EXECUTIVE EMPLOYMENT AGREEMENT
This
Executive Employment Agreement (this “Agreement”) is
made
and entered into as of
this
20th day of August, 2007 (the “Effective
Date”) by
and
between New Motion, Inc., a Delaware corporation (the “Company”) and
Xxxxx
X. Xxxxxxx (“Executive”).
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1.
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Engagement
and Duties
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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 Operating
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 Operating Officer of a corporation, subject to the
supervision, direction, control, and discretion of the Chief Executive Officer
of the Company.
1.3 Executive
agrees to devote her primary business time, energies, skills, efforts and
attention to her duties hereunder, and will not, without the prior written
consent of the CEO and the Board, render any material services to any other
for-profit business concern. The Company acknowledges, and accepts that, the
Executive currently sits on the corporate boards of Xxxxx
Fargo, mBox and Eltek and
will
continue to sit on such boards so long as there is no stated, direct conflict
between those respective corporations and the Company’s primary business
activities. Executive will use her best efforts and abilities faithfully and
diligently to promote the Company's business interests.
1.4 Except
for travel incident to the business of the Company, Executive shall perform
her
duties and obligations under this Agreement principally from an office provided
by the Company in Irvine, California.
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”):
2.1 the
close
of business on the second (2nd) anniversary of the Effective Date, provided,
that if the Company has not given Executive written Notice (as defined below)
of
its decision not to renew the Term on or before ninety (90) days prior to the
end of the two year Term then, unless otherwise terminated as provided below,
the Term shall be automatically extended until the earlier of (i) a date which
is ninety (90) days following the Company's delivery to Executive of written
Notice of the Company's decision not to renew this Agreement beyond such date,
and (ii) December 31, 2009;
2.2 the
death
of Executive;
2.3 delivery
to Executive of written Notice of termination by the Company if Executive
suffers 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 CEO or the Board, is likely
to render Executive unable to perform her duties and obligations under this
Agreement for 60 days in any 12-month period;
2.4 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 her
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 notice from the CEO or the Board
of
Directors and no less than thirty days to cure such circumstances prior to
any
termination of her
employment
for Cause;
2.5 delivery
to Executive of written Notice of termination by the Company “without
Cause;”
2.6 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
more than 60 miles from the location set forth in Section
1.4
above;
or (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
2.7 delivery
to the Company of written Notice of Termination by Executive without “Good
Reason.”
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3.
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Compensation:
Executive Benefit
Plans
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3.1 The
Company shall pay to Executive a base salary (the “Base
Salary”)
at an
annual rate of $300,000 for the period commencing on the Effective Date and
ending on the first (1st) anniversary of the Effective Date. At the commencement
of each subsequent twelve (12) month period during the Term, the “Base Salary”
shall increase by no less than 5% (five percent) per annum from the previous
year. 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.
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3.2 Commencing
with fiscal year 2007 and for each fiscal year during the Term
thereafter during which Executive is performing services to the Company, the
Company shall
maintain a Management Incentive Program, pursuant to which the Company will
set
aside in
a fund
a discretionary amount to be determined by the Company’s Board of Directors
based upon of the Company's EBIT for such fiscal year (the “MIP
Fund”). Executive
and such other members of management as determined by the Board of Directors
shall be paid a bonus (the “EBIT
Bonus”).
Executive's EBIT Bonus target for the fiscal years ending December 31, 2007
and
December 31, 2008 will be no less than 15 (fifteen) percent of the MIP Fund.
As
a percentage of the MIP Fund, this target will increase at no less than 5%
per
year so long as Executive remains employed with the Company. For purposes
hereof, “EBIT” shall mean earnings before interest and taxes, calculated based
on the Company's audited consolidated financial statements for the applicable
fiscal year prepared in accordance with generally accepted accounting principles
in the United States. Executive's EBIT Bonus for fiscal year 2007 will be pro
rated for the number of days Executive is employed hereunder in fiscal 2007.
The
EBIT Bonus, if any, shall be payable in cash or cash equivalent by April 15
of
the year immediately following the fiscal year for which such EBIT Bonus is
calculated.
3.3 During
the Term, Executive shall be entitled each year to vacation for a minimum
of three 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 her
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 five weeks.
