EMPLOYMENT AGREEMENT
EMPLOYMENT
AGREEMENT, dated as of July 14, 2008 (this “Agreement”), by and between NEW
MOTION, INC., a Delaware corporation (the “Company”), and XXXXXX XXXXX
(“Executive”).
WITNESSETH:
WHEREAS,
the Company desires to employ Executive on the terms and subject to the
conditions hereinafter set forth, and Executive desires so to be
employed.
NOW,
THEREFORE, in consideration of the premises and the mutual covenants hereinafter
set forth, the parties agree as follows:
1. Offices
and Duties.
During
the Term (as hereinafter defined), Executive shall serve as the Chief Financial
Officer of the Company and shall have such duties and responsibilities that
are
commensurate with such position and such other duties and responsibilities
as
are from time to time assigned to the Executive by the Company’s Chief Executive
Officer and the Company’s board of directors. The Company’s board of directors
may elect or designate Executive to serve in a similar capacity for a subsidiary
or affiliate of the Company as the Company’s board of directors from time to
time may reasonably deem necessary, proper or advisable and as the Executive
shall accept. Executive hereby agrees that throughout the Term he shall
faithfully, diligently and to the best of his ability, in furtherance of the
business of the Company, perform the duties assigned to him or incidental to
the
offices assumed by him pursuant to this Section. Executive shall devote all
of
his business time and attention to the business and affairs of the Company
and
the performance of Executive’s duties and responsibilities hereunder; provided,
however, Executive may serve as an advisor or director to other organizations
as
long as such activities are disclosed to and approved by the Company’s Chief
Executive Officer or board of directors (which approval will not be unreasonably
withheld) and do not interfere or conflict with his duties or obligations to
the
Company. Executive shall at all times be subject to the supervision, direction
and control of the Company’s Chief Executive Officer and board of directors, and
observe and comply with such rules, regulations, policies and practices as
the
Company’s board of directors may from time to time establish. Executive shall
report to the Company’s Chief Executive Officer. The Executive represents and
warrants to the Company that the Executive has the legal right to enter into
this Agreement and to perform all of the obligations on the Executive’s part to
be performed hereunder in accordance with its terms and that the Executive
is
not a party to any agreement or understanding, written or oral, which could
prevent the Executive from entering into this Agreement or performing all of
the
Executive’s obligations hereunder.
2. Term.
The
employment of Executive hereunder shall commence on the date hereof (the
“Commencement Date”) and continue for a term ending on the third (3rd)
anniversary of the last day of the calendar month in which such Commencement
Date occurs, subject to earlier termination upon the terms and conditions
provided elsewhere herein (the “Term”). As used herein, “Termination Date” means
the last day of the Term. Subject to the provisions of Section 14 hereof, the
Executive shall be an “at-will” employee of the Company such that the Company
may terminate the Executive’s employment with the Company and the Term upon
advance written notice at any time and for any reason (or no reason).
3. Compensation.
(a) As
compensation for Executive’s services hereunder, the Company shall pay to
Executive during the Term an annual salary (the “Base Salary”), which shall be
equal to Four Hundred Thousand Dollars ($400,000.00), payable
in accordance with the ordinary payroll practices of the Company.
The
Base Salary shall be subject to increase at the end of each year of the Term
at
the sole and complete discretion of the Company’s board of directors; provided,
however, that such increase shall be in an amount no less than five percent
(5%).
(b) As
additional compensation for Executive’s services hereunder, Executive shall
receive an automobile allowance of One Thousand Dollars ($1,000) per month
inclusive of insurance, gas and maintenance on Executive’s vehicle.
(c) Executive
may also receive an annual bonus in an amount not to exceed Executive’s Base
Salary for each calendar year during the Term if the Company’s business
operations meet or exceed certain financial performance standards to be
determined by the Company’s board of directors in accordance with this Section,
and as part of an annual incentive plan to be submitted for approval by the
stockholders of the Company. Any annual bonus payable to Executive for the
calendar year ending December 31, 2008 shall be calculated by multiplying the
total amount of the annual bonus by a fraction, the numerator of which is the
number of days served by Executive during 2008, and the denominator shall be
three hundred sixty five (365) days. No later than the end of the first calendar
quarter of each calendar year, the Company’s board of directors (or the
compensation committed thereof) shall adopt and approve: (i) financial goals
(the “Goals”) for the Company with respect to such calendar year (which Goals
shall be consistent for all executive officers); and (ii) the bonus targets
and
other performance standards (collectively, the “Bonus Matrix”) to be used to
determine Executive’s annual bonus for such calendar year. The Company shall
deliver the Goals and the Bonus Matrix to Executive promptly after their
adoption and approval by the board of directors (or the compensation committed
thereof). The Goals and the Bonus Matrix for the calendar year ending December
31, 2008 are set forth on the 2008 Bonus Schedule attached hereto as Exhibit
A.
