Document:

ex10-7.htm

Exhibit 10.7

 

CHANGE OF CONTROL AGREEMENT

for

RYAN K. STAFFORD

 

THIS AGREEMENT is made effective as of the 1st day of January, 2012, by and between LITTELFUSE, INC., a Delaware corporation (hereinafter referred to as the “Company”), and the executive named above (hereinafter referred to as the “Executive”);

 

W I T N E S S E T H:

 

WHEREAS, the Board of Directors of the Company (hereinafter referred to as the “Board”) has determined that it is in the best interests of the Company and its stockholders to provide the Executive with certain protections against the uncertainties usually created by a Change of Control; and

 

WHEREAS, the Board wishes to better enable the Executive to devote his full time, attention and energy to the business of the Company prior to and after a Change of Control, thereby benefiting the Company and its stockholders;

 

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Company and the Executive hereby agree as follows:

 

CHANGE OF CONTROL BENEFITS

 

Section 1.                      Certain Definitions.

 

(a)           The “Effective Date” shall mean the first date during the Change of Control Period (as defined in Subsection 1(b) hereof) on which a Change of Control (as defined in Section 2 hereof) occurs.  Notwithstanding anything to the contrary contained in this Agreement, if a Change of Control occurs and if the Executive separates from service with the Company prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such separation from service (i) was at the direct or indirect request of a third party who theretofore had taken any steps intended to effect a Change of Control or (ii) otherwise arose in connection with or in anticipation of a Change of Control, then for all purposes of this Agreement the “Effective Date” shall mean the date immediately prior to the date of such separation from service.

 

(b)           The “Change of Control Period” shall mean the period commencing on the date hereof and ending on December 31, 2014.

 

Section 2.                      Change of Control. For the purpose of this Agreement, a “Change of Control” shall mean:

 

  

  

  

 

(a)           The acquisition by any one person or more than one person acting as a group (within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(v)(B)), other than the Company or any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company (as defined in Section 4), (a “Person”) of any of stock of the Company that, together with stock held by such Person, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company.  For purposes of this Subsection (a), the following acquisitions shall not constitute a Change of Control: (i) the acquisition of additional stock by a Person who is considered to own more than 50% of the total fair market value or total voting power of the stock of the Company, (ii) any acquisition in which the Company does not remain outstanding thereafter and (iii) any acquisition pursuant to a transaction which complies with Subsection (c) of this Section 2.  An increase in the percentage of stock owned by any one Person as a result of a transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this Subsection;

 

(b)           The replacement of individuals who, as of the date hereof, constitute a majority of the Board, during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the Board before the date of the appointment or election, provided that, if the Company is not the relevant corporation for which no other corporation is a majority shareholder for purposes of Treasury Regulation Section 1.409A-3(i)(5)(iv)(A)(2), this Subsection (b) shall be applied instead with respect to the members of the board of the directors of such relevant corporation for which no other corporation is a majority shareholder;

 

(c)           The acquisition by any one person or more than one person acting as a group (within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(vi)(D)), other than the Company or any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated company (as defined in Section 4), during the 12-month period ending on the date of the most recent acquisition by such person or persons, of ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company.  For purposes of this Subsection (c), the following acquisitions shall not constitute a Change of Control: (i) the acquisition of additional control by a person or more than one person acting as a group who are considered to effectively control the Company within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(vi) and (ii) any acquisition pursuant to a transaction which complies with Subsection (a) of this Section 2; or

 

(d)           The acquisition by any person or more than one person acting as a group (within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(vii)(C)), other than a transfer to a related person within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(vii)(B), during the 12-month period ending on the date of the most recent acquisition by such person or persons, of assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition(s).  For purposes of this Subsection (d), “gross fair market value” means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

 

The above definition of “Change of Control” shall be interpreted by the Board, in good faith, to apply in a similar manner to transactions involving partnerships and partnership interests, and to comply with Section 409A of the Internal Revenue Code and Treasury Regulations and official guidance issued thereunder from time to time (“Section 409A”).

 

  

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Section 3.                       Service Period.  The Company hereby agrees to continue to retain the services of the Executive, and the Executive hereby agrees to provide services to the Company and its successors, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the second anniversary of such date (the “Service Period”).

 

Section 4.                      Terms of Service.

 

(a)           Position and Duties.

 

(i)           During the Service Period, (A) the Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive’s services shall be performed at the location where the Executive was providing services to the Company or its affiliated companies immediately preceding the Effective Date or any office or location less than 20 miles from such location. As used in this Agreement, the term “affiliated companies” shall include any company controlled by, controlling or under common control with the Company.

 

(ii)           During the Service Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities.  During the Service Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee or service provider of the Company in accordance with this Agreement.

 

(b)           Compensation.

 

(i)           Base Salary.  During the Service Period, the Executive shall receive an annual base salary (hereinafter referred to as the “Annual Base Salary”), which shall be paid at a monthly rate, equal to at least twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs.  During the Service Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually.  Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement.  Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as used in this Agreement shall refer to Annual Base Salary as so increased.

 

  

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(ii)           Annual Bonus.  In addition to the Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Service Period, an annual bonus in cash at least equal to the greater of: (i) the average of the Executive’s annual bonuses paid under the Company’s Annual Incentive Plan or any successor plan (such plan(s) hereinafter collectively referred to as the “Bonus Plan”) for the last three full fiscal years prior to the Effective Date, provided that, in calculating this average, the Executive’s target annual bonus specified by the Board for the 2009 fiscal year, disregarding any later cancellation of such bonus, shall be presumed to be the annual bonus paid to the Executive under the Bonus Plan for such fiscal year); or (ii) the Executive’s target annual bonus under the Bonus Plan for the year in which the Effective Date occurs.  Each such annual bonus shall be paid no later than the fifteenth day of the third month of the fiscal year next following the fiscal year for which such annual bonus is awarded, unless the Executive shall elect to defer the receipt of such annual bonus.  Any such deferral election shall be made not later than the first day of the fiscal year for which the annual bonus is paid, and shall be made in accordance with policies adopted by the Company in compliance with Section 409A.