3.4 As
an
inducement to Executive to accept this Agreement and serve as Chief Operating
Officer of the Company, upon approval by the Company’s Board of Directors,
Executive will be granted 75,000 shares of Restricted Common Stock of the
Company (the “Common Stock”) (the “Inducement Grant”). The Inducement Grant
shall be granted pursuant to Company’s 2007 Stock Incentive Plan. Company and
Executive hereby agree to determine a mutually agreeable vesting schedule for
such Inducement Grant within 90 days from the Effective Date of this Agreement.
Consistent with Section
5.1(iii)
below,
the Stock Purchase Agreement covering the Inducement Grant (the “Stock Purchase
Agreement”) will provide for the full acceleration of all applicable vesting
requirements upon (i) a change of control of the Company, as to be defined
in
the Stock Purchase Agreement and (ii) upon a termination of Executive’s
employment Without Cause, for Good Reason, or due to Executive’s death or
Permanent Disability.
3.5 During
the Term, the Company shall pay to Executive, in increments payable at the
times
that the Company pays the Base Salary to Executive, an allowance of $700 per
month for costs associated with the lease or purchase, maintenance and insurance
of an automobile, and an additional allowance of $300 per month for costs
associated with use of cellular equipment and mobile communication service
or
subscriptions or fees.
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3.6 During
the Term, Executive shall be entitled to reimbursement from the Company for
the
reasonable costs and expenses which she incurs in connection with the
performance of her 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 six (6) hours in duration.
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.
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. The Company will provide
Executive, Director and Officer Liability coverage of no less than two million
dollars as set forth in Section
13.5
below.
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 her
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 her estate), (a) Executive's earned but unpaid Base Salary accrued through
such Date of Termination, (b) accrued but unpaid vacation time through such
Date
of Termination, (c) any EBIT Bonus required to be paid to Executive pursuant
to
this Agreement for any fiscal year of the Company ending prior to the Date
of
Termination, to the extent payable, but not previously paid, (d) reimbursement
of any business expenses incurred by Executive prior to the Date of Termination
that are reimbursable under Section
3.6
above,
and (e) any vested benefits and other amounts due to Executive under any plan,
program, policy of, or other agreement with, the Company (together, the
“Accrued
Obligations”).
In
addition, Executive (or her estate) shall be entitled to the following payments
and benefits (the “Severance”)
from
the Company:
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(i)
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payment,
at the time and in the manner specified in Section
5.2 below,
of an aggregate amount equal to Executive's Base Salary (at
the rate then in effect, but disregarding any reduction of Base
Salary
in violation of this Agreement) that would have been payable
to the Executive had she remained employed by the Company
for the period (such period, or the period described in the next
sentence, as applicable, the “Severance
Period”)
commencing
on the Date of Termination and ending on the second anniversary of
the
Effective Date or, if later, the date which is three (3) 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 she remained
employed by the Company through the second
anniversary of the Effective Date. The Severance payable to the Executive
pursuant to this paragraph (i) is hereinafter referred to as the
“Base
Salary Severance”;
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(ii)
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payment,
at the time specified in Section
5.2
below, of a pro rated portion of the EBIT Bonus for the fiscal year
in
which the Date of Termination occurs, where such pro rated portion
is
equal to: (a) the amount contributed to the MIP Fund, if any, for
the
period (the “EBIT
Period”)
from January 1 of the applicable fiscal year through the last day
of the
fiscal quarter in which such Date of Termination occurs, multiplied
by (b)
the ratio determined by dividing the number of days Executive was
employed
during the EBIT Period by the total number of days in the EBIT Period,
multiplied by (c) Executive's percentage of the MIP
Fund;
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(iii)
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as
of the Date of Termination, the Inducement Grant will fully vest;
and
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(iv)
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continued
healthcare coverage for Executive (if living) and her dependents
for the
Severance Period, to the extent each such individual received healthcare
coverage immediately prior to such termination of employment, at
the same
cost to Executive and her dependants as such coverage cost immediately
prior to such termination of employment (subject to premium increases
affecting participants in such plans generally), provided that if
the
Board determines, in its sole discretion, that it is necessary or
advisable for Executive to elect continuation of healthcare coverage
under
Section 4980B of the Code and the regulations hereunder 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 her
dependents (as described above) at the same cost to Executive and
her
dependents as was paid for medical coverage immediately prior to
Executive's termination of
employment.
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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)
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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
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(ii)
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the
EBIT Bonus amount contemplated by clause (ii) of Section
5.1 shall
be
paid on the date that is 50 calendar days following the last day
of the
fiscal quarter during which Executive's separation from service
occurs.
