11.

Commitments and Contingencies

Leasing Arrangements

The Company’s headquarters facility is located in Bedford, Massachusetts, where the Company leases approximately

134,000

square feet of administrative, manufacturing, and R&D space. This lease was entered into on

January

2007,

and the lease commenced on

May

2007

for an initial term of

ten

and

one

-half years. On

February

2017,

the Company finalized the exercise of its

first

option under the lease to extend the terms from

November

2017

through

October

31,

2022,

including the determination of a new annual base rent of

$1.5

million which is included in the future lease commitments table below. No other terms of the Lease were altered. The Company has an option under the lease to extend its terms for up to

three

additional periods subject to the condition that the Company notify the landlord that the Company is exercising each option at least

one

year prior to the expiration of the original or then current term. The next

two

renewal options each extend the term an additional

five

years, while the final renewal option extends the term by

six

years. The Company’s administrative and R&D personnel moved into the Bedford facility in

November

2007.

The Bedford facility was fully validated and approved by applicable regulatory authorities in

2012.

October

2015,

Anika S.r.l, entered into a build-to-suit lease agreement with Consorzio Zona Industriale E Porto Fluviale di Padova (“ZIP”), as landlord, pursuant to which Anika S.r.l. will lease a new European headquarters facility, consisting of approximately

33,000

square feet of general office, research and development, training, and warehousing space located in Padova, Italy. The Lease has an initial term of

fifteen

years, which is expected to commence during the

first

quarter of

2017

once construction of the facility is completed. The Lease will automatically renew for up to

three

additional

six

-year terms, subject to certain terms and conditions. The Company has the ability to withdraw from this lease subject to certain financial penalties after

six

years and with no penalties after the

ninth

year. Beginning on the commencement date, the Lease provides for an initial yearly rent of approximately

$0.3

million.

Construction of the new facility began in the

first

quarter of

2016

and is expected to be completed in early

2017.

During the period of construction, the Company is considered the deemed owner of the facility and as a result at

December

31,

2016

has recorded a construction-in-process asset of approximately

$1.7

million, and an offsetting facility lease obligation associated with the new facility.

Anika S.r.l. leases approximately

28,000

square feet of laboratory, warehouse, and office space in Abano Terme, Italy. On

December

29,

2016

Anika S.r.l. notified the landlord of its intention to terminate the lease agreement originally executed on

December

30,

2009

for the facility that serves as the current headquarters for Anika S.r.l. as of

March

31,

2017.

Rental expense in connection with the various facility leases totaled

$1.3

million,

$1.3

million and

$1.4

million for the year ended

December

31,

2016,

2015

and

2014,

respectively.

The Company’s future lease commitments as of

December

31,

2016

are as follows:

2017	$	1,454
2018		1,878
2019		1,858
2020		1,888
2021 and thereafter		4,759
Total	$	11,837

Warranty and Guarantor Arrangements

In certain of its contracts, the Company warrants to its customers that the products it manufactures conform to the product specifications as in effect at the time of delivery of the specific product. The Company

may

also warrant that the products it manufactures do not infringe, violate or breach any U.S. patent or intellectual property rights, trade secret, or other proprietary information of any

third

party. On occasion, the Company contractually indemnifies its customers against any and all losses arising out of, or in any way connected with, any claim or claims of breach of its warranties or any actual or alleged defect in any product caused by the negligence or acts or omissions of the Company. The Company maintains a products liability insurance policy that limits its exposure to these risks. Based on the Company’s historical activity, in combination with its liability insurance coverage, the Company believes the estimated fair value of these indemnification agreements is immaterial. The Company has

accrued warranties at

December

31,

2016

2015,

respectively, and has no history of claims paid.

Legal Proceedings

July

2010,

Genzyme Corporation filed a complaint against the Company in the United States District Court for the District of Massachusetts seeking unspecified damages and equitable relief. The complaint alleged that the Company infringed U.S. Patent No.

5,143,724

by manufacturing MONOVISC in the United States for sale outside the United States and would infringe U.S. Patent Nos.

5,143,724

and

5,399,351

if the Company manufactured and sold MONOVISC in the United States. On

March

2014,

Genzyme and the Company filed a joint motion to lift the stay in Genzyme’s lawsuit against the Company and to dismiss with prejudice all of Genzyme’s claims. On

March

10,

2014,

the District Court granted the motion to dismiss all of Genzyme’s claims against the Company with prejudice, and the case was terminated.

The Company is involved in various other legal proceedings arising in the normal course of business. Although the outcomes of these other legal proceedings are inherently difficult to predict, the Company does not expect the resolution of these other legal proceedings to have a material adverse effect on its financial position, results of operations, or cash flow.