12. Commitments and Contingencies

Leases

The Company's operating lease obligations result from the lease of land and buildings that comprise the Company's corporate headquarters and manufacturing facilities, leases related to additional manufacturing, office, and warehouse space, leases on Company vehicles, and leases on a variety of office equipment. In prior years, the Company's capital lease obligations resulted from the financing of certain of the Company's equipment. As of December 31, 2013 and 2012 the remaining obligations under the Company’s capital leases was zero.

The term of the lease of the land and buildings that comprise the Company’s corporate headquarters was originally 15 years. During the second quarter of 2010 the Company signed an amendment to the lease on its corporate headquarters extending the lease until 2022. The Company has a deferred rent obligation of $1.7 million as of December 31, 2013 and $1.6 million as of December 31, 2012 recorded on the Company’s Consolidated Balance Sheets, primarily related to the lease on its corporate headquarters. Total rental expense for operating leases was $3.0 million in 2013 and $2.7 million in both 2012 and 2011.

Future minimum operating lease payments under non-cancelable leases as of December 31, 2013 are as follows (in thousands):



	Operating
	Leases
2014	$	2,799
2015		3,031
2016		2,943
2017		2,980
2018		3,010
Thereafter		10,124
Total minimum lease payments	$	24,887

Liability Claims

At December 31, 2013 and 2012 the Company’s unreported loss liability was $1.5 million and $1.7 million, respectively. The related recoverable insurance amounts were $580,000 and $620,000 as of December 31, 2013 and 2012, respectively. The Company accrues its estimate of unreported product and tissue processing liability claims as components of accrued expenses and other long‑term liabilities and records the related recoverable insurance amounts as a component of receivables and other long‑term assets, as appropriate. Further analysis indicated that the liability as of December 31, 2013 could be estimated to be as high as $2.7 million, after including a reasonable margin for statistical fluctuations calculated based on actuarial simulation techniques.

Employment Agreement

The Company has an employment agreement with its Chief Executive Officer (“CEO”) that confers benefits which become payable upon the occurrence of certain events, including the voluntary retirement of the CEO or termination of the CEO’s employment in conjunction with certain change events. As of both December 31, 2013 and 2012 the Company had $2.1 million in accrued expenses and other current liabilities on the Consolidated Balance Sheets representing benefits payable upon the CEO’s voluntary retirement, for which he is currently eligible. The CEO’s current agreement took effect on January 1, 2013 and terminates on December 31, 2015. A payment of $100,000 was made in January 2013 in accordance with the terms of the new agreement.

PerClot Technology

On September 28, 2010 the Company entered into a worldwide distribution agreement (the “Distribution Agreement”) and a license and manufacturing agreement (the “License Agreement”) with SMI of San Jose, California for PerClot, a polysaccharide hemostatic agent used in surgery. The Distribution Agreement contains certain minimum purchase requirements and has a term of 15 years. Following the start of manufacturing and U.S. regulatory approval, CryoLife may terminate the Distribution Agreement and the related minimum purchase requirements and sell PerClot pursuant to the License Agreement. The Company will pay royalties to SMI at stated rates on net revenues of products manufactured under the License Agreement and will pay additional contingent amounts of up to $2.5 million to SMI if certain FDA regulatory and other commercial milestones are achieved. The Company expects to record future contingent payment amounts of up to $2.5 million initially as research and development expense or, after FDA approval or issuance of a patent, as acquired intangible assets.