Any amounts payable under this Section shall be calculated using the results
reported in the Company’s audited financial statements for the applicable fiscal
year and shall be payable the later of (A) ninety (90) days after the end of
the
applicable fiscal year or (B) completion of the Company’s audited financial
statements for such year. Until approval of this Agreement by the Company’s
stockholders, in no event shall the amount payable to Executive under this
Section in any fiscal year of the Company exceed an amount, which, when added
to
all other compensation (as such term is used in Section 162(m) of the Code)
paid
to Executive in such fiscal year results in the total of such compensation
for
such fiscal year to exceed One Million Dollars ($1,000,000).
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(d) As
additional compensation for Executive’s services to be provided hereunder, and
as an inducement for Executive to accept employment with the Company, the
Company shall pay Executive One Hundred Thousand Dollars ($100,000) upon
execution of this Agreement by Executive and the Company (the “Signing Bonus”).
In the event that Executive’s employment with the Company is terminated “for
cause” in accordance with Section 11 or voluntarily by Executive in accordance
with Section 13, on or prior to the Termination Date, Executive shall refund
to
Company an amount equal to: (i) $60,000, multiplied by a ratio equal to (A)
the
sum of the number of days between the Termination Date and the third anniversary
of the Commencement Date and (B) 1,095 (which is the product of 3 x 365).
(e) The
Company shall use its commercially reasonable efforts to procure medical,
hospitalization, dental, life and disability insurance for the benefit of
executive and his wife and children, and the Company shall pay all premiums
and
any other costs or expenses incurred to maintain such policies in effect during
the Term, or as provided under Section 14, all consistent with the Company’s
established practices and policies. As an alternative to procuring such
policies, the Company may authorize Executive to procure such policies, and
the
Company shall reimburse Executive for the reasonable costs incurred by him
in
connection with the procurement of such policies.
(f) In
addition to his Base Salary and other compensation provided herein, during
the
Term Executive shall be entitled to participate, to the extent he is eligible
under the terms and conditions thereof, in any stock, stock option or other
equity participation plan and any profit-sharing, pension, retirement,
insurance, medical service or other employee benefit plan generally available
to
the executive officers of the Company, and to receive any other benefits or
perquisites generally available to the executive officers of the Company
pursuant to any employment policy or practice, which may be in effect from
time
to time during the Term. The Company shall be under no obligation hereunder
to
institute or to continue any such employee benefit plan or employment policy
or
practice.
(g) During
the Term, Executive shall not be entitled to additional compensation for serving
in any office of the Company (or any subsidiary thereof) to which he is elected
or appointed.
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4. Stock
Options.
(a) On
the
Commencement Date, the Company shall grant to Executive an option (the “Option”)
to acquire Two Hundred Thousand (200,000) shares of the Company’s common stock,
par value $.001 per share (the “Common Stock”), subject to the terms and
conditions of the Stock Option Agreement substantially in the form annexed
to
this Agreement as Exhibit
B
(the
“Stock Option Agreement”). The Company agrees to register the shares of Common
Stock underlying the Option on its next regularly filed Form S-8, but in no
event later than six (6) months following the Commencement Date. As a condition
to receiving the Option, Executive shall execute and deliver to the Company
the
Stock Option Agreement. As provided in the Stock Option Agreement, the Option
shall be exercisable at the fair market value of the Company’s common stock on
the date of grant at any time during the ten (10) year period following the
Commencement Date. Additionally, as provided in the Stock Option Agreement,
the
Option shall be subject to the following vesting schedule:
(i) the
Option shall first vest, with respect Sixty Six Thousand Six Hundred Sixty
Six
(66,666) shares of Common Stock, on the first (1st)
anniversary of the Commencement Date;
(ii) thereafter,
the Option shall next vest, with respect to Five Thousand Five Hundred Fifty
Five (5,555) shares of Common Stock, on the last day of the calendar month
immediately following the first (1st)
anniversary of the Commencement Date (such vesting date, the “Second Vesting
Date”); and
(iii) thereafter,
the Option shall next vest, with respect to the remaining One Hundred Twenty
Seven Thousand Seven Hundred Seventy Nine (127,779) shares of Common Stock
underlying the Option, in twenty two (22) equal installments of Five Thousand
Five Hundred Fifty Five (5,555) shares and one final installment of Five
Thousand Five Hundred Sixty Nine (5,569) shares, each on the last day of each
calendar month during the period of twenty three (23) consecutive months
commencing after the Second Vesting Date;
provided
that all Options to acquire shares of the Company’s common stock shall
immediately and automatically vest upon a Change of Control (as hereinafter
defined).
(b) As
provided in the Stock Option Agreement, other than as a result of termination
of
Executive’s employment resulting from a Change of Control and except (as
provided in Section 14(c)(iii) hereof) in the event of a termination of the
Executive’s employment by the Company without “cause” (as such term is used in
Section 11 hereof) and except in the event of a termination of the Executive’s
employment by Executive for “good reason” (as contemplated under Section 12
hereof), any portion of the Option that remains unvested at the time of
termination of Executive’s employment (and/or upon termination or expiration of
the Term) (the “Unvested Portion”) shall be extinguished and cancelled and
Executive shall have no rights or benefits whatsoever with respect to the
Unvested Portion. Executive represents and warrants that he is acquiring the
Option and the shares of Common Stock issuable upon exercise thereof for
investment purposes only, and not with a view to distribution thereof. Executive
is aware that the Option and such shares may not be registered under the federal
or any state securities laws and that, in addition to the other restrictions,
the Option and such shares issuable upon exercise thereof will not be able
to be
transferred unless an exemption from registration is available or the option
or
such shares become registered.