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5.3 Cause.
If
Executive's employment becomes terminable by the Company for Cause, the Company
may terminate Executive's employment immediately (subject to the cure rights
described above) and Executive shall be entitled to receive the Accrued
Obligations upon the Date of Termination, or, in the case of benefits described
in Section
5.1(e),
as such
obligations become due to Executive.
5.4 Resignation.
Executive may terminate her employment without Good Reason upon thirty (30)
days' Notice to the Company. If Executive so terminates her employment,
Executive shall be entitled to receive the Accrued Obligations promptly, or,
in
the case of benefits described in Section
5.1(e),
as such
obligations become due to Executive.
5.5 Non-Renewal.
In the
event that either the Company or the Executive elects not to renew the Term
in
accordance with Section
2(a),
Executive shall be entitled to receive the Accrued Obligations upon the Date
of
Termination, or, in the case of benefits described in Section
5.1(e),
as such
obligations become due to Executive. In addition, Executive shall be entitled
to
receive payment of a pro rated portion of the EBIT Bonus for the EBIT Period
in
the manner contemplated by Section
5.1(ii)
and at
the time specified in Section
5.2(ii).
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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.
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6.
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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 and for which the
Company takes reasonable precautions to maintain
the confidentiality of such information. 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
hereof.
6.4 Proprietary
Information.
For the
purpose of this Agreement, “Proprietary
Information” shall
mean all of the Company's Industrial Property Rights, Trade Secrets and
Technical Data. Proprietary Information shall not include any information which
(i) was lawfully in the possession of Executive prior to Executive's employment
with the Company, (ii) may be obtained by a reasonably diligent businessperson
from readily available and public sources of information, (iii) is lawfully
disclosed to Executive after termination of Executive's employment by a third
party which does not have an obligation to the Company to keep such information
confidential, or (iv) is independently developed by Executive without utilizing
any of
the
Company's Proprietary Information.
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6.5 Agreement
Not To Copy Or Use.
Executive agrees, at any time during the term of her employment and for a period
of ten years thereafter, not to copy, use or disclose (except
(i) as required, authorized or permitted in connection with the performance
of
her services
to the Company, (ii) as required by law after first notifying the Company and
giving it an
opportunity to object, or (iii) as required to enforce Executive's rights under
this Agreement) any
Proprietary Information without the Company's prior written permission. The
Company may
withhold such permission as a matter within its sole discretion during the
term
of this Agreement and thereafter.
7. Return
of Corporate Property.
Upon
any termination of this Agreement, Executive shall turn over to the Company
all
property, writings or documents then in her possession or custody belonging
to
or relating to the affairs of the Company or comprising or relating to any
Proprietary Information.
8. Discoveries
and Inventions
8.1 Disclosure.
Executive will promptly disclose in writing to the Company complete information
concerning each and every invention, discovery, improvement, device, design,
apparatus, practice, process, method, product or work of authorship, in any
case, relating to the business, products, practices, techniques or confidential
information of the Company, whether patentable or not, made, developed,
perfected, devised, conceived or first reduced to practice by Executive,
(hereinafter referred to as “Developments”),
either solely or in collaboration with others, (a) prior to the Term while
working for the Company, (b) during the Term or (c) within six months after
the
Term.
8.2 Assignment.
Executive,
to the extent that she 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 her own time
without using the Company's equipment, supplies, facilities or trade secret
information except for those Developments that either:
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(i)
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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,
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(ii)
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result
directly from any work performed by Executive for the
Company.
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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.
8.4 Records.
Executive will keep complete and accurate accounts, notes, data and
records of all Developments in the manner and form reasonably requested by
the
Company. Such
accounts, notes, data and records shall be the property of the Company, subject
to the proviso
in Section
8.2 hereof,
and, upon written request by the Company, Executive will promptly
surrender the same to it.
8.5 Obligations,
Restrictions and Limitations.
Executive understands that the Company
may enter into agreements or arrangements with agencies of the United States
Government
and that the Company may be subject to laws and regulations which impose
obligations,
restrictions and limitations on it with respect to inventions and patents which
may be acquired by it or which may be conceived or developed by employees,
consultants or other agents rendering services to it. Executive agrees that
she
shall be bound by all such obligations, restrictions
and limitations applicable to any such invention conceived or developed by
him
during
the Term and shall take any reasonable action which may be required to discharge
such obligations and to comply with such restrictions and
limitations.