 

(iii)           Incentive, Savings and Retirement Plans.  During the Service Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.

 

(iv)           Welfare Benefit Plans.  During the Service Period, the Executive and/or the Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies.  In the event such plans, practices, policies and programs are not reasonably able to provide the Executive with coverage or provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies, then the Company shall provide individual insurance policies or reimburse the Executive, on at least a monthly basis, to cover any post-tax difference in the benefits received by the Executive.

 

  

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(v)           Expenses.  During the Service Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and to the extent that any resulting change in reimbursement or payment dates would comply with Section 409A, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

 

(vi)           Fringe Benefits.  During the Service Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and to the extent that any resulting change in reimbursement or payment dates would comply with Section 409A, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

 

(vii)           Office and Support Staff.  During the Service Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and to the extent that any resulting change in reimbursement or payment dates would comply with Section 409A, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

 

(viii)           Vacation.  During the Service Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

 

The requirements of paragraphs 4(b)(iii) through (viii) shall not apply to the extent prohibited by applicable law or to the extent such provision would cause the applicable plan, practice, policy, or program to fail nondiscrimination or coverage tests imposed thereon by applicable law.

 

Section 5.                      Separation from Service.

 

(a)           Disability.  If the Company determines in good faith that the Disability of the Executive has occurred during the Service Period (pursuant to the definition of Disability set forth below), it may terminate the Executive’s service effective upon the date the Company provides written notice to the Executive.  For purposes of this Agreement, “Disability” shall mean the Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company.

 

  

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(b)           Cause.  The Company may terminate the Executive’s service during the Service Period for Cause.  For purposes of this Agreement, “Cause” shall mean:

 

(i)           the willful and continued failure of the Executive to perform substantially the Executive’s duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board which specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties and such failure is not cured within sixty (60) calendar days after receipt of such written demand; or

 

(ii)           the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.

 

For purposes of this provision, any act or failure to act on the part of the Executive in violation or contravention of any order, resolution or directive of the Board shall be considered “willful” unless such order, resolution or directive is illegal or in violation of the certificate of incorporation or by-laws of the Company; provided, however, that no other act or failure to act on the part of the Executive, shall be considered “willful,” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or General Counsel of the Company or based upon the advice of outside counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company.  The separation from service of the Executive shall not be deemed to be 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 three-quarters of the entire membership of the Board (other than the Executive) at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in paragraph (i) or (ii) above, and specifying the particulars thereof in detail.

 

(c)           Good Reason.  The Executive’s service may be terminated by the Executive for Good Reason.  For purposes of this Agreement, “Good Reason” shall mean:

 

(i)           the Executive is not elected to, or is removed from, any elected office of the Company which the Executive held immediately prior to the Effective Date;

 

  

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(ii)           the assignment to the Executive of any duties materially inconsistent in any respect with the Executive’s position, authority, duties or responsibilities as contemplated by Subsection 4(a) hereof, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

 

(iii)           any failure by the Company to comply with any of the provisions of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

 

(iv)           the Company’s requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; or

 

(v)           any purported termination by the Company of the Executive’s service with the Company otherwise than as expressly permitted by this Agreement.

 

For purposes of this Subsection 5(c), a good faith determination of “Good Reason” made by the Executive shall be conclusive.

 

(d)           Notice of Termination.  Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Subsection 13(b) hereof.  For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s service under the provision so indicated, and (iii) specifies the termination date.  To qualify as “Good Reason,” the Executive must provide such notice within 90 days following the initial existence of the condition described in paragraph (c)(i) through (v) above, upon notice of which the Company shall have 30 days during which it may remedy the condition, in which case “Good Reason” shall not exist.  The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

(e)           Separation from Service.  All references to “separation from service,” “termination of service” and words of similar import shall have the same meaning as “separation from service” as defined by Section 409A.  By way of illustration, and without limiting the generality of the foregoing, the following principals shall apply:

 

(i)           The Executive shall not be considered to have separated from service so long as the Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the Executive retains a right to return to service with the Company under an applicable statute or by contract.

 

  

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(ii)           Regardless of whether the Executive has formally separated from service, the Executive will be considered to have separated from service as of the date it is reasonably anticipated that no further services will be performed by the Executive for the Company, or that the level of bona fide services the Executive will perform after such date will permanently decrease to no more than 20% of the average level of bona fide services performed over the immediately preceding 36-month period.  For purposes of the preceding test, during any paid leave of absence the Executive shall be considered to have been performing services at the level commensurate with the amount of compensation received, and unpaid leaves of absence shall be disregarded.

 

(iii)           For purposes of determining whether the Executive has separated from service, all services provided for the Company, or for any other entity that is part of a controlled group that includes the Company as defined in Section 414(b) or (c) of the Internal Revenue Code (“Code”), shall be taken into account, whether provided as an employee or as a consultant or other independent contractor; provided that the Executive shall not be considered to have not separated from service solely by reason of service as a non-employee director of the Company or any other such entity.

 

Section 6.                      Obligations of the Company upon Separation during the Service Period.

 

(a)           Good Reason; Other Than for Cause, Death or Disability.  If, during the Service Period, the Company causes the Executive to separate from service other than for Cause or Disability, or the Executive shall voluntarily separate from service for Good Reason as described in Subsection 5(c), the following provisions shall apply:

 

(i)           The Company shall pay to the Executive the amounts set forth in Paragraphs A and B below.

