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OTHER COMMITMENTS AND CONTINGENCIES
 12 Months Ended
Dec. 31, 2013
Notes to Financial Statements  
NOTE 13. OTHER COMMITMENTS AND CONTINGENCIES

Property and Rental Agreements

 

We were obligated under an operating lease for a manufacturing and warehouse facility in St. Petersburg, Florida which lease required monthly payments of approximately $14,000, and expired on October 31, 2013. We also lease a separate warehouse facility in Clearwater (under a month-to-month arrangement requiring monthly payments of approximately $1,600).

 

The following is a schedule of approximate future minimum lease payments under operating leases as of December 31, 2013 (in thousands):

 

2014   $ 12  
2015     --  
         
         
Total   $ 12  

  

Rent expense for the years ended December 31, 2013, 2012 and 2011 approximated $228,000, $256,000 and $256,000, respectively.

 

Purchase Commitments

 

At December 31, 2013, we had purchase commitments for inventories totaling approximately $3.1 million, substantially all of which is expected to be purchased by the end of 2014.

 

Employment Agreements

 

At December 31, 2013, we were obligated under three employment agreements which have expiration dates between June 2015 and December 2016. Approximate future minimum payments under these agreements are as follows as of December 31, 2013 (in thousands):

 

2014   $ 1,316  
2015     786  
2016     216  
         
Total   $ 2,318  

 

At December 31, 2013, employment contracts with Mr. Makrides, Mr. Gershon, Mr. Saron, and Mr. Citronowicz, which are set to expire in December 2016 for Mr. Makrides and December 31, 2015 for the others, contain an automatic extension for a period of one year after the initial term unless we provide the executives with appropriate 60 days written notice pursuant to the contracts.  The employment agreements provide, among other things, that the executive may be terminated as follows:

 

  (a) Upon the death of the executive, in which case the executive’s estate shall be paid the basic annual compensation due the employee pro-rated through the date of death.

 

  (b) By the resignation of the executive at any time upon at least thirty (30) days prior written notice to Bovie in which case Bovie shall be obligated to pay the employee the basic annual compensation due him pro-rated to the effective date of termination.

 

  (c) By Bovie, “for cause” if during the term of the employment agreement the employee violates the non-competition provisions of his employment agreement, or is found guilty in a court of law of any crime of moral turpitude in which case the contract would be terminated and provisions for future compensation forfeited.

 

  (d) By Bovie, without cause, with the majority approval of the Board of Directors, for Mr. Makrides, Mr. Gershon, Mr. Saron, and Mr. Citronowicz at any time upon at least thirty (30) days prior written notice to the executive. In this case Bovie shall be obligated to pay the executive compensation in effect at such time, including all bonuses, accrued or prorated, and expenses up to the date of termination. Thereafter for Messrs Makrides, Saron, and Citronowicz for the period remaining under the contract, Bovie shall pay the executive the salary in effect at the time of termination payable weekly until the end of their contract.

 

  (e) If Bovie fails to meet its obligations to the executive on a timely basis, or if there is a change in the control of Bovie, the executive may elect to terminate his employment agreement. Upon any such termination or breach of any of its obligations under the employment agreement, Bovie shall pay Mr. Makrides, Mr. Saron and Mr. Citronowicz a lump sum severance equal to three times the annual salary and bonus in effect the month preceding such termination or breach as well as any other sums which may be due under the terms of the employment agreement up to the date of termination. Mr. Gershon shall be paid two times his annual salary and bonus in effect the month preceding such termination or breach as well as any other sums which may be due under the terms of the employment agreement up to the date of termination.

 

We have an employment contract with Mr. Pickett to serve as Chief Financial Officer which has a current expiration date of June 2015.  In the event of a change of control, the contract provides that Mr. Pickett will receive salary and bonus in effect up to the date of the remaining portion of the contract.

 

There are no other employment contracts that have non-cancelable terms in excess of one year.

 

Litigation

 

Stockholder Derivative Action

 

In September 2011, the Company was served in a purported stockholder derivative action that was filed in the United States District Court for the Middle District of Florida against the Company and certain of its present and former officers and directors. The complaint asserts, among other things, breach of fiduciary duties and bad faith in relation to the management of the Company’s business. The complaint seeks, among other things, unspecified compensatory damages and various forms of equitable relief. The allegations in the derivative action appear to be based largely on the January 10, 2011 Livneh counterclaim.

 

On March 29, 2012, plaintiffs amended their complaint to remove one of the plaintiffs and replace it with another. The amended complaint asserted essentially the same allegations as the original filing. In May 2012, the Company, together with the individual defendants filed a motion to dismiss the plaintiff’s complaint based, in part, upon the plaintiff’s failure to make demand upon the board as required by applicable law. The motion was denied.

 

Since October 2013, the parties have been engaged in a Court-sanctioned medication process.  In the context of the mediation process, the parties have discussed the terms of a potential settlement, however, a definitive agreement has not been signed at this time.

 

Keen Action

 

In connection with the previously disclosed litigation pending in the United States District Court for the Middle District of Florida between the Company and Leonard Keen, the Company’s former Vice President and General Counsel, on August 8, 2013, following a jury trial, the jury returned a verdict in favor of Mr. Keen awarding him $622,500 in severance.  In addition, the jury determined that, Mr. Keen’s previously issued 110,000 stock options should be reinstated and accelerated, and that the Company must indemnify Mr. Keen for any damages or costs he suffered in his capacity as an employee of Bovie pursuant to the terms of Mr. Keen’s prior employment agreement with the Company.  Subsequent to the trial, the Court awarded Mr. Keen $241,310 in attorneys’ fees.  These amounts have been paid.

 

Amounts related to the verdict of this case and subsequent attorney’s fee award were accrued and expensed in 2013.

 

In the normal course of business, we are subject, from time to time, to legal proceedings, lawsuits and claims. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. If any of these matters arise in the future, it could affect the operating results of any one or more quarters.

 

We expense costs of litigation related to contingencies in the periods in which the costs are incurred.