Note 13.Commitments and Contingencies

Long-Term Contractual Obligations

As of April 30, 2016, aggregate annual required payments over the remaining fiscal year, the next four years and thereafter under our contractual obligations that have long-term components are as follows:


		Three Months	Year Ending July 31,
		Ending July 31,	(Amounts in thousands)
	2016		2017		2018		2019		2020		Thereafter		Total
Maturity of the credit facility	$	—	$	—	$	—	$	132,000	$	—	$	—	$	132,000
Expected interest payments under the credit facility (1)		673		2,693		2,693		1,570		—		—		7,629
Minimum commitments under noncancelable operating leases		1,422		5,163		3,918		3,055		2,026		4,553		20,137
Compensation agreements		1,350		8,562		616		498		498		961		12,485
Contingent consideration (2)		—		—		—		36		132		40		208
Assumed contingent liability (3)		1		19		93		188		246		719		1,266
Contingent guaranteed obligation (4)		90		197		147		135		—		—		569
Other long-term obligations		101		273		205		98		12		3		692
Total contractual obligations	$	3,637	$	16,907	$	7,672	$	137,580	$	2,914	$	6,276	$	174,986

(1)

The expected interest payments under our credit facility reflect an interest rate of 2.04%, which was our weighted average interest rate on outstanding borrowings at April 30, 2016.

(2)

These future potential payments of contingent consideration relate to the Jet Prep Acquisition, as further explained below, and are reflected in the April 30, 2016 Condensed Consolidated Balance Sheet at its net present value of $148,000 using a discount rate of 12.6%.

(3)

These future potential payments of an assumed contingent liability relate to the Jet Prep Acquisition, as further explained below, and are reflected in the April 30, 2016 Condensed Consolidated Balance Sheet at its net present value of $1,138,000 using a discount rate of 2.5%.

(4)

These future potential payments of a contingent guaranteed obligation relate to Cantel Medical (UK), as further explained below, and are reflected in the April 30, 2016 Condensed Consolidated Balance Sheet at its net present value of $569,000 using a discount rate of 10.1%.

Operating Leases

Minimum commitments under operating leases include minimum rental commitments for our leased manufacturing facilities, warehouses, office space and equipment.

Contingent Liabilities

In relation to the acquisition of Jet Prep, we have recorded at April 30, 2016 a $148,000 liability for the estimated fair value of contingent consideration payable to the sellers and a $1,138,000 liability for the estimated fair value of an assumed contingent obligation payable to the Israeli Government, as further described in Note 7 to the Condensed Consolidated Financial Statements, which will be payable based on future sales of Jet Prep’s business (above a minimum threshold with respect to the contingent consideration liability). Additionally, in connection with Cantel Medical (UK), we assumed a contingent guaranteed obligation to reimburse an endoscope service company for endoscope repair costs it incurs when servicing its customers’ endoscopes that are damaged by one of Cantel Medical (UK)’s discontinued endoscope reprocessing machine models, which has an estimated fair value of $569,000 at April 30, 2016, as further described in Note 7 to the Condensed Consolidated Financial Statements. As such, the estimates of the annual required payments, as well as the fair value of these contingent liabilities are subjective in nature and highly dependent on future sales projections. Additionally, since we will be continually re-measuring these liabilities at each balance sheet date and recording changes in the respective fair values through our Condensed Consolidated Statements of Income, we may potentially have earnings volatility in our future results of operations until the completion of the seven year period with respect to the contingent consideration liability and until the assumed contingent obligation and contingent guaranteed obligation are satisfied, or until the sales of the Jet Prep products no longer exist.

Compensation Agreements

We have previously entered into various severance contracts with executives of the Company, including our Corporate executive officers and our subsidiary Chief Executive Officers, which define certain compensation arrangements relating to various employment termination scenarios, and multi-year employment agreements with certain executive officers of businesses we have acquired. Additionally, in March 2016 we entered into a succession plan agreement due to the planned retirement of our Chief Executive Officer in which he will be succeeded as Chief Executive Officer on July 31, 2016 and remain employed as a Senior Advisor until his October 15, 2016 retirement date. This succession plan agreement requires future annual payments to our Chief Executive Officer beginning in fiscal 2017 for transition-related services. The majority of those future payments are being recorded in general and administrative expenses from March 17, 2016 through his October 15, 2016 retirement date.

Other Long-Term Obligations

In relation to the IMS Acquisition on November 3, 2014, we assumed an $843,000 liability to the Bank of Italy as part of funding provided by an Italian government agency, of which $187,000 and $656,000 were recorded in accrued expenses and other long-term liabilities, respectively. Such amount was a portion of the financial support obtained from the Italian government’s Ministry of Education, Universities and Research to fund research and development activity relating to IMS’s automated endoscope reprocessors. The liability is payable in semi-annual installments, bears interest at 0.25% per annum and has a maturity date of January 1, 2019. At April 30, 2016, $510,000 is outstanding, of which $169,000 is recorded in accrued expense and $341,000 is recorded in other long-term liabilities.

Additionally, other long-term obligations include deferred compensation arrangements for certain former Medivators directors and officers and is recorded in other long-term liabilities.