 

A.           The sum of the following (“Accrued Obligations”):

 

(1)           the Executive’s Annual Base Salary through the separation from service to the extent not theretofore paid, payable on the next regularly scheduled payroll date (or such earlier date as required by law),

 

(2)           an amount, equal to the greatest of the Executive’s target annual bonus under the Bonus Plan for the fiscal year in which the separation from service occurs (“Target Bonus”), the Executive’s annual bonus under the Bonus Plan for the current fiscal year based on performance through date of separation, or the Executive’s average annual bonus under the Bonus Plan for the last three fiscal years ending prior to the separation from service (“Average Annual Bonus”), multiplied by a fraction, the numerator of which is the number of days in the fiscal year through the separation from service, and the denominator of which is 365, payable in a lump sum on the 30th day following the separation from service (in calculating the Average Annual Bonus, the Executive’s target annual bonus under the Bonus Plan specified by the Board for the 2009 fiscal year, disregarding any later cancellation of such bonus, shall be presumed to be the annual bonus paid to the Executive for such fiscal year),

 

  

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(3)           any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon), paid in accordance with the Executive’s deferral elections in effect under any such deferral program, plus

 

(4)           any accrued but unpaid vacation pay, paid in a lump sum on the 30th day following the separation from service (or such earlier date as required by law).

 

B.           The amount equal to the product of (1) two multiplied by (2) the sum of (x) the Executive’s Annual Base Salary plus (y) the greater of the Executive’s Average Annual Bonus or Target Bonus, which shall be paid in a lump sum on the 30th day following the separation from service.

 

(iii)           The Company shall reimburse the Executive for the additional premium costs incurred by the Executive, in excess of the active employee rate for the Executive’s peer group, to continue group medical coverage for the Executive and/or the Executive’s family under Section 4980B of the Code and applicable state laws (“COBRA”) for the maximum period of time as permitted by law.  The Executive shall submit to the Company satisfactory evidence of premium costs incurred within 30 days following the date such costs were incurred.  Within 30 days following receipt of such evidence, the Company shall pay to the Executive such reimbursement, plus additional severance pay in an amount such that the net amount of such reimbursement and additional severance pay, after all applicable tax withholding, equals the difference between the full COBRA premium and the premium charged to active employees in Executive’s peer group.  Following the end of COBRA coverage, the Company shall reimburse the Executive for the additional premium costs incurred by the Executive, in excess of the former employee COBRA rate for the Executive’s peer group, for the purchase of an individual insurance policy providing medical coverage to the Executive and/or the Executive’s family which is substantially similar to the coverage provided by the Company’s group medical plan.  In no event shall the combined period of reimbursable coverage under COBRA and any individual insurance policy exceed two years from separation from service.

 

(iv)           For a period of up to 2 years after the separation from service, the Company shall provide monthly outplacement services to the Executive at reasonable levels as provided to peer executives of the Company, for the purpose of assisting the Executive to seek a new position; provided, however, that the Company shall have no further obligations to provide such outplacement services once the Executive has accepted a position with any third party.

 

(v)           Notwithstanding anything to the contrary set forth in any stock option plans pursuant to which the Executive has been granted any stock options or other rights to acquire securities of the Company or its Affiliates, as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act (the “Plans”), any option or right granted to the Executive under any of the Plans shall be exercisable by the Executive until the earlier of (x) the date on which the option or right terminates in accordance with the terms of its grant, or (y) the expiration of 12 months after the separation from service.

 

(vi)           To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall hereinafter be referred to collectively as the “Other Benefits”).

 

  

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(vii)           Notwithstanding anything to the contrary contained in any employment agreement, benefit plan or other document, in the event the Executive incurs a separation from service during the Service Period by the Executive for Good Reason or by the Company other than for Cause or Disability, on and after the separation from service the Executive shall not be bound or prejudiced by any non-competition agreement benefiting the Company or its subsidiaries.

 

(b)           Death.  If the Executive dies during the Service Period, this Agreement shall terminate without further obligations by the Company to the Executive’s legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits.  Accrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, at the time and in the form as provided in Paragraph 6(a)(i)(A) above.  With respect to the provision of Other Benefits, the term “Other Benefits” as utilized in this Subsection 6(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date.

 

(c)           Disability.  If the Company causes the Executive to separate from service by reason of the Executive’s Disability during the Service Period as set forth in Subsection 5(a), this Agreement shall terminate without further obligations by the Company to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits.  Accrued Obligations shall be paid to the Executive at the time and in the form provided in Paragraph 6(a)(i)(A).  With respect to the provision of Other Benefits, the term “Other Benefits” as utilized in this Subsection 6(c) shall include, and the Executive shall be entitled after the Executive’s separation from service to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date.

 

  

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(d)           Cause; Other than for Good Reason.  If the Company causes the Executive to separate from service for Cause during the Service Period as described in Subsection 5(b), this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the separation from service, payable on the next regularly scheduled payroll date (or such earlier date as required by law), (y) the amount of any compensation previously deferred by the Executive (which shall be paid at the time and in the form it would otherwise have been paid had this Agreement not applied), and (z) Other Benefits, in each case to the extent theretofore unpaid and at the times provided in the applicable plan or agreement.  If the Executive voluntarily separates from service during the Service Period, excluding a separation from service for Good Reason as described in Subsection 5(c), this Agreement shall terminate without further obligations of the Company to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits.  In such case, all Accrued Obligations shall be paid to the Executive at the time and in the form provided in Subsection 6(a)(i)(A) and the Company shall timely pay or provide the Other Benefits to the Executive.  In no event shall the Executive be liable to the Company for any damages caused by such voluntary separation from service by the Executive nor shall the Executive be in any way restricted from providing service to any other party after such voluntary separation from service.

