EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this "AGREEMENT") is made and
entered into as of this 18th day of June, 2008 (the "EFFECTIVE DATE"), by and
between TALON INTERNATIONAL, INC., a Delaware corporation (the "Company") and
XXXXXX X. XXXXXXX ("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
and/or not-for-profit business concern or organization. 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, 2010, provided,
that if the Company has not given Executive Notice of its decision not to renew
the Term on or before April 1, 2010, then, unless otherwise terminated as
provided below, the Term shall be automatically extended until the earlier of
(i) a date which is nine (9) months following delivery after April 1, 2010 by
the Company to Executive of Notice of its decision not to extend the Term
further, and (ii) December 31, 2011;
(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 (v) the commencement
of a voluntary or involuntary proceeding by or against the Company under Chapter
7 of the United States Bankruptcy Code or other law or statute of any
jurisdiction providing for the cessation of the Company's business and the
liquidation of its assets; or
(g) delivery to the Company of written Notice of
termination by Executive without "Good Reason."
3. COMPENSATION; EXECUTIVE BENEFIT PLANS.
3.1 The Company shall pay to Executive a base salary (the
"BASE SALARY") at an annual rate of (i) $275,000 for the period effective from
January 1, 2008 through December 31, 2008, (ii) $300,000 for the period from
January 1, 2009 through December 31, 2009, and (iii) $325,000 for the period
from January 1, 2010 through December 31, 2010, which Base Salary shall be
subject to increase, but not decrease, at the discretion of the Board. The Base
Salary 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. As soon as practicable following the Effective Date, the Company shall
pay to Executive a lump sum cash payment in an amount equal to the difference
between (x) the Base Salary for the period from January 1, 2008 through the
Effective Date and (y) the amount of base salary actually paid to Executive for
such period.
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3.2 Commencing with fiscal year 2008 and for each fiscal
year during the Term thereafter during which Executive is performing services to
the Company, Executive shall be entitled to participate in the Company's
Management Incentive Program, which is described more fully on EXHIBIT A
attached hereto (the "MIP BONUS").
3.3 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.
3.4 Executive shall receive a performance option to
purchase 900,000 shares of common stock of the Company (the "COMMON STOCK") at a
per share exercise price equal to the average closing price of the Company's
stock during the five (5) days immediately following the Effective Date (the
"PERFORMANCE OPTION"). The Performance Option will be granted to Executive
pursuant to the Company's 2007 Stock Incentive Plan (the "STOCK PLAN"). Except
as otherwise provided below, and subject to earlier termination in accordance
with its terms, the Performance Option shall vest in full on December 31, 2010,
subject to earlier vesting upon Executive's achievement of the performance
criteria described on EXHIBIT B attached hereto. The Performance Option
agreement (the "OPTION AGREEMENT") will provide for the full acceleration of all
applicable vesting requirements of all options granted under the Option
Agreement upon a change in control of the Company, as defined in the Option
Agreement. The Option Agreement shall be substantially in the form of EXHIBIT C
attached hereto.
3.5 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 flight greater than five hours
in duration.
3.6 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.
3.7 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.
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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. During the Term, the Company shall also pay to Executive, in increments
payable at the times that the Company pays the Base Salary to Executive, an
allowance of $1,000 per month for costs associated with the lease or purchase,
maintenance and insurance of an automobile.
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
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 MIP 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 3.5 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, if Executive (or his estate) delivers to the Company a signed
settlement agreement and general release in the form attached hereto as EXHIBIT
D (the "RELEASE") and satisfies all conditions to make the Release effective,
Executive (or his estate) shall be entitled to the following payments and
benefits (the "SEVERANCE") from the Company:
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(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) for the period (the "SEVERANCE PERIOD")
commencing on the Date of Termination and ending on December 31, 2010 or, if
later, the date which is nine (9) 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, 2010. 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 MIP Bonus for the fiscal year in which
the Date of Termination occurs, where such pro rated portion shall be determined
based on the Company's actual performance for the full fiscal year in which such
Date of Termination occurs, and shall be equal to: (a) the MIP Bonus, if any,
for the fiscal year in which such Date of Termination occurs, MULTIPLIED BY (b)
a ratio determined by dividing the number of days Executive was employed during
such fiscal year by 365 days;
(iii) as of the Date of Termination, full vesting
and exercisability of the Performance Option (and all other options either
previously or hereinafter granted to Executive by the Company). All of said
options shall remain outstanding and exercisable for twelve (12) months
following the Date of Termination (and shall be exercisable by Executive's
estate in the event of his death). To the extent the terms of this paragraph
(iii) are inconsistent with the terms of that certain Stock Option Agreement
(Non-Statutory Stock Option) previously executed between Executive and the
Company (the "EXISTING OPTION AGREEMENT"), the terms of this paragraph (iii)
shall supercede the terms of the Existing Option Agreement; and
(iv) continued medical coverage of the type
provided to Executive pursuant to SECTION 4 of this Agreement for Executive (if
living) and his dependents for the Severance Period, to the extent each such
individual received medical 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 medical 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:
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(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 MIP Bonus, if any, contemplated by
clause (ii) of Section 5.1 shall be payable in cash not later than April 15 of
the year immediately following the fiscal year for which such MIP Bonus is
calculated.
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.l(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 employment, Executive shall be entitled to receive the Accrued
Obligations promptly, or, in the case of benefits described in Section 5.l (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.L(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 MIP Bonus for the fiscal year in which the
Date of Termination occurs, where such pro rated portion is calculated in the
same manner described in clause (ii) of Section 5.1 above.
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.
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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.
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 of this
Agreement.
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 this Agreement 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 Executive's services hereunder
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.
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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 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 in writing. 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.
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9. NON-SOLICITATION COVENANT.
9.1 NON-SOLICITATION AND NONINTERFERENCE. Until the
earlier of (i) two years following termination of this Agreement and (ii)
December 31, 2011, 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 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 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.
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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.
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.
10
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, 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 ATTORNEYS' FEES. If any legal action is brought for
the enforcement of this Agreement, or because of an alleged dispute, breach or
default in connection with or arising out of any of the provisions of this
Agreement, the successful or prevailing party or parties shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which such party or parties may
be entitled.
13.3 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:
Talon International, 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.
11
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.
13.4 ENTIRE AGREEMENT. This Agreement, together with the
Option Agreement and Existing Option Agreement, 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.
13.5 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.
13.6 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 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.
13.7 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.
13.8 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.
13.9 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.
13.10 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.
13.11 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.
12
13.12 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).
