6. Commitments and contingencies:

Capital leases—fiber lease agreements

The Company has entered into lease agreements with numerous providers of dark fiber primarily under 15-20 year IRUs typically with additional renewal terms. Once the Company has accepted the related fiber route, leases that meet the criteria for treatment as capital leases are recorded as a capital lease obligation and an IRU asset. The interest rate used in determining the present value of the aggregate future minimum lease payments is the lessee's incremental borrowing rate for the lease term. The future minimum payments (principal and interest) under these agreements are as follows (in thousands):

For the year ending December 31,
2017	$	21,161
2018		19,846
2019		19,609
2020		19,593
2021		19,137
Thereafter		199,798

Total minimum lease obligations		299,144
Less—amounts representing interest		(157,183	)

Present value of minimum lease obligations		141,961
Current maturities		(6,626	)

Capital lease obligations, net of current maturities	$	135,335

Gains on capital lease terminations

In March 2015 the Company elected to terminate certain IRU capital lease obligations in Spain. The Company obtained alternative fiber to serve its customers in Spain. Under its estimate of the termination provisions of the related contracts the Company has recorded an estimated termination liability of $8.1 million included in accrued and other current liabilities. The difference between the remaining carrying amount of the related IRU capital lease liabilities ($29.9 million), the remaining net book value of the IRU assets ($10.0 million) and the termination liability and amounts due through the termination date was recorded as a gain on capital lease terminations of $10.1 million in 2015.

In July 2015, the Company settled a dispute for the payment of the remaining balances for certain IRU capital lease obligations in Europe. The IRU assets were fully depreciated in 2012 when the related fiber was replaced and was no longer used by the Company. The difference between the remaining net present value of the related IRU capital lease obligations ($1.8 million) and the settlement liability ($0.4 million) was recorded as a $1.4 million gain on capital lease terminations in 2015.

Current and potential litigation

In accordance with the accounting guidance for contingencies, the Company accrues its estimate of a contingent liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Where it is probable that a liability has been incurred and there is a range of expected loss for which no amount in the range is more likely than any other amount, the Company accrues at the low end of the range. The Company reviews its accruals at least quarterly and adjusts them to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter. The Company has taken certain positions related to its obligations for leased circuits for which it is reasonably possible could result in a loss of up to $2.4 million in excess of the amount accrued at December 31, 2016.

In December 2011, certain former sales employees of the Company filed a collective action against the Company in the United States District Court, Southern District of Texas, Houston Division alleging misclassification of the Company's sales employees throughout the United States in violation of the Fair Labor Standards Act. The lawsuit sought to recover pay for allegedly unpaid overtime and other damages, including attorney's fees. In March 2014, the judge de-certified the collective action. Each of the former employees that opted-in to the collective action retained the right to file an individual action. Approximately 70 former employees did so. The Company has settled a number of the cases that were filed and made the required settlement payments. Currently, only one case in California remains (Ambrosia v. Cogent Communications, Inc. in the U. S. District Court for the Northern District of California). The parties have agreed to a settlement under which Cogent will pay approximately $3.1 million to settle the claims. The $3.1 million proposed settlement, which has been accrued at December 31, 2016 and recorded in selling, general and administrative expenses, is subject to approval by the court and individual plaintiffs will be able to opt out of the settlement if they wish and pursue claims separately.

In the ordinary course of business the Company is involved in other legal activities and claims. Because such matters are subject to many uncertainties and the outcomes are not predictable with assurance, the liability related to these legal actions and claims cannot be determined with certainty. Management does not believe that such claims and actions will have a material impact on the Company's financial condition or results of operations. Judgment is required in estimating the ultimate outcome of any dispute resolution process, as well as any other amounts that may be incurred to conclude the negotiations or settle any litigation. Actual results may differ from these estimates under different assumptions or conditions and such differences could be material.

Operating leases

The Company leases office space, network equipment sites, and data center facilities under operating leases. In certain cases the Company enters into operating lease commitments for fiber. Future minimum annual payments under these arrangements are as follows (in thousands):

For the year ending December 31,
2017	$	33,125
2018		24,455
2019		21,320
2020		18,050
2021		14,896
Thereafter		44,264

	$	156,110

Expenses related to these arrangements were $34.6 million in 2016, $38.2 million in 2015 and $39.1 million in 2014.

Unconditional purchase obligations

Unconditional purchase obligations for equipment and services totaled $5.6 million at December 31, 2016. As of December 31, 2016, the Company had also committed to additional dark fiber IRU capital and operating lease agreements totaling $21.5 million in future payments to be paid over periods of up to 20 years. These obligations begin when the related fiber is accepted, which is generally expected to occur in 2017. Future minimum payments under these obligations are $10.6 million, $0.8 million, $0.9 million, $0.9 million and $0.9 million for the years ending December 31, 2017 to December 31, 2021, respectively, and $13.0 million, thereafter.

Defined contribution plan

The Company sponsors a 401(k) defined contribution plan that provides for a Company matching payment. The Company matching payments were $0.6 million for 2016, $0.6 million for 2015 and $0.5 million 2014 and were paid in cash.