 

Section 7.                      Code Section 409A Payment Limits.  To the maximum extent possible, the provisions of this Agreement shall be construed in such a manner that no amounts payable to the Executive are subject to the additional tax and interest provided in Section 409A(a)(1)(B) of the Code.  If any payment (whether cash or in-kind), including but not limited to reimbursements and Other Benefits, would constitute a “deferral of compensation” under Section 409A and a payment date that complies with Section 409A(a)(2) of the Code is not otherwise provided for such benefit either in this Agreement or a Company program or policy, then such payment shall be made not later than 2 1⁄2 months after the end of the calendar year in which the payment is no longer subject to a substantial risk of forfeiture.  Any receipts or other proof of expenses (if required) shall be submitted to the Company by the Executive no later than one month after the end of the calendar year in which the payment is no longer subject to a substantial risk of forfeiture.  Notwithstanding any provision in this Agreement to the contrary, if at the time of separation from service the Executive is a "specified employee" within the meaning of Section 409A, any cash or in-kind payments which constitute a "deferral of compensation" under Section 409A and which would otherwise become due under this Agreement during the first 6 months (or such longer period as required by Section 409A) after separation from service shall be delayed and all such delayed payments shall be paid in full in the 7th month after the separation from service, and all subsequent payments shall be paid in accordance with their original payment schedule.  To the extent that any insurance premiums or other benefit contributions constituting a "deferral of compensation" become subject to the above delay, the Executive shall be responsible for paying such amounts directly to the insurer or other third party and shall receive reimbursement from the Company for such amounts in the 7th month as described above.  The above specified employee delay shall not apply to any payments that are excepted from coverage by Section 409A, such as those payments covered by the short-term deferral exception described in Treasury Regulations Section 1.409A-1(b)(4).

 

Section 8.                      Nonexclusivity of Rights.  Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Subsection 13(f) hereof, shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies.  Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to his or her separation from service shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement.

 

  

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Section 9.                      Full Settlement.  The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others.  In no event shall the Executive be obligated to seek another position or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains another position.   To the extent that any amount due hereunder has become subject to a bona fide dispute, payment of such amount may be delayed until no later than the end of the first taxable year of the Executive in which the Company and the Executive enter into a legally binding settlement of such dispute, the Company concedes that the amount is payable, or the Company is required to make such payment pursuant to a final and nonappealable judgment or other binding decision, as set forth in Treasury Regulation Section 1.409A-3(g), and any such payment shall include interest on such delayed amount from the original due date thereof until paid at the prime rate from time to time reported in The Wall Street Journal during said period, plus, to the fullest extent permitted by law, the amount of all legal fees and expenses which the Executive reasonably incurs as a result of any contest by the Company, the Executive or others in which the Executive is the prevailing party.

 

Section 10.                      Confidential Information.  The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive’s service with the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement).  After Executive’s separation from service with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it.  In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.  The provisions of this Section 10 shall survive any termination of this Agreement or the Executive’s separation of service with the Company.

 

Section 11.                      Excise Tax on Parachute Payments.  (a)  Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section, except as otherwise provided in this Section) (hereinafter referred to collectively as a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Payments shall be reduced to the extent necessary so that no portion thereof shall be subject to the Excise Tax, but only if, by reason of such reduction, the net after-tax benefit received by the Executive shall exceed the net after-tax benefit that would be received by the Executive if no such reduction was made.

 

  

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(b)           For purposes of paragraph (a), “net after-tax benefit” shall mean (i) the total of all Payments which the Executive receives or is then entitled to receive from the Company that would constitute “excess parachute payments” within the meaning of Section 280G of the Code, less (ii) the amount of all foreign, federal, state and local income and employment taxes payable by the Executive with respect to the foregoing calculated at the maximum marginal income tax rate for each year in which such payments shall be made to the Executive (based on the rate in effect for such year as set forth in the Code as in effect at the time of the first such payment), less (iii) the amount of Excise Tax imposed with respect to the Payments described in (i) above.

 

(c)           If a reduction is to occur pursuant to paragraph (a), the payments and benefits under this Agreement shall be reduced in the following order:  any cash severance (in reverse order of payment), then outplacement services (in reverse order), then any other amount that is a “parachute payment” within the meaning of Section 280G of the Code in such order as determined in the sole discretion of the Company and not the Executive.

 

Section 12.                      Successors.  (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution.  This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

 

(b)           This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

 

(c)           The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  As used in this Agreement, the term “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise.

 

Section 13.                      Miscellaneous.  (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without reference to principles of conflict of laws.  This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

 

(b)           Each notice, request, demand, approval or other communication which may be or is required to be given under this Agreement shall be in writing and shall be deemed to have been properly given when delivered personally at the address set forth below for the intended party during normal business hours at such address, when sent by facsimile or other electronic transmission to the respective facsimile transmission numbers of the parties set forth below with telephone confirmation of receipt, or when sent by recognized overnight courier or by the United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

  

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If to the Company:

 

	
Littelfuse, Inc.

8755 W. Higgins Road

O'Hare Plaza, Suite 500

Chicago, IL 60631

Attention: President

	
Facsimile: (773) 628-0802

Confirm:   (773) 628-0880

 

	
If to the Executive, to the last address shown in the records of the Company.

 

Notices shall be given to such other addressee or address, or both, or by way of such other facsimile transmission number, as a particular party may from time to time designate by written notice to the other party hereto.  Each notice, request, demand, approval or other communication which is sent in accordance with this Section shall be deemed given and received for all purposes of this Agreement as of two business days after the date of deposit thereof for mailing in a duly constituted United States post office or branch thereof, one business day after deposit with a recognized overnight courier service or upon confirmation of receipt of any facsimile transmission.  Notice given to a party hereto by any other method shall only be deemed to be given and received when actually received in writing by such party.

 

(c)           The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

 

(d)           The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

 

(e)           The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to promptly assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to separate from service for Good Reason pursuant to Subsection 5(c)(i)-(v) hereof, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

 

(f)           The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment or other service of the Executive by or with the Company is “at will” and, subject to Subsection 1(a) hereof and/or any other written agreement between the Executive and the Company, prior to the Effective Date, the Executive’s employment and/or service and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date upon written notice to the other party, in which case the Executive shall have no further rights under this Agreement.  From and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.