(SIGNATURES ON FOLLOWING PAGE)
13
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
Company: Executive:
TALON INTERNATIONAL, INC.
By: /S/ XXXX XXXX /S/ XXXXXX XXXXXXX
------------------------ --------------------------
Xxxx Xxxx Xxxxxx X. Xxxxxxx
Chairman of the Board
S-1
EXHIBIT A
MANAGEMENT INCENTIVE PROGRAM
Commencing with fiscal year 2008 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 determine an incentive fund (the "MIP FUND") each fiscal year for
payment to Executive and such other non-commissioned members of management of
the Company as mutually agreed upon by Executive and the Board (collectively,
the "OTHER MANAGEMENT PARTICIPANTS"). Subject to the minimum MIP Bonus, if any,
Executive is entitled to receive as set forth below, the allocation of the MIP
Fund to Executive and the Other Management Participants shall be mutually agreed
upon by Executive and the Board. The portion of the MIP Fund, if any, payable to
Executive as a bonus for any fiscal year is referred to herein as the MIP Bonus.
For fiscal year 2008, the MIP Fund shall be an amount equal to twelve
percent (12%) of the Company's EBITDA for such fiscal year. For purposes hereof
and subject to the terms of this EXHIBIT A, "EBITDA" means earnings before
interest, taxes, depreciation and amortization calculated based on the Company's
audited consolidated financial statements for the applicable fiscal year in
question prepared in accordance with generally accepted accounting principles in
the United States. Notwithstanding the foregoing, the calculation of EBITDA
shall exclude (i) any severance payments and/or payments made under the MIP Fund
to either Executive or any other officers (or former officers) of the Company
whose employment was terminated on or before March 1, 2008; and (ii) any charges
resulting from asset impairment of the Company assets (x) previously used in or
located at the Company's North Carolina manufacturing plant that existed prior
to January 1, 2006 or which arise from such assets during the applicable fiscal
year, including any impairment or loss associated with the disposition of the
North Carolina plant real property or improvements to such real property, or (y)
consisting of shares of common stock of Cygne Designs Inc. Notwithstanding the
above, no MIP Fund for fiscal year 2008 shall be established unless the EBITDA
shall exceed $1,000,000. Executive shall be entitled to receive a MIP Bonus
equal to forty percent (40%) of the MIP Fund, if any, for fiscal year 2008.
For fiscal year 2009 and 2010 the MIP Fund shall be based upon
performance criteria established by the Board and Executive for each of such
fiscal years. Each fiscal year, management of the Company shall submit a budget
to the Board, including a budgeted profit and loss statement, cash flow
statement and balance sheet for such fiscal year by quarter, which shall be
reviewed, modified (if applicable) and ultimately approved by the Board (the
"BUDGET"). At the time such Budget is approved, but not later than February 15th
of the fiscal year in question, the applicable performance criteria for
determination of the MIP Fund shall also be established by mutual agreement of
Executive and the Board. Such performance criteria shall be based upon actual
results for the fiscal year and shall be structured to reasonably result in a
target bonus for Executive (based upon Executive's participation in the MIP
Fund) of $150,000 if the established performance criteria or targeted results
are achieved. The MIP Fund shall be structured so that Executive shall be
eligible to earn from 0% to 200% of such target amount each fiscal year, based
upon a sliding scale determined from the performance criteria.
The MIP Bonus, if any, shall be payable in cash not later than April 15
of the year immediately following the fiscal year for which such MIP Bonus is
calculated.
A-1
EXHIBIT B
OPTION PERFORMANCE CRITERIA
The Performance Option shall vest in full on December 31, 2010, and
shall be subject to earlier vesting, if at all, based on an Annual Target
Tranche of 300,000 shares and based on the performance criteria established by
the Company's Board of Directors for such fiscal year, where the Company's
actual performance for such fiscal year is measured and evaluated against the
Company's budgeted performance for such fiscal year. Each fiscal year,
management shall submit a budget to the Company's Board of Directors, including
a budgeted profit and loss statement, cash flow statement and balance sheet for
such fiscal year by calendar quarter, which shall be reviewed, modified (if
applicable) and ultimately approved by the Board of Directors (as approved, the
"Budget"). At the time such Budget is approved, the Board of Directors also
shall establish the applicable performance criteria against which the
Executive's performance shall be measured.
Executive shall be eligible to vest from 80% to 200% of the Annual
Target Tranche for fiscal 2008 and fiscal 2009 (provided that in no event shall
more than 900,000 shares vest pursuant to the Performance Option). As soon as
practicable following completion of the audit of the Company's financial
statements for the applicable fiscal year, the Board of Directors shall compare
the Company's actual performance against budgeted performance, and the
Performance Option shall vest early, if at all, based on a percentage of the
Annual Target Tranche, calculated as follows:
RELATIONSHIP OF ACTUAL
TO BUDGETED PERCENTAGE OF
PERFORMANCE CRITERIA TRANCHE THAT VESTS
-------------------------------------- -----------------------------------
Less than 80% 0%
80-100% 80-100%
100-115% 100-115%
115-125% 125%
125-140% 150%
Over 140% 200%
The Performance Option shall vest early, if at all, on April 15, 2009
(with respect to fiscal 2008 performance) and April 15, 2010 (with respect to
fiscal 2009 performance).
B-1
EXHIBIT C
OPTION AGREEMENT
OPTION CERTIFICATE
(NON-STATUTORY STOCK OPTION)
THIS IS TO CERTIFY that Talon International, Inc., a Delaware
corporation (the "COMPANY"), has granted to the person named below ("OPTIONEE")
a non-statutory stock option (the "OPTION") to purchase shares of the Company's
Common Stock (the "SHARES") under its 2007 Stock Plan and upon the terms and
conditions as follows:
Name of Optionee: XXXXXX XXXXXXX
Address of Optionee: 0000 XXXXXX XXXXX
XXXXXXXX XXXX, 00000
Number of Shares: 900,000
Option Exercise Price: $[ ] PER SHARE
Date of Grant: JUNE [ ], 2008
Option Expiration Date: JUNE [ ], 2018
EXERCISE SCHEDULE: The Option shall become exercisable as follows:
The option shall vest and become exercisable with respect 100% of the
Shares on December 31, 2010, subject to earlier vesting as provided in the Stock
Option Agreement attached hereto as ANNEX I.
By your signature and the signature of the Company's representative
below, you and the Company agree to be bound by all of the terms and conditions
of the Stock Option Agreement, which is attached hereto as ANNEX I and
incorporated herein by this reference.
OPTIONEE: TALON INTERNATIONAL, INC.
