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EMPLOYMENT
AGREEMENT
EMPLOYMENT
AGREEMENT, dated as of January 31, 2008 (this
“Agreement”), by and between NEW MOTION, INC., a
Delaware corporation (the “Company”), and ANDREW
STOLLMAN (“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 President 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
board of directors. The Company’s board of directors may
elect or designate Executive to serve in such other corporate
offices of the Company or 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. Executive may engage or participate in
such other activities incidental to any other full-time employment
or occupation as do not interfere or conflict with, or compromise
his ability to perform, his duties hereunder, and do not create a
potential business conflict, and with respect to which the
Company’s board of directors has expressly consented and
approved in advance in writing. Executive shall at all times be
subject to the supervision, direction and control of the
Company’s Chief Executive Officer and its 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 (3
rd )
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”); provided, however, that this Agreement shall
become effective only upon consummation of the merger contemplated
by that certain Agreement and Plan of Merger dated as of September
26, 2007, by and among, the Company, Traffix, Inc. and a
wholly-owned subsidiary of the Company. As used herein,
“Termination Date” means the last day of the Term.
Subject to the provisions of Section 18 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 initially
be equal to Four Hundred Twenty Five Thousand Dollars
($425,000.00), 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.
(b)
As
additional compensation for Executive’s services
hereunder, upon the execution of this Agreement (i) the
Company shall pay to Executive a signing bonus of Two Hundred
Fifty Thousand Dollars ($250,000) and (ii) all options to
purchase equity securities of the Company held by Executive at
the time of such execution (other than stock options issued to
Executive under Section 4) shall automatically
vest.
(c)
Executive
may also receive an annual bonus 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. 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; 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).
(d)
The
Company shall use its commercially reasonable efforts to
procure medical, hospitalization, dental and disability
insurance (in the case of disability insurance, providing for
$15,000 coverage per month) 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 18, 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.
(e)
The
Company shall use commercially reasonable efforts to procure a
term policy of life insurance on the life of Executive with a
death benefit of at least Five Million Dollars ($5,000,000)
for a beneficiary or beneficiaries to be designated by
Executive, and the Company shall pay all premiums and any
other ordinary costs or expenses incident to maintaining such
policy in effect during the Term, or as provided under Section
18. In connection with the procurement of such policy,
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. As
an alternative to procuring such policy, the Company may
authorize Executive to procure such policy, and the Company
shall reimburse Executive for the reasonable costs incurred by
him in connection with the procurement of such policy. Upon
the expiration or termination of the Term and until the
earlier of the second anniversary of a termination by
Executive for “good reason” under Section 16 or by
the Company other than for “cause” under Section
15, Executive shall have the right to maintain such policy at
Executive’s cost and expense.
(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)
[RESERVED]
(h)
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.
4.
Stock Options .
(a)
On
the Commencement Date, the Company shall grant to Executive an
option (the “Option”) to acquire Three Hundred
Thousand (300,000) shares of the Company’s common stock,
par value $.001 per share (the “Common Stock”),
subject to the terms and conditions of the Company’s
Stock Option Plan and the Stock Option Agreement substantially
in the form annexed to this Agreement as
Exhibit B (the
“Stock Option Agreement”). 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 an exercise price equal to the
average closing price of the Common Stock reported for the ten (10)
trading days immediately preceding the Commencement Date, 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 One Hundred Thousand
(100,000) shares of Common Stock, on the first (1
st )
anniversary of the Commencement Date;
(ii)
thereafter,
the Option shall next vest, with respect to Eight Thousand
Three Hundred Forty One (8,341) shares of Common Stock, on the
last day of the calendar month immediately following the first
(1
st )
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 Ninety One Thousand Six Hundred Fifty Nine (191,659)
shares of Common Stock underlying the Option, in twenty three
(23) equal installments of Eight Thousand Three Hundred Thirty
Three (8,333) 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.
(b)
As
provided in the Stock Option Agreement, except (as provided
herein) in the event of a termination of the Executive’s
employment by the Company without “cause” (as such
term is used in Section 15 hereof) and except in the event of
a termination of the Executive’s employment by Executive
for “good reason” (as contemplated under Section
16 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.
5.
Restricted Stock .
