EXHIBIT 10.7 

AMENDED AND RESTATED SEVERANCE COMPENSATION AGREEMENT 

Dated as of June 11, 2007 

COMARCO, Inc. corporation (the “Company”) 

and 

Peggy L. Vessell Eoff (the “Executive”) 

The Company’s Board of Directors (the “Board”) has determined that it is appropriate to reinforce and encourage the continued attentionand dedication of members of the Company’s management, including the Executive, to their assigned duties without distraction in potentially disturbing circumstances arising from the possibility of a change in control of the Company. 

This Agreement sets forth the severance compensation which the Company agrees it will pay to the Executive if the Executive’s employment with theCompany terminates under one of the circumstances described herein following a “Change in Control” of the Company (as defined in Section 2). 

l. Term. The term (“Term”) of this Agreement shall commence on the date hereof and, subject to earlier termination pursuant to Section 3(b), 3(c) or 3(d) hereof, shall end three (3) yearsfollowing the date on which notice of non-renewal or termination of this Agreement is given by either the Company or the Executive to the other. Thus, this Agreement shall be renewable automatically on a daily basis so that the outstanding Term isalways three (3) years following any effective notice of non-renewal or of termination given by the Company or the Executive. 

2.Change in Control. No compensation shall be payable under this Agreement unless and until (a) there has been a Change in Control of the Company while the Executive is still an employee of the Company and (b) the Executive’semployment by the Company terminates in the circumstances specified in Section 3(a). For purposes of this Agreement, a “Change in Control” of the Company shall be deemed to have occurred if (i) there shall be consummated(x) any consolidation or merger of the Company (whether or not the Company is the continuing or surviving entity) other than a consolidation or merger of the Company in which the holders of the Company’s Common Stock immediately prior tothe consolidation or merger continue to have proportionate ownership of at least 50.1% of capital stock of the surviving corporation eligible to vote in the election of directors immediately after the consolidation or merger, or (y) any sale,lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company other than to a corporation in which the holders of the Company’s Common Stock immediatelyprior to such transaction continue to have proportionate ownership of at least 50.1% of the capital stock of such corporation eligible to vote in the election of directors, or (ii) the stockholders of the Company approve any plan or proposalfor the liquidation or 

dissolution of the Company, or (iii) any person (as such term is used in Section l3(d) and l4(d)(2) of the Securities Exchange Act of 1934, as amended(the “Exchange Act”)), shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of more than 25% of the Company’s outstanding shares of Common Stock, or (iv) during any period of two consecutiveyears during the term of this Agreement, individuals who at the beginning of the two year period constituted the entire Board do not for any constitute a majority thereof unless the election, or the nomination for election by the Company’sstockholders, of each new director was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of the period or who were elected or nominated for election in the manner provided herein.

3. Termination Following Change in Control.

(a) Termination. If a Change in Control of the Company shall have occurred while the Executive is still an employee of the Company, the Executive shall be entitled to the compensation provided in Section 4upon the subsequent termination of the Executive’s employment with the Company within twenty-four (24) months of such Change in Control, whether requested by the Executive or by the Company, unless such termination is as a result of(i) the Executive’s death; (ii) the Executive’s Disability (as defined in Section (3)(b) below); (iii) the Executive’s Retirement (as defined in Section 3(c) below); (iv) the Executive’s decision toterminate employment other than for Good Reason (as defined in Section 3(e) below). 

(b) Death or Disability. If, as a resultof the Executive’s incapacity due to physical or mental illness, the Executive is absent from his duties with the Company on a full-time basis for six months, the Company may elect to terminate the Executive for “Disability’ bywritten notice to the Executive and without liability to the Executive pursuant to this Agreement; provided, however, that any such termination shall be effective only at the end of thirty (30) days following the delivery of such notice andonly if the Executive fails to return to the full-time performance of duties by the end of such 30-day notice period. In addition, this Agreement shall terminate immediately in the event of the death of the Executive occurring at any time during theTerm hereof, and in such event the Company shall have no liability by reason of such termination. 

