Note 9 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

9.

          COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company

may

be involved in certain legal actions arising from the ordinary course of business. While it is

not

feasible to predict or determine the outcome of these matters, we do

not

anticipate that any of these matters, or these matters in the aggregate, will have a material adverse effect on the financial position or results of operations.

Commissions, Royalty and License Fee Agreements

Royalty and license fees are paid in accordance with their related agreements, either on a monthly or quarterly basis. We deal with a number of independent licensors for whose intellectual property we compete with other manufacturers. Rights to such intellectual property, when acquired by us, are usually exclusive and the agreements require us to pay the licensor a royalty on our net sales of the item. These license agreements, in some cases, also provide for advance royalties and minimum guarantees in order to maintain technical rights and exclusivity. As of

December 

31,

2019

and

2018,

 

$9

thousand and

$3

thousand, respectively, was accrued for royalty and license fees payable in accrued expenses.

Employment Agreements

As of the year ended

December 

31,

2019,

the following employment agreements were in place:

William J. Clough, General Counsel of CUI Global, Inc. and Executive Chairman of the Company’s board of directors

Mr. Clough is employed under a

three

-year employment contract with the Company, which became effective

May 14, 2019.

Said contract provides, in relevant part, for salary in year

1

of

$750

thousand, year

2

of

$800

thousand and year

3

of

$850

thousand. The employment agreement includes bonus provisions for each calendar year targeted at

seventy-five

percent of base salary to be based on performance objectives, goals and milestones for each calendar year including company performance. Bonuses are approved based on various performance-related factors and an evaluation of current performance and includes a discretionary bonus of up to

twenty-five

percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. Mr. Clough's employment agreement includes a grant for

1,600,000

options; however, the grant is subject to the approval of an equity incentive plan by shareholders within

one

year of the employment agreement. As of

December 31, 2019,

the shareholders have

not

approved an equity incentive plan. The agreement provides for up to

$9,999

of annual premium life insurance expenses along with the ordinary benefits provided to employees of the Company. The agreement entitles Mr. Clough to severance package of

2.5

times the sum of annual base salary and target bonus along with

eighteen

months of medical coverage under the Company's medical plans. At

December 

31,

2019,

2018,

and

2017,

there was an accrual of

$0,

$30

thousand, and

$33

thousand, respectively, for compensation owed to Mr. Clough.

Daniel N. Ford, Chief Financial Officer of CUI Global Inc. and Subsidiaries, Chief Operating Officer of the Energy Division

Mr. Ford is employed under a

three

-year employment contract with the Company, which became effective

May 14, 2019.

Said contract provides, in relevant part, for salary in year

1

of

$500

thousand, year

2

of

$550

thousand and year

3

of

$600

thousand. The employment agreement includes bonus provisions for each calendar year targeted at

seventy-five

percent of base salary to be based on performance objectives, goals and milestones for each calendar year including company performance. Bonuses are approved based on various performance-related factors and an evaluation of current performance and includes a discretionary bonus of up to

twenty-five

percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. Mr. Ford's employment agreement includes a grant for

960,000

options; however, the grants are subject to the approval of an equity incentive plan by shareholders within

one

year of the grant. As of

December 31, 2019,

the shareholders have

not

approved an equity incentive plan. The agreement provides for ordinary benefits provided to employees of the Company. The agreement entitles Mr. Ford to a severance package of

2.0

times the sum of annual base salary and target bonus along with

eighteen

months of medical coverage under the Company's medical plans. At

December 

31,

2019,

2018,

and

2017,

there was an accrual of

$0,

$21

thousand, and

$22

thousand, respectively, for compensation owed to Mr. Ford.

James F. O’Neil III, Chief Executive Officer, Vice Chairman of the Board of Directors, and Chief Executive Officer of the Company’s wholly owned subsidiaries

Mr. O'Neil is employed under a

three

-year employment contract with the Company, which became effective

October 1, 2019.

Said contract provides, in relevant part, for salary in year

1

of

$750

thousand, year

2

of

$800

thousand and year

3

of

$850

thousand. The employment agreement includes bonus provisions for each calendar year targeted at

seventy-five

percent of base salary to be based on performance objectives, goals and milestones for each calendar year including company performance. Bonuses are approved based on various performance-related factors and an evaluation of current performance and includes a discretionary bonus of up to

twenty-five

percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. Mr. O'Neil's employment agreement includes a grant for

1,000,000

options and he also received a grant for

600,000

options when he was initially appointed to the Board of Directors, however the grants are subject to the approval of an equity incentive plan by shareholders within

one

year of the grants. As of

December 31, 2019,

the shareholders have

not

approved an equity incentive plan. The agreement provides for up to

$9,999

of annual premium life insurance expenses along with the ordinary benefits provided to employees of the Company. The agreement entitles Mr. O'Neil to a severance package of

2.5

times the sum of annual base salary and target bonus along with

eighteen

months of medical coverage under the Company's medical plans.

Off-Balance Sheet Arrangements - Obligations under Certain Guarantee Contracts

The Company

may

enter into guarantee arrangements in the normal course of business to facilitate commercial transactions with

third

parties. As of

December 31, 2019,

the Company is an indemnitor on a surety bond for an unconsolidated

third

party related to a

$4.6

million project that is approximately

90%

complete and expected to be completed in

2020.

 The Company does

not

expect any liability associated with this off-balance sheet arrangement.