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5. Restricted
Stock Units.
(a) Within
ninety (90) days following the Commencement Date, the Company shall grant to
Executive Restricted Stock Units for Two Hundred Thousand (200,000) shares
of
Common Stock (the “RSUs”), pursuant to the terms of a Restricted Stock Unit
Agreement in a form acceptable to the Company (the “RSU Agreement”). Executive
shall execute and deliver to the Company the RSU Agreement as a condition to
the
Company’s obligation to grant the RSUs. The RSUs shall be subject to vesting as
provided in the RSU Agreement, in accordance with and subject to the following
vesting schedule:
(i) the
first
One Hundred Thousand (100,000) RSUs shall vest after the closing of trading
on
the date that the average per share trading price of the Common Stock during
any
period of ten (10) consecutive trading days (following the Commencement Date)
equals or exceeds Fifteen Dollars ($15); and
(ii)
the
remaining One Hundred Thousand (100,000) RSUs shall vest after the closing
of
trading on the date that the average per share trading price of the Common
Stock
during any period of ten (10) consecutive trading days equals or exceeds Twenty
Dollars ($20);
provided
that all RSUs shall immediately and automatically vest upon a Change of Control
(as hereinafter defined).
(b) As
provided in the RSU Agreement, other than as a result of termination of
Executive’s employment resulting from a Change of Control, any and all of the
RSUs that remain unvested at the time of termination of Executive’s employment
(and/or upon termination or expiration of the Term)(the “Unvested RSU Portion”)
shall be subject to forfeiture and Executive’s entire ownership interest in to
the Unvested RSU Portion shall be forfeited, extinguished and cancelled and
Executive shall have no rights or interest in the Unvested RSU Portion. Subject
to the terms of the RSU Agreement, the Company may issue certificates or
otherwise evidence the Executive’s interest in the RSUs by using a book entry
account. Executive represents and warrants that he is acquiring the RSUs for
investment purposes only, and not with a view to distribution thereof. Executive
is aware that the RSUs may not be registered under the federal or any state
securities laws and that, in addition to the other restrictions on the RSUs,
the
RSUs will not be able to be transferred unless an exemption from registration
is
available or the RSUs become registered.
(c) If
the
Company’s stockholders adopt a restricted share plan, the RSUs shall be deemed
issued in accordance therewith and subject thereto.
6. Expense
Allowance.
The
Company shall pay directly, or advance funds to Executive or reimburse Executive
for, all out-of-pocket expenses reasonably incurred by him in connection with
the performance of his duties hereunder and the business of the Company, in
each
case subject to and in accordance with the Company’s standard policies
(including, without limitation, expense verification policies) regarding the
reimbursement of business expenses, as in effect from time to time.
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7. Vacation.
Executive shall be entitled to four (4) weeks paid vacation during each year
of
his employment hereunder (as pro rated for partial years), such vacation to
be
taken at such time or times as shall be agreed upon by Executive and the Company
with due regard to the needs of the Company. Vacation time shall be cumulative
from year to year, except that Executive shall not be entitled to take more
than
five (5) weeks vacation during any period of twelve (12) consecutive months
during the Term; and provided further that at no time shall Executive be
entitled to accrue more than five (5) weeks of vacation time under this
Agreement; and provided further that the rights of Executive to vacation shall
be otherwise subject to the Company’s policies on vacation as in effect from
time to time.
8. Key-Man
Insurance.
The
Company shall have the right from time to time to purchase, increase, modify
or
terminate insurance policies on the life of Executive for the benefit of the
Company in such amounts as the Company may determine in its sole discretion.
In
connection therewith, Executive shall, at such time or times and at such place
or places as the Company may reasonably direct, submit himself to such physical
examinations and execute and deliver such documents as the Company may deem
necessary or appropriate.
9. Non-Competition
Agreement.
As a
material inducement to the Company for entering into this Agreement and as
a
condition to the obligations of the Company hereunder, Executive is hereby
executing and delivering that certain Non-Competition, Non-Solicitation and
Proprietary Information Agreement dated of even date herewith, by and between
Executive and the Company in the form of Exhibit
C
attached
hereto (the “Non-Competition Agreement”). Each of the Company and Executive
hereby agrees and acknowledges that the rights and obligations of the parties
under the Non-Competition Agreement and the terms and provisions thereof are
an
integral part of this Agreement and hereby are incorporated in this Agreement
as
if fully set forth herein. Without limiting any other rights that the Company
may have, if Executive breaches any provision of the Non-Competition Agreement,
any right that Executive may have to receive any compensation or payments from
the Company hereunder shall be forfeited by Executive and extinguished in all
respects.
