CONSULTING AGREEMENT
THIS
CONSULTING AGREEMENT, dated as of January 31, 2008 (this “Agreement”), by and
between New Motion, Inc., a Delaware corporation (“New Motion” or the “Company”)
with its offices at 00 Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxx, XX 00000 and Xxxxxxx
Xxxxxxxx., an individual residing at 0 Xxxx Xxxxxx Xxxxx, Xxx Xxxx, XX 00000
(“Consultant”). The parties to the Agreement are sometimes referred to
collectively as the “Parties” or simply as a “Party.”
WITNESSETH:
WHEREAS,
the Company and NM Merger Sub, a Delaware corporation and Traffix, Inc., a
Delaware corporation (“Traffix”) are parties to that certain Agreement and Plan
of Merger, dated as of September 26, 2007 (the “Merger Agreement”);
WHEREAS,
it is a condition to the Merger contemplated by the Merger Agreement (the
“Merger”) that Consultant terminate his employment as Chairman and Chief
Executive Officer of Traffix and thereafter provide consulting services to
the
Company; and
WHEREAS,
Consultant is willing to act as a consultant to the Company and Company wishes
to retain Consultant to perform consulting services for the Company, all on
the
terms set forth herein.
NOW,
THEREFORE, in consideration of the foregoing, and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
Company and Consultant hereby agree as follows:
1. Effective
Date.
This
Agreement shall become effective at the Effective Time of the Merger under
the
Merger Agreement. Prior to the Effective time, none of the parties hereto shall
have any rights or obligations hereunder. The date on which this Agreement
becomes effective shall be referred to herein as the “Effective Date”.
2. Term.
The
term of this Agreement (the “Term”) shall end on the second anniversary of the
Effective Date, unless sooner terminated pursuant to the terms hereof. The
date
on which the Term ends (or the date on which Consultant’s retention hereunder is
terminated) is sometimes referred to as the “Termination Date”.
3. Consulting
Services.
During
the Term, Consultant hereby agrees to consult with Xxxxxx Xxxx, the Chief
Executive Officer of the Company (or any successors) and any other executive
officers of the Company reasonably designated by the Chief Executive Officer
regarding the general strategic direction of the Company and the marketing
and
development of the Company’s products and services. Consultant agrees to devote
up to three (3) business days per week or up to twelve (12) business days per
month to the performance of said consulting services. The precise schedule
for
the performance of consulting services hereunder shall be developed from to
time
by the Company giving reasonable regard to Consultant’s schedule, and subject to
Consultant’s reasonable approval. Consultant shall perform said consulting
services from such locations as the Company and Consultant shall reasonably
agree.
4. Consulting
Fee.
Company
shall pay to Consultant during the Term a consulting fee of $200,000.00 per
annum (the “Base Fee”), such Base Fee to be paid in arrears in substantially
equal installments no less often than twice per month during the Term.
5. Benefits. Company shall provide Consultant with the same benefits he enjoyed as Chairman and CEO of Traffix, including a non-accountable monthly allowance for business expenses (of up to $1,000 per month), automobile allowance (up to $2,000 per month, including all insurance and maintenance costs), reimbursement for professional fees for legal and accounting fees and tax planning of $10,000 per year, and reimbursement of fees for maintenance of American Express black credit card. Company shall reimburse Consultant during the Term (up to $10,000 per annum) for the cost of maintaining health and dental insurance substantially equivalent to the coverage he enjoyed as Chairman and CEO of Traffix.
6. Expenses.
In
accordance with the Company’s established practices applicable to its most
senior executives, Company shall pay directly, or advance funds to Consultant
or
reimburse Consultant for, all expenses reasonably and actually incurred by
him
in connection with the performance of his consulting services hereunder in
excess of the monthly expense allowance specified under Section 5 hereof.
7. Independent
Contractor.
Consultant agrees and understands that under this Agreement he is an independent
contractor and not an employee, partner, or joint venturer of Company. Company
will not pay, or withhold, any federal, state, local, city or other payroll
or
employment taxes, including, but not limited to, FICA, state and federal income
taxes, state disability insurance taxes, or state unemployment insurance taxes
relating to income received by Consultant from Company pursuant to this
Agreement. The Consultant shall be liable for his own debts, obligations, acts
and omissions and agrees to indemnify and hold the Company harmless against
any
claim related to any such taxes made by any such governmental
authority.
8. Proprietary
Information and Restrictive Covenants; Termination Agreement.
As a
condition to the obligations of the Company hereunder, concurrently with the
execution and delivery of this Agreement, Consultant is hereby executing and
delivering to the Company the Non-Competition, Non-Solicitation and
Confidentiality Agreement in the form attached hereto as Exhibit A (the
“Non-Competition Agreement”) and the Termination of Employment Agreement and
General Release attached hereto as Exhibit B (the “Termination Agreement”).
