COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

COMMITMENTS AND CONTINGENCIES

8. COMMITMENTS AND CONTINGENCIES

The Company holds certain rights to market and manufacture all products developed or created under certain research, development and licensing agreements with various entities. In connection with such agreements, the Company has agreed to pay the entities royalties on net product sales. In the years ended December 31, 2012, 2011 and 2010, royalties of $503 thousand, $513 thousand and $515 thousand became payable under these agreements, respectively.

The Company has contracts with suppliers for unconditional annual minimum inventory purchases and milestone obligations to third parties the Company believes are likely to be triggered currently totaling approximately $5.0 million in fiscal 2013, $6.8 million for fiscal 2014, $3.3 million for fiscal 2015 and $3.0 million for fiscal 2016.

The Company has entered into operating leases for its office and research facilities and certain equipment with future minimum payments as of December 31, 2012 as follows (in thousands):

Year Ending December 31,
2013	$	1,975
2014		1,648
2015		1,562
2016		1,545
2017		1,518
Thereafter		8,496
	$	16,744

The Company had rent expense of $1.8 million, $1.8 million and $1.8 million in 2010, 2011 and 2012, respectively.

From time to time, the Company may be involved in litigation relating to claims arising out of its operations. At December 31, 2012, the Company was not a party to any legal proceedings that were expected, individually or in the aggregate, to have a material adverse effect on our business, financial condition or operating results.

The Company's current terms and conditions of sale include a limited warranty that its products and services will conform to published specifications at the time of shipment and a more extensive warranty related to certain of its products. The typical remedy for breach of warranty is to correct or replace any defective product, and if not possible or practical, the Company will accept the return of the defective product and refund the amount paid. Historically, the Company has incurred minimal warranty costs. The Company's warranty reserve on December 31, 2012 was $451 thousand.

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[1] Disclosure of Commitments and Contingencies for the Company.