EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this "AGREEMENT") is made and
entered into as of this 16th day of March, 2006 (the "EFFECTIVE DATE"), by and
between TAG-IT PACIFIC, INC., a Delaware corporation (the "COMPANY") and XXXXXXX
XXXXX ("EXECUTIVE").
1. ENGAGEMENT AND DUTIES.
1.1 Commencing as of the Effective Date, and upon the terms and
subject to the conditions set forth in this Agreement, the
Company hereby engages and employs Executive as an officer of
the Company, with the title and designation of Chief Executive
Officer of the Company. Executive hereby accepts such
engagement and employment.
1.2 Executive's duties and responsibilities shall be those
normally and customarily vested in the office of Chief
Executive Officer of a corporation, subject to the
supervision, direction and control of the Board of Directors
(the "BOARD") of the Company. Executive shall report directly
to the Board.
1.3 Executive agrees to devote his primary business time,
energies, skills, efforts and attention to his duties
hereunder, and will not, without the prior written consent of
the Board, which consent will not be unreasonably withheld,
render any material services to any other for-profit business
concern, PROVIDED, that Executive's service on the boards (or
similar bodies) of the entities listed on EXHIBIT A hereto
shall not constitute any violation of this Agreement.
Executive will use his best efforts and abilities faithfully
and diligently to promote the Company's business interests.
1.4 Except for routine travel incident to the business of the
Company, Executive shall perform his duties and obligations
under this Agreement principally from an office provided by
the Company in Woodland Hills, California, or such other
location in Los Angeles or Ventura County, California, as the
Board may from time to time determine.
2. TERM OF EMPLOYMENT. Executive's employment pursuant to this Agreement
shall commence on the Effective Date and shall terminate on the
earliest to occur of the following (in any case, the "TERM"):
(a) the close of business on December 31, 2008, PROVIDED, that if
the Company has not given Executive Notice of its decision not
to renew the Term on or before July 1, 2008, then, unless
otherwise terminated as provided below, the Term shall be
automatically extended until the earlier of (i) a date which
is six (6) months following delivery after July 1, 2008 by the
Company to Executive of Notice of its decision not to extend
the Term further, and (ii) December 31, 2009;
(b) the death of Executive;
(c) delivery to Executive of written Notice (as defined below) of
termination by the Company if Executive shall suffer a
"PERMANENT DISABILITY," which for purposes of this
Agreement shall mean a condition that entitles Executive to
benefits under an applicable Company long-term disability plan
or, if no such plan exists, a physical or mental disability
which, in the reasonable judgment of the Board, is likely to
render Executive unable to perform his duties and obligations
under this Agreement for 90 days in any 12-month period;
(d) delivery to Executive of written Notice of termination by the
Company for "Cause," which Notice shall identify the
particular details of the conduct that the Company believes
constitutes Cause. For purposes of this Agreement, "Cause"
shall mean: (i) any act or omission knowingly undertaken or
omitted by Executive with the intent of causing damage to the
Company, its properties, assets or business or its
stockholders, officers, directors or employees; (ii) any
fraud, misappropriation or embezzlement by Executive resulting
in a material personal profit to Executive, in any case,
involving properties, assets or funds of the Company or any of
its subsidiaries; (iii) Executive's consistent failure to
materially perform his normal duties as described in SECTION
1.2, other than any such failure resulting from Executive's
Permanent Disability; (iv) conviction of, or pleading nolo
contendere to, (A) any crime or offense involving monies or
other property of the Company; or (B) any felony offense
involving a crime of moral turpitude; or (v) Executive's
chronic or habitual use or consumption of drugs or alcoholic
beverages, in either case, that causes material damage to the
Company, its properties, assets or business, PROVIDED, that to
the extent any circumstances that would otherwise constitute
Cause shall be capable of cure, Executive shall be given no
less than thirty days to cure such circumstances prior to any
termination of his employment for Cause;
(e) delivery to Executive of written Notice of termination by the
Company "without Cause;"
(f) delivery to the Company of written Notice of termination by
Executive for "GOOD REASON," by reason of: (i) the material
diminution of Executive's duties, job title or
responsibilities as provided in SECTION 1 above; (ii) a
relocation of Executive's principal work location to a
location that is inconsistent with the terms of SECTION 1.4
above; (iii) a material breach by the Company of this
Agreement, including without limitation, a material reduction
in any component of Executive's compensation or benefits as
provided for herein; or (iv) a change in Executive's reporting
arrangement such that Executive no longer reports directly to
the Board; or
(g) delivery to the Company of written Notice of termination by
Executive without "Good Reason."
