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
LONNIE D. SCHNELL ("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;
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(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.
9
<PAGE>
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
<PAGE>
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.
21900 Burbank Boulevard, Suite 270
Woodland Hills, CA 91367
Attn: Board of Directors
Fax: 818-444-4110
mdyne@ecamail.com
If to Executive, at the address, fax or email
maintained for Executive in the Company's payroll records.
11
<PAGE>
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
CA