By:
---------------------------------- ---------------------------
Xxxxxx Xxxxxxx Xxxx Xxxx
Its: Chairman of the Board
ANNEX I
STOCK OPTION AGREEMENT
(NON-STATUTORY STOCK OPTION)
This STOCK OPTION AGREEMENT (this "OPTION AGREEMENT") is made and
entered into as of the execution date of the Option Certificate to which it is
attached (the "CERTIFICATE") by and between Talon International, Inc., a
Delaware corporation (the "COMPANY"), and the person named in the Certificate
("OPTIONEE").
Pursuant to the Talon International, Inc. 2007 Stock Plan (as amended,
the "PLAN"), the Board of Directors of the Company (the "BOARD") has authorized
the grant to Optionee of a non-statutory stock option to purchase shares of the
Company's Common Stock, par value $.001 per share (the "COMMON STOCK"), upon the
terms and subject to the conditions set forth in this Option Agreement.
The Company and Optionee agree as follows:
1. GRANT OF OPTION.
The Company hereby grants to Optionee the right and option (the
"OPTION"), upon the terms and subject to the conditions set forth in this Option
Agreement and the Plan, to purchase all or any portion of that number of shares
of the Common Stock (the "SHARES") set forth in the Certificate at the Option
exercise price set forth in the Certificate (the "EXERCISE PRICE").
2. TERM OF OPTION.
The Option shall terminate and expire on the Option Expiration Date set
forth in the Certificate (the "EXPIRATION DATE"), unless sooner terminated as
provided herein. In no event shall the Option be exercisable after the
expiration of ten years from the date it was granted.
3. EXERCISE PERIOD.
(a) Subject to the provisions of SECTIONS 3(B), 3(C),
3(D), 5 and 7(B) of this Option Agreement, the Option shall become exercisable
(in whole or in part) upon and after the dates set forth under the caption
"Exercise Schedule" in the Certificate. The installments shall be cumulative;
I.E., the Option may be exercised, as to any or all Shares covered by an
installment, at any time or times after the installment first becomes
exercisable and until the Option Expiration Date or the termination of the
Option.
(b) Notwithstanding anything to the contrary contained in
this Option Agreement or the Certificate, this Option shall immediately vest and
become exercisable with respect to all remaining shares upon a Change in Control
of the Company or upon termination of Optionee's employment without Cause, for
Good Reason or due to Optionee's death or permanent disability. For purposes
hereof: (a) the terms "Cause" and "permanent disability" shall have the meanings
set forth in SECTION 5 below; (b) the term "GOOD REASON" shall mean a
termination of Optionee's employment with the Company by Optionee by reason of:
(i) the material diminution of Optionee's duties, job title or responsibilities;
C-1
(ii) a relocation of Optionee's principal work location to a location outside of
Los Angeles or Ventura County, California; (iii) a material breach by the
Company of this Option Agreement or written employment agreement between the
Company and Optionee, including without limitation, a material reduction in any
component of Optionee's compensation or benefits as provided for in such written
employment agreement; (iv) a change in Optionee's reporting arrangement such
that Optionee no longer reports directly to the Board; or (v) the commencement
of a voluntary or involuntary proceeding by or against the Company under Chapter
7 of the United States Bankruptcy Code or other law or statute of any
jurisdiction providing for the cessation of the Company's business and the
liquidation of its assets; and (c) the term "CHANGE IN CONTROL" shall mean (i)
the sale of all or substantially all of the assets of the Company, or (ii) the
acquisition of the Company by another entity by means of merger, consolidation,
share exchange, reorganization or otherwise pursuant to which shares of capital
stock of the Company are converted into cash, securities or other property of
the acquiring entity or any of its affiliates and which results in the holders
of voting securities of the Company immediately prior to such merger,
consolidation, share exchange, reorganization or sale of assets beneficially
owning, directly or indirectly, less than 50% of the combined voting power of
the surviving entity resulting from such merger, consolidation, share exchange,
reorganization or sale of assets.
(c) Notwithstanding anything to the contrary contained in
this Option Agreement or the Certificate, this Option shall vest and become
exercisable prior to December 31, 2010, based on an annual target tranche of
300,000 Shares (the "ANNUAL TARGET TRANCHE") and based on performance criteria
established by the Board for a given fiscal year, where the Company's actual
performance for such fiscal year is measured and evaluated against the Company's
budgeted performance for such fiscal year. Each fiscal year, the Board shall
adopt a budget (the "BUDGET") and establish the applicable performance criteria
against which the Optionee's performance shall be measured. Optionee shall be
eligible to vest from 80% to 200% of the Annual Target Tranche for fiscal 2008
and fiscal 2009 (provided that in no event shall more than 900,000 Shares vest
hereunder). As soon as practicable following completion of the audit of the
Company's financial statements for the applicable fiscal year, the Board shall
compare the Company's actual performance against budgeted performance, and this
Option shall vest early, if at all, based on a percentage of the Annual Target
Tranche, calculated as follows:
RELATIONSHIP OF ACTUAL
TO BUDGETED PERCENTAGE OF
PERFORMANCE CRITERIA TRANCHE THAT VESTS
-------------------------------------- -----------------------------------
Less than 80% 0%
80-100% 80-100%
100-115% 100-115%
115-125% 125%
125-140% 150%
Over 140% 200%
This Option shall vest early, if at all, on April 15, 2009 (with
respect to fiscal 2008 performance) and April 15, 2010 (with respect to fiscal
2009 performance).
C-2
(d) Notwithstanding anything to the contrary contained in
this Option Agreement, the Option may not be exercised, in whole or in part,
unless and until any then-applicable requirements of all federal, state and
local laws and regulatory agencies shall have been fully complied with to the
satisfaction of the Company and its counsel.
4. EXERCISE OF OPTION.
There is no obligation to exercise the Option, in whole or in part. The
Option may be exercised, in whole or in part, only by delivery to the Company
of:
(a) written notice of exercise in form and substance
identical to EXHIBIT A attached to this Option Agreement stating the number of
Shares then being purchased (the "PURCHASED SHARES");
(b) payment of the Exercise Price of the Purchased
Shares, either (1) in cash, or (2) with the consent of the Board (which may be
withheld in its absolute discretion), by (i) delivery to the Company of other
shares of Common Stock with an aggregate Fair Market Value equal to the total
Exercise Price of the Purchased Shares, or (ii) in any other form of legal
consideration that may be acceptable to the Board; and
(c) if requested by the Company, a letter of investment
intent in such form and containing such provisions as the Company may require.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be payable at the minimum rate of interest
necessary to avoid the imputation of interest, under the applicable provision of
the Internal Revenue Code of 1986, as amended (the "CODE"), and Treasury
Regulations.
