Commitments and Contingencies

On December 15, 2009, the Company entered into a lease agreement for approximately 125,000 square feet of office space located at 1050 Enterprise Way in Sunnyvale, California commencing on July 1, 2010 and expiring on June 30, 2020. The office space is used for the Company’s corporate headquarters, as well as engineering, marketing and administrative operations and activities. The annual base rent for these leases includes certain rent abatement and increases annually over the lease term. The Company has two options to extend the lease for a period of 60 months each and a one-time option to terminate the lease after 84 months in exchange for an early termination fee. Pursuant to the terms of the lease, the landlord agreed to reimburse the Company approximately $9.1 million, which was received by the year ended December 31, 2011. The Company recognized the reimbursement as an additional imputed financing obligation as such payment from the landlord is deemed to be an imputed financing obligation. On November 4, 2011, to better plan for future expansion, the Company entered into an amended lease for its Sunnyvale facility for approximately an additional 31,000-square-foot space commencing on March 1, 2012 and expiring on June 30, 2020. Additionally, a tenant improvement allowance to be provided by the landlord was approximately $1.7 million. On September 29, 2012, the Company entered into a second amended Sunnyvale lease to reduce the tenant improvement allowance to approximately $1.5 million. On January 31, 2013, the Company entered into a third amendment to the Sunnyvale lease to surrender the 31,000 square-foot space from the first amendment back to the landlord and recorded a total charge of $2.0 million related to the surrender of the amended lease.

On March 8, 2010, the Company entered into a lease agreement for approximately 25,000 square feet of office and manufacturing areas, located in Brecksville, Ohio. The office area is used for the LDT group’s engineering activities while the manufacturing area is used for the manufacture of prototypes. This lease was amended on September 29, 2011 to expand the facility to approximately 51,000 total square feet and the amended lease will expire on July 31, 2019. The Company has an option to extend the lease for a period of 60 months.

The Company undertook a series of structural improvements to ready the Sunnyvale and Brecksville facilities for its use. Since these improvements were considered structural in nature and the Company was responsible for any cost overruns, for accounting purposes, the Company was treated in substance as the owner of each construction project during the construction period. At the completion of each construction, the Company concluded that it retained sufficient continuing involvement to preclude de-recognition of the building under the FASB authoritative guidance applicable to the sale leasebacks of real estate. As such, the Company continues to account for the buildings as owned real estate and to record an imputed financing obligation for its obligations to the legal owners.

Monthly lease payments on these facilities are allocated between the land element of the lease (which is accounted for as an operating lease) and the imputed financing obligation. The imputed financing obligation is amortized using the effective interest method and the interest rate was determined in accordance with the requirements of sale leaseback accounting. For the years ended December 31, 2013, 2012 and 2011, the Company recognized in its Consolidated Statements of Operations $4.4 million, $4.1 million, and $3.3 million, respectively, of interest expense in connection with the imputed financing obligation on these facilities. At December 31, 2013 and 2012, the imputed financing obligation balance in connection with these facilities was $39.7 million and $45.9 million, respectively, which was primarily classified under long-term imputed financing obligation.

As of December 31, 2013 and 2012, the Company capitalized $40.3 million and $48.8 million in property, plant and equipment based on the estimated fair value of the portion of the pre-construction shell, construction costs related to the build-out of the facilities and capitalized interest during construction period. At the end of the initial lease term, should the Company decide not to renew the lease, the Company would reverse the equal amounts of the net book value of the building and the corresponding imputed financing obligation.

In November 2011, the Company entered into a lease agreement for approximately 26,000 square feet of office space in San Francisco, California to be used for CRI's office space and is treated as an operating lease. This lease has a commencement date of February 1, 2012 and a lease term of 75 months from the commencement date. The annual base rent includes certain rent abatement and increases annually over the lease term.

In connection with the June 3, 2011 acquisition of CRI, the Company is obligated to pay a retention bonus to certain CRI employees and contractors, subject to certain eligibility and acceleration provisions including the condition of employment, in three equal amounts of approximately $16.7 million. The first and second payments were paid in cash during the second quarter of 2012 and 2013, respectively, and the remaining payment payable on June 3, 2014 will be paid in cash or stock at the Company’s election. As of December 31, 2013, the remaining retention bonus commitment is $16.9 million and may be forfeited in part or whole by the covered employees and contractors upon voluntary departure from employment or discontinuation of services. Any amounts forfeited will be accelerated and paid by the Company to a designated charity. See Note 5, “Acquisitions,” for additional information regarding the acquisition of CRI.

