EXECUTIVE EMPLOYMENT AGREEMENT
This
Executive Employment Agreement (this "Agreement")
is
made
and entered into as of
this
day of August, 2006 (the "Effective
Date"), by
and
between New Motion, Inc., a Delaware
corporation (the "Company")
and
Xxxxxx Xxxx ("Executive").
1. Engagement
and Duties.
1.1
Commencing as of the Effective Date, and upon the terms and subject to
the
conditions set forth in this Agreement, the Company hereby engages and employs
Executive as an officer of the Company, with the title and designation of Chief
Executive Officer of the Company. Executive hereby accepts such engagement
and
employment.
1.2
Executive's duties and responsibilities shall be those normally and customarily
vested in the office of Chief Executive Officer of a corporation, subject to
the
supervision, direction and control of the Board of Directors (the "Board")
of
the
Company. Executive shall report directly to the Board.
1.3
Executive agrees to devote his primary business time, energies, skills,
efforts
and attention to his duties hereunder, and will not, without the prior written
consent of the Board,
render any material services to any other for-profit business concern. Executive
will use his
best
efforts and abilities faithfully and diligently to promote the Company's
business interests.
1.4
Except for routine travel incident to the business of the Company, Executive
shall perform his duties and obligations under this Agreement principally from
an office
provided by the Company in Irvine, California, or such other location in Los
Angeles or Orange County, California, as the Board may from time to time
determine.
2. Term
of Employment. Executive's
employment pursuant to this Agreement shall commence on the Effective Date
and
shall terminate on the earliest to occur of the following
(in any case, the "Term"):
(a) the
close
of business on the third (3rd)
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 three 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;
(b) the
death
of Executive;
(c) 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
Board, is likely to render Executive unable to perform his duties and
obligations under this Agreement for 60 days in any 12-month
period;
(d) delivery
to Executive of written Notice of termination by the Company for "Cause,"
which Notice shall identify the particular details of the conduct that the
Company believes
constitutes Cause. For purposes of this Agreement, "Cause" shall mean: (i)
any
act or omission knowingly undertaken or omitted by Executive with the intent
of
causing damage to the Company,
its properties, assets or business or its stockholders, officers, directors
or
employees; (ii)
any
fraud, misappropriation or embezzlement by Executive resulting in a material
personal profit
to
Executive, in any case, involving properties, assets or funds of the Company
or
any of its
subsidiaries; (iii) Executive's consistent failure to materially perform his
normal duties as described
in Section
1.2, other
than any such failure resulting from Executive's Permanent Disability;
(iv) conviction of, or pleading nolo contendere to, (A) any crime or offense
involving monies or other property of the Company; or (B) any felony offense
involving a crime of moral turpitude;
or (v) Executive's chronic or habitual use or consumption of drugs or alcoholic
beverages,
in either case, that causes material damage to the Company, its properties,
assets or business,
provided,
that
to
the extent any circumstances that would otherwise constitute Cause shall
be
capable of cure, Executive shall be given notice from the Board of Directors
and
no less than
thirty days to cure such circumstances prior to any termination of his
employment for Cause;
(e) delivery
to Executive of written Notice of termination by the Company "without
Cause;"
(f) delivery
to the Company of written Notice of termination by Executive for "Good
Reason," by
reason
of: (i) the material diminution of Executive's duties, job title or
responsibilities as provided in Section
1 above;
(ii) a relocation of Executive's principal work location to a location that
is
inconsistent with the terms of Section
1.4 above;
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
(g) delivery
to the Company of written Notice of Termination by Executive without "Good
Reason."
3. Compensation;
Executive Benefit Plans.
3.1
Within 30 business days following the Effective Date, the Company shall
make
available to the Executive "Advance Funds" up to the amount of $30,000 through
cash payment or expense reimbursements directly related to and to assist with
the Executive's costs incurred in relocation of his personal residence to Los
Angeles or Orange County, California. All expenses to be covered by such Advance
Funds must be submitted to the Company for prior approval. All such related
Advance. Funds(s) shall remain outstanding for the Term. Should the Executive
remain employed through the entire Term, the Advance Funds shall be additional
compensation to Executive and need not be repaid by Executive. Should the
Executive resign without Good Reason or be terminated for Cause during the
Term,
then any amounts otherwise due Executive upon such termination shall be retained
by the Company and offset against such Advanced
Funds, and the remaining balance of such Advanced Funds will be repayable by
the
Executive to the Company within six months of termination.