Following receipt of the notice and payment referred to above, the
Company shall issue and deliver to Optionee a stock certificate or stock
certificates evidencing the Purchased Shares; PROVIDED, HOWEVER, that the
Company shall not be obligated to issue a fraction or fractions of a share of
its Common Stock, and may pay to Optionee, in cash or by check, the Fair Market
Value of any fraction or fractions of a share exercised by Optionee. "FAIR
MARKET VALUE" means: (i) if the Common Stock is traded on an exchange or in an
over-the-counter market, the last sale price of the Common Stock on such
securities exchange on the trading day immediately prior to the date of
determination, or if no sale occurred on such day, the mean among the closing
"bid" and "asked" prices on such day or if the principal market for such
security is in the over-the-counter market, the closing sale price of the Common
Stock on the trading day immediately prior to the date of the determination, as
published by the National Association of Securities Dealers Automated Quotation
System or similar organization, or if such price is not so published on such
day, the mean among the closing "bid" and "asked" prices, if available, on such
day, which prices may be obtained from any reputable pricing service, broker or
dealer reasonably satisfactory to the Company, and (ii) in the case the Common
Stock is not traded on an exchange, the value thereof, as determined in good
faith by the Board.
C-3
5. TERMINATION OF SERVICES.
(a) If Optionee shall cease to be an officer, director,
consultant or employee of the Company or any "Affiliate" of the Company (as that
term is defined in Rule 501(b) of the Rules and Regulations under the Securities
Act of 1933, as amended (the "1933 ACT")) for any reason other than death or
permanent disability (a "TERMINATING EVENT"), Optionee shall have the right,
subject to the provisions of SECTION 5(C) below, to exercise the Option at any
time following such Terminating Event until the earlier to occur of (1) twelve
(12) months following the date of such Terminating Event and (2) the Expiration
Date. The Option may be exercised following a Terminating Event only to the
extent exercisable as of the date of the Terminating Event, including with
respect to that portion of the Option that becomes exercisable in connection
with such Terminating Event. To the extent unexercised at the end of the period
referred to above, the Option shall terminate. The Board, in its sole and
absolute discretion, shall determine whether or not authorized leaves of absence
shall constitute termination of employment for purposes of this Option
Agreement.
(b) If, by reason of death or permanent disability (a
"SPECIAL TERMINATING EVENT"), Optionee shall cease to be an officer, director,
consultant or employee of the Company or any Affiliate, then Optionee,
Optionee's executors or administrators or any person or persons acquiring the
Option directly from Optionee by bequest or inheritance, shall have the right to
exercise the Option at any time following such Special Terminating Event until
the earlier to occur of (1) twelve (12) months following the date of such
Special Terminating Event and (2) the Expiration Date. The Option may be
exercised following a Special Terminating Event only to the extent exercisable
at the date of the Special Terminating Event, including with respect to that
portion of the Option that becomes exercisable in connection with such Special
Terminating Event. To the extent unexercised at the end of the period referred
to above, the Option shall terminate. For purposes of this Option Agreement,
"PERMANENT DISABILITY" shall mean a condition that entitles Optionee 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 Optionee unable to perform his duties and obligations
under this Agreement for 90 days in any 12-month period.
(c) If Optionee's employment shall be terminated for
"Cause" by the Company or any Affiliate, all outstanding Options granted to such
Optionee shall expire as of the commencement of business on the date of such
termination. For purposes of this Option Agreement, "CAUSE" shall mean: (i) any
act or omission knowingly undertaken or omitted by Optionee 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 Optionee resulting in a material personal profit to Optionee,
in any case, involving properties, assets or funds of the Company or any of its
subsidiaries; (iii) Optionee's consistent failure to materially perform his
normal duties as described in his employment agreement with the Company, other
than any such failure resulting from Optionee'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) Optionee'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, Optionee shall be given no less than thirty days to cure
such circumstances prior to any termination of his employment for Cause;
C-4
(d) Nothing in the Plan, the Certificate or this Option
Agreement shall confer upon Optionee any right to continue in the service and/or
employ of the Company or any Affiliate or shall affect the right of the Company
or any Affiliate to terminate the relationship or employment of Optionee, with
or without cause.
6. RESTRICTIONS ON PURCHASED SHARES.
(a) SECURITIES LAW RESTRICTIONS. In the event that the
issuance of the Purchased Shares shall not be registered under the 1933 Act,
none of the Purchased Shares shall be sold, transferred, assigned, pledged,
hypothecated or otherwise disposed of ("TRANSFERRED") (with or without
consideration), and the Company shall not be required to register any such sale,
transfer, assignment, pledge, hypothecation or other disposition ("Transfer")
and the Company may instruct its transfer agent not to register any such
Transfer, unless and until one of the following events shall have occurred:
(i) The Purchased Shares are Transferred
pursuant to and in conformity with (i) an effective registration statement filed
with the Securities and Exchange Commission (the "COMMISSION") pursuant to the
1933 Act, and (ii) the qualification and/or registration requirements under any
applicable securities laws of any state of the United States; or
(ii) Optionee has, prior to the Transfer of such
Purchased Shares, and if requested by the Company, provided all relevant
information to the Company's counsel so that upon the Company's request, the
Company's counsel is able to, and actually prepares and delivers to the Company
a written opinion that the proposed Transfer (i) is exempt from registration
under the 1933 Act as then in effect, and the Rules and Regulations of the
Commission thereunder, and (ii) is exempt from qualification and/or registration
under any applicable state securities laws. The Company shall bear all
reasonable costs of preparing such opinion.
(b) NONCOMPLYING TRANSFERS INVALID. Any attempted
Transfer which is not in full compliance with this SECTION 6 shall be null and
void AB INITIO, and of no force or effect.
7. ADJUSTMENTS UPON RECAPITALIZATION.
(a) Subject to the provisions of SECTION 7(B), if any
change is made in the Common Stock, without receipt of consideration by the
Company or its shareholders (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company or its shareholders), the Option will be
appropriately adjusted in the class(es) and number of shares and price per share
of stock subject to the Option. Such adjustments shall be made by the Board, the
determination of which shall be final, binding and conclusive. The conversion of
any convertible securities of the Company shall not be treated as a change
"without the receipt of consideration by the Company or its shareholders."