3. COMPENSATION; EXECUTIVE BENEFIT PLANS.
3.1 As soon as practicable (but in no event more than 5 business
days) following the Effective Date, the Company shall pay the
Executive a lump-sum cash payment in an amount equal to
$7,480.76.
3.2 The Company shall pay to Executive a base salary (the "BASE
SALARY") at an annual rate of (i) $275,000 for the period
commencing on the Effective Date and ending on December 31,
2006, and (ii) $325,000 during each subsequent calendar year
of the Term, subject to increase, but not decrease, on an
annual basis at the discretion of the Board. The Base Salary
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shall be payable in installments throughout the year in the
same manner and at the same times the Company pays base
salaries to similarly situated executive officers of the
Company, but in any event, no less frequently than monthly.
3.3 Commencing with fiscal year 2006 and for each fiscal year
during the Term thereafter during which Executive is
performing services to the Company, the Company shall maintain
a Management Incentive Program, pursuant to which the Company
will set aside each fiscal year for payment to Executive and
such other members of management as determined by the Board of
Directors, an amount equal to fifteen percent (15%) of the
Company's EBIT for such fiscal year (the "MIP FUND"). For
purposes hereof, "EBIT" shall mean earnings before interest
and taxes, calculated based on the Company's audited
consolidated financial statements for the applicable fiscal
year prepared in accordance with generally accepted accounting
principles in the United States. Executive shall be entitled
to receive an EBIT based bonus (the "EBIT BONUS") equal to (i)
fifty percent (50%) of the MIP Fund, if any, for fiscal year
2006, and (ii) thirty three percent (33%) of the MIP Fund, if
any, for each subsequent fiscal year during the Term. The EBIT
Bonus, if any, shall be payable in cash on April 15 of the
year immediately following the fiscal year for which such EBIT
Bonus is calculated.
3.4 During the Term, Executive shall be entitled each year to
vacation for a minimum of four calendar weeks (pro-rated for
any partial year of service during the Term), plus such
additional period or periods as the Board may approve in the
exercise of its reasonable discretion, during which time his
compensation shall be paid in full. To the extent that
Executive does not use any such vacation during any year, up
to two calendar weeks of such unused vacation shall be carried
over from year to year; provided, however that in no event
shall Executive's total accrued but unused vacation at any
time exceed six weeks.
3.5 As an inducement to Executive to accept this Agreement and
serve as Chief Executive Officer of the Company, Executive has
been granted an option to purchase 900,000 shares of common
stock of the Company (the "COMMON STOCK") at a per share
exercise price of $0.37 (the "INDUCEMENT OPTION"). The
Inducement Option was granted to Executive outside of (and not
pursuant to) the Company's 1997 Stock Plan (the "STOCK PLAN")
and shall be registered with the SEC on a Form S-8
Registration Statement no later than May 31, 2006. Except as
otherwise provided below, and subject to earlier termination
in accordance with its terms, the Inducement Option shall vest
as to 300,000 shares on October 24, 2006 and as to an
additional 25,000 shares on the last day of each calendar
month thereafter until fully vested. In addition, the Company
has granted to Executive pursuant to the Stock Plan (i)
135,135 fully vested shares of Common Stock (the "STOCK
GRANT"), and (ii) an option to purchase 135,135 shares of
Common Stock at a per share exercise price of $0.37 (the
"COMPANION OPTION"). The Companion Option shall vest in full
on October 24, 2006. Consistent with SECTION 5.1(II) below,
the option agreements covering the Inducement Option and the
Companion Option (the "OPTION AGREEMENTS") will provide for
the full acceleration of all applicable vesting requirements
upon (i) a change of control of the Company, as defined in the
applicable agreement, and (ii) upon a termination of
Executive's employment without Cause, for Good Reason or due
to Executive's death or Permanent Disability.
3.6 During the Term, the Company shall pay to Executive, in
increments payable at the times that the Company pays the Base
Salary to Executive, an allowance of $1,500
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per month for costs associated with the lease or purchase,
maintenance and insurance of an automobile.
3.7 During the Term, Executive shall be entitled to reimbursement
from the Company for the reasonable costs and expenses which
he incurs in connection with the performance of his duties and
obligations under this Agreement, substantiated in a manner
consistent with the Company's practices and policies as
adopted or approved from time to time by the Board for
executive officers. For the avoidance of doubt, "business
class" travel shall constitute reasonable costs and expenses
on any international flight greater than five hours in
duration.