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3.2
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.
3.3
Commencing with fiscal year 2006 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
(the "MIP
Fund") each
fiscal year for payment (the "EBIT
Bonus") to
Executive and such other members of management as determined by the Board of
Directors, an amount based upon of the Company's EBIT for such fiscal year.
Executive's EBIT Bonus will be no less than 30% of MIP Fund. 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 2006 will be pro rated
for
the number of days Executive is employed hereunder in fiscal 2006, but no less
than $50,000 provided the Executive remains
employed by the company by December 31, 2006. The EBIT Bonus goal for Executive
is
targeted at 5% of the total annual EBIT for 2007 and 2008. The EBIT Bonus,
if
any, shall be payable in cash or cash equivalent on April 15 of the year
immediately following the fiscal year for which such EBIT Bonus is
calculated.
3.4
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 his compensation shall be paid in
full.
To the extent that Executive does
not
use any such vacation during any year, up to two calendar weeks of such unused
vacation
shall be carried over from year to year; provided, however that in no event
shall Executive's
total accrued but unused vacation at any time exceed five weeks.
3.5
As an
inducement to Executive to accept this Agreement and serve as Chief
Executive Officer of the Company, Executive will be granted an option to
purchase 250,0000
shares of common stock of the Company (the "Common
Stock") at
a per
share exercise
price of $3.40 (the "Inducement
Option"). The
Inducement Option shall be granted pursuant
to the Company's 2005 Stock Plan (the "Stock
Plan"). Except
as
otherwise provided below, and subject to earlier termination in accordance
with
its terms, the Inducement Option shall
vest as to 83,344 shares on the first anniversary of the Effective Date and
as
to an additional 6,944 shares on the last day of each full calendar month
thereafter until fully vested. Consistent with Section
5.1(ii) below,
the option agreements covering the Inducement Option (the "Option
Agreements")
will
provide for the full acceleration of all applicable vesting requirements upon
(i)
a
change of control of the Company, as defined in the applicable agreement, and
(ii) upon a termination
of Executive's employment without Cause, for Good Reason or due to Executive's
death or Permanent Disability.
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3.6
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
$1,000 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.
3.7
During the Term, Executive shall be entitled to reimbursement from the
Company
for the reasonable costs and expenses which he incurs in connection with the
performance
of his duties and obligations under this Agreement, substantiated in a manner
consistent
with the Company's practices and policies as adopted or approved from time
to
time by
the
Board for executive officers. For the avoidance of doubt, "business class"
travel shall constitute reasonable costs and expenses on any flight greater
than
six (6) hours in duration.
3.8
The
Company shall promptly pay or reimburse to Executive legal fees actually
incurred by Executive in connection with the negotiation and drafting of this
Agreement, which
fees shall not exceed $10,000 in the aggregate. The Company shall also
indemnify, hold harmless and defend Executive from any legal action brought
by
Executive's former employer as a result of his acceptance of the position with
the Company. Executive will fully cooperate in providing any
defense.
3.9
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.
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5.1
Termination
Without Cause, for Good Reason, or due to Executive's death or
Permanent Disability. The
Company may terminate Executive's employment without Cause at
any
time upon 15 days' prior written Notice to Executive, and Executive may
terminate his employment
with Good Reason at any time upon 15 days' prior written Notice to the Company,
in
each
case, subject to any applicable cure periods (in the case of a termination
without Cause or for Good Reason, the date specified in any such Notice in
accordance with this Section
5.1 shall
constitute
the "Date
of Termination"). For
purposes of clarity, the Company's delivery of Notice
in
accordance with Section
2(a) of
its
decision not to renew the Term shall not constitute termination
without Cause, and shall be governed by Section
5.5 below.