9. Termination
Upon Death or Disability.
Consultant’s retention as a consultant hereunder shall terminate automatically
upon his death. In the event that Consultant is unable to perform his material
duties hereunder by reason of any disability or incapacity (due to any physical
or mental injury, infirmity, incapacity, illness or defect) for an aggregate
of
120 days in any consecutive 12-month period, Company shall have the right to
terminate Consultant’s retention as a consultant hereunder within 60 days after
the 120th day of his disability or incapacity by giving Consultant notice to
such effect at least 30 days prior to the date of termination set forth in
such
notice, and on such date such retention shall terminate.
10. Termination
for Cause by Company.
(a) In
addition to any other rights or remedies provided by law or in this Agreement,
the Company may terminate Consultant’s retention as a consultant for “cause”
under this Agreement if:
(i) Consultant
is indicted for, convicted of, or enters a plea of guilty or nolo contendere
(which plea is not withdrawn prior to its approval by the court) to (x) a felony
or crime involving moral turpitude, or (y) any other acts involving the matters
identified in clauses (1) through (3) of paragraph (ii) below; or
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(ii) the
Company’s Board of Directors (“Board”) determines, after due inquiry, that
Consultant has:
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(1)
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committed
fraud against, or embezzled or misappropriated funds or other assets
of,
Company or any Affiliate (as defined below) thereof;
or
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(2)
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committed
any other act or omission involving dishonesty or fraud with respect
to
the Company or any Affiliate
thereof;
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(3)
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violated,
or caused Company or any Affiliate or any of their officers, employees
or
other agents, or any other person to violate, any material law, regulation
or ordinance, which violation has or would reasonably be expected
to have
a significant detrimental effect on Company or its Affiliates, or
any
material rule, regulation, policy or practice established by the
Board and
communicated to Consultant, which violation has or would reasonably
be
expected to have a significant detrimental effect on Company or its
Affiliates;
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(iii) the
Consultant’s willful misconduct or gross negligence with respect to the Company
or any Affiliate thereof;
(iv) repeated
failure of the Consultant to follow established reasonable and lawful directions
of the Company; or
(v) any
violation or breach of this Agreement, the Non-Competition Agreement or any
established Company policy, procedure or guideline;
provided,
however, that the Consultant’s violation or breach of paragraphs (ii), (iii),
(iv) or (v) shall not constitute Cause if such violation or breach is remedied
or cured, if capable of remedy or cure, within five days after receipt of
written notice from the Company specifying the violation or breach, except
that
no such cure period shall apply if facts exist that give Company a right of
termination for Cause on more than two occasions in any 12 month period during
the Term.
(b) Company
may effect such termination for cause under Section 10(a) of this Agreement
by
giving Consultant written notice to such effect, setting forth in reasonable
detail the factual basis for such termination before the date of termination
set
forth therein; provided, however, that in the case of any termination under
paragraphs (iii), (iv) or (v) of Section 10(a), such written notice shall be
given at least ten (10) days prior to the date of termination set forth therein.
(c) For
the
purposes of this Agreement, (i) the term “Affiliate” of a Person means another
Person directly or indirectly controlling, controlled by, or under common
control with, such Person; for this purpose, “control” of a Person means the
power (whether or not exercised) to direct the policies, operations or
activities of such Person by virtue of the ownership of, or right to vote or
direct the manner of voting of, securities of such Person, or pursuant to
agreement or law or otherwise; and (ii) the term “Person” includes without
limitation a natural person, corporation, joint stock company, limited liability
company, partnership, joint venture, association, trust, governmental authority,
or any group of the foregoing acting in concert.
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11. Termination by Consultant for Good Reason.
(a) In
addition to any other rights or remedies provided by law or in this Agreement,
Consultant may terminate his retention as a consultant under this Agreement
for
“good reason” if:
(i) Company
violates, or fails to perform or satisfy any material covenant, condition or
obligation required to be performed or satisfied by it hereunder, including
without limitation, making payments in accordance with Sections 4, 5 and 6
of
this Agreement; or
(ii) without
Consultant’s express written consent, Company requires services that are not
consistent with Consultant’s former position as Chairman and Chief Executive
Officer of Traffix.
(b) Consultant
shall give Company notice of termination for good reason, setting forth in
reasonable detail the factual basis for such termination, at least ten (10)
days
prior to the date of termination set forth therein; provided however, that
Company may avoid such termination if it, prior to the date of termination
set
forth in such notice, cures the factual basis for termination set forth therein,
except that no such cure period shall apply if facts exist that give Consultant
a right to give notice of termination on more than two occasions in any 12
month
period during the Term.
12. Voluntary
Termination.
Notwithstanding anything to the contrary contained hereinabove, Company shall
be
entitled to terminate this Agreement without restriction at any time upon
written notice to Consultant, and Consultant shall be entitled to terminate
this
Agreement without restriction upon sixty (60) day written notice to the
Company.