 

  

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(g)           This Agreement may be executed in two or more counterparts, all of which taken together shall constitute one and the same agreement.

 

IN WITNESS WHEREOF, the parties hereto have executed this Change of Control Agreement on the dates set forth below.

 

 

	 	
EXECUTIVE

	 
	 	 	 
	 	 	 
	 	 	 
	Date:     December 16, 2011                                                            	/s/ Ryan K. Stafford	 
	 	

RYAN K. STAFFORD

	 

 

 

 

	 	
LITTELFUSE, INC.

	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	
Date:     December 16, 2011                                                            

	
By

	/s/ Gordon Hunter	 
	 	 	Gordon Hunter, Chief Executive Officer	 

 

 

15ex10-99x.htm

Exhibit 10.99x

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”), is entered into as of January 12, 2012 (the “Effective Date”) by and between Location Based Technologies, Inc., a Nevada corporation (“Company”), and Dave Morse (“Executive”).

 

W I T N E S S E T H:

 

WHEREAS, Company is a technology and telecommunications company that has designed and patented wireless communications products and systems combining advanced wireless technology to provide features of location based devices; and

 

WHEREAS, Company wishes to assure itself of the services of Executive for the period and upon the terms and conditions provided in this Agreement; and

 

WHEREAS, Executive is willing to serve in the employ of Company on a full-time basis for said period and upon the terms and conditions provided in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

 

1.              Employment.

 

a.           Term and Title.  Subject to the terms and conditions of this Agreement, Company hereby agrees to employ Executive as Co-President and Chief Executive Officer, or in such other responsible or additional executive capacity as set forth herein, commencing on the Effective Date and continuing in full force and effect until the fifth (5) anniversary of the Effective Date; provided however, that the term of this Agreement shall automatically be extended for additional one-year periods unless either party provides written notice to the contrary at least sixty (60) days prior to the end of the term then in effect (“Employment Term”).

 

b.           Duties and Responsibilities.  During the Employment Term, Executive agrees to devote his/her working time and attention to the business and affairs of Company and to faithfully and efficiently perform all reasonable responsibilities and duties commensurate with his/her position in Company to the best of his/her skill and abilities, in a competent and professional manner.  Executive agrees to fulfill such general management duties and responsibilities as are consistent with his/her position.  In addition, Executive shall serve as a director of the Company without additional compensation if elected by the stockholders of the Company.

 

c.           Exclusive Services.  During the Employment Term, Executive further agrees not to engage in any business or perform any services that are competitive with the business of or services provided by Company or that may be deemed to constitute a conflict of interest.  Notwithstanding anything to the contrary contained in this Section 1(c), Executive shall not be prohibited from (i) rendering services to relatives, charitable or community organizations; (ii) managing his/her personal investments in such manner as to not interfere with the performance of his/her duties hereunder; or (iii) owning no more than 4.99% of the equity securities of a corporation or other entity, the securities of which are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.

 

  

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2.              Compensation; Benefits.  During the Employment Term, Executive shall be entitled to the compensation package and benefits provided below:

 

a.           Base Salary.  During the Employment Term, in full consideration for the services to be rendered by Executive and in complete discharge of Company’s salary obligations hereunder, Company shall pay to Executive a base salary (“Base Salary”) of Fifteen Thousand dollars ($15,000) per month, which amount shall be paid to Executive in accordance with Company’s payroll policies as in effect from time to time for senior executives of Company, subject to all standard payroll deductions, if any.

 

b.           Adjustments to Base Salary.  The monthly Base Salary shall be automatically increased by Two Thousand Five Hundred Dollars ($2,500) per month upon Company first achieving each of the following milestones (to be measured at the end of each fiscal quarter on the basis of the trailing twelve (12) months): (i) One Million Five Hundred Thousand Dollars ($1,500,000) in Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) ; (ii) Two Million Five Hundred Thousand Dollars ($2,500,000) in EBITDA; (iii) Three Million Five Hundred Thousand Dollar ($3,500,000) in EBITDA; and (iv) Four Million Five Hundred Thousand Dollars ($4,500,000) in EBITDA.

 

c.           Option Grant.  The Company shall grant to Executive under the Amended and Restated 2007 Incentive Stock Plan (“Plan”) options to purchase four million (4,000,000) shares of Company common stock at a price equal to ten percent (10%) above the thirty day volume weighted average price on the date of the signing of this Agreement.  The vesting schedule shall be as follows, provided, however, that none of such options may be exercised unless and until the Plan has been approved by the stockholders of Company:

 

(i)  500,000 options shall vest immediately as a year-end bonus for 2011.

 

(ii)  250,000 options shall vest upon achieving 100,000 worldwide activations (including U.S.).

 

(iii)  250,000 options shall vest upon completing a capital raise in the form of a term loan, equity investment or equity-linked investment of Twenty Million Dollars ($20,000,000) or greater.

 

(iv)  250,000 options shall vest upon succesfully listing of Company common stock on the NYSE Amex Equities.

 

(v)  500,000 options shall vest upon succesfully listing of Company common stock on the NASDAQ Stock Market.

 

(vi)  In the event a Change of Control as defined in the Plan, any of the four million (4,000,000) options which have not vested or been cancelled shall automatically vest on such terms and conditions as the Board of Directors of the Company (the “Board”) deems appropriate.

 

  

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Within twenty (20) days prior to the vesting of options under Section 2(c)(iii), (iv) or (v) above, Executive, in his/her sole discretion, may notify Company that he/she elects to receive the following amount of cash in lieu of the vesting of the additional options: Seventy Five Thousand Dollars ($75,000) under Section 2(c)(iii) or (iv) and One Hundred Fifty Thousand Dollars ($150,000) under Section 2(c)(v).  In the event of such an election, Company shall pay such amount to Executive in cash promptly following occurrence of the event that would cause such vesting and the options that otherwise would have vested shall be cancelled.