3.8 The Company shall promptly pay or reimburse to Executive legal
fees actually incurred by Executive in connection with the
negotiation and drafting of this Agreement, which fees shall
not exceed $10,000 in the aggregate.
3.9 The Company may deduct from any compensation payable to
Executive the minimum amounts sufficient to cover applicable
federal, state and/or local income and employment tax
withholding.
4. OTHER BENEFITS. During the Term, Executive shall be eligible to
participate in all operative employee compensation, fringe benefit and
perquisite, and other benefit and welfare plans or arrangements of the
Company then in effect from time to time and in which similarly
situated executive officers of the Company generally are entitled to
participate, including without limitation, to the extent then in
effect, incentive, group life, medical, dental, prescription,
disability and other insurance plans, all on terms at least as
favorable as those offered to similarly situated executives of the
Company.
5. TERMINATION OF EMPLOYMENT. Subject to the provisions of this Section 5,
either the Company or Executive may terminate Executive's employment at
any time for any reason or no reason. The following provisions shall
control any such termination of Executive's employment.
5.1 TERMINATION WITHOUT CAUSE, FOR GOOD REASON, OR DUE TO
EXECUTIVE'S DEATH OR PERMANENT DISABILITY. The Company may
terminate Executive's employment without Cause at any time
upon 15 days' prior written Notice to Executive, and Executive
may terminate his employment with Good Reason at any time upon
15 days' prior written Notice to the Company, in each case,
subject to any applicable cure periods (in the case of a
termination without Cause or for Good Reason, the date
specified in any such Notice in accordance with this SECTION
5.1 shall constitute the "DATE OF TERMINATION"). For purposes
of clarity, the Company's delivery of Notice in accordance
with SECTION 2(A) of its decision not to renew the Term shall
not constitute termination without Cause, and shall be
governed by SECTION 5.5 below. Executive's employment shall
also terminate upon the occurrence of Executive's death or
Permanent Disability (in the case of a termination due to
Executive's death or Permanent Disability, the date of the
death or the date specified in a Notice from the Company
indicating termination due to Permanent Disability shall
constitute the "DATE OF TERMINATION"). If Executive's
employment is terminated pursuant to this SECTION 5.1, the
Company shall promptly, or in the case of obligations
described in clause (e) below, as such obligations become due
to Executive, pay or provide to
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Executive (or his estate), (a) Executive's earned but unpaid
Base Salary accrued through such Date of Termination, (b)
accrued but unpaid vacation time through such Date of
Termination, (c) any EBIT Bonus required to be paid to
Executive pursuant to this Agreement for any fiscal year of
the Company ending prior to the Date of Termination, to the
extent payable, but not previously paid, (d) reimbursement of
any business expenses incurred by Executive prior to the Date
of Termination that are reimbursable under SECTION 3.7 above,
and (e) any vested benefits and other amounts due to Executive
under any plan, program, policy of, or other agreement with,
the Company (together, the "ACCRUED OBLIGATIONS"). In
addition, Executive (or his estate) shall be entitled to the
following payments and benefits (the "SEVERANCE") from the
Company:
(i) payment, at the time and in the manner specified in
SECTION 5.2 below, of an aggregate amount equal to
Executive's Base Salary (at the rate then in effect,
but disregarding any reduction of Base Salary in
violation of this Agreement) that would have been
payable to the Executive had he remained employed by
the Company for the period (such period, or the
period described in the next sentence, as applicable,
the "SEVERANCE PERIOD") commencing on the Date of
Termination and ending on December 31, 2008 or, if
later, the date which is six (6) months following
delivery by the Company of Notice of its decision not
to extend the Term (as contemplated by SECTION 2(A),
which Notice, if not previously given, shall be
deemed to be given on the Date of Termination for any
reason other than death or Permanent Disability). If
termination occurs due to death or Permanent
Disability, then such amount shall be equal to the
Base Salary that would have been payable to the
Executive had he remained employed by the Company
through December 31, 2008. The Severance payable to
the Executive pursuant to this paragraph (i) is
hereinafter referred to as the "BASE SALARY
SEVERANCE";
(ii) payment, at the time specified in SECTION 5.2 below,
of a pro rated portion of the EBIT Bonus for the
fiscal year in which the Date of Termination occurs,