C-5
(b) In the event of: (1) a dissolution, liquidation or
sale of substantially all of the assets of the Company; (2) a merger or
consolidation in which the Company is not the "surviving corporation" (as
defined below); or (3) a merger in which the Company is the surviving
corporation but the shares of the Common Stock outstanding immediately preceding
the merger are converted by virtue of the merger into other property, whether in
the form of securities, cash or otherwise, then, at the sole discretion of the
Board and to the extent permitted by applicable law, the Option shall (i)
terminate upon such event and may be exercised prior thereto to the extent the
Option is then exercisable, provided that upon such election by the Board, the
Option shall vest and become exercisable with respect to all remaining shares
underlying the Option immediately prior to such event, or (ii) continue in full
force and effect and, if applicable, the surviving corporation or an Affiliate
of such surviving corporation shall assume the Option and/or shall substitute a
similar option or award in place of the Option.
(c) To the extent that the foregoing adjustments relate
to stock or securities of the Company, such adjustments shall be made by the
Board, and its determination shall be final, binding and conclusive.
(d) The provisions of this SECTION 7 are intended to be
exclusive, and Optionee shall have no other rights upon the occurrence of any of
the events described in this Section 7.
(e) The grant of the Option shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes in its capital or business structure, or to merge,
consolidate, dissolve or liquidate, or to sell or transfer all or any part of
its business or assets.
(f) The determination as to which party is a "surviving
corporation" in a merger or consolidation shall be made on the basis of the
relative equity interests of the shareholders in the corporation existing after
the merger or consolidation, as follows: If following any merger or
consolidation the holders of outstanding voting securities of the Company prior
to the merger or consolidation own equity securities possessing more than 50% of
the voting power of the corporation existing after the merger or consolidation,
then for purposes of the Option Agreement, the Company shall be the surviving
corporation. In all other cases, the Company shall not be the surviving
corporation.
8. WAIVER OF RIGHTS TO PURCHASE STOCK.
By signing this Option Agreement, Optionee acknowledges and agrees that
neither the Company nor any other person or entity is under any obligation to
sell or transfer to Optionee any option or equity security of the Company, other
than the Shares subject to the Option and any other right or option to purchase
Common Stock which was previously granted or may be granted in writing to
Optionee by the Board.
9. INVESTMENT INTENT.
Optionee represents and agrees that if he or she exercises the Option
in whole or in part, and if at the time of such exercise the Plan and/or the
Purchased Shares have not been registered under the 1933 Act, he or she will
acquire the Shares upon such exercise for the purpose of investment and not with
a view to the distribution of such Shares, and that upon each exercise of the
Option he or she will furnish to the Company a written statement to such effect.
C-6
10. LEGEND ON STOCK CERTIFICATES.
Optionee agrees that all certificates representing the Purchased Shares
will be subject to such stock transfer orders and other restrictions (if any) as
the Company may deem advisable under the rules, regulations and other
requirements of the Commission, any stock exchange upon which the Common Stock
is then listed and any applicable federal or state securities laws, and the
Company may cause a legend or legends to be put on such certificates to make
appropriate reference to such restrictions.
11. NO RIGHTS AS SHAREHOLDER.
Except as provided in SECTION 7 of this Option Agreement, Optionee
shall have no rights as a shareholder with respect to the Shares until the date
of the issuance to Optionee of a stock certificate or stock certificates
evidencing such Shares. Except as may be provided in SECTION 7 of this Option
Agreement, no adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued.
12. MODIFICATION.
Subject to the terms and conditions of the Plan, the Board (excluding
the Optionee) may modify, extend or renew the Option or accept the surrender of,
and authorize the grant of a new option in substitution for, the Option (to the
extent not previously exercised). No modification of the Option shall be made
which, without the consent of Optionee, would alter or impair any rights of the
Optionee under the Option.
13. WITHHOLDING.
(a) The Company shall be entitled to require as a
condition of delivery of any Purchased Shares upon exercise of any Option that
the Optionee agree to remit, at the time of such delivery or at such later date
as the Company may determine, an amount sufficient to satisfy all federal, state
and local withholding tax requirements relating thereto, and Optionee agrees to
take such other action required by the Company to satisfy such withholding
requirements.
(b) With the consent of the Board (excluding the
Optionee), and in accordance with any rules and procedures from time to time
adopted by the Board, Optionee may elect to satisfy his or her obligations under
SECTION 13(A) above by (1) directing the Company to withhold a portion of the
Shares otherwise deliverable (or to tender back to the Company a portion of the
Shares issued where the Optionee (a "SECTION 16(B) RECIPIENT") is required to
report the ownership of the Shares pursuant to Section 16(a) of the Securities
Exchange Act of 1934, as amended, and has not made an election under Section
83(b) of the Code (a "WITHHOLDING RIGHT")); or (2) tendering other shares of the
Common Stock of the Company which are already owned by Optionee which in all
cases have a Fair Market Value (as determined in accordance with the provisions
of Section 4 hereof) on the date as of which the amount of tax to be withheld is
determined (the "TAX DATE") equal to the amount of taxes to be paid by such
C-7
method. Notwithstanding any other provision of the Option, the number of Shares
which may be withheld with respect to the issuance, vesting, exercise or payment
of any Option (or which may be repurchased from Optionee within six months after
such Shares were acquired by Optionee from the Company) in order to satisfy
Optionee's federal, state, local and foreign income and payroll tax liabilities
with respect to the issuance, vesting, exercise or payment of the Option shall
be limited to the number of Shares which have a Fair Market Value on the date of
withholding or repurchase equal to the aggregate amount of such liabilities
based on the minimum statutory withholding rates for federal, state, local and
foreign income tax and payroll tax purposes that are applicable to such
supplemental taxable income.
(c) To exercise a Withholding Right, the Optionee must
follow the election procedures set forth below, together with such additional
procedures and conditions set forth in this Option Agreement or otherwise
adopted by the Board:
(i) the Optionee must deliver to the Company a
written notice of election (the "ELECTION") and specify whether all or a stated
percentage of the applicable taxes will be paid in accordance with SECTION 13(B)
above;
(ii) unless disapproved by the Board (excluding
the Optionee) as provided in subsection (3) below, the Election once made will
be irrevocable;
(iii) if the Optionee on the date of delivery of
the Election to the Company is a Section 16(b) Recipient, the following
additional provisions will apply:
(1) the Election cannot be made during
the six calendar month period commencing with the date of grant of the
Withholding Right (even if the Option to which such Withholding Right relates
has been granted prior to such date); and
(2) the Election (and the exercise of
the related Option) must be made either during the period beginning on the third
business day following the date of release for publication of the quarterly or
annual summary statements of sales and earnings of the Company and ending on the
12th business day following such date or at least six calendar months or more
prior to the Tax Date.