Executive's employment
shall also terminate upon the occurrence of Executive's death or Permanent
Disability
(in the case of a termination due to Executive's death or Permanent Disability,
the date of the death or the date specified in a Notice from the Company
indicating termination due to Permanent
Disability shall constitute the "Date
of Termination"). If
Executive's employment is terminated
pursuant to this Section
5.1, the
Company shall promptly, or in the case of obligations described in clause (e)
below, as such obligations become due to Executive, pay or provide to
Executive
(or his estate), (a) Executive's earned but unpaid Base Salary accrued through
such Date
of
Termination, (b) accrued but unpaid vacation time through such Date of
Termination, (c) any 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
3.7 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 his 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 he 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 third 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 he remained
employed by the Company throu gh the third anniversary of the Effective
Date. The Severance ix yable 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 y(
ar in
which the Date of Termination
occurs, where such pro rated portion is equal to: (a) the
amount contributed to the MIP Fund, ii 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) 1. 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
lay
(c) Executive's percentage of the MIP
Fund;
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(iii)
|
as
of the Date of Termination, the Inducement Option will fully vest
and be exercisable, which Inducement Option shall remain outstanding
and
exercisable for at least six months following the Date
of Termination (and shall be exercisable by Executive's estate
in the event of his death); and
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(iv)
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continued
healthcare coverage for Executive (if living) and his 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 his 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 healthcare coverage under Section
4980B of the Code and the regulations thereunder in order for
the Company to provide such coverage under its healthcare plans,
and the Company so notifies the Executive, Executive hereby agrees
to make
such an election. For the avoidance of doubt,
if the Company requires that Executive elect continuation coverage
under
Section 4980B of the Code, such coverage shall nevertheless
be provided to Executive and his dependents (as described
above) at the same cost to Executive and his dependents as was paid
for
medical coverage immediately prior to Executive's termination of
employment.
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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)
|
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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6
5.3
Cause.
If
Executive's employment becomes terminable by thCompany 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, subject to the Company's right to recoup the Advance
Funds
from such Accrued Obligations.
5.4
Resignation.
Executive
may terminate his employment without Good Reason
upon thirty (30) days' Notice to the Company. If Executive so terminates his
employment,
Executive shall be entitled to receive the Accrued Obligations promptly, or,
in
the case of benefits described in Section
5.1(e), as
such
obligations become due to Executive, subject to the Company's right to recoup
the Advance Funds from such Accrued Obligations.
5.5
Nonrenewal.
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, subject to the Company's right to
recoup
the Advance Funds from such Accrued Obligations. 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(H) and
at
the time specified in Section
5.2(H).
5.6
Six-Month
Delay. Notwithstanding
anything to the contrary in this Agreement,
no Severance payments or benefits shall be paid to Executive during the
six-month period following the Executive's separation from service to the extent
that the Company and the Executive
mutually determine in good faith that paying such amounts at the time or times
indicated
in this Section
5 would
cause the Executive to incur an additional tax under Section 409A
of
the Code (in which case such amounts shall be paid at the time or times
indicated in this Section
5.6). If
the
payment of any such amounts are delayed as a result of the previous sentence,
then on the first day following the end of such six-month period, the Company
will pay the
Executive a lump-sum amount equal to the cumulative amount that would have
otherwise been
payable to the Executive during such six-month period.
6. Confidentiality
of Proprietary Information and Material.
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.
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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,
6.5
Agreement
Not To Copy Or Use. Executive
agrees, at any time during the term of his 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
his 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
his
possession
or custody belonging to or relating to the affairs of the Company or comprising
or relating to any Proprietary Information.
8. Discoveries
and Inventions.
8.1
Disclosure.
Executive
will promptly disclose in writing to the Company complete
information concerning each and every invention, discovery, improvement, device,
design,
apparatus, practice, process, method, product or work of authorship, in any
case, relating to
the
business, products, practices, techniques or confidential information of the
Company, whether
patentable or not, made, developed, perfected, devised, conceived or first
reduced to practice
by Executive, (hereinafter referred to as "Developments"),
either
solely or in collaboration
with others, (a) prior to the Term while working for the Company, (b) during
the
Term or (c) within six months after the Term .
8.2
Assignment.
