Commitments, Contingencies and Related Party Transactions

12 Months Ended

Dec. 31, 2011

Commitments, Contingencies and Related Party Transactions

NOTE 12 - Commitments, Contingencies and Related Party Transactions

We lease real property under operating leases with terms expiring through March 2016. Rent expense under operating leases was $124,000, $43,000 and $13,000 for the years ended December 31, 2011, 2010 and 2009, respectively. Minimum lease rental commitments as of December 31, 2011 are not material.

We are a party to agreements with eleven executives providing that, in the event we terminate the executive’s employment (other than for cause) or if the executive voluntarily terminates his or her employment for good reason (as defined), the executive will be entitled to at least six months severance pay, the continuation of benefits during the ensuing six month period and the acceleration of vesting of stock options. We do not provide our other employees any post-retirement or post-employment benefits, except discretionary severance payments upon termination of employment and their COBRA entitlement.

In October 2011, we replaced our then President and Chief Executive Officer and on March 16, 2012 entered into a settlement and mutual release agreement with him, effective March 23, 2012. In connection with his termination, we recorded $527,000 of severance expense in the fourth quarter of 2011.

From time to time, we are subject to legal proceedings or claims which arise in the ordinary course of business. While the outcome of such matters cannot be predicted with certainty, we believe that such matters will not have a material adverse effect on our financial condition or liquidity.

In January 2012, we settled a lawsuit that was filed in Puerto Rico in 2009 by a former sales representative against us for an insignificant amount. The settlement was recorded as an expense in the fourth quarter of 2011 and is included in selling, general and administrative expense.