On June 29, 2009, the Company entered into an Indenture with U.S. Bank, National Association, as trustee, relating to the issuance by the Company of $150.0 million aggregate principal amount of the 2014 Notes. On July 10, 2009, an additional $22.5 million in aggregate principal amount of 2014 Notes were issued as a result of the underwriters exercising their overallotment option. The aggregate principal amount of the 2014 Notes outstanding as of December 31, 2013 and 2012 was $172.5 million, offset by unamortized debt discount of $8.5 million and $24.9 million, respectively, in the accompanying consolidated balance sheets. The debt discount is currently being amortized over the remaining 6 months until maturity of the 2014 Notes on June 15, 2014. See Note 11, “Convertible Notes,” for additional details.

On August 16, 2013, the Company entered into an Indenture with U.S. Bank, National Association, as trustee, relating to the issuance by the Company of $138.0 million aggregate principal amount of the 2018 Notes. The aggregate principal amount of the 2018 notes as of December 31, 2013 was $138.0 million, offset by unamortized debt discount of $28.4 million in the accompanying consolidated balance sheet. The unamortized discount related to the 2018 Notes is being amortized to interest expense using the effective interest method over the remaining 56 months until maturity of the 2018 Notes on August 15, 2018. See Note 11, “Convertible Notes,” for additional details.

As of December 31, 2013, the Company’s material contractual obligations are as follows (in thousands):



	Total		2014		2015		2016		2017		2018		Thereafter
Contractual obligations (1)
Imputed financing obligation (2)	$	40,260	$	5,874	$	6,010	$	6,156	$	6,302	$	6,447	$	9,471
Leases and other contractual obligations	8,456		3,753		2,108		1,237		1,018		340		—
Software licenses (3)	8,715		5,477		2,865		373		—		—		—
Acquisition retention bonuses (4)	18,083		18,013		70		—		—				—
Convertible notes	310,500		172,500		—		—		—		138,000		—
Interest payments related to convertible notes	12,076		5,865		1,553		1,553		1,553		1,552		—
Total	$	398,090	$	211,482	$	12,606	$	9,319	$	8,873	$	146,339	$	9,471

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(1)

The above table does not reflect possible payments in connection with uncertain tax benefits of approximately $18.8 million including $12.6 million recorded as a reduction of long-term deferred tax assets and $6.2 million in long-term income taxes payable, as of December 31, 2013. As noted below in Note 17, “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 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)	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 December 31, 2013 which are also presented on the Company’s Consolidated Balance Sheet under current and other long-term liabilities.


(4)	In connection with 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 $16.9 million of CRI retention bonuses payable on June 3, 2014 will be paid in cash or stock at the Company’s election.

Rent expense was approximately $3.1 million, $4.1 million and $2.7 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Indemnifications

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. Indemnifications cover customers for losses suffered or incurred by them as a result of any patent, copyright, or other intellectual property infringement claim by any third party arising as result of the applicable agreement with the Company. The Company generally attempts to limit the maximum amount of indemnification that the Company could be required to make under these agreements, to the amount of 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 December 31, 2013 and 2012, the Company had made cumulative payments of approximately $32.2 million and $32.2 million, respectively, on their behalf. These payments were recorded under costs of restatement and related legal activities in the consolidated statements of operations. Also, in 2011, the Company reached a settlement agreement that resolved the matter captioned Stuart J. Steele, et al. v. Rambus Inc., et al., where the Company agreed to settle the claims against it and the individual defendants for approximately $10.9 million which was recorded under costs of restatement and related legal activities in the consolidated statements of operations. As of December 31, 2013, the Company has cumulatively received $12.3 million from insurance settlements related to the defense of the Company, its directors and its officers which were recorded under costs of restatement and related legal activities in the consolidated statements of operations. During the year ended December 31, 2013, no insurance settlements were received.