11. COMMITMENTS AND CONTINGENCIES

Lease Commitments. The Company leases various types of office, manufacturing and warehouse facilities and equipment under noncancelable operating leases that expire at various terms through 2021. Future minimum lease payments under non-cancelable operating leases are projected as follows:


2015	$	839
2016		240
2017		172
2018		174
2019		171
2020 and thereafter		140

Total	$	1,736

The table above does not include annual lease payments of approximately $1,400 related to a new headquarters building lease due to the uncertainty of the timing of lease inception.

In August 2014 the Company and LM-VP AtriCure, LLC (Landlord), a third party unrelated to the Company, entered into a new building lease (Mason Lease) in order to re-locate its headquarters and West Chester, Ohio facilities from their current location to a building to be constructed on Innovation Way in Mason, Ohio and occupied exclusively by the Company.

The term of the Mason Lease is fifteen years with three separate five-year renewal options, at the Company’s option, and begins upon substantial completion of the construction of the building (Commencement Date). The amount of initial annual base rent of $1,353 is payable monthly beginning on the Commencement Date and is subject to a 2% increase each year during the initial term of the agreement. Upon each renewal, the amount of rent payable will be agreed upon by the Company and Landlord or, if not so agreed upon, by an appraiser. The size of the building subject to the Mason Lease is expected to be approximately 92 square feet.

Under the Mason Lease, the Company is responsible for paying real estate taxes, insurance, utilities, operating expenses, and most building repairs and maintenance. The Company is also responsible for paying the first $750 of construction related tenant improvement costs, as well as amounts in excess of the estimated total cost of construction, as defined by the Mason Lease. On the Commencement Date, the Company is required to provide a letter of credit to the Landlord in the amount of $1,250 which amount may decrease or be removed entirely based on the Company’s financial performance. The Company is deemed the owner of the project during the construction period. As a result, approximately $3,941 of project costs incurred to date to construct the building are included in property and equipment and the financing obligation is included in other current liabilities in the Consolidated Balance Sheet as of December 31, 2014. An increase in purchases of property and equipment and proceeds from the construction financing obligation were also included in the Consolidated Statement of Cash Flows as of December 31, 2014.

Rent expense was approximately $1,331, $870 and $769 in 2014, 2013, and 2012, respectively.

Royalty Agreements. The Company has certain royalty agreements in place with terms that include payment of royalties based on product revenue from sales of specified current products. The royalty agreements have effective dates as early as 2003 and terms ranging from three years to at least twenty years. The royalties range from 0.75% to 5% of product sales. One of the agreements includes minimum quarterly payments of $50 through 2015 and a maximum of $2,000 in total royalties over the term of the agreement. Parties to the royalty agreements have the right at any time to terminate the agreement immediately for cause. Royalty expense of $1,322, $962 and $603 was recorded as part of cost of revenue for the years ended December 31, 2014, 2013 and 2012, respectively.

Purchase Agreements. The Company enters into standard purchase agreements with certain vendors in the ordinary course of business. Outstanding commitments at December 31, 2014 were not significant.

Chief Financial Officer and Chief Executive Officer Resignations. The Company’s Vice President, Finance and Administration and Chief Financial Officer (CFO) resigned effective April 30, 2012. In connection with the resignation, the CFO and AtriCure entered into an agreement pursuant to which the CFO is entitled to receive: (i) all accrued and unpaid base salary through the effective date of the resignation; (ii) payment for any accrued and unused vacation; (iii) continued vesting of all stock options and restricted stock until April 30, 2013; and (iv) twelve (12) months base salary ($250).

On August 2, 2012, the Company’s Chief Executive Officer and President (CEO) notified the Company that he was resigning from his positions with the Company. Pursuant to his Employment Agreement, the CEO continued to serve as Chief Executive Officer and President of the Company through September 30, 2012. The CEO’s term as a member of the Company’s Board of Directors ended effective August 2, 2012. In connection with the resignation, the CEO and AtriCure entered into an agreement pursuant to which he is entitled to receive: (i) all accrued and unpaid base salary through the effective date of the resignation; (ii) payment for any accrued and unused vacation; (iii) continued vesting of all stock options and restricted stock until March 31, 2013; and (iv) six (6) months base salary ($225).

The Company recorded a total of approximately $1,600 in expense related to the departure of the Company’s Chief Financial Officer and Chief Executive Officer during 2012.

Legal. The Company is not party to any material pending or threatened litigation, except as described below:

Department of Justice Investigation

In October 2008 the Company received a letter from the Department of Justice (DOJ) informing the Company that it was conducting an investigation for potential False Claims Act (FCA) and common law violations relating to its surgical ablation devices. The Company cooperated with the investigation and operated its business in the ordinary course during the investigation. In December 2009 the Company reached a tentative settlement with the DOJ to resolve the investigation and recorded a liability. The settlement was finalized pursuant to the preliminary terms in February 2010, and the resulting settlement agreement definitively resolved all claims related to the DOJ investigation. The Company did not admit nor will it admit to any wrongdoing in connection with the settlement. As of December 31, 2014 the Company had completed making payments totaling $4,350 (including interest) and has no remaining financial liability.

The Company may, from time to time, become a party to additional legal proceedings.