(c) Retirement. The Executiveshall be deemed terminated automatically, without liability to Executive pursuant to this Agreement, upon Retirement (as hereinafter defined) of Executive without liability to the Company pursuant to this Agreement. “Retirement” as used inthis Agreement shall be deemed to occur upon the Executive’s having reached such age as shall have been fixed in any arrangement mutually established by the Company and the Executive. 

(d) Cause. The Company may terminate the Executive, without liability to the Executive pursuant to this Agreement, if the Executive’semployment with the Company is terminated for Cause. For purposes solely of determining whether the Company may terminate the Executive pursuant to this Section 3(d) without liability to the Executive, the Executive shall be deemed to have beenterminated for “Cause” only if 

 

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the Executive (1) has engaged in fraud, misappropriation or embezzlement involving the Company, (2) is convicted of or admits a felony or otheroffense involving dishonesty or moral turpitude, or (3) willfully refuses to carry out a lawful written instruction of the Board that is consistent with the Executive’s position and duties, which refusal continues for a period of 30 daysafter the Executive has received a written notice describing in reasonable detail the circumstances deemed by the Board to constitute such refusal. Notwithstanding the foregoing, the Executive shall not be deemed, for purposes of this Agreement, tohave been terminated for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than majority of the entire membership of the Company’s Board at a meetingof the Board called and held for that purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board), finding that in the good faith opinion of theBoard the Executive engaged in the conduct set forth in the second sentence of this Section 3(d) and specifying the particulars thereof in reasonable detail. 

(e) Good Reason. The Executive may terminate the Executive’s employment for Good Reason at any time after a Change in Control during the Term. For purposes of this Agreement, “Good Reason” shallmean any of the following: 

(i) The Company has materially changed the Executive’s position, duties, responsibilities, status, oroffices as in effect immediately prior to a Change in Control of the Company, or has removed the Executive from or failed to reelect the Executive to any of such positions; 

(ii) A reduction by the Company in the Executive’s base salary as in effect on the date hereof or as the same may be increased from time to timeduring the Term; 

(iii) Any failure by the Company to continue in effect any benefit plan or arrangement (including, without limitation,the Company’s life insurance, accident, disability and health insurance plans, 40l(k) and bonus plans, stock options, and all other similar plans which are from time to time made generally available to senior executives/officers of the Company)and in which the Executive is participating at the time of a Change in Control of the Company, unless there are substituted therefore plans or arrangements providing the Executive with essentially equivalent benefits (hereinafter referred to as“Benefit Plans”), or the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any such Benefit Plan or deprive the Executive of anymaterial fringe benefit enjoyed by the Executive at the time of a Change in Control of the Company; 

(iv) Any failure by the Company tocontinue in effect any incentive plan or arrangement (including, without limitation, the Company’s plans enumerated in subparagraph (iii) above and similar incentive compensation benefits) in which the Executive is participating at thetime of a Change in Control of the Company, unless there are substituted therefore plans or arrangements providing the Executive with 

 

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essentially equivalent benefits (hereinafter referred to as “Incentive Plans”), or taking of any action by the Company which would adversely affectthe Executive’s participation in any such Incentive Plan or reduce the Executive’s potential benefits under any such Incentive Plan, expressed as a percentage of his base salary, by more than 10 percentage points in any fiscal year ascompared to the immediately preceding fiscal year; 

(v) Any failure by the Company to continue in effect any plan or arrangement toreceive securities of the Company (including, without limitation, the Company’s stock option and purchase plans and any other plan or arrangement to receive the exercise stock options, stock appreciation rights, restricted stock or grantsthereof) in which the Executive is participating at the time of a Change in Control of the Company, unless there are substituted therefore plans or arrangements providing the Executive with essentially equivalent benefits (hereinafter referred to as“Securities Plans”), or the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any such Securities Plan; 

(vi) The Executive’s relocation to a principal office more than 25 miles from the location at which the Executive performed the Executive’sduties prior to a Change in Control of the Company, except for required travel by the Executive on the Company’s business to an extent substantially consistent with the Executive’s business travel obligations during the 12 monthsimmediately preceding a Change of Control of the Company. 