10. Termination
of Employment.
Executive’s employment and the Term will terminate on the first of the following
to occur:
(a) Automatically
upon Executive’s death.
(b) Upon
written notice by the Company to Executive of termination due to Disability
(as
defined below). For the purposes of this Agreement, “Disability” 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 Company’s board of
directors, 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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(c) Upon
written notice by the Company to the Executive of a termination for “cause”
under Section 11 of this Agreement.
(d) Upon
termination for “good reason” under Section 12 of this Agreement.
(e) Upon
written notice by the Company to the Executive of an involuntary termination
without “cause”, other than for death or Disability.
(f) Upon
“voluntary termination” by Executive under Section 13 of this Agreement.
11. Termination
for Cause.
(a) In
addition to any other rights or remedies provided by law or in this Agreement,
the Company may terminate Executive’s employment under this Agreement for
“cause” if:
(i) Executive
is convicted of, or enters a plea of guilty or nolo contendere
to, a
felony offense (unless, in the case of a conviction, the conviction shall have
been reversed on appeal); or
(ii) the
Company’s board of directors determines that Executive has:
(A) committed
fraud against, or embezzled or misappropriated funds or other assets of, the
Company (or any subsidiary thereof);
(B) violated,
or caused the Company (or any subsidiary thereof) or any officer, employee
or
other agent thereof, or any other person to violate, any material law,
regulation or ordinance or, violated, or caused the Company (or any subsidiary
thereof) or any officer, employee or other agent thereof, or any other person
to
violate, any material rule, regulation, policy or practice established by the
Company’s board of directors;
(C) willfully,
or because of gross or persistent negligence, (A) failed to properly perform
his
duties hereunder or (B) acted in a manner detrimental to, or adverse to the
interests of, the Company, and such failure or action has caused, or is likely
to cause, the Company (or any subsidiary thereof) to suffer or incur casualty,
loss, penalty, expense or other liability or cost;
(D) knowingly
violated, or repeatedly failed to perform or satisfy any material covenant,
condition or obligation required to be performed or satisfied by Executive
under
this Agreement or contained in the Company’s employee handbook or policies, as
in force from time to time; or
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(E) habitually
used illegal drugs or consumed alcohol and such consumption has caused or is
likely to cause material damage to the Company.
(b) The
Company may effect such termination for cause by giving Executive written notice
to such effect, setting forth in reasonable detail the factual basis for such
termination (the “Cause Notice”); provided,
however,
that
Executive may avoid such termination if the termination is based on any
occurrence, act or event described in clauses (A) to (E) of paragraph (ii)
of
Section 11(a) (each, a “For Cause Event”), if the matters giving rise to such
termination (including without limitation, any breach or violation by Executive)
are remedied or cured, if capable of remedy or cure, within 30 days after
receipt of the Cause Notice (“30-Day Executive Cure Period”). For the avoidance
of doubt, Executive’s employment hereunder and the Term shall be terminated
immediately upon delivery of the Cause Notice if Executive’s employment is being
terminated due to the occurrence, act or event described in paragraph (i) of
Section 11(a), and Executive’s employment hereunder and the Term shall be
terminated immediately upon expiration of the 30-Day Executive Cure Period
if
Executive’s employment is terminated due to the occurrence, act or events
described in clauses (A) to (E) of paragraph (ii) of Section 11(a) (assuming
the
matters, violations or conditions giving rise to such termination are capable
of
being cured or remedied, provided that if they are incapable of being so cured
or remedied, then such termination shall be immediate upon delivery of the
Cause
Notice).
(c) In
making
any determination pursuant to paragraph (ii) of Section 11(a) based on or due
to
any For Cause Event, the board of directors may take into account each and
all
of the following:
(i) if
Executive is made a party to, or target of, any Proceeding arising under or
relating to any For Cause Event, Executive’s failure to defend against such
Proceeding or to answer any complaint filed against him therein, or to deny
any
claim, charge, averment, or allegation thereof asserting or based upon the
occurrence of a For Cause Event;
(ii) any
judgment, award, order, decree or other adjudication or ruling in any such
Proceeding finding or based upon the occurrence of a For Cause Event (that
is
not reversed or vacated on appeal); or
(iii) any
settlement or compromise of, or consent decree issued in, any such Proceeding
in
which Executive expressly admits the occurrence of a For Cause Event;
provided
that the
Company’s board of directors shall not be required to treat any of the foregoing
as dispositive or giving rise to an irrebuttable presumption of the occurrence
of such For Cause Event; and provided further
that the
Company's board of directors may rely on any other factor or event as convincing
evidence of the occurrence of a For Cause Event.
