8. Commitments and Contingencies Commitments: Leases The Company and its subsidiary lease certain manufacturing, laboratory and office facilities. The lease provides for the Company to pay its allocated share of insurance, taxes, maintenance and other costs of the leased property. Under the agreement, MTI Instruments has an option to terminate the lease as of December 1, 2016. If MTI Instruments terminates the lease prior to November 2019, MTI Instruments is required to reimburse the landlord for all unamortized costs that the landlord incurred for renovations to the leased space in conjunction with the lease renewal. Future minimum rental payments required under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) as of March 31, 2016 are: $169 thousand remaining in 2016, $227 thousand in 2017, $221 thousand in 2018 and $207 thousand in 2019. Warranties Product warranty liabilities are included in ?Accrued liabilities? in the Condensed Consolidated Balance Sheets. Below is a reconciliation of changes in product warranty liabilities: (Dollars in thousands) Three Months Ended March 31, 2016 2015 Balance, January 1 $ 16 $ 17 Accruals for warranties issued 3 4 Settlements made (in cash or in kind) (2 ) (2 ) Balance, end of period $ 17 $ 19 Employment Agreement The Company has an employment agreement with one employee that provides certain payments upon termination of employment under certain circumstances, as defined in the agreement. As of March 31, 2016, the Company?s potential minimum obligation to this employee was approximately $67 thousand. Contingencies: Legal We are subject to legal proceedings, claims and liabilities which arise in the ordinary course of business. When applicable, we accrue for losses associated with legal claims when such losses are probable and can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change. Legal fees are charged to expense as they are incurred.