 

d.           Bonus.  Each year during the Employment Term, the Company may pay a bonus to Executive, which may be part of a general bonus plan established by the Board.

 

e.           Stock Incentive Plan/Options for Performance. Executive shall be entitled to participate in the Plan of the Company on such terms as the Board deems appropriate from time to time.

 

f.            Expenses.  Company recognizes that in connection with Executive’s performance of Executive’s duties and obligations under this Agreement, Executive shall incur certain expenses of a business character.  Company shall reimburse Executive for all ordinary and reasonable expenses incurred by Executive in connection with performance of his/her duties hereunder, provided that Executive submits to Company substantiation of such expenses.

 

g.           Fringe Benefits/Insurance.  Executive shall be entitled to participate in any and all benefits and perquisites as are generally provided by the Company for the benefit of its executive employees including, but not limited to, eligibility for participation in any group life, health, dental, vision, hospitalization, disability or accident insurance, pension plan, retirement savings plan, 401(k) plan, or other such benefit plan or policy which may presently be in effect or which may hereafter be adopted by the Company; provided, however, that nothing herein contained shall be deemed to require the Company to adopt or maintain any particular plan or policy, or to preclude the Company from amending or terminating any plan or policy.

 

h.           Vacation and Holidays.  Executive shall be entitled to four (4) weeks paid vacation per year.  Executive shall also be entitled to all paid holidays given by Company to its employees.

 

i.            Payment of Accrued Compensation.  If at the Effective Date any compensation payable to Executive has been accrued and unpaid and from and after the Effective Date any such compensation is accrued, Executive shall be entitled to payment of such accrued compensation in the following manner:

 

(i)  If the Company recieves an equity or equity-linked investment in the amount of Twelve Million Dollars ($12,000,000) or greater, Company shall pay Executive all accrued compensation in full.

 

(ii)  If the Company receives an capital investment which is strategic in nature (and therefore does not require the issuance of equity), of Eight Million Dollars ($8,000,000) or more, Company shall pay Exeutive any accrued compensaton in full. This includes, but is not limited to, the proceeds from the sale of any significant portion of the assets of the Company other than inventory in the ordinary course of business.

 

  

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(iii)  If the Company acheives EBITDA of One Million Dollars ($1,000,000) or more, Company shall pay Exeutive on a monthly basis an amount equal to two times Executive’s monthly Base Salary until any accrued compensation has been paid in full.  EBITDA shall be measured at each fiscal quarter end and any salary adjustements shall begin on the first pay cycle of the following fiscal quarter. The final month’s remuneration may be adjusted as needed to prevent Executive from receiving more than the amount to which he/she is so entitled.

 

3.              Termination of Employment.

 

a.           Death.  In the event of Executive’s death occurring any time during the Employment Term, the Agreement shall automatically terminate in which event Company shall thereupon be released and discharged of and from all further obligations under this Agreement except as in Section 4 hereof.

 

b.           Incapacity.  In the event of Executive’s physical or mental disease or disability, to such a degree as to render Executive unable to substantially perform all of the duties and responsibilities with which Executive is then charged for a period of 180 consecutive days (“Incapacity”), Company may terminate Executive’s employment upon written notice to Executive that he/she is being terminated for Incapacity.  Executive’s termination due to Incapacity shall be effective the later of (i) the expiration of the above period of Incapacity or (ii) 30 days after the date of such notice.

 

c.           Resignation.  Executive may resign his/her current position with Company and thereby terminate his/her employment, for any reason by giving Company 90 days advance written notice.

 

d.           Termination for Cause.  Notwithstanding anything to the contrary contained in this Agreement, Company may, by written notice to Executive, immediately terminate Executive’s employment for “Cause.”  For purposes of this Agreement, “Cause” shall mean that one of the following events (each, a “Cause Event”) shall have occurred after the Effective Date:  (i)  Executive’s ongoing material breach of a material provision of this Agreement, following written notice of such breach from the Board and a reasonable period of time to cure; or (ii) chronic alcoholism or any other form of addiction that prevents Executive from performing the essential functions of his/her position with a reasonable accommodation.

 

e.           Suspension for Cause.  Company may, by written notice to Executive, suspend the employment of Executive only for Cause.  If Company exercises such right of suspension, Executive’s obligation to render services, but not Company’s obligation to pay Executive’s Base Salary, shall be suspended for the period of time set forth in the notice; but in no event shall such suspension exceed a period of time equal to three (3) consecutive months.  Company may, in its reasonable discretion by written notice, terminate the employment of Executive at the expiration of the suspension period.

 

f.            Termination without Cause.  Any of the following shall constitute a “termination without cause”:  (i) termination of Executive’s full-time employment hereunder for any reason other than set forth in Sections 3(a) through (e) above; (ii) failure to elect or re-elect, or appoint or re-appointment, Executive as _____________________ of the Company, unless consented to by Executive; (iii) a material change in Executive’s functions, duties or responsibilities with the Company, which change would cause Executive’s position to become one of substantially less responsibility or scope, unless consented to by the Executive; or (iv) a material reduction in benefits or perquisites to Executive from those being provided as of the Effective Date, unless consented to by Executive.

 

  

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4.              Rights Upon Termination.

 

a.           Upon termination of Executive’s employment pursuant to Section 3(a), (b) or (c) hereof, Executive shall receive (i) any salary or monies previously due and owing to Executive and remaining unpaid; (ii) outstanding reimbursable business expenses; (iii) all earned but unused vacation time; (iv) life insurance benefits, if applicable, and (v) all other benefit entitlements in which Executive is a participant.

