 2006. The lease was extended through February 2008. The Company has a lease agreement for its offices in Paris, France which expires



Notes to Consolidated Financial Statements — (Continued)

in 2016 with the Company option to terminate in 2009 and Worcester, United Kingdom which expires in 2009 with the Company option to terminate in 2008. Future minimum annual payments are as follows:
Year Ending December 31,
  $ 1,679  
  $ 1,656  
  $ 1,557  
  $ 1,093  
  $ 418  
    $ 6,403  
Rent expense under operating leases amounted to approximately $1,732, $1,538 and $1,405 for the years ended 2006, 2005 and 2004, respectively.
Rent expense is calculated by amortizing total rental payments (net of any rental abatements, allowances and other rental concessions), on a straight-line basis, over the lease term. Accordingly, rent expense charged to operations differs from rent paid resulting in the Company recording deferred rent.
[2] Litigation:
In May 2003, a provider of information storage systems (“Plaintiff”), filed a complaint in the State of California alleging that the Company infringed certain of its patents. In December 2005, the Company and Plaintiff entered into a settlement agreement (the “Settlement Agreement”) wherein all claims and counterclaims were dismissed with prejudice. Under the terms of the Settlement Agreement, the Company made an initial payment to Plaintiff of $3,760 and further agreed to make additional minimum payments aggregating $2,000 which the Company can use towards the purchase or resale of Plaintiff’s products over 4 years. This annual payment obligation is collateralized by a letter of credit. As the Company has the ability and intent to acquire inventory or fixed assets for the $2,000, no accrual of this amount was made at settlement. The Company acquired $500 worth of computer equipment from the plaintiff in 2006, which was subsequently paid in January 2007.
Included in legal fees and settlement costs for the years ended December 31, 2006, 2005 and 2004 are costs of $0, $5,671 and $1,755, respectively. As of December 31, 2005, the Company had accrued the initial settlement payment and legal costs of $3,860, which were included in accounts payable and accrued expenses. The initial settlement payment of $3,760 was paid in January 2006.
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