where such pro rated portion is equal to: (a) fifteen
percent (15%) of the Company's EBIT, if any, for the
period (the "EBIT Period") from January 1 of the
applicable fiscal year through the last day of the
fiscal quarter in which such Date of Termination
occurs, MULTIPLIED BY (b) a ratio determined by
dividing the number of days Executive was employed
during the EBIT Period by the total number of days in
the EBIT Period, MULTIPLIED BY (c) either fifty
percent (50%) or thirty-three percent (33%) if such
Date of Termination occurs during fiscal 2006 or
after fiscal 2006, respectively;
(iii) as of the Date of Termination, full vesting and
exercisability of the Inducement Option and the
Companion Option, which Options shall remain
outstanding and exercisable for at least twelve
months
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following the Date of Termination (and shall be
exercisable by Executive's estate in the event of his
death); and
(iv) continued healthcare coverage for Executive (if
living) and his dependents for the Severance Period,
to the extent each such individual received
healthcare coverage immediately prior to such
termination of employment, at the same cost to
Executive and his dependents as such coverage cost
immediately prior to such termination of employment
(subject to premium increases affecting participants
in such plan(s) generally), PROVIDED, that if the
Board determines, in its sole discretion, that it is
necessary or advisable for Executive to elect
continuation healthcare coverage under Section 4980B
of the Code and the regulations thereunder in order
for the Company to provide such coverage under its
healthcare plans, and the Company so notifies the
Executive, Executive hereby agrees to make such an
election. For the avoidance of doubt, if the Company
requires that Executive elect continuation coverage
under Section 4980B of the Code, such coverage shall
nevertheless be provided to Executive and his
dependents (as described above) at the same cost to
Executive and his dependents as was paid for medical
coverage immediately prior to Executive's termination
of employment.
5.2 TIMING OF PAYMENT. The Company shall make payment of the
amounts specified in clauses (i) and (ii) of SECTION 5.1 as
follows:
(i) with respect to the Base Salary Severance, (a) 50% of
such amount shall be paid on the date of Executive's
"separation from service" within the meaning of
Section 409A(a)(2)(A)(i) of the Code (a "SEPARATION
FROM SERVICE") , and (b) 50% of such amount shall be
paid in equal installments on the first day of each
of the twelve (12) calendar months immediately
following such separation from service; and
(ii) the EBIT Bonus amount contemplated by clause (ii) of
SECTION 5.1 shall be paid on the date that is 50
calendar days following the last day of the fiscal
quarter during which Executive's separation from
service occurs.
5.3 CAUSE. If Executive's employment becomes terminable by the
Company for Cause, the Company may terminate Executive's
employment immediately (subject to the cure rights described
above) and Executive shall be entitled to receive the Accrued
Obligations upon the Date of Termination, or, in the case of
benefits described in SECTION 5.1(E), as such obligations
become due to Executive.
5.4 RESIGNATION. Executive may terminate his employment without
Good Reason upon thirty (30) days' Notice to the Company. If
Executive so terminates his
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employment, Executive shall be entitled to receive the Accrued
Obligations promptly, or, in the case of benefits described in
SECTION 5.1(E), as such obligations become due to Executive.
5.5 NONRENEWAL. In the event that either the Company or the
Executive elects not to renew the Term (or any extension
thereof) in accordance with SECTION 2(A), Executive shall be
entitled to receive the Accrued Obligations upon the Date of
Termination, or, in the case of benefits described in SECTION
5.1(E), as such obligations become due to Executive. In
addition, Executive shall be entitled to receive payment, (i)
if Executive's separation from service occurs during any of
the first three fiscal quarters of the applicable fiscal year,
on the date that is 50 calendar days following the last day of
the fiscal quarter during which the Executive's separation
from service occurs, or (ii) if the separation from service
occurs during the fourth fiscal quarter of the applicable
fiscal year, on April 15 of the immediately following year, of
a pro rated portion of the EBIT Bonus for the fiscal year in
which the Date of Termination occurs, where such pro rated
portion is equal to: (a) fifteen percent (15%) of the
Company's EBIT, if any, for the EBIT Period, multiplied by (b)
a ratio determined by dividing the number of days Executive
was employed during the EBIT Period by the total number of
days in the EBIT Period, multiplied by thirty-three percent
(33%).
