COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company

may

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

not

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

not

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

Commissions, Royalty and License Fee Agreements

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

December

31,

2018

and

2017,

$17

thousand and

$36

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

External Sales Representative Commissions

Commissions to external sales representatives are paid in accordance with their related agreements, either on a monthly or annual basis. As of

December

31,

2018

and

2017,

$0.3

million and

$0.3

million, respectively, was accrued for commissions to external sales representatives, and is reported as a current liability in accrued expenses.

Employment Agreements

As of the year ended

December

31,

2018,

the following employment agreements were in place:

William J. Clough, President/Chief Executive Officer and General Counsel of CUI Global, Inc., Chief Executive Officer of all CUI Global subsidiaries

Mr. Clough is employed under a multi-year employment contract with the Company, which became effective

July 1, 2013,

and which was recently extended to run to and through

December 31, 2019.

Said contract provides, in relevant part, for salary in

2018

$560

thousand, and includes bonus provisions for each calendar year up to

one hundred twenty-five

percent of base salary to be based on performance objectives, goals and milestones for each calendar year including revenue performance and entitles Mr. Clough to a

two

-year severance package and an annual

cost of living adjustment. Bonuses are approved quarterly based on various performance-related factors and an evaluation of current performance and includes a discretionary bonus of up to

twenty-five

percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. All such bonus payments shall be paid to Mr. Clough in equal monthly installments following the period in which the bonus is earned and shall be paid on the

15th

day of each month. At

December

31,

2018,

2017,

and

2016,

there was an accrual of

$30

thousand,

$33

thousand, and

$29

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

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

Mr. Ford is employed under a multi-year employment contract with the Company, which became effective

July 1, 2013

and which was extended to run to and through

December 31, 2019.

Said contract provides, in relevant part, for salary in

2018

$350

thousand, an annual

cost of living adjustment, an

eighteen

-month severance package and bonus provisions up to

one hundred twenty-five

percent of base salary to be based on performance objectives, goals and milestones for each calendar year including revenue performance. The bonus includes a discretionary bonus of up to

twenty-five

percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. Bonuses are approved quarterly based on the above factors and an evaluation of current performance. All such bonus payments shall be paid to Mr. Ford in equal monthly installments following the period in which the bonus is earned and shall be paid on the

15th

day of each month. At

December

31,

2018,

2017,

and

2016,

there was an accrual of

$21

thousand,

$22

thousand, and

$19

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

Matthew M. McKenzie, President of CUI Inc., Chief Operating Officer of the Power and Electromechanical Division and Corporate Secretary of CUI Global, Inc.

Mr. McKenzie is employed under a multi-year employment contract with the Company, which became effective

July 1, 2013

and which was extended to run to and through

December 31, 2019.

Said contract provides, in relevant part, for salary in

2018

$320

thousand, an annual

cost of living adjustment, an

eighteen

-month severance package and bonus provisions up to

one hundred twenty-five

percent of base salary to be based on performance objectives, goals, and milestones for each calendar year, including revenue performance in the Power and Electromechanical segment. The bonus includes a discretionary bonus of up to

twenty-five

percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. Bonuses are approved quarterly based on the above factors and an evaluation of current performance. All such bonus payments shall be paid to Mr. McKenzie in equal monthly installments following the period in which the bonus is earned and shall be paid on the

15th

day of each month. At

December

31,

2018,

2017,

and

2016,

there was an accrual of

$18

thousand,

$12

thousand, and

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

Paul D. White, President of Orbital Gas Systems, Limited

Mr. White is employed under a

three

-year employment contract with the Company through

December 1, 2020

and provides, in relevant part, for an initial annual salary of

$225

thousand in year

along with a

$30

thousand

one

-time signing bonus, and increases to

$250

thousand and

$275

thousand in years

and

respectively, a severance of the Executive’s salary for the remainder of his severance term upon termination, bonus provisions to be based on performance objectives, goals, and milestones for each calendar year, including revenue performance at Orbital-UK. Mr. White served as President of Orbital Gas Systems, Ltd. since

July 2017,

initially in a consulting role. Upon accepting the permanent role of President of Orbital Gas Systems, Ltd. effective

December 1, 2017,

Mr. White ceased to be independent as a director of the Company. The bonus includes a discretionary bonus of up to

twenty-five

percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. Bonuses are approved on an ongoing basis based on the above factors and an evaluation of current performance. All such bonus payments shall be paid to Mr. White following the period in which the bonus is earned. At

December

31,

2018

and

2017,

there was an accrual of

$155

thousand, and

$40

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

Leases

CUI executed a sale-leaseback transaction of its Tualatin, OR headquarters facility in

December

2018.

There was

$16

thousand of rent expense associated with this lease in

2018,

and monthly rent expense in

2019

will be approximately

$51

thousand per month.

Orbital-UK has a number of leases, on vehicles, equipment, and on accommodations for visiting personnel. During the year ended

December

31,

2018,

the total monthly rent on these leases was approximately

$32

thousand.

January 2015,

the Company rented office and warehouse space in Houston, TX for its Orbital North America operations. During the year ended

December

31,

2017,

the monthly rent of this lease, which terminated in

January 2018,

was approximately

$10

thousand. In

November 2017,

the Company relocated to another rented office and warehouse space in Houston, TX. Rent expense on this lease is approximately

$30

thousand per month.

March 2015,

as part of the Tectrol acquisition, the Company leased the Toronto facility. During the year ended

December

31,

2018,

the monthly rent of this lease was approximately

$34

thousand dollars per month.

Additionally, CUI Japan leases office space. During the year ended

December

31,

2018,

the monthly base rent of this lease was approximately

thousand.

Rental expense was

$1.2

million,

$0.9

million, and

$0.8

million in

2018,

2017

and

2016,

respectively, and is included in selling, general and administrative on the statement of operations.

Future minimum operating lease obligations are as follows:

(In thousands)	As of December 31, 2018
2019	$	1,482
2020		1,129
2021		1,031
2022		1,013
2023		605
Thereafter		3,307
Total	$	8,567