Digital River 2006 Annual Report Download - page 99

the time of acquisition. If these earnings were to be distributed, the income tax liability would be
approximately $4.9 million.
8. Commitments and Contingencies:
Leases
We currently have 34 facility leases in addition to leasing certain computer equipment under non-
cancelable operating leases. Total rent expense, including common area maintenance charges, recognized under
all leases was $4.3 million, $3.0 million and $2.4 million for the years ended December 31, 2006, 2005 and
2004, respectively. The minimum annual rents under long-term leases at December 31, 2006, were as follows
(in thousands):
Year Ending December 31, Lease Obligations
2007 ........................................................... $ 3,964
2008 ........................................................... 2,893
2009 ........................................................... 1,395
2010 ........................................................... 850
2011 ........................................................... 362
Thereafter ....................................................... 5,306
Total future minimum obligations...................................... $14,770
Litigation
We are subject to legal proceedings, claims and litigation arising in the ordinary course of business.
While the final outcome of these matters is currently not determinable, we believe there is no litigation
pending against us that is likely to have, individually or in the aggregate, a material adverse effect on our
consolidated financial position, results of operation or cash flows. Because of the uncertainty inherent in
litigation, it is possible that unfavorable resolutions of these lawsuits, proceedings and claims could exceed the
amount we have currently reserved for these matters.
Third parties have from time-to-time claimed, and others may claim in the future, that we have infringed
their intellectual property rights. We have been notified of several potential patent disputes, and expect that we
will increasingly be subject to patent infringement claims as our services expand in scope and complexity. We
have in the past been forced to litigate such claims. We may also become more vulnerable to third-party
claims as laws, such as the Digital Millennium Copyright Act, the Lanham Act and the Communications
Decency Act are interpreted by the courts and as we expand geographically into jurisdictions where the
underlying laws with respect to the potential liability of online intermediaries like ourselves are either unclear
or less favorable. These claims, whether meritorious or not, could be time consuming and costly to resolve,
cause service upgrade delays, require expensive changes in our methods of doing business, or could require us
to enter into costly royalty or licensing agreements.
Indemnification Provisions
In the ordinary course of business we have included limited indemnification provisions in certain of our
agreements with parties with whom we have commercial relations. Under these contracts, we generally
indemnify, hold harmless and agree to reimburse the indemnified party for losses suffered or incurred by the
indemnified party in connection with claims by any third party with respect to our domain names, trademarks,
logos and other branding elements to the extent that such marks are applicable to our performance under the
subject agreement. In a limited number of agreements, including agreements under which we have developed
technology for certain commercial parties, we have provided an indemnity for other types of third-party
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DIGITAL RIVER, INC.
Notes to Consolidated Financial Statements — (Continued)