(vii) Any failure by the Company to provide the Executive with the number ofpaid vacation days to which the Executive is entitled at the time of a Change of Control of the Company; 

(viii) Any material breach bythe Company of any provision of this Agreement; 

(ix) Any failure by the Company to obtain the assumption of this Agreement by anysuccessor or assignee of the Company; or 

(x) Any purported termination of the Executive’s employment that is not effected pursuantto a Notice of Termination satisfying the requirements of Section 3(f), and for purposes of this Agreement, no such purported termination shall be effective. 

(f) Notice of Termination. Any termination of the Executive by the Company for Disability pursuant to Section 3(b) or for Cause pursuant to Section 3(d) shall be communicated by a Notice ofTermination. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate those specific termination provisions in this Agreement relied upon and which set forth in reasonable detail the factsand circumstances claimed to provide a basis for termination of the Executive’s employment under the provisions so indicated. For purposes of this Agreement, no such purported termination by the Company shall be effective without such Notice ofTermination. 

 

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(g) Date of Termination. “Date of Termination” shall mean (i) if the Executive isterminated by the Company for Disability, 30 days after Notice of Termination is given to the Executive (provided that the Executive shall not have returned to the performance of the Executive’s duties on a full-time basis during such 30-dayperiod) or (ii) if the Executive is terminated by the Company for any other reason, the date on which a Notice of Termination is given. 

4. Severance Compensation upon Termination of Employment. Subject to Section 4(e) below, if within twenty-four (24) months following a Change in Control, the Company shall terminate the Executive’s employment otherthan pursuant to Section 3(b), 3(c) or 3(d), or if the Executive terminates his employment for Good Reason pursuant to Section 3(e), then: 

(a) Severance Payment. 

(i) The Company shall pay to the Executive as severance pay a lump sum (the “SeverancePayment”), in cash, in full as soon as practicable but in no event later than the fifth day following the Date of Termination of an amount equal to (x) the Executive’s highest annual base salary in effect during the 12-month periodimmediately preceding the Date of Termination, and (y) the Executive’s incentive compensation bonus that would otherwise be payable to the Executive under the Company’s Bonus Plan then in effect for the year in which the Date ofTermination occurred assuming one hundred percent (l00%) satisfaction of all performance goals established under such Bonus Plan for the Executive, multiplied by 1.00. 

(ii) In the event that the Company asserts that the Executive has been terminated for “Cause” as provided in Section 3(d), the Executive may within 30 days after a Notice of Termination is given to theExecutive by the Company notify the Company in writing disputes the basis for the termination. After such notice has been timely given by the Executive, if either (x) the Executive prevails in his assertion or (y) the Company changes itsposition and voluntarily pays the Severance Payment to the Executive, then in either case as liquidated damages and not any penalty the Company shall also pay to the Executive together with the Severance Payment an additional amount equal to theExecutive’s highest annual base salary in effect during the 12-month period immediately preceding the Date of Termination, pro rated on a daily basis for the period (not to exceed 12 months) from the Date of Termination until the Companyactually pays the Severance Payment to the Executive. 

(iii) The foregoing payments shall be in addition to any payments or othercompensation that would otherwise be payable to the Executive under any other then existing Severance Plan of the Company. All payments hereunder shall be made net of withholdings required by applicable federal, state or local laws. 