Executive,
to the extent that he has the legal right to do so, hereby
acknowledges that any and all Developments that are created during the Term,
are
the property
of
the
Company and hereby assigns and agrees to assign to the Company any and all
ofExecutive's
right, title and interest in and to any and all of such Developments;
provided,
however,
that,
in
accordance with California Labor Code Sections 2870 and 2872, the provisions
of
this Section
8.2 shall
not
apply to any Development that Executive developed entirely on his own time
without using the Company's equipment, supplies, facilities or trade secret
information except for those Developments that either:
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(a) relate
at
the time of conception or reduction to practice of the Development to the
Company's business, or actual or demonstrably anticipated research or
development of the Company; or.
(b) result
directly from any work performed by Executive for the Company.
8.3
Assistance
of Executive. Upon
the
Company's request and at no expense to
Executive, whether during the Term or thereafter, Executive will do all
reasonable lawful acts, including,
but not limited to, the execution of papers and lawful oaths and the giving
of
testimony,
that, in the reasonable opinion of the Company, its successors and assigns,
may
be necessary or desirable in obtaining, sustaining, reissuing, extending and
enforcing United States and
foreign Letters Patent, including, but not limited to, design patents, on any
and all Developments
and for perfecting, affirming and recording the Company's complete ownership
and
title
thereto, subject to the proviso in Section
8.2 hereof,
and Executive will otherwise reasonably
cooperate in all proceedings and matters relating thereto.
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 he shall be bound by all such
obligations, restrictions
and limitations applicable to any such invention conceived or developed by
him
during
the Term and shall take any reasonable action which may be required to discharge
such obligations and to comply with such restrictions and
limitations.
9. Non-solicitation
Covenant.
9.1
Nonsolicitation
and Noninterference. Until
the
earlier of (i) two years following
termination of this Agreement and (ii) June 30, 2011, Executive shall not (a)
induce or attempt to induce any employee of the Company to leave the employ
of
the Company, (b) induce or
attempt to induce any employee of the Company to work for, render services
or
provide advice
to
or supply confidential business information or Trade Secrets of the Company
to
any third
person, firm or corporation, or (c) induce or attempt to induce any customer,
supplier, licensee,
licensor or other business relation of the Company to cease doing business
with
the Company, provided,
that
advertisements and general solicitations shall not constitute a breach of this
Section 9.1.
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9.2
Indirect
Solicitation. Executive
agrees that, during the period covered by Section
9.1 hereof,
he will not, directly or indirectly, assist or encourage any other person in
carrying
out, directly or indirectly, any activity that would be prohibited by the
provisions of Section
9.1 if
such
activity were carried out by Executive, either directly or indirectly; and,
in
particular, Executive agrees that he will not, directly or indirectly, induce
any employee of the Company to carry out, directly or indirectly, any such
activity.
10. Injunctive
Relief. Executive
hereby recognizes, acknowledges and agrees that in the event of any breach
by
Executive of any of his covenants, agreements, duties or obligations
contained
in Sections
6, 7, 8 and 9 of
this
Agreement, the Company would suffer great and irreparable
harm, injury and damage, the Company would encounter extreme difficulty in
attempting
to prove the actual amount of damages suffered by the Company as a result of
such breach, and the Company would not be reasonably or adequately compensated
in damages in any action at law. Executive therefore covenants and agrees that,
in addition to any other remedy the Company may have at law, in equity, by
statute or otherwise, in the event, of any breach by Executive
of any of his covenants, agreements, duties or obligations contained in
Sections
6, 7, 8 and
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 therefrom; provided,
however, that
nothing contained in this Section
10 shall
be
deemed or construed in any manner whatsoever as a waiver by the Company
of
any of
the rights which the Company may have against Executive at law, in equity,
by
statute or
otherwise arising out of, in connection with or resulting from the breach by
Executive of any of
his
covenants, agreements, duties or obligations hereunder.