13. Consequences
of Termination.
(a) Upon
termination of Consultant’s retention as a consultant under this Agreement for
any reason, except for any termination under Section 9 and except for any
termination by Consultant pursuant to Section 12 hereof, Consultant shall be
entitled to receive any compensation or other amounts due to him pursuant to
Sections 4, 5 and 6 in respect of his retention prior to the Termination Date,
and from and after the Termination Date, except as otherwise provided in
Sections 13(b) of this Agreement, the Company shall have no further obligation
to Employee hereunder.
(b) If
Company terminates Consultant’s retention as a consultant under this Agreement
other than upon his disability or incapacity pursuant to Section 9 and other
than for “cause” pursuant to Section 10, subject to the terms hereof and
Consultant’s compliance with the obligations set forth in the Non-Competition
Agreement, the Company shall pay to Consultant the amounts payable to Consultant
under Sections 4 and 6 (in accordance with the payment schedule set forth in
Sections 4 and 6, as applicable) and provide him with the benefits and
perquisites to be provided under Section 5 of this Agreement during the period
from the Termination Date until the second anniversary of the Effective Date.
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(c) The
amounts payable pursuant to Section 13(b) shall only be payable if the
Consultant delivers to the Company and does not revoke a general release of
all
claims in a form substantially the same as that made by Consultant in the
Termination Agreement.
14. 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.
15. Notices.
Any
Notice or demand required or permitted to be given or made hereunder to or
upon
any party hereto shall be deemed to have been duly given or made for all
purposes if (a) in writing and sent by (i) messenger or an overnight courier
service against receipt, or (ii) certified or registered mail, postage paid,
return receipt requested, or (b) sent by telegram, telecopy (confirmed orally),
telex or similar electronic means, provided that a written copy thereof is
sent
on the same day by postage-paid first-class mail, to such party at their
respective addresses first set forth above or to such other address as any
party
hereto may at any time, or from time to time, direct by notice given to the
other parties in accordance with this Section. Except as otherwise expressly
provided herein, the date of giving or making of any such notice or demand
shall
be, in the case of clause (a) (i) of this Section 14, the date of the receipt;
in the case of clause (a) (ii) of this Section 14, three Business Days after
such notice or demand is sent; and, in the case of clause (b) of this Section
14, the Business Day next following the date such notice or demand is
sent.
16. 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.
17. 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.
18. Mitigation.
Consultant shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking any other employment, consulting engagement
or
otherwise.
19. 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. Each party to this Agreement submits to the jurisdiction
of
the courts of the State of New York, located in New York County, New York,
and
to the jurisdiction of the United States District Court for the Southern
District of New York, with respect to any matter arising out of this Agreement,
waives any objection to venue in the County of New York, State of New York,
or
such District, and agrees that service of any summons, complaint, Notice or
other process relating to such proceeding may be effected in the manner provided
by Section 14 of this Agreement.
20. Indemnification.
In
addition to any rights that Consultant may have under the Company’s certificate
of incorporation or under any liability insurance policy maintained by the
Company with respect to the indemnification of Consultant, the Company hereby
agrees to indemnify and hold harmless the Consultant from and against any and
all damages, claims, liabilities, expenses and losses incurred or initiated
by
any third party and arising from the performance of services by Consultant
under
and in accordance with this Agreement.
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21. Code
Section 409A.
(a) This
Agreement is intended to satisfy the requirements of Section 409A(a)(2), (3)
and
(4) of the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder (collectively, 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. In
particular, and without limiting the preceding sentence, if Consultant is a
“specified employee” under Section 409A(a)(2)(B)(i) of the Code, then any
payment under this Agreement that is treated as deferred compensation under
Section 409A of the Code shall be delayed until the date which is six months
after the date of separation from service (without interest or
earnings).
(b) If
any
payments made to Consultant under this Agreement constitute “nonqualified
deferred compensation” under Section 409A of the Code, such payments will be
grossed up to make Consultant whole for any tax, penalty or other assessment
imposed by reason of such payments under Section 409A of the Code.
22. 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.
23. Counterparts.
This
Agreement may be executed in counterparts, each of which shall be deemed an
original and which together shall constitute one and the same
agreement.
24. 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 anyone not a party hereto.
25. Assignment.
Consultant shall not assign Consultant’s obligations under this Agreement, and
any purported assignment without such consent shall be void and without effect.
26. 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 or modify or otherwise affect any of the provisions
hereof.
27. 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.
28. Entire
Agreement.
This
Agreement embodies the entire agreement of the parties hereto with respect
to
the subject matter hereof and supersedes all prior agreements, commitments
or
arrangements relating thereto.
(Signature
page follows)
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IN
WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the
day
and year first above written.
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By:
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Name:
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Title:
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