(a)
On
the Commencement Date, the Company shall issue to Executive
Two Hundred Seventy Five Thousand (275,000) shares of Common
Stock (the “Restricted Shares”), pursuant to the
terms of a Restricted Stock Purchase Agreement in a form
acceptable to the Company (the “Restricted Stock
Purchase Agreement”). Executive shall execute and
deliver to the Company the Restricted Stock Purchase Agreement
as a condition to the Company’s obligation to issue the
Restricted Shares. The Restricted Shares shall be subject to
forfeiture under the terms of the Restricted Stock Purchase
Agreement. The Restricted Shares shall be subject to vesting
as provided in the Restricted Stock Purchase Agreement, in
accordance with and subject to the following vesting
schedule:
(i)
the
first One Hundred Thousand (100,000) Restricted Shares 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 the greater of (a)
Fifteen Dollars ($15) or (b) One Hundred Fifty Percent (150%)
of the per share trading price of the Common Stock on the
Commencement Date. The per share trading price of the Common
Stock that causes such Restricted Shares to vest shall be
referred to herein as the “First Vesting
Price”.
(ii)
the
remaining One Hundred Seventy Five Thousand (175,000)
Restricted Shares 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 the greater of (a) Twenty Dollars ($20)
or (b) One Hundred Thirty Three and One-Third Percent (133
1/3%) of the First Vesting Price.
(b)
As
provided in the Restricted Stock Purchase Agreement, except
(as provided herein) in the event of a termination of the
Executive’s employment by the Company without
“cause” (as such term is used in Section 15
hereof) and except in the event of a termination of the
Executive’s employment by Executive for “good
reason” (as contemplated under Section 16 hereof), any
and all of the Restricted Shares that remain unvested at the
time of termination of Executive’s employment (and/or
upon termination or expiration of the Term) (the
“Unvested Restricted Stock Portion”) shall be
subject to forfeiture and Executive’s entire ownership
interest in to the Unvested Restricted Stock Portion shall be
forfeited, extinguished and cancelled and Executive shall have
no rights or interest in the Unvested Restricted Stock
Portion. Subject to the terms of the Restricted Stock Purchase
Agreement, the Company may issue stock certificates or
otherwise evidence the Executive’s interest in the
Restricted Shares by using a book entry account, and may
maintain physical possession or custody of such stock
certificates until such time as the Restricted Shares are
vested in accordance with this Section, and may place a legend
on the stock certificate(s) restricting the transferability of
such certificates and referring to the terms and conditions
(including forfeiture) of this Agreement. Executive represents
and warrants that he is acquiring the Restricted Shares for
investment purposes only, and not with a view to distribution
thereof. Executive is aware that the Restricted Shares may not
be registered under the federal or any state securities laws
and that, in addition to the other restrictions on the
Restricted Shares, the Restricted Shares will not be able to
be transferred unless an exemption from registration is
available or the Restricted Shares become
registered.
(c)
If
the Company’s stockholders adopt a restricted share
plan, the Restricted Shares shall be deemed issued in
accordance therewith and subject thereto.
6.
Long Term Performance Unit Plan .
Promptly after the Commencement Date, the Company shall establish
and maintain a long-term executive compensation plan (the
“LTEC Plan”) for the benefit of Executive and other
senior executives of the Company. LTEC Plan shall provide for the
payment of additional compensation to Executive based upon the
Company’s achievement of certain performance standards to be
determined by the Company’s board of directors. Such
performance standards shall be based upon a three to five year
strategic plan for the Company. In addition, the terms of the LTEC
Plan shall include the nature of the compensation to be awarded,
the number of units to be awarded and vesting.
7.
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. Without limiting the foregoing, the Company shall
reimburse Executive for the reasonable legal costs incurred by him
(up to a maximum of Ten Thousand Dollars ($10,000)) in connection
with the preparation and execution of this Agreement.
8.
Location; Office .
Except for routine travel and temporary accommodation reasonably
required to perform his services hereunder, Executive shall not be
required to perform his services hereunder at any location other
than the office of the Company located in Pearl River, New York,
or, if relocated, at a location within a distance of fifty (50)
miles from its location in Pearl River, New York, or at such other
office or site to which Executive may, in his sole discretion,
consent; nor shall he be required to relocate his principal
residence to, or otherwise to reside at, any location specified by
the Company; provided, however, that if the Company does not
maintain offices within fifteen (15) miles from its present
location in Pearl River, New York, Executive shall not be required
to work at the Company’s offices more than two (2) days per
week (excluding weekends and holidays) to the extent that Executive
is capable of properly performing his duties and responsibilities
hereunder from a location other than the Company’s offices.
The Company shall provide Executive with suitable office space,
furnishings and equipment, secretarial and clerical services and
such other facilities and office support as are commensurate with
the position of Executive, in all cases consistent with and subject
to the practices of the Company.
9.
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 six (6) 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 six (6) 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.
10.
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.
11.
Ancillary Agreements .
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 each
of the following: (a) 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”), and (b) that
certain General Release date of even date herewith, by and among
Executive, Traffix, Inc. and the Company in the form of
Exhibit D attached
hereto (together with the Non-Competition Agreement, the
“Ancillary Agreements”). 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
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