5.6 SIX-MONTH DELAY. Notwithstanding anything to the contrary in
this Agreement, no Severance payments or benefits shall be
paid to Executive during the six-month period following the
Executive's separation from service to the extent that the
Company and the Executive mutually determine in good faith
that paying such amounts at the time or times indicated in
this SECTION 5 would cause the Executive to incur an
additional tax under Section 409A of the Code (in which case
such amounts shall be paid at the time or times indicated in
this SECTION 5.6). If the payment of any such amounts are
delayed as a result of the previous sentence, then on the
first day following the end of such six-month period, the
Company will pay the Executive a lump-sum amount equal to the
cumulative amount that would have otherwise been payable to
the Executive during such six-month period.
6. CONFIDENTIALITY OF PROPRIETARY INFORMATION AND MATERIAL.
6.1 INDUSTRIAL PROPERTY RIGHTS. For the purpose of this Agreement,
"INDUSTRIAL PROPERTY RIGHTS" shall mean all of the Company's
patents, trademarks, trade names, inventions, copyrights,
know-how, formulas and science, now in existence or hereafter
developed or acquired by the Company or for its use, relating
to any and all products and services which are developed,
formulated and/or manufactured by the Company.
6.2 TRADE SECRETS. For the purpose of this Agreement, "TRADE
SECRETS" shall mean any formula, pattern, device, or
compilation of information that is used in the Company's
business and gives the Company an opportunity to obtain an
advantage over its competitors who do not know and/or do not
use it. This term includes, but is not limited to, information
relating to the marketing of the Company's products and
services, including price lists, pricing information, customer
lists, customer names, the particular needs of customers,
information relating to their desirability as customers,
financial information, intangible property and other such
information which is not in the public domain.
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6.3 TECHNICAL DATA. For the purpose of this Agreement, "TECHNICAL
DATA" shall mean all information of the Company in written,
graphic or tangible form relating to any and all products
which are developed, formulated and/or manufactured by the
Company, as such information exists as of the Effective Date
or is developed by the Company during the term hereof.
6.4 PROPRIETARY INFORMATION. For the purpose of this Agreement,
"PROPRIETARY INFORMATION" shall mean all of the Company's
Industrial Property Rights, Trade Secrets and Technical Data.
Proprietary Information shall not include any information
which (i) was lawfully in the possession of Executive prior to
Executive's employment with the Company, (ii) may be obtained
by a reasonably diligent businessperson from readily available
and public sources of information, (iii) is lawfully disclosed
to Executive after termination of Executive's employment by a
third party which does not have an obligation to the Company
to keep such information confidential, or (iv) is
independently developed by Executive without utilizing any of
the Company's Proprietary Information.
6.5 AGREEMENT NOT TO COPY OR USE. Executive agrees, at any time
during the term of his employment and for a period of ten
years thereafter, not to copy, use or disclose (except (i) as
required, authorized or permitted in connection with the
performance of his services to the Company, (ii) as required
by law after first notifying the Company and giving it an
opportunity to object, or (iii) as required to enforce
Executive's rights under this Agreement) any Proprietary
Information without the Company's prior written permission.
The Company may withhold such permission as a matter within
its sole discretion during the term of this Agreement and
thereafter.
7. RETURN OF CORPORATE PROPERTY. Upon any termination of this Agreement,
Executive shall turn over to the Company all property, writings or
documents then in his possession or custody belonging to or relating to
the affairs of the Company or comprising or relating to any Proprietary
Information.
8. DISCOVERIES AND INVENTIONS.
8.1 DISCLOSURE. Executive will promptly disclose in writing to the
Company complete information concerning each and every
invention, discovery, improvement, device, design, apparatus,
practice, process, method, product or work of authorship, in
any case, relating to the business, products, practices,
techniques or confidential information of the Company, whether
patentable or not, made, developed, perfected, devised,
conceived or first reduced to practice by Executive,
(hereinafter referred to as "DEVELOPMENTS"), either solely or
in collaboration with others, (a) prior to the Term while
working for the Company, (b) during the Term or (c) within six
months after the Term .
8.2 ASSIGNMENT. Executive, to the extent that he has the legal
right to do so, hereby acknowledges that any and all
Developments that are created during the Term, are the
property of the Company and hereby assigns and agrees to
assign to the Company any and all of Executive's right, title
and interest in and to any and all of such Developments;
PROVIDED, HOWEVER, that, in accordance with California Labor
Code Sections 2870 and 2872, the provisions of this SECTION
8.2 shall not apply to any Development that Executive
developed entirely on his
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own time without using the Company's equipment, supplies,
facilities or trade secret information except for those
Developments that either:
(a) relate at the time of conception or reduction to
practice of the Development to the Company's
business, or actual or demonstrably anticipated
research or development of the Company; or
(b) result directly from any work performed by Executive
for the Company.
