Commitments and Contingencies

Capital Lease Obligation

During fiscal year 2015, the Company was leasing the building and the related land on its Chelmsford, Massachusetts campus. The assets and the associated capital lease obligation were recorded on the Company's Consolidated Balance Sheets.

On September 30, 2015, the Company purchased the building and the related land for a total price of $8.4 million and derecognized the associated capital lease obligation of $7.8 million. The difference of $0.6 million between the purchase price of $8.4 million and the capital lease obligation of $7.8 million was recorded as an adjustment to the acquisition cost of the building and land of $6.6 million and $2.3 million, respectively, which were classified as "Property, plant and equipment, net" in the Company's Consolidated Balance Sheets as of September 30, 2015. Depreciation expense related to the building was computed using the straight-line method over the estimated useful life of the asset. Accumulated amortization related to the building was $0.2 million at September 30, 2015.

Operating Leases Commitments

The Company leases manufacturing and office facilities and certain equipment under non-cancelable operating leases that expire throughout 2020. Rent expense under the operating leases, excluding costs recorded as a component of restructuring charges, was $4.9 million, $6.5 million and $8.2 million, respectively, for the fiscal years ended September 30, 2016, 2015 and 2014.

The Company leases approximately 85,000 square feet of space in Indianapolis, Indiana to accommodate its sample storage, sales and support functions. The initial lease term expires in July 2017 and may be extended at the Company's option for two successive terms of five years each subject to the terms and conditions of the lease. In addition to the Indianapolis facility, the Company leases approximately 45,000 square feet of space in Fremont, California and Manchester, UK to accommodate its manufacturing, research and development, and sales and support functions. The initial term for the Fremont, California facility expires in August 2018 and may be extended at the Company's option for five years subject to the terms and conditions of the lease. The initial term for the Manchester, UK facility expires in December 2019 and may be extended at the Company's option for five years subject to the terms and conditions of the lease.

Future minimum lease commitments on non-cancelable operating leases and scheduled sublease payments as of September 30, 2016 are as follows (in thousands):



Year Ended September 30,	Gross Payments		Scheduled Sublease Payments		Net Payments
2017	$	3,390	$	54	$	3,336
2018	2,118		54		2,064
2019	926		9		917
2020	104		—		104
2021	—		—		—
Thereafter	—		—		—
	$	6,538	$	117	$	6,421

The Company utilizes a third party to manage its manufacturing operations in Mexico. As a part of this arrangement, the Company makes and guarantees the monthly payments for a lease of its Mexico facility which expires in December 2018. The remaining payments under the lease were approximately $0.9 million at September 30, 2016.

Letters of Credit

At September 30, 2016 and 2015, the Company had $2.0 million and $3.5 million, respectively, of letters of credit outstanding related primarily to customer advances and other performance obligations. These arrangements guarantee the refund of advance payments received from our customers in the event that the product is not delivered or warranty obligations are not fulfilled in accordance with the contract terms. These obligations could be called by the beneficiaries at any time before the expiration date of the particular letter of credit if the Company fails to meet certain contractual requirements. None of these obligations were called during fiscal years ended September 30, 2016 and 2015, and the Company currently does not anticipate any of these obligations to be called in the near future.

Purchase Commitments

The Company has non-cancelable contracts and purchase orders for inventory of $101.4 million at September 30, 2016.

Contingencies

During the fourth quarter of fiscal year 2016, the Company discovered that it inadvertently failed to register on Form S-8 with the Securities and Exchange Commission certain shares of common stock previously authorized for issuance by the Company’s Board of Directors and stockholders under the Company’s 1995 Employee Stock Purchase Plan, as amended (the “ESPP”). As a result, certain purchasers of common stock under the ESPP may have the right to rescind their purchases for an amount equal to the purchase price paid for the shares, plus interest from the date of purchase, limited to the shares purchased in the last twelve months, which is the applicable federal statute of limitations, and still held by the original purchasers. These shares have been treated as issued and outstanding for financial reporting purposes.

As of September 30, 2016, there were approximately 115,793 shares of common stock issued under the ESPP during fiscal year 2016 and held by the original purchasers of such shares which may be subject to these rescission rights. Of these, approximately 53,800 shares were originally purchased for $8.00 per share and the remaining 61,993 shares were originally purchased for $8.02 per share. If holders of all of these shares seek to rescind their purchases, the Company could be required to make aggregate payments of up to approximately $950,000, which includes estimated statutory interest. The Company may also be subject to civil and other penalties by regulatory authorities as a result of the potential failure to register these shares. The Company does not believe that the failure to register the shares on a Form S-8 or a potential rescission offer, if any, will have a material impact on its consolidated financial statements.

The Company is subject to various legal proceedings, both asserted and unasserted, that arise in the ordinary course of business. The Company cannot predict the ultimate outcome of such legal proceedings or in certain instances provide reasonable ranges of potential losses. However, as of the date of this report, the Company believes that none of these claims will have a material adverse effect on its consolidated financial position or results of operations. In the event of unexpected subsequent developments and given the inherent unpredictability of these legal proceedings, there can be no assurance that the Company's assessment of any claim will reflect the ultimate outcome, and an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company's consolidated financial position or results of operations in particular quarterly or annual periods.