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(d) In
determining and assessing the detrimental effect of any For Cause Event on
the
Company and whether such For Cause Event warrants the termination of Executive’s
employment hereunder, the Company's board of directors may take into account
each and all of the following:
(i)
whether
the Company's Board of Directors directed or authorized Executive to take,
or to
omit to take, any action involved in such For Cause Event, or approved,
consented to or acquiesced in his taking or omitting to take such action;
(ii) any
award
of damages, penalty or other sanction, remedy or relief granted or imposed
in
any Proceeding based upon or relating to such For Cause Event, and whether
such
sanction, remedy or relief is sufficient to recompense the Company or any other
injured person, or to prevent or to deter the recurrence of such For Cause
Event;
(iii) whether
any lesser sanction would be appropriate and effective; and
(iv) any
adverse effect that the loss of Executive's services would have, or be
reasonably likely to have, upon the Company.
Nothing
contained in this Section 11 shall be construed in any way to limit or restrict
the right and ability of the board of directors of the Company to consider
or
base its determination on any other factors that the board of directors deems
to
be relevant in connection with any determination or assessment under this
Section 11.
12. Termination
by Executive for Good Reason.
(a) In
addition to any other rights or remedies provided by law or in this Agreement,
Executive may terminate his employment hereunder for “good reason” if (A) the
Company violates, or fails to perform or satisfy any material covenant,
condition or obligation required to be performed or satisfied by it hereunder,
(B) as a result of any action or failure to act by the Company, there is a
material adverse change in the nature or scope of the duties, obligations,
rights or powers of Executive’s employment (including any such material adverse
change resulting from a Change of Control, as hereinafter defined), or (C)
the
Company moves its headquarters more than fifty (50) miles from its location
in
New York, New York, in each case subject to the terms set forth in this Section
12.
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(b) Executive
may effect such termination for good reason by giving the Company written notice
to such effect, setting forth in reasonable detail the factual basis for such
termination (the “Good Reason Notice”); provided, however, that the Company may
avoid such termination, if the matters giving rise to such termination
(including without limitation, any breach or violation by the Company) are
remedied or cured, within 30 days after receipt of the Good Reason Notice
(“30-Day Company Cure Period”). For the avoidance of doubt, Executive’s
employment hereunder and the Term shall be terminated immediately upon
expiration of the 30-Day Company Cure Period in the case of a termination for
“good reason” under this Section 12.
13. Voluntary
Termination by Executive.
In
addition to any other rights or remedies provided by law or in this Agreement,
Executive may terminate his employment hereunder at any time by giving the
Company written notice to such effect at least thirty (30) days prior to the
date of termination set forth therein, such termination to be irrevocable upon
receipt of such notice by the Company.
For
the
avoidance of doubt, the termination by Executive of his employment hereunder
for
“good reason” pursuant to Section 12 of this Agreement shall not constitute or
be deemed to constitute for any purpose a "voluntary termination" of his
employment under this Section 13.
14. Compensation
and Benefits upon Termination.
(a) If
Executive’s employment is terminated as a result of his death or Disability, the
Company will pay or provide to Executive any Accrued Benefits (as hereinafter
defined). For the purposes of this Agreement, “Accrued Benefits” means: 1) any
unpaid Base Salary through the date of termination; (2) reimbursement for any
unreimbursed expenses incurred through the date of termination; (3) any unused
vacation time accrued (through the date of termination) in accordance with
Company policy; and (4) any other payments, benefits or fringe benefits to
which
the Executive may be entitled under the terms of any applicable compensation
arrangement or benefit plan or program or this Agreement, in all cases only
through the date of termination (collectively items (1) through (4) shall be
hereafter referred to as “Accrued Benefits”).
(b) If
Executive’s employment is terminated for cause under Section 11, or if
Executive’s employment is terminated by Executive voluntarily under Section 13
or voluntarily other than for good reason pursuant to Section 12 hereof, the
Company will pay or provide to Executive any Accrued Benefits.
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(c) If
Executive’s employment is terminated by Executive for good reason pursuant to
Section 12 or by the Company other than for cause under Section 11, the Company
will pay or provide the Executive with (i) any Accrued Benefits, (ii) subject
to
Executive’s compliance with the obligations herein, (A) a one time payment equal
to the sum of (x) the Base Salary payable Executive for the greater of (I)
the
remaining term of this Agreement or (II) twelve (12) months (the “Severance
Period”), and (y) the Average Bonus Amount (as hereinafter defined); and (B)
coverage under the employee benefit plans described in Section 3(e) until the
earlier of the end of the Severance Period or Executive’s eligibility to receive
similar benefits from a new employer; and (iii) all stock options granted under
Section 4 hereof and other awards granted hereunder (other than options and
awards, including the RSU granted under Section 5 hereof, that vest upon the
achievement of performance objectives) shall automatically vest and shall remain
exercisable for a period of one (1) year after such termination. For the
purposes hereof, the “Average Bonus Amount” means, in the case of a termination
of Executive’s employment, an amount equal to the average of the annual bonus
amounts received by Executive under this Agreement for the two (2) years prior
to such termination (with any Bonus paid on a partial year (i.e. 2008) being
annualized). Any amount due to Executive under clause (i) and (ii)(A) of this
Section shall be payable as follows: fifty percent (50%) of such amount shall
be
payable in a lump sum within thirty (30) days of termination of employment,
and
the balance shall be payable in twenty four (24) equal monthly installments
over
the period of twenty four (24) months following such termination. Amounts
payable to Executive under this Section 14(c), if any, are hereinafter referred
to as the “Parachute Amount.”