8.3 ASSISTANCE OF EXECUTIVE. Upon the Company's request and at no
expense to Executive, whether during the Term or thereafter,
Executive will do all reasonable lawful acts, including, but
not limited to, the execution of papers and lawful oaths and
the giving of testimony, that, in the reasonable opinion of
the Company, its successors and assigns, may be necessary or
desirable in obtaining, sustaining, reissuing, extending and
enforcing United States and foreign Letters Patent, including,
but not limited to, design patents, on any and all
Developments and for perfecting, affirming and recording the
Company's complete ownership and title thereto, subject to the
proviso in SECTION 8.2 hereof, and Executive will otherwise
reasonably cooperate in all proceedings and matters relating
thereto. Executive shall be compensated at a rate of $250 per
hour for any actions he is required to take pursuant to this
SECTION 8.3 after the Term.
8.4 RECORDS. Executive will keep complete and accurate accounts,
notes, data and records of all Developments in the manner and
form reasonably requested by the Company. Such accounts,
notes, data and records shall be the property of the Company,
subject to the proviso in SECTION 8.2 hereof, and, upon
written request by the Company, Executive will promptly
surrender the same to it.
8.5 OBLIGATIONS, RESTRICTIONS AND LIMITATIONS. Executive
understands that the Company may enter into agreements or
arrangements with agencies of the United States Government and
that the Company may be subject to laws and regulations which
impose obligations, restrictions and limitations on it with
respect to inventions and patents which may be acquired by it
or which may be conceived or developed by employees,
consultants or other agents rendering services to it.
Executive agrees that he shall be bound by all such
obligations, restrictions and limitations applicable to any
such invention conceived or developed by him during the Term
and shall take any reasonable action which may be required to
discharge such obligations and to comply with such
restrictions and limitations.
9. NON-SOLICITATION COVENANT.
9.1 NONSOLICITATION AND NONINTERFERENCE. Until the earlier of (i)
two years following termination of this Agreement and (ii)
December 31, 2009, Executive shall not (a) induce or attempt
to induce any employee of the Company to leave the employ of
the Company, (b) induce or attempt to induce any employee of
the Company to work for, render services or provide advice to
or supply confidential business information or Trade Secrets
of the Company to any third person, firm or corporation, or
(c) induce or attempt to induce any customer, supplier,
licensee, licensor or other business relation of the Company
to cease doing business
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with the Company, PROVIDED, that advertisements and general
solicitations shall not constitute a breach of this Section
9.1.
9.2 INDIRECT SOLICITATION. Executive agrees that, during the
period covered by SECTION 9.1 hereof, he will not, directly or
indirectly, assist or encourage any other person in carrying
out, directly or indirectly, any activity that would be
prohibited by the provisions of SECTION 9.1 if such activity
were carried out by Executive, either directly or indirectly;
and, in particular, Executive agrees that he will not,
directly or indirectly, induce any employee of the Company to
carry out, directly or indirectly, any such activity.
10. INJUNCTIVE RELIEF. Executive hereby recognizes, acknowledges and agrees
that in the event of any breach by Executive of any of his covenants,
agreements, duties or obligations contained in SECTIONS 6, 7, 8 AND 9
of this Agreement, the Company would suffer great and irreparable harm,
injury and damage, the Company would encounter extreme difficulty in
attempting to prove the actual amount of damages suffered by the
Company as a result of such breach, and the Company would not be
reasonably or adequately compensated in damages in any action at law.
Executive therefore covenants and agrees that, in addition to any other
remedy the Company may have at law, in equity, by statute or otherwise,
in the event of any breach by Executive of any of his covenants,
agreements, duties or obligations contained in SECTIONS 6, 7, 8 AND 9
of this Agreement, the Company shall be entitled to seek and receive
temporary, preliminary and permanent injunctive and other equitable
relief from any court of competent jurisdiction to enforce any of the
duties or obligations contained in SECTIONS 6, 7, 8 AND 9 of this
Agreement without the necessity of proving the amount of any actual
damage to the Company or any affiliate thereof resulting therefrom;
PROVIDED, HOWEVER, that nothing contained in this SECTION 10 shall be
deemed or construed in any manner whatsoever as a waiver by the Company
of any of the rights which the Company may have against Executive at
law, in equity, by statute or otherwise arising out of, in connection
with or resulting from the breach by Executive of any of his covenants,
agreements, duties or obligations hereunder.