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 thereunder. In the event that following the Effective Date, the Company
and the Executive reasonably determine that any compensation or benefits payable
under this Agreement may be subject to Section 409A of the Code and related
Department of Treasury guidance, the Company and the Executive shall work
together to adopt such amendments to this Agreement or adopt
other policies or procedures (including amendments, policies and procedures
with
retroactive
effective), or take any other commercially reasonable actions necessary or
appropriate to (a) exempt the compensation and benefits payable under this
Agreement from Section 409A of the Code and/or preserve the intended tax
treatment of the compensation and benefits provided with
respect to this Agreement, or (b) comply with the requirements of Section 409A
of the Code and related Department of Treasury guidance.
10
12. Code
Section 280G. If
any
payment or benefit received or to be received by Executive in connection with
a
"change in ownership or control" of the Company (within the meaning of Section
280G of the Code), whether payable pursuant to the terms of this Agreement
or
any
other plan, arrangement or agreement with the Company or an affiliate of the
Company (the
"Payments"),
would
constitute a "parachute payment" within the meaning of Section 280G of
the
Code, the Payments shall be reduced to the extent necessary so that no portion
thereof shall
be
subject to the excise tax imposed by Section 4999 of the Code but only if,
by
reason of such reduction, the net after-tax benefit to Executive shall exceed
the net after-tax benefit to Executive if no such reduction was made. For
purposes of this Section
12, "net
after-tax benefit" shall
mean (i) the total of all payments and the value of all benefits which Executive
receives or is
then
entitled to receive from the Company that would constitute "parachute payments"
within the
meaning of Section 280G of the Code, less (ii) the amount of all federal, state
and local income
taxes payable with respect to the foregoing calculated at the maximum marginal
income tax
rate
for each year in which the foregoing shall be paid to Executive (based on the
rate in effect
for such year as set forth in the Code as in effect at the time of the first
payment of the foregoing),
less (iii) the amount of excise taxes imposed with respect to the payments
and
benefits
described in (i) above by Section 4999 of the Code. The foregoing determination
will be
made
by a nationally recognized accounting firm (the "Accounting
Firm") selected
by Executive
and reasonably acceptable to the Company, provided,
that
the
Accounting Firm's determination
shall be made based upon "substantial authority" within the meaning of Section
6662
of
the Code. The Accounting Firm shall provide Executive and the Company with
its
determinations and detailed supporting calculations with respect thereto at
least 15 business days prior
to
the date on which Executive would be entitled to receive a Payment (or as soon
as practicable
in the event that the Accounting Firm has less than 15 business days advance
notice that Executive may receive a Payment) in order that Executive may
determine whether it is in Executive's best interest to waive the receipt of
any
or all amounts which may constitute "excess parachute payments." If the
Accounting Firm determines that such reduction is required by this Section
12, Executive,
in his sole and absolute discretion, may determine which of the Payments
shall
be
reduced to the extent necessary so that no portion thereof shall be subject
to
the excise tax
imposed by Section 4999 of the Code, and the Company shall pay such reduced
amount to Executive.
Executive and the Company shall each provide the Accounting Firm access to
and
copies
of
any books, records, and documents in the possession of Executive or the Company,
as the case may be, reasonably requested by the Accounting Firm, and otherwise
cooperate with the Accounting Firm in connection with the preparation and
issuance of the determinations and calculations
contemplated by this Section
12. The
first
$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.
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 his 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:
| (a) |
If
to Company:
|
|
New
Motion, Inc.
00
Xxxxxxxxx Xxxx, 0xx Xxxxx
Xxxxxx,
XX 00000
Attn:
Board of Directors
Fax
000-000-0000
|
| (b) | If to Executive, at the address, fax or email maintained for Executive in the Company's payroll records. |
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 Option Agreements, 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.
12
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 Articles and Bylaws and as
otherwise allowed
by law. During the Term and for a period of at least six years thereafter,
Executive shall be
entitled to the same directors and officers' liability insurance coverage that
the Company provides
generally to its other directors and officers, as may be amended from time
to
time for such
directors and officers.
13.6
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).
13
In
witness whereof, the parties have executed this Agreement as of the date first
set forth above.
| Company: | Executive: | |
| New Motion, Inc. | ||
 |
||
| By: | Xxxxxx Xxxx | |
|
Chairman
of the Board
|
14
EXHIBIT A
15
