EX-10.1






May 22, 2006



Dear Jim,



On behalf of Delta Design, Inc. we are pleased to present this letter of assignment (“Agreement”)
effective January 1, 2006, to confirm our offer to you for temporary relocation to the Philippines.
Your assignment shall be in accordance with the following terms and conditions for the duration of
your stay in the Philippines:



Position/Term



Your job assignment will be in the capacity of President, Delta Design Philippines LLC. This
assignment is anticipated to continue for approximately 13 months. Your assignment will be
reviewed at the end of the 13 months. However, Delta Design reserves the right to terminate your
assignment prematurely if business reasons require us to do so.



Compensation/Benefits



Your base salary will be $16,666.67 per month. Your salary will be reviewed during the normal
annual review in accordance with Delta’s policy. Your benefits will include paid vacation, holiday
pay for official Philippine holidays, health/dental insurance, and Company-paid life insurance.



Housing Allowance



The Company will provide you with a housing allowance of $1,666.66 per month. The annual lease on
your house as well as two months’ deposit has been paid in advance by the Company. Additionally,
the annual homeowner’s association dues have been paid. By signing this agreement, you will be
responsible to the Company for full repayment of any un-refunded deposit upon the termination of
your lease for any damages caused by you.



Expense Reporting



The Company will provide a monthly allowance of $3,750.00 paid to you (as additional salary) in the
Philippines to cover among other things, food, household services and maintenance, fuel and
incidental expenses, normally reported on an expense report, as reimbursement and settlement of
those items incurred in the Philippines, in lieu of the requirement to submit an expense report.
This allowance, in lieu of expense report, will be effective on May 1, 2006. Additional expenses
incurred, for other business travel and vehicle maintenance must be reported on an expense report
and submitted to either the Philippines or San Diego, depending upon which entity the travel
benefited.



Household Goods and Maintenance Allowance



The Company will provide you basic furnishings for your house. You are to obtain services
necessary to maintain the house. These services should be funded out of the $3,750.00 monthly
allowance.





1





James McFarlane


Page 2



Auto/Transportation Allowance



You will be provided a company car, purchased by Delta Design, for the value of approximately
$25,000.00, to use during your assignment.



Tax Equalization



Under the Company’s tax equalization program for U.S. expatriate employees, you will not pay any
more (or less) income taxes than had you remained in the U.S. and not accepted the assignment. The
Company along with Ernst & Young LLP, will make a determination as to an appropriate ‘hypothetical
tax’ which will be withheld each month from your paycheck. The hypothetical tax will be computed
on your base salary and bonus less your 401(k) or other pre-tax contributions, and your actual
personal exemptions. You will be entitled to the greater of the itemized deductions as reflected
on your federal income tax return as filed, or the IRS standard deduction.



The Company will pay all of your foreign taxes reduced by the foreign earned income exclusions and
foreign tax credits claimed on your U.S. federal tax return, under the tax equalization program.



Philippine Taxation



Under Philippine tax laws, you are liable for Philippine income tax on compensation derived from
sources within the Philippines and with respect to compensation for personal services, the situs of
income is the place where the services are performed, irrespective of the source of funds that will
be used to pay the compensation.



Since you will stay for more than 180 days in any one calendar year, you are subject to the
graduated rates of 5% to 32% on taxable income. Taxable income means compensation less allowable
personal and additional exemptions. The income that must be reported consists of the total
compensation you receive in connection with your assignment in the Philippines, regardless of
whether that income was fully paid in U.S. dollars or Philippine pesos. Since you will be in the
Philippines for more than 180 days, you will be subject to Philippine income tax at the graduated
rate.



Philippine Social Tax



Under the law all employees are covered by the Philippine government’s social security program.
Local employers are required to withhold social taxes from compensation paid to employees. You
will be subject to Philippine social tax on your Philippine compensation.



Tax Assistance



Assistance in preparing your U.S. and foreign income tax returns will be provided at Company
expense by Ernst & Young LLP. The fees for a private tax return preparer will not be reimbursed if
you elect not to use the Company-provided accounting firm. After completion of your U.S. income
tax return, the tax equalization computation will be prepared to settle any differences between
your stay-at-home tax and actual taxes paid based on your income tax returns as filed.



2



James McFarlane


Page 3



Tax equalization will be determined based on filing your U.S. and foreign income tax returns in the
most cost effective manner for the Company. If your actual U.S. and hypothetical tax exceeds your
stay-at-home tax (computed at year-end and includes Company source and personal source income), you
will be entitled to a tax reimbursement from the Company. If your stay-at-home tax is greater than
the hypothetical tax retained and actual U.S. taxes paid, the short fall must be paid to the
Company.



Emergency Leave



The Company will pay your travel expenses to return to the U.S. for family emergencies. Travel
arrangements will need to be made through Delta, Poway.



Repatriation/Termination



At the conclusion of the assignment, the Company will pay for your return move to the U.S. If you
terminate employment while abroad, other than a termination by the Company for cause, the Company
will not pay repatriation expenses. If you should voluntarily terminate with the Company within 12
months after the first day of employment, you will be required to reimburse the Company in full for
relocation expenses. Upon repatriation, the Company will reimburse you for a hotel room in the
U.S., not to exceed 30 days.



General



You understand and agree the differential payments and adjustments described above as well as any
other allowance or gratuities provided by the Company to you under this Agreement are, at the
election of the Company, in substitution for the statutory benefits required under the laws of the
Philippines to compensate employees who are not entitled to receive these contractual benefits.



The terms and conditions of this Agreement shall at all times be governed by the laws of the United
States and the State of California. All issues relating to the Agreement’s validity, construction,
performance, and termination shall be subject to such laws. Notwithstanding the terms and
provisions outlined herein, this Agreement is not intended as, nor does it imply, a guarantee of
employment or an employment contract. Employment at Delta Design is “at will”.



In the case of repatriation at the conclusion of the assignment or due to a termination, your
rights will be determined under this Agreement and the laws of the State of California. If any
payments related to termination are required under foreign law, then the Company retains the right
of offset against payments due under this Agreement. Any litigation or arbitration resulting from
this employment Agreement will be governed by the laws of the State of California.



Modification or assignment of this Agreement will be made only by instrument in writing, signed by
you, and countersigned by a Company officer.



If during the assignment you feel that you are incurring costs related to living in the Philippines
that are not being addressed, please contact me so we can resolve the issue.



3



James McFarlane



Page 4



Please signify your understanding of and agreement with, the terms of this Agreement by initialing
each page and signing the last page of this letter.



Sincerely,



/s/ Susan Hane



Susan Hane


Human Resources Manager



I agree to the terms and conditions covering my assignment to the Philippines as set forth in the
above letter.



/s/ James G. McFarlane



James G. McFarlane




4