11. CODE SECTION 409A. Certain amounts under this Agreement may constitute
"nonqualified deferred compensation" which are intended to comply with
the requirements of Section 409A of the Code. To the extent that the
parties reasonably determine that any compensation or benefits payable
under this Agreement are subject to Section 409A of the Code, this
Agreement shall incorporate the terms and conditions required by
Section 409A of the Code and Department of Treasury regulations as
reasonably determined by the Company and the Executive. To the extent
applicable, this Agreement shall be interpreted in accordance with
Section 409A of the Code and Department of Treasury regulations and
other interpretative guidance issued thereunder. In the event that
following the Effective Date, the Company and the Executive reasonably
determine that any compensation or benefits payable under this
Agreement may be subject to Section 409A of the Code and related
Department of Treasury guidance, the Company and the Executive shall
work together to adopt such amendments to this Agreement or adopt other
policies or procedures (including amendments, policies and procedures
with retroactive effective), or take any other commercially reasonable
actions necessary or appropriate to (a) exempt the compensation and
benefits payable under this Agreement from Section 409A of the Code
and/or preserve the intended tax treatment of the compensation and
benefits provided with respect to this Agreement, or (b) comply with
the requirements of Section 409A of the Code and related Department of
Treasury guidance.
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12. CODE SECTION 280G. If any payment or benefit received or to be received
by Executive in connection with a "change in ownership or control" of
the Company (within the meaning of Section 280G of the Code), whether
payable pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company or an affiliate of the
Company (the "PAYMENTS"), would constitute a "parachute payment" within
the meaning of Section 280G of the Code, the Payments shall be reduced
to the extent necessary so that no portion thereof shall be subject to
the excise tax imposed by Section 4999 of the Code but only if, by
reason of such reduction, the net after-tax benefit to Executive shall
exceed the net after-tax benefit to Executive if no such reduction was
made. For purposes of this SECTION 12, "net after-tax benefit" shall
mean (i) the total of all payments and the value of all benefits which
Executive receives or is then entitled to receive from the Company that
would constitute "parachute payments" within the meaning of Section
280G of the Code, less (ii) the amount of all federal, state and local
income taxes payable with respect to the foregoing calculated at the
maximum marginal income tax rate for each year in which the foregoing
shall be paid to 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 payment
of the foregoing), less (iii) the amount of excise taxes imposed with
respect to the payments and benefits described in (i) above by Section
4999 of the Code. The foregoing determination will be made by a
nationally recognized accounting firm (the "ACCOUNTING FIRM") selected
by Executive and reasonably acceptable to the Company, PROVIDED, that
the Accounting Firm's determination shall be made based upon
"substantial authority" within the meaning of Section 6662 of the Code.
The Accounting Firm shall provide Executive and the Company with its
determinations and detailed supporting calculations with respect
thereto at least 15 business days prior to the date on which Executive
would be entitled to receive a Payment (or as soon as practicable in
the event that the Accounting Firm has less than 15 business days
advance notice that Executive may receive a Payment) in order that
Executive may determine whether it is in Executive's best interest to
waive the receipt of any or all amounts which may constitute "excess
parachute payments." If the Accounting Firm determines that such
reduction is required by this SECTION 12, Executive, in his sole and
absolute discretion, may determine which of the Payments shall be
reduced to the extent necessary so that no portion thereof shall be
subject to the excise tax imposed by Section 4999 of the Code, and the
Company shall pay such reduced amount to Executive. Executive and the
Company shall each provide the Accounting Firm access to and copies of
any books, records, and documents in the possession of Executive or the
Company, as the case may be, reasonably requested by the Accounting
Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determinations and
calculations contemplated by this SECTION 12. The first $10,000 of fees
and expenses of the Accounting Firm for its services in connection with
the determinations and calculations contemplated by this SECTION 12
will be borne exclusively by the Company, and the balance of any such
fees and expenses, if any shall be borne exclusively by Executive.