(b) Stock Options. To the extent permitted by the plans or programs 

 

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under which the same were granted or awarded, all stock options not currently exercisable held by the Executive will accelerate and become exercisable as ofthe Date of Termination. However, if any such option constitutes “deferred compensation” within the meaning of Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”), andacceleration exercisability of such option would result in the imposition of interest, penalties and additional tax in respect of such option under Section 409A, than such option shall not become exercisable immediately by reason of thisAgreement, but instead shall become fully vested as of the Executive’s termination of employment and thereafter become exercisable for all of the shares covered by the option and expire in accordance with the option’s terms without regardto this Agreement. 

(c) Restricted Stock. To the extent permitted by the plans or programs under which the same were granted orawarded, all restrictions on any restricted stock, including without limitation any vesting requirements on any unvested stock, held by the Executive as of the Date of Termination shall be removed. 

(d) Continuation of Benefits. The Company shall continue for a period of one year from the Date of Termination to provide the following benefitsto the Executive on the same terms as provided to the Executive on the Date of Termination: 

(i) Participation in the Company’smedical, dental and vision plans; 

(ii) Long-term disability insurance; 

(iii) Life Insurance. 

Notwithstanding the foregoing, anybenefits payable under this subsection 4(d) shall terminate at such time as the Executive becomes eligible for similar benefits from any subsequent employer. 

(e) Section 280G Limitation. To the extent that any or all of the payments and benefits provided for in this Agreement constitute “parachute payments” within the meaning of Section 280G ofthe Code and, but for this Section 4(e), would be subject to the excise tax imposed by Section 4999 of the Code, then the aggregate amount of such payments and benefits shall be reduced such that the present value thereof (as determinedunder the Code and applicable regulations) is equal to 2.99 times the Executive’s “base amount” (as defined in the Code). 

The determinationof any reduction or increase of any payment or benefits under this Section 4 Pursuant to the foregoing provision shall be made by a nationally recognized public accounting firm chosen by the Company in good faith, and such determination shallbe conclusive and binding on the Company and the Executive. 

(f) Adjustments for Section 409A. Anything in this Agreement to thecontrary notwithstanding: 

(i) No payment of cash or benefits under this Agreement which constitute “deferred compensation”within the meaning of Section 409A shall be made or delivered except following the Employee’s “separation from service” as defined for purposes of Section 409A. 

 

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(ii) If at the time of the Employee’s separation from service within the meaning ofSection 409A, the Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) and if any payment or benefit that the Employee becomes entitled to under this Agreement is considered deferred compensationsubject to interest, penalties and additional tax imposed pursuant to Section 409A(a)(2)(B)(i), then no such payment shall be payable or benefit shall be provided prior to the date that is the earlier of (i) six months and one day afterthe Employee’s date of termination, and (ii) the Employee’s death, and the initial payment of provision of benefit shall included a catch-up amount covering amounts that would otherwise have been paid during the first six-month periodbut for the application of this Section 4(f). For purposes of the application of Section 409A, each payment under this Agreement shall constitute a separate payment. 

5. No Obligation to Mitigate Damages; No Effect on Other Contractual Rights; Release. 

(a) No Obligation to Mitigate. The Executive shall not be required to mitigate damages or the amount of any payment provided for under thisAgreement by seeking other employment or otherwise, nor, except as set forth in Section 4(d), shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by the Executive as the result of employmentby another employer after the Date of Termination, or otherwise. 

(b) No Effect on Other Contractual Rights. The provisions of thisAgreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Executive’s existing rights, or rights which would accrue solely as a result of the passage of time, under any BenefitPlan, Incentive Plan or Securities Plan, employment agreement or other contract, plan or arrangement. 

(c) Release. TheExecutive’s entitlement to receive the payments and other benefits specified in Section 4 shall be conditioned on his execution and delivery of a General Release in the form attached as Exhibit A to this Agreement within sixty(60) days of the date of his termination of employment. 