 

b.           In the event Executive’s employment is terminated by Company for Cause pursuant to Section 3(d) or (e) hereof, Executive shall be entitled to payment for (i) all outstanding reimbursable business expenses, (ii) any unpaid Base Salary or incentive compensation that has accrued and has been earned for services performed by Executive prior to the effective date of the termination, and (iii) all earned but unused vacation time.  Executive shall not be entitled to any other payments or compensation.  Company shall be released and discharged of and from any further obligation to Executive, except the payment of any monies previously due and owing to Executive.

 

c.           In the event Executive’s employment is terminated by Company pursuant to Section 3(f) hereof, Company shall pay Executive the Base Salary at least equal to the salary, including all bonuses and commissions, of the highest paid employee of the Company and medical benefits through the end of the Employment Term, or if such termination occurs in the last year of the Employment Term for a period of two years after the date of termination. If at any time during such period any events occur that would have resulted in increasing the Base Salary under the provisions of Section 2(b) if Executive were still employed by Company, Executive shall promptly be paid such additional amounts.  In addition, any of the four million (4,000,000) options granted under Section 2(c) hereof which have not vested or been cancelled shall automatically vest in the event Executive’s employment is terminated by Company pursuant to Section 3(f) hereof.

 

Executive shall not be entitled to any other payments or compensation.  Company shall be released and discharged of and from any further obligation to Executive, except the payment of any monies previously due and owing to Executive.

 

d.           Sole Obligations of Company.  Company shall have no other contractual obligations to Executive upon termination of Executive’s employment for any reason, except as explicitly set forth in this Section 4 of this Agreement.

 

5.              Cooperation Following Termination.  Executive agrees that, following notice of termination of his/her employment with Company, he/she will cooperate fully with Company in all matters relating to the completion of his/her pending work on behalf of Company and the orderly transition of such work to such other officer as Company may designate.  Executive further agrees that during and following the termination of his/her employment with Company, he will cooperate fully with Company as to any and all claims, controversies, disputes or complaints over which he/she has any knowledge other than his or her employment relationship with Company; provided, however, Executive will be reimbursed by Company for any out of pocket expenses incurred pursuant to his/her duties under this Section 5 and reasonably compensated for his/her time.  Such cooperation includes, but is not limited to, providing Company with all information known to him/her related to such claims, controversies, disputes or complaints and appearing and giving testimony in any forum.

 

  

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6.              Confidential Information.

 

a.           Company Information.  Executive acknowledges that during the course of employment, Executive will have access to information about Company and that Executive’s employment with Company shall bring Executive into close contact with proprietary information of Company.  In recognition of the foregoing, Executive agrees at all times during and following Executive’s employment with Company, to hold in confidence, and not to use, except for the benefit of Company, or to intentionally disclose to any person, firm, corporation or other entity without written authorization of Company, any “Confidential Information” of Company which Executive obtains or creates.  Executive understands that “Confidential Information” means any Company proprietary information, technical data, trade secrets or know-how, including, but not limited to, research, product plans, products, services, suppliers, customer lists, prices and costs, markets, software, developments, inventions, laboratory notebooks, processes, formulas, technology, designs, drawing, engineering, hardware configuration information, marketing, licenses, finances, budgets or other business information disclosed to Executive by Company in writing or by drawings of parts or equipment, or created by Executive during the period of Executive’s employment (the “Employment Period”) during working hours.  Executive understands that “Confidential Information” includes information pertaining to any aspects of Company’s business which is either information not known by actual or potential competitors of Company or is proprietary information of Company or its customers or suppliers, whether of a technical nature or otherwise.  Executive further understand that Confidential Information does not include any of the foregoing items which have become publicly known and made generally available through no wrongful act of Executive.

 

b.           Third Party Information. Executive recognizes that Company has received and in the future will receive confidential or proprietary information from third parties subject to a duty on Company’s part to maintain the confidentiality of such information and to use such information only for certain limited purposes.  Executive agrees to hold all such confidential or proprietary information in confidence and not to intentionally disclose it to any person, firm or corporation or to use it except as necessary in carrying out his/her work for Company consistent with Company’s agreement with such third party.

 

7.              Inventions.

 

a.           Inventions Retained and Licensed.  Executive represents and warrants to Company that there are no inventions, original works of authorship, developments, improvements, or trade secrets which were made by Executive prior to the commencement of his/her employment with the Company under this Agreement (collectively, “Prior Invention(s)”), which belong solely to Executive or belong to Executive jointly with another, which relate in any way to any of Company’s proposed businesses, products or research and development, and which are not assigned to Company hereunder.  If, in the course of the Employment Period, Executive incorporates into a Company product, process or machine a Prior Invention owned by Executive, Company is hereby granted and shall have a non-exclusive, non-royalty-based, license to make, have made, copy, modify, make derivative works of, use, sell and otherwise distribute such Prior Invention as part of or in connection with such Company product, process or machine.

 

  

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b.           Assignment of Inventions.  Executive agrees that Executive will promptly make full written disclosure to Company, will hold in trust for the right and benefit of Company, and hereby assigns to Company, or its designee, all rights, title and interests throughout the world in and to any and all inventions, original works of authorship, developments, concepts, know-how, improvements or trade secrets, whether or not patentable or registrable under copyright or similar laws, which Executive may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice during the Employment Period that (i) relate at the time of conception or development to the actual or demonstrably proposed business or research and development activities of Company; (ii) result from or relate to any work performed for Company during normal business hours; and (iii) are developed through the use of Confidential Information (collectively, “Inventions”).  Executive further acknowledges that all Inventions, which are made by Executive (solely or jointly with others) within the scope of and during the period of Executive’s employment with Company, are “works made for hire” and are compensated by the Base Salary, unless regulated otherwise by a separate agreement between the “Company” and the “Executive.”