13. MISCELLANEOUS.
13.1 ARBITRATION. The parties agree that they will use their best
efforts to amicably resolve any dispute arising out of or
relating to this Agreement. Any controversy, claim or dispute
that cannot be so resolved shall be settled by final, binding
arbitration in accordance with the rules of the American
Arbitration Association and judgment upon the award rendered
by the arbitrator or arbitrators may be entered in any court
having jurisdiction thereof. Any such arbitration shall be
conducted in Los Angeles County or Ventura County, California,
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or such other place as may be mutually agreed upon by the
parties. Within fifteen (15) days after the commencement of
the arbitration, each party shall select one person to act as
an arbitrator, and the two arbitrators so selected shall
select a third arbitrator within ten (10) days of their
appointment. Each party shall bear its own costs and expenses
and an equal share of the arbitrator's expenses and
administrative fees of arbitration.
13.2 NOTICES. All notices, requests and other communications
(collectively, "NOTICES") given pursuant to this Agreement
shall be in writing, and shall be delivered by fax, email,
personal service, reputable overnight carrier or by United
States first class, registered or certified mail (return
receipt requested), postage prepaid, addressed to the party at
the address set forth below:
If to Company:
Tag-It Pacific, Inc.
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000
Attn: Board of Directors
Fax 000-000-0000
xxxxx@xxxxxxx.xxx
If to Executive, at the address, fax or email
maintained for Executive in the Company's payroll records.
Any Notice shall be deemed duly given when received
by the addressee thereof, provided that any Notice sent by
registered or certified mail shall be deemed to have been duly
given three days from date of deposit in the United States
mails, unless sooner received. Either party may from time to
time change its address for further Notices hereunder by
giving Notice to the other party in the manner prescribed in
this section.
13.3 ENTIRE AGREEMENT. This Agreement, together with the Option
Agreements, contains the sole and entire agreement and
understanding of the parties with respect to the entire
subject matter of this Agreement, and any and all prior
agreements, discussions, negotiations, commitments and
understandings, whether oral or otherwise, related to the
subject matter of this Agreement are hereby merged herein. No
representations, oral or otherwise, express or implied, other
than those contained in this Agreement have been relied upon
by any party to this Agreement.
13.4 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES
THEREOF.
13.5 INDEMNIFICATION; INSURANCE. The Company shall defend,
indemnify and hold Executive harmless from any and all
liabilities, obligations, claims or expenses which arise in
connection with or as a result of Executive's service as an
officer or director of the Company to the greatest extent now
provided in the Company's Articles and Bylaws and as otherwise
allowed by law. During the Term and for a period of at least
six years thereafter, Executive shall
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be entitled to the same directors and officers' liability
insurance coverage that the Company provides generally to its
other directors and officers, as may be amended from time to
time for such directors and officers.
13.6 AMENDMENT. The terms of this Agreement may not be amended or
modified other than by a written instrument executed by the
parties hereto or their respective successors.
13.7 WAIVER. Failure by any party hereto to insist upon strict
compliance with any provision of this Agreement or to assert
any right such party may have hereunder shall not be deemed to
be a waiver of such provision or right or any other provision
or right of this Agreement.
13.8 ASSIGNMENT. This Agreement is binding on and for the benefit
of the parties hereto and their respective successors, heirs,
executors, administrators and other legal representatives.
13.9 CAPTIONS. The various captions of this Agreement are for
reference only and shall not be considered or referred to in
resolving questions of interpretation of this Agreement.
13.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same
instrument.
13.11 BUSINESS DAY. If the last day permissible for delivery of any
Notice under any provision of this Agreement, or for the
performance of any obligation under this Agreement, shall be
other than a business day, such last day for such Notice or
performance shall be extended to the next following business
day (provided, however, under no circumstances shall this
provision be construed to extend the date of termination of
this Agreement).
In witness whereof, the parties have executed this Agreement as of the
date first set forth above.
Company: Executive:
TAG-IT PACIFIC, INC.
By: /S/ XXXX XXXX /S/ XXXXXXX XXXXX
---------------------------------- ----------------------------------
Xxxx Xxxx Xxxxxxx Xxxxx
Chairman of the Board
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EXHIBIT A
1. Board of Directors, Ascendent Telecommunications, Inc.
2. Board of Directors, Forte Group, LLC
3. Board of Directors, Forte Design Group, LLC
4. Board of Advisors, Blue Sky Broadcast
5. Member, Young President's Organization
6. Board of Directors - Los Angeles Chapter, Young Entrepreneur's Organization
7. Board of Advisors, The Xxxxxx Xxxxxxxxxx University
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