14. CHARACTER OF OPTION.
The Option is not intended to qualify as an "incentive stock option" as
that term is defined in Section 422 of the Code.
15. GENERAL PROVISIONS.
(a) FURTHER ASSURANCES. Optionee shall promptly take all
actions and execute all documents requested by the Company which the Company
deems to be reasonably necessary to effectuate the terms and intent of this
Option Agreement.
(b) NOTICES. All notices, requests, demands and other
communications under this Option Agreement shall be in writing and shall be
given to the parties hereto as follows:
C-8
(i) If to the Company, to:
Talon International, Inc.
00000 Xxxxxxx Xxxx. Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000
(ii) If to Optionee, to the address set forth on
the Certificate,
or at such other address or addresses as may have been furnished by such either
party in writing to the other party hereto. Any such notice, request, demand or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mail by first-class certified mail, return
receipt requested, postage prepaid, addressed as aforesaid, or (ii) if given by
any other means, when delivered at the address specified in this subsection (b).
(c) OPTION TRANSFERABLE TO PERMITTED TRANSFEREES ONLY.
Optionee may not Transfer the Option, in whole or in part, other than to one or
more Permitted Transferees (as defined below). For purposes of this SECTION
15(C), "PERMITTED TRANSFEREE" shall mean, with respect to Optionee, any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, any person sharing the Optionee's household (other than a tenant
or employee), a trust in which these persons (or the Optionee) control the
management of assets, and any other entity in which these persons (or the
Optionee) own more than fifty percent of the voting interests, or any other
transferee specifically approved by the Board.
(d) SUCCESSORS AND ASSIGNS. Except to the extent
specifically limited by the terms and provisions of this Option Agreement, this
Option Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors, assigns, heirs and personal
representatives.
(e) GOVERNING LAW. THIS OPTION AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA
APPLICABLE TO CONTRACTS MADE IN, AND TO BE PERFORMED WITHIN, THAT STATE, EXCEPT
TO THE EXTENT PREEMPTED BY FEDERAL LAW, WHICH SHALL TO THAT EXTENT GOVERN.
(f) INCORPORATION OF PLAN BY REFERENCE. This Option is
granted pursuant to the terms of the Plan, the terms of which are incorporated
herein by reference, and it is intended that this Option Agreement shall be
interpreted in a manner to comply therewith. Any provision of this Option
Agreement inconsistent with the Plan shall be superseded and governed by the
Plan.
(g) A COMMITTEE. As provided in the Plan, the Board may
delegate administration of the Plan and this Option Agreement to the
Compensation Committee or other committee (the "COMMITTEE"). If administration
is delegated to a Committee, the Committee shall have, in connection with this
Option Agreement, the powers theretofore possessed by the Board (and references
in this Option Agreement to the Board shall thereafter be to the Committee).
C-9
(h) MISCELLANEOUS. Titles and captions contained in this
Option Agreement are inserted for convenience of reference only and do not
constitute a part of this Option Agreement for any other purpose. Except as
specifically provided herein, neither this Option Agreement nor any right
pursuant hereto or interest herein shall be assignable by any of the parties
hereto without the prior written consent of the other party hereto.
THE SIGNATURE PAGE TO THIS OPTION AGREEMENT
CONSISTS OF THE LAST PAGE OF THE CERTIFICATE.
C-10
EXHIBIT A
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
To: Talon International, Inc.
The undersigned, the holder of the enclosed Stock Option Agreement
(Non-Statutory Stock Option), hereby irrevocably elects to exercise the purchase
rights represented by the Option and to purchase thereunder _________ * shares
of Common Stock of Talon International, Inc. (the "COMPANY"), and herewith
encloses payment of $__________ and/or _________ shares of the Company's Common
Stock in full payment of the purchase price of such shares being purchased.
Dated:
-------------------------- ----------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Option)
----------------------------------------
(Please Print Name)
----------------------------------------
----------------------------------------
(Address)
* Insert here the number of Shares called for on the face of the Option (or,
in the case of a partial exercise, the number of Shares being exercised),
in either case without making any adjustment for additional Common Stock of
the Company, other securities or property which, pursuant to the adjustment
provisions of the Option, may be deliverable upon exercise.
C-11
EXHIBIT D
RELEASE
[TALON INTERNATIONAL, INC. LETTERHEAD]
RELEASE
[DATE]
EMPLOYEE NAME
ADDRESS
RE: SEPARATION TERMS AND GENERAL RELEASE AGREEMENT
Dear [NAME]:
This letter confirms the terms of your separation from the employment of Talon
International, Inc. and consideration in exchange for your waiver and general
release of claims in favor of Talon International, Inc. and its officers,
directors, employees, agents, representatives, subsidiaries, divisions,
affiliated companies, successors, and assigns (collectively, the "COMPANY" or
"TLN").
1. TERMINATION DATE. Your employment with the Company will end
effective _____________ (the "TERMINATION DATE"). Between now and the
Termination Date, you should assist with any transition-related activities as
directed by the employee to whom you directly report.
2. ACKNOWLEDGMENT OF PAYMENT OF WAGES. On or before execution of
this release, we delivered to you a final paycheck that includes payment for all
accrued wages, salary, accrued and unused vacation time, reimbursable expenses,
and any similar payments due and owing to you from the Company as of the
Termination Date (collectively referred to as "WAGES"). You are entitled to
these Wages regardless of whether you sign this Separation Terms and General
Release Agreement (the "AGREEMENT").
3. CONSIDERATION FOR RELEASE. In consideration of the waiver and
release of claims set forth in Paragraphs 7 and 8 below, and in exchange for
your signing this Agreement, the Company agrees to provide you with the
post-termination payments (the "SEVERANCE PAYMENTS") described in Section 5 of
that certain Executive Employment Agreement, dated June 18, 2008. The Severance
Payments are in addition to any amounts owed to you by the Company. You
acknowledge and agree that you are not otherwise entitled to receive the
Severance Payments. You understand that if you do not sign the Agreement, or if
you revoke the signed Agreement as described in Paragraph 19 below (if
applicable), the Company has no obligation to provide you with the Severance
Payments.
4. COBRA CONTINUATION COVERAGE. Your Company provided health
coverage will end on your Termination Date. If you are eligible for, and timely
elect COBRA continuation, you may continue health coverage pursuant to the terms
and conditions of COBRA at your own expense, unless the Company has agreed to
pay for such coverage as part of your Severance Payments. Our Human Resources
Department will contact you shortly after your Termination Date. All other
insured benefit coverage (e.g., life insurance, disability insurance) will also
end on your Termination Date, unless the Company has agreed to pay for such
coverage as part of your Severance Payments.