6. Successors and Assigns. 

(a) The Company. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor or assignee to itsbusiness and/or assets as aforesaid which assumes the obligations of the Company under this Agreement or which otherwise becomes bound by all of the terms and provisions of this Agreement by operation of law. If at any time during the term of thisAgreement the Executive is employed by any corporation a majority of the voting securities of which is then owned 

 

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by the Company, such indirect employment of the Executive by the Company shall not excuse the Company from performing its obligations under this Agreement asif the Executive were directly employed by the Company, and the Company agrees that it shall pay or shall cause such employer to pay any amounts owed to the Executive pursuant to Section 4 hereof, notwithstanding any such indirect employmentrelationship. 

(b) The Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personaland legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts are still payable to him hereunder, all such amounts, unless otherwise provided herein, shallbe paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, or other designee or, if there is no such designee, to the Executive’s estate. 

7. Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall bedeemed to have been duly given when delivered, one business day after being sent for overnight delivery by a nationally recognized overnight courier or three business days after being mailed by United States registered mail, return-receiptrequested, postage-prepaid, addressed as follows: 

If to the Company: 

Thomas A. Franza 

Chief Executive Officer

Comarco, Inc. 

25541Commercentre Drive 

Suite 250 

Lake Forest, CA 92630 

If to the Executive: 

Peggy L. Vessell Eoff 

 

 
      
 
      
or such other address as either party may have furnished to the other in writing in accordance herewith, exceptthat notices of change of address shall be effective only upon receipt. 

8. Miscellaneous. No provisions of this Agreement may bemodified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliancewith, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provision or conditions at the same or at any prior or 

 

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subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by eitherparty which are not set forth expressly in this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 

9. Validity. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force andeffect. 

10. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be anoriginal but all of which together will constitute one and the same instrument. 

11. Arbitration, Legal Fees and Expenses. In theevent of any controversy, claim or dispute between the parties hereto arising out of or relating to this Agreement, the matter shall be determined by arbitration, which shall take place in Orange County, California, under the rules of the AmericanArbitration Association; and a judgment upon such award may be entered in any court having jurisdiction thereof. Any decision or award of such arbitrator shall be final and binding upon the parties and shall not be appealable. The parties herebyconsent to the jurisdiction of such arbitrator and or any court having jurisdiction to enter judgment upon and enforce any action taken by such arbitrator. The Company shall pay all reasonable legal fees and expenses (including any fees or expensesincurred in any appeals) that the Executive may incur at any time prior to the sixth anniversary of the expiration of the applicable statue to limitations under governing law for contract claims and (i) as a result of the Company’scontesting the validity, enforceability of, or the Executive’s interpretation of, or determinations under, this Agreement, or (ii) in seeking to recover his reasonable legal fees and expenses to which he is entitled as provided herein. TheExecutive’s reasonable legal fees and expenses shall be paid by the Company whether or not the Executive prevails in any such contest or disputes and shall be promptly paid by the Company as they are incurred upon submission by the Executive ofdocumentation thereof in reasonable detail. Any such claim for reimbursement must be made, if at all, not later than the end of the calendar year following the calendar year in which incurred and shall be reimbursed promptly, but in any event notlater than by the last day of such following calendar year. The amount of expenses eligible for reimbursement during any calendar year shall not affect the amount eligible for reimbursement during any other calendar year. 

12. Confidentiality. The Executive shall retain in confidence any and all confidential information known to the Executive concerning the Companyand its business so long as such information is not otherwise publicly disclosed. 

13. Entire Agreement. This Agreement contains allof the terms agreed upon between the Executive and the Company with respect to the subject matter hereof and replaces and supercedes all prior severance agreements between the Executive and the Company. The Executive and the Company agree that noterm, provision or condition of this Agreement shall be held to be altered, amended, changed or waived in any respect except as evidenced by written agreement of the Executive and the Company. 

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. 

 
“COMPANY”  “EXECUTIVE”COMARCO, INC.  By: 
/s/ Thomas A. Franza
  
/s/ Peggy L. Vessell Eoff      
Name: Thomas A. Franza  Peggy L. Vessell EoffTitle: President and Chief Executive Officer  
 

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