(d) Except
as
expressly set forth herein, any amount payable to Executive upon termination
of
his employment hereunder shall be paid promptly, and in any event within thirty
(30) days, after the Termination Date.
15. Change
of Control.
(a) For
the
purposes of this Section 15:
(i) The
"Act"
is the Securities Exchange Act of 1934, as amended.
(ii) A
"person" includes a "group" within the meaning of Section 13(d)(3) of the
Act.
(iiii) "Beneficially
owns" and "acquisition" are used herein as defined in Rules 13d-3 and 13d-5,
respectively, under the Act.
(iv) "Non-Affiliated
Person" means any person, other than Executive, an employee stock ownership
trust of the Company (or any trustee thereof for the benefit of such trust),
or
any person controlled by Executive, the Company or such a trust.
(v) "Voting
Securities" includes Common Stock and any other securities of the Company that
ordinarily entitle the holders thereof to vote, together with the holders of
Common Stock or as a separate class, with respect to matters submitted to a
vote
of the holders of Common Stock; provided, however, that securities of the
Company as to which the consent of the holders thereof is required by applicable
law or the terms of such securities only with respect to certain specified
transactions or other matters, or the holders of which are entitled to vote
only
upon the occurrence of certain specified events (such as default in the payment
of a mandatory dividend on preferred stock or a scheduled installment of
principal or interest of any debt security), shall not be Voting
Securities.
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(vi) "Right"
means any option, warrant or other right to acquire any Voting Security (other
than such a right of conversion or exchange included in a Voting
Security).
(vii)
The
"Code" is the Internal Revenue Code of 1986, as amended.
(viii)
"Base
amount," "present value" and "parachute payment" are used herein as defined
in
Section 280G of the Code.
(b) A
"Change
of Control" occurs upon an acquisition of Voting Securities or Rights by a
Non-Affiliated Person or any change in the number or voting power of outstanding
Voting Securities, such that such Non-Affiliated Person beneficially owns Voting
Securities or Rights entitling such person to cast a number of votes (determined
in accordance with Section 15(f)) equal to or greater than fifty percent (50%)
of the sum of (A) the number of votes that may be cast by all other holders
of
outstanding Voting Securities and (B) the number of votes that may be cast
by
such Non-Affiliated Person (determined in accordance with Section 15(f)).
(c) It
is
intended that the present value of any payments or benefits to Executive,
whether hereunder or otherwise, that are includible in the computation of the
Parachute Amount shall not exceed 2.99 times the Executive's base amount.
Accordingly, if Executive receives any payment or benefit from the Company
prior
to payment of the Parachute Amount which, when added to the Parachute Amount,
would subject any of the payments or benefits to Executive to the excise tax
imposed by Section 4999 of the Code, the Parachute Amount shall be reduced
by
the least amount necessary to avoid such tax. The Company shall have no
obligation hereunder to make any payment or provide any benefit to Executive
after the payment of the Parachute Amount which would subject any of such
payments or benefits to the excise tax imposed by Section 4999 of the
Code.
(d) Any
other
provision hereof notwithstanding, Executive may, prior to his receipt of the
Parachute Amount pursuant to Section 14(c), waive the payment thereof, or,
after
his receipt of the Parachute Amount thereunder, treat some or all of such amount
as a loan from the Company which Executive shall repay to the Company within
one
hundred eighty (180) days after the receipt thereof, together with interest
thereon at the rate provided in Section 7872 of the Code, in either case, by
giving the Company notice to such effect.
(e) Any
determination of the Executive's base amount, the Parachute Amount, any
liability for excise tax under Section 4999 of the Code or other matter required
to be made pursuant to this Section 15, shall be made by the Company's
regularly-engaged independent certified public accountants, whose determination
shall be conclusive and binding upon the Company and Executive; provided that
such accountants shall give to Executive, on or before the date on which payment
of the Parachute Amount or any later payment or benefit would be made, a notice
setting forth in reasonable detail such determination and the basis therefor,
and stating expressly that Executive is entitled to rely thereon.
12
(f) The
number of votes that may be cast by holders of Voting Securities or Rights
upon
the issuance or grant thereof shall be deemed to be the largest number of votes
that may be cast by the holders of such securities or the holders of any other
Voting Securities into which such Voting Securities or Rights are convertible
or
for which they are exchangeable or exercisable, determined as though such Voting
Securities or Rights were immediately convertible, exchangeable or exercisable
and without regard to any anti-dilution or other adjustments provided for
therein.
16. Other
Termination Provisions.
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 ten (10) years thereafter, or for a seven (7) year period commencing
on
the date of the termination of Executive’s employment hereunder, 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.
17. Limitation
of Authority.