9. Non-solicitation
Covenant
9.1 Nonsolicitation
and Noninterference.
For two
years following termination of this Agreement, 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.
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9.2 Indirect
Solicitation.
Executive agrees that, during the period covered by Section
9.1 hereof,
she 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 she 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 her 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 her covenants,
agreements, duties or obligations contained in Sections
6, 7, 8 and 9
of this
Agreement, the Company shall be entitled to seek and receive temporary,
preliminary and permanent injunctive and other equitable relief from any court
of competent jurisdiction to enforce any of the duties or obligations contained
in Sections
6, 7, 8 and 9
of this
Agreement without the necessity of proving the amount of any actual damage
to
the Company or any affiliate thereof resulting there from; provided, however,
that nothing contained in this Section
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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 her covenants, agreements, duties or obligations
hereunder.
11. Code
Section 409A.
Certain
amounts under this Agreement may constitute “nonqualified
deferred compensation” which is 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 hereunder.
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 her 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 $5,000 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. The parties agree to
mediate any matter within 30 days of a demand by either party with a mediator
mutually agreed upon
by
both parties. 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
(“AAA”). If the parties are able to agree to a single arbitrator, the matter
need not be
filed
with the AAA; however, the AAA rules governing employment disputes will still
be
applied.
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.
Each party shall bear its own costs and expenses and an equal share of the
arbitrator's expenses and administrative fees of arbitration during the
pendency
of
the
proceeding. However, the prevailing party shall be entitled to an award of
her
or its fees and costs at the termination of the arbitration.
11
13.2 Notices.
All
notices, requests and other communications (collectively, “Notices”)
given
pursuant to this Agreement shall be in writing, and shall be delivered by fax,
email, personal service, reputable overnight carrier or by United States first
class, registered or certified mail (return receipt requested), postage prepaid,
addressed to the party at the address set forth below:
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(i)
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If
to Company:
00
Xxxxxxxxx Xxxx, 0xx Xxxxx Xxxxxx, XX 00000
Attn:
Board of Directors Fax:
000-000-0000
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(ii)
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If
to Executive, at the address, fax or email maintained for Executive
in the
Company's payroll records.
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Any
Notice shall be deemed duly given when received by the addressee thereof,
provided that any Notice sent by registered or certified mail shall be deemed
to
have been duly given three days from date of deposit in the United States mails,
unless sooner received. Either party may from time to time change its address
for further Notices hereunder by giving Notice to the other party in the manner
prescribed in this section.
13.3 Entire
Agreement.
This Agreement, together with the Stock Purchase Agreement, and any
indemnification 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.
13.4 Governing
Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF.
13.5 Indemnification;
Insurance.
The
Company shall defend, indemnify and hold
Executive harmless from any and all liabilities, obligations, claims or expenses
which arise in
connection with or as a result of Executive's service as an officer or director
of the Company to
the
greatest extent now provided in the Company's Certificate of Incorporation
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.
12
13.6 Amendment.
The
terms
of this Agreement may not be amended or modified
other than by a written instrument executed by the parties hereto or their
respective successors.
13.7 Waiver.
Failure
by any party hereto to insist upon strict compliance with any
provision of this Agreement or to assert any right such party may have hereunder
shall not be
deemed
to be a waiver of such provision or right or any other provision or right of
this Agreement.
13.8 Assignment.
This
Agreement is binding on and for the benefit of the parties
hereto and their respective successors, heirs, executors, administrators and
other legal representatives.
13.9 Captions.
The
various captions of this Agreement are for reference only and
shall
not be considered or referred to in resolving questions of interpretation of
this Agreement.
13.10 Counterparts.
This
Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which together
shall
constitute one and the same instrument.
13.11 Business
Day.
If the
last day permissible for delivery of any Notice under any
provision of this Agreement, or for the performance of any obligation under
this
Agreement, shall
be
other than a business day, such last day for such Notice or performance shall
be
extended
to the next following business day (provided, however, under no circumstances
shall this
provision be construed to extend the date of termination of this
Agreement).
(Remainder
of page intentionally left blank.)
Signature
page to follow
13
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
set forth above.
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Company:
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By:
/s/
Xxxxxx Xxxx
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Executive
/s/ Xxxxx Xxxxxxx
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Xxxxxx Xxxx, CEO |
Xxxxx Xxxxxxx |
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