D-1
5. RETURN OF COMPANY PROPERTY. By signing below, you represent
that you have returned all the Company property and data of any type whatsoever
that was in your possession or control.
6. CONFIDENTIAL INFORMATION. You hereby acknowledge that as a
result of your employment with the Company you have had access to the Company's
confidential information. You acknowledge your continuing obligations under any
proprietary information and inventions agreement you have previously executed,
and you agree you will hold all such confidential information in strictest
confidence and that you may not make any use of such confidential information.
You further confirm that you have delivered to the Company all documents and
data of any nature containing or pertaining to such confidential information and
that you have not taken with you any such documents or data or any copies
thereof.
7. GENERAL RELEASE AND WAIVER OF CLAIMS.
7.1. The payments and agreements set forth in this
Agreement fully satisfy any and all accrued salary, vacation pay, bonus and
commission pay, stock-based compensation, profit sharing, termination benefits
or other compensation to which you may be entitled by virtue of your employment
with the Company or your termination of employment. You acknowledge that you
have no claims and have not filed any claims against the Company based on your
employment with or the separation of your employment with the Company.
7.2. To the fullest extent permitted by law, you hereby
release and forever discharge the Company, its successors, subsidiaries and
affiliates, directors, shareholders, current and former officers, agents and
employees (all of whom are collectively referred to as "RELEASEES") from any and
all existing claims, demands, causes of action, damages and liabilities, known
or unknown, that you ever had, now have or may claim to have had arising out of
or relating in any way to your employment or separation from employment with the
Company including, without limitation, claims based on any oral, written or
implied employment agreement, claims for wages, bonuses, commissions,
stock-based compensation, expense reimbursement, and any claims that the terms
of your employment with the Company, or the circumstances of your separation,
were wrongful, in breach of any obligation of the Company or in violation of any
of your rights, contractual, statutory or otherwise. Each of the Releasees is
intended to be a third party beneficiary of the General Release and Waiver of
Claims set forth in this Paragraph 7.
(a) RELEASE OF STATUTORY AND COMMON LAW CLAIMS.
Such rights include, but are not limited to, your rights under the following
federal and state statutes: the Employee Retirement Income Security Act (ERISA)
(regarding employee benefits); the Occupational Safety and Health Act (safety
matters); the Family and Medical Leave Act of 1993; the Worker Adjustment and
Retraining Act ("WARN") (notification requirements for employers who are
curtailing or closing an operation) and common law; tort; wrongful discharge;
public policy; workers' compensation retaliation; tortious interference with
contractual relations, misrepresentation, fraud, loss of consortium; slander,
libel, defamation, intentional or negligent infliction of emotional distress;
claims for wages, bonuses, commissions, stock-based compensation or fringe
benefits; vacation pay; sick pay; insurance reimbursement, medical expenses, and
the like.
D-2
(b) RELEASE OF DISCRIMINATION CLAIMS. You
understand that various federal, state and local laws prohibit age, sex, race,
disability, benefits, pension, health and other forms of discrimination,
harassment and retaliation, and that these laws can be enforced through the U.S.
Equal Employment Opportunity Commission, the National Labor Relations Board, the
Department of Labor, and similar state and local agencies and federal and state
courts. You understand that if you believe your treatment by the Company
violated any laws, you have the right to consult with these agencies and to file
a charge with them. Instead, you have decided voluntarily to enter into this
Agreement, release the claims and waive the right to recover any amounts to
which you may have been entitled under such laws, including but not limited to,
any claims you may have based on age or under the Age Discrimination in
Employment Act of 1967 (ADEA; 29 U.S.C. Section 621 et. seq.) (age); the Older
Workers Benefit Protection Act ("OWBPA") (age); Title VII of the Civil Rights
Act of 1964 (race, color, religion, national origin or sex); the 1991 Civil
Rights Act; the Vocational Rehabilitation Act of 1973 (disability); The
Americans with Disabilities Act of 1990 (disability); 42 U.S.C. Section 1981,
1986 and 1988 (race); the Equal Pay Act of 1963 (prohibits pay differentials
based on sex); the Immigration Reform and Control Act of 1986; Executive Order
11246 (race, color, religion, sex or national origin); Executive Order 11141
(age); Vietnam Era Veterans Readjustment Assistance Act of 1974 (Vietnam era
veterans and disabled veterans); and California state statutes and local laws of
similar effect.
7.3. Releasees and you do not intend to release claims (i)
which you may not release as a matter of law (including, but not limited to,
indemnification claims under applicable law); (ii) for unemployment, state
disability and/or paid family leave insurance benefits pursuant to the terms of
applicable state law; (iii) for any benefit entitlements that are vested as of
the Termination Date pursuant to the terms of a Company-sponsored benefit plan
governed by the federal law known as "ERISA"; and (iv) for vested stock and/or
vested option shares pursuant to the written terms and conditions of your
existing stock and stock option grants and agreements existing as of the
Termination Date. To the fullest extent permitted by law, any dispute regarding
the scope of this general release shall be determined by an arbitrator under the
procedures set forth in paragraph 12.
8. WAIVER OF UNKNOWN CLAIMS. You expressly waive any benefits of
Section 1542 of the Civil Code of the State of California (and any other laws of
similar effect), which provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE
MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR."
D-3
9. COVENANT NOT TO XXX.
9.1. To the fullest extent permitted by law, you agree
that you will not now or at any time in the future pursue any charge, claim, or
action of any kind, nature and character whatsoever against any of the
Releasees, or cause or knowingly permit any such charge, claim or action to be
pursued, in any federal, state or municipal court, administrative agency,
arbitral forum, or other tribunal, arising out of any of the matters covered by
paragraphs 7 and 8 above.
9.2. You further agree that you will not pursue, join,
participate, encourage, or directly or indirectly assist in the pursuit of any
legal claims against the Releasees, whether the claims are brought on your own
behalf or on behalf of any other person or entity.
9.3. Nothing in this paragraph shall prohibit you from:
(1) providing truthful testimony in response to a subpoena or other compulsory
legal process, and/or (2) filing a charge or complaint with a government agency
such as the Equal Employment Opportunity Commission, the National Labor
Relations Board or applicable state anti-discrimination agency.
10. NON-DISPARAGEMENT. You agree that you will not make any
statement, written or oral, or engage in any conduct that is or could reasonably
be construed to be disparaging of the Company or its products, services, agents,
representatives, directors, officers, shareholders, attorneys, employees,
vendors, affiliates, successors or assigns, or any person acting by, through,
under or in concert with any of them. Nothing in this paragraph shall prohibit
you from providing truthful testimony in response to a subpoena or other
compulsory legal process.