Except
as expressly provided herein, no provision hereof shall be deemed to authorize
or empower either party hereto to act on behalf of, obligate or bind the other
party hereto.
18. IRC
409A.
This
Agreement is intended to satisfy the requirements of Section 409A(a)(2), (3)
and
(4) of the Code, including current and future guidance and regulations
interpreting such provisions. To the extent that any provision of this Agreement
fails to satisfy those requirements, the provision shall automatically be
modified in a manner that, in the good-faith opinion of the Company, brings
the
provisions into compliance with those requirements while preserving as closely
as possible the original intent of the provision. Notwithstanding anything
to
the contrary in this Agreement, no severance payments or benefits shall be
paid
to Executive during the six (6) month period following Executive's separation
from service to the extent that the Company and Executive mutually determine
in
good faith that paying such amounts at the time or times indicated in this
Agreement would cause 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. 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 (6) month period, the Company will pay Executive a lump-sum amount equal
to
the cumulative amount that would have otherwise been payable to Executive during
such six (6) month period.
13
19. Notices.
All
notices which are required by or may be given pursuant to the terms of this
Agreement must be in writing and must be delivered personally; sent by certified
mail, return receipt requested, postage prepaid; sent by facsimile (with written
confirmation of transmission), provided that notice is also sent via first
class
mail, postage prepaid; or sent for next business day delivery by a nationally
recognized overnight delivery service as follows:
If
to the
Company at:
00
Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxx,
Xxxxxxxxxx, 00000
Attn:
Xxxxxx Xxxx
Fax:
_______________________
with
copies to:
Xxxxxx
Xxxxxxxx & Markiles LLP
00000
Xxxxxxx Xxxx., 00xx
Xxxxx
Xxxxxxx
Xxxx, Xxxxxxxxxx 00000
Attn:
Xxxxx Xxxxx
Fax:
(000) 000-0000
If
to
Executive at his last residence on record with the Company,
with
copies to:
Xxxxxxxxx
& Xxxxxxxxx, L.L.P.
0000
Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Xxxxx Xxxxxxxxx
Fax:
(000) 000-0000
Any
of
the addresses and other contact information set forth above may be changed
from
time to time by written notice (delivered in accordance with this Section)
from
the party requesting the change.
Such
notices and other communications will be treated for all purposes of this
Agreement as being effective immediately if delivered personally or by facsimile
(with written confirmation of transmission) during normal business hours, or
five (5) days after mailing by certified mail, return receipt requested, first
class postage prepaid, or one business day after deposit for next business
day
delivery by a nationally recognized overnight delivery service.
20. Amendment.
Except
as otherwise provided herein, no amendment of this Agreement shall be valid
or
effective, unless in writing and signed by or on behalf of the parties
hereto.
21. Waiver.
No
course of dealing or omission or delay on the part of either party hereto in
asserting or exercising any right hereunder shall constitute or operate as
a
waiver of any such right. No waiver of any provision hereof shall be effective,
unless in writing and signed by or on behalf of the party to be charged
therewith. No waiver shall be deemed a continuing waiver or waiver in respect
of
any other or subsequent breach or default, unless expressly so stated in
writing.
14
22. Governing
Law.
This
Agreement shall be governed by, and interpreted and enforced in accordance
with,
the laws of the State of New York without regard to principles of choice of
law
or conflict of laws.
23. Arbitration.
Any
dispute or controversy arising out of or related to this Agreement or any breach
hereof shall be settled by binding arbitration by the American Arbitration
Association (or any organization successor thereto) in New York, New York in
accordance with its Employment Arbitration Rules then prevailing. Judgment
and
the award rendered by the arbitration panel may be entered in any court or
tribunal of competent jurisdiction. This provision encompasses all disputes
relating to Executive’s employment, this Agreement, the termination of
Executive’s employment, and the amounts paid to the Executive upon termination,
regardless of whether such dispute arises during or after the Executive’s
employment. In any arbitration proceeding conducted pursuant to this Section
23,
both parties shall have the right to discovery, to call witnesses and to
cross-examine the other party’s witnesses (through legal counsel, expert
witnesses, or both). All decisions of the arbitration panel shall be final,
conclusive and binding upon the parties, and not subject to judicial review.
The
arbitration panel shall have no power to change any of the provisions hereof
in
any respect or make an award of reformation, and the jurisdiction of the
arbitrators is expressly limited accordingly. All statutes of limitations that
would otherwise be applicable shall apply to any arbitration proceeding
hereunder. Any arbitration shall be conducted by an arbitration panel consisting
of one or more arbitrators jointly selected by the parties hereto; provided,
however, that if the parties are unable to agree on an arbitrator or
arbitrators, the arbitrator or arbitrators shall be selected in accordance
with
the aforementioned Employment Arbitration Rules then prevailing. Each of the
parties hereto shall pay the fees and expenses of its counsel, accountants
and
other experts incident to any such arbitration. The fees and expenses of the
arbitrator shall be paid fifty percent (50%) by the Company and fifty percent
(50%) by Executive. Any notice or other process relating to any such arbitration
may be effected in the manner provided by Section 19.