 

c.           Inventions on Executive’s Own Time.  The provisions of Section 7(a) and 7(b) above do not apply to any invention which qualifies fully under the provisions of California Labor Code §2870, which provides as follows:

 

§ 2870 – Employment agreements; assignment of rights

 

(a)  Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either (1) relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or (2) result from any work performed by the employee for the employer.

 

(b)  To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a) of Section 2870, the provision is against the public policy of this state and is unenforceable.

 

d.           Patent and Copyright Rights.  Executive agrees to assist Company, or its designee, at Company’s expense, in every reasonable way to secure Company’s rights in the Inventions and any copyrights, patents, trademarks, mask work rights, moral rights, or other intellectual property rights relating thereto in any and all countries, including the disclosure to Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, recordations, and all other instruments which are necessary in order to apply for, obtain, maintain and transfer such rights and in order to assign and convey to Company, its successors, assigns and nominees the sole and exclusive rights, title and interest in and to such Inventions, and any copyrights, patents, mask work rights, or other intellectual property rights relating thereto.

 

  

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8.              Return of Company Documents.  Executive agree that, at the time of termination of employment with Company for any reason, Executive will deliver to Company (and will not keep in his/her possession, recreate or deliver to anyone else) any and all Confidential Information and all other documents, materials, information or property belonging to Company, its successors or assigns. Executive further agrees that any property situated on Company’s premises and owned by Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice.

 

9.              Injunctive Relief.  Executive expressly acknowledges that any breach or threatened breach of any of the terms and/or conditions set forth in Sections 6 and 7 of this Agreement will result in substantial, continuing and irreparable injury to Company.  Therefore, Executive hereby agrees that, in addition to any other remedy that may be available to Company, Company shall be entitled to injunctive relief, specific performance or other equitable relief by a court of appropriate jurisdiction in the event of any breach of threatened breach of the terms of this Agreement.

 

10.            Miscellaneous.

 

a.           Governing Law. This Agreement is deemed to be entered into and performed in Orange County, California.  Except as otherwise explicitly noted, this Agreement shall be governed by and construed in accordance with the laws of the State of California, without giving effect to the conflict of law rules of California.  The parties hereby submit to the exclusive jurisdiction of the state of California in connection with any dispute arising from or related to this Agreement, and Orange County shall be the sole venue therefore.

 

b.           Modifications and Amendments.  This Agreement may be modified or amended only by a written instrument executed by the parties hereto and approved in writing by a duly authorized officer of Company and signed by Executive. No modification or amendment shall be effective absent such approval.

 

c.           Independence and Severability.  Each of the rights enumerated above shall be independent of the others and shall be in addition to and not in lieu of any other rights and remedies available to Company at law or in equity.  If any of the covenants contained herein or any part of any of them is hereafter construed or adjudicated to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants or rights or remedies which shall be given full effect without regard to the invalid portions.  If any of the covenants contained herein are held to be invalid or unenforceable because of the duration of such provision or the area or scope covered thereby, Executive agrees that the court or arbitrator making such determination shall have the power to reduce the duration, scope and/or area of such provision and in its reduced form said provision shall then be enforceable.

 

  

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d.           Notice.  For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given as of the date if delivered in person or by telecopy, on the next business day, if sent by a nationally recognized overnight courier service, and on the third business day if mailed by registered mail, return receipt requested, postage prepaid, and if addressed to the Company then at its principal place of business, or if addressed to Executive, then his/her last known address on file with the Company.

 

e.           Waiver.  The observation or performance of any condition or obligation imposed upon Executive hereunder may be waived only upon the written consent of Company and the Executive.  Such waiver shall be limited to the terms thereof and shall not constitute a waiver of any other condition or obligation of Executive under this Agreement.

 

f.            Assignment.  This Agreement is personal to Executive and shall not be assigned by him/her. Company may assign its rights hereunder to (a) any corporation or other legal entity resulting from any merger, consolidation or other reorganization to which Company is a party or (b) any corporation, partnership, association or other legal entity or person to which Company may transfer all or substantially all of the assets and business of Company existing at such time.  All of the terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns.

 

g.           Headings.  The headings have been inserted for convenience only and are not to be considered when construing the provisions of this Agreement.

 

h.           Counterparts.  This Agreement may be executed in one or more counterparts and transmitted electronically, a copy of which shall constitute an original and each of which, when taken together, shall constitute one and the same agreement.

 

i.            Survival of Provisions.  Notwithstanding anything to the contrary in this Agreement, Sections 5, 6, 7, 8, 9 and 10 of this Agreement shall survive the termination of this Agreement for the period of time so specified or implied in such Sections, respectively.

 

j.            Arbitration.  Any controversy, dispute or claim of any nature whatsoever involving Company and Executive or Executive’s spouse or family, including without limitation any claims arising out of, in connection with, or in relation to this Agreement or Executive’s employment with Company, any claims of unlawful discrimination, sexual harassment or wrongful termination, and any issues of arbitrability of any such disputes, will be resolved by final and binding arbitration before the American Arbitration Association in Orange County, California, in accordance with its employee arbitration rules.

 

k.           Entire Agreement.  This Agreement is a restatement of, and shall replace, the Executive Employment Agreement dated as of January 12, 2012 between the Company and Executive, and constitutes the entire understanding between the parties hereto in respect of the employment of Executive by Company, superseding all negotiations, prior discussions, prior written, implied and oral agreements, preliminary agreements and understandings with Company or any of its officers, employees or agents, including without limitation the Executive Employment Agreement dated October 11, 2007 between Company and Executive.

 

  

9

  

 

IN WITNESS WHEREOF, this Agreement is executed and agreed to as of the Effective Date.

 

COMPANY:

 

LOCATION BASED TECHNOLOGIES, INC.

 

By: /s/ Desiree Mejia                                         

Name:  Desiree Mejia                                        

Title:  Chief Operating Officer                         

EXECUTIVE:

 

/s/ Dave Morse                                                  

Dave Morse

 

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