11. LEGAL AND EQUITABLE REMEDIES. You and the Company agree that
either party shall have the right to enforce this Agreement and any of its
provisions by injunction, specific performance or other equitable relief without
prejudice to any other rights or remedies that either party may have at law or
in equity for breach of this Agreement.
12. ARBITRATION OF DISPUTES. Except for claims for injunctive
relief arising out of a breach of any proprietary information and inventions
agreement you have executed in favor of the Company, you and the Company agree
to submit to mandatory binding arbitration any future disputes between you and
the Company, including any claim arising out of or relating to this Agreement.
By signing below, you and the Company waive any rights you and the Company may
have to trial by jury of any such claims. You agree that the American
Arbitration Association will administer any such arbitration(s) under its
National Rules for the Resolution of Employment Disputes, with administrative
and arbitrator's fees to be borne by the Company. The arbitrator shall issue a
written arbitration decision stating his or her essential findings and
conclusions upon which the award is based. A party's right to review of the
decision is limited to the grounds provided under applicable law. The parties
agree that the arbitration award shall be enforceable in any court having
jurisdiction to enforce this Agreement. This Agreement does not extend or waive
any statutes of limitations or other provisions of law that specify the time
within which a claim must be brought. Notwithstanding the foregoing, each party
retains the right to seek preliminary injunctive relief in a court of competent
jurisdiction to preserve the status quo or prevent irreparable injury before a
matter can be heard in arbitration.
D-4
13. ATTORNEYS' FEES. If any legal action arises or is brought to
enforce the terms of this Agreement, the prevailing party shall be entitled to
recover its reasonable attorneys' fees, costs and expenses from the other party,
in addition to any other relief to which such prevailing party may be entitled,
except where the law provides otherwise. The costs and expenses that may be
recovered exclude arbitration fees pursuant to paragraph 12 above.
14. CONFIDENTIALITY PROVISION. You agree to keep the contents,
terms and conditions of this Agreement confidential and not disclose them except
to your spouse or domestic partner, attorneys, accountant or as required by
subpoena or court order.
15. MATERIALITY OF BREACH. Any breach of the provisions contained
in paragraphs 6 through 10 and/or 14 will be deemed a material breach of this
Agreement.
16. NO ADMISSION OF LIABILITY. You agree that this Agreement is
not an admission or evidence of any wrongdoing or liability on the part of the
Company, its representatives, attorneys, agents, partners, officers,
shareholders, directors, employees, subsidiaries, affiliates, divisions,
successors or assigns. This Agreement will be afforded the maximum protection
allowable under California Evidence Code Section 1152 and/or any other state or
Federal provisions of similar effect.
17. INDEMNIFICATION. This Release shall not apply with respect to
any claims arising under your existing rights to indemnification and defense
pursuant to (a) the articles and bylaws of the Company for acts as a director
and/or officer, (b) any indemnification agreement with the Company, or (c) your
rights of insurance under any director and officer liability policy in effect
covering the Company's directors and officers.
18. REVIEW OF AGREEMENT. You may not sign this Agreement prior to
your Termination Date. You may take up to twenty-one (21) days from the date you
receive this Agreement, or until your Termination Date, whichever date is later,
to consider this Agreement and release and, by signing below, affirm that you
were advised by this letter to consult with an attorney before signing this
Agreement and were given ample opportunity to do so. You understand that this
Agreement will not become effective until you return the original properly
signed Agreement to the Company, Attention: Human Resources Department, at the
Company's principal executive offices in Los Angeles, California, and after
expiration of the revocation period without revocation by you.
[IF EMPLOYEE IS OVER 40 AT THE TIME OF TERMINATION, THE FOLLOWING
SECTION 19 APPLIES:
19. REVOCATION OF AGREEMENT. You acknowledge and understand that
you may revoke this Agreement by faxing a written notice of revocation to the
Company, Attention: Human Resources Department, at (000) 000-0000 any time up to
seven (7) days after you sign it. After the revocation period has passed,
however, you may no longer revoke your Agreement.
IF EMPLOYEE IS UNDER 40 AT THE TIME OF TERMINATION, THE FOLLOWING
SECTION 19 APPLIES:
19. INTENTIONALLY OMITTED.]
D-5
20. ENTIRE AGREEMENT. This Agreement together with any proprietary
information and inventions agreement you have executed in favor of the Company
is the entire agreement between you and the Company with respect to the subject
matter of this Agreement and supersedes all prior negotiations and agreements,
whether written or oral, relating to this subject matter. You acknowledge that
none of the Company, its agents or attorneys made any promise or representation,
express or implied, written or oral, not contained in this Agreement to induce
you to execute this Agreement. You acknowledge that you have signed this
Agreement knowingly, voluntarily and without coercion, relying only on such
promises, representations and warranties as are contained in this document. You
understand that you do not waive any right or claim that may arise after the
date this Agreement is executed.
21. MODIFICATION. By signing below, you acknowledge your
understanding that this Agreement may not be altered, amended, modified, or
otherwise changed in any respect except by another written agreement that
specifically refers to this Agreement, executed by the Company's authorized
representatives and you.
22. GOVERNING LAW. This Agreement is governed by, and is to be
interpreted according to, the laws of the State of California.
23. SAVINGS AND SEVERABILITY CLAUSE. Should any court, arbitrator
or government agency of competent jurisdiction declare or determine any of the
provisions of this Agreement to be illegal, invalid or unenforceable, the
remaining parts, terms or provisions shall not be affected thereby and shall
remain legal, valid and enforceable. Further, it is the intention of the parties
to this Agreement that, if a court, arbitrator or agency concludes that any
claim under paragraph 7 above may not be released as a matter of law, the
General Release in paragraph 7 and the Waiver Of Unknown Claims in paragraph 8
shall otherwise remain effective as to any and all other claims.
If this Agreement accurately sets forth the terms of your separation from the
Company and if you voluntarily agree to accept the terms of the severance
package offered please sign below no earlier than your Termination Date and
return it to the Company's Human Resources Department.
PLEASE REVIEW CAREFULLY. THIS AGREEMENT CONTAINS
A GENERAL RELEASE OF KNOWN AND UNKNOWN CLAIMS.
Sincerely,
[NAME]
REVIEWED, UNDERSTOOD AND AGREED:
By:
--------------------------------------------
[NAME]
Date:
--------------------------------------------
DO NOT SIGN PRIOR TO YOUR TERMINATION DATE
D-6