24. Remedies.
In the
event of any actual or prospective breach or default by either party hereto,
the
other party shall be entitled to seek equitable relief, including remedies
in
the nature of rescission, injunction and specific performance. All remedies
hereunder are cumulative and not exclusive, and nothing herein shall be deemed
to prohibit or limit either party hereto from pursuing any other remedy or
relief available at law or in equity for such actual or prospective breach
or
default, including the recovery of damages.
25. Severability.
The
provisions hereof are severable and in the event that any provision of this
Agreement shall be determined to be invalid or unenforceable in any respect
by a
court of competent jurisdiction, the remaining provisions hereof shall not
be
affected, but shall, subject to the discretion of such court, remain in full
force and effect, and any invalid or unenforceable provision shall be deemed,
without further action on the part of the parties hereto, amended and limited
to
the extent necessary to render the same valid and enforceable.
15
26. Counterparts.
This
Agreement may be executed in counterparts, including, without limitation, by
facsimile, each of which shall be deemed an original and which together shall
constitute one and the same agreement.
27. Assignment.
This
Agreement, and each right, interest and obligation hereunder, may not be
assigned by either party hereto without the prior written consent of the other
party hereto, and any purported assignment without such consent shall be void
and without effect, except that this Agreement shall be assigned to, and assumed
by, any person with or into which the Company merges or consolidates, or which
acquires all or substantially all of its assets, or which otherwise succeeds
to
and continues the Company’s business substantially as an entirety. Except as
otherwise expressly provided herein or required by law, Executive shall not
have
any power of anticipation, assignment or alienation of any payments required
to
be made to him hereunder, and no other person may acquire any right or interest
in any thereof by reason of any purported sale, assignment or other disposition
thereof, whether voluntary or involuntary, any claim in a bankruptcy or other
insolvency proceeding against Executive, or any other ruling, judgment, order,
writ or decree.
28. Withholding.
The
Company may withhold from any and all amounts payable under this Agreement
such
federal, state and local taxes, as may be required to be withheld pursuant
to
any applicable law or regulation, and all other applicable
withholdings.
29. Binding
Effect.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. This Agreement is not
intended, and shall not be deemed, to create or confer any right or interest
for
the benefit of any person not a party hereto.
30. Titles
and Captions.
The
titles and captions of the Articles and Sections of this Agreement are for
convenience of reference only and do not in any way define or interpret the
intent of the parties hereto or modify or otherwise affect any of the provisions
hereof.
31. Grammatical
Conventions.
Whenever the context so requires, each pronoun or verb used herein shall be
construed in the singular or the plural sense and each capitalized term defined
herein and each pronoun used herein shall be construed in the masculine,
feminine or neuter sense.
32. References.
The
terms “herein,” “hereto,” “hereof,” “hereby,” and “hereunder,” and other terms
of similar import, refer to this Agreement as a whole, and not to any Article,
Section or other part hereof.
16
33. No
Presumptions.
Each
party hereto acknowledges that it has had an opportunity to consult with counsel
and has participated in the preparation of this Agreement. No party hereto
is
entitled to any presumption with respect to the interpretation of any provision
hereof or the resolution of any alleged ambiguity herein based on any claim
that
the other party hereto drafted or controlled the drafting of this
Agreement.
34. Certain
Definitions.
As used
herein:
(a) “Person”
includes, without limitation, a natural person, corporation, joint stock
company, limited liability company, partnership, joint venture, association,
trust, government or governmental authority, agency or instrumentality, or
any
group of the foregoing acting in concert.
(b) A
“Proceeding” is any suit, action, arbitration, audit, investigation or other
proceeding before or by any court, magistrate, arbitration panel or other
tribunal, or any governmental agency, authority or instrumentality of competent
jurisdiction.
35. Entire
Agreement.
This
Agreement embodies the entire agreement of the parties hereto with respect
to
the subject matter hereof and supersedes any prior or contemporaneous agreement,
commitment or arrangement relating thereto, written or oral, if any, which
shall
terminate immediately upon the commencement of the Term, except that each party
thereto shall (a) remain required to perform any act and to satisfy any
obligation or condition that such party is required to perform or satisfy
thereunder with respect to any event occurring or circumstance existing prior
to
the commencement of the Term hereof (including, without limitation, the payment
or delivery to Executive of any compensation, reimbursable expense or employee
benefit or perquisite to which he may be entitled, but which has not yet been
paid to him, on account of his employment under any such prior arrangement)
that
has not been so performed or satisfied, and (b) retain his or its right under
any such prior assignment to assert or to allege any claim or cause of action
relating to or based upon, or otherwise to enforce, any provision thereof with
respect to any event occurring or circumstance existing during the term thereof.
17
IN
WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the
day
and year first above written.
|
By:
|
/s/ Xxxxxx Xxxx |
|
Name:
|
Xxxxxx Xxxx |
|
Title:
|
CEO |
|
/s/
Xxxxxx
Xxxxx
|
|
18
