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EXECUTIVE EMPLOYMENT AGREEMENT
This
Executive Employment Agreement (this
“Agreement” )
is
made and entered into as of
this 20th day of August, 2007 (the
“Effective Date” )
by
and between New Motion, Inc., a Delaware corporation (the
“Company” )
and
Susan G. Swenson (
“Executive” ).
1.1
Commencing
as of the Effective Date, and upon the terms and subject to
the conditions set forth in this Agreement, the Company hereby
engages and employs Executive as an officer of the Company,
with the title and designation of Chief Operating Officer of
the Company. Executive hereby accepts such engagement and
employment.
1.2
Executive's
duties and responsibilities shall be those normally and
customarily vested in the office of Chief Operating Officer of
a corporation, subject to the supervision, direction, control,
and discretion of the Chief Executive Officer of the
Company.
1.3
Executive
agrees to devote her primary business time, energies, skills,
efforts and attention to her duties hereunder, and will not,
without the prior written consent of the CEO and the Board,
render any material services to any other for-profit business
concern. The Company acknowledges, and accepts that, the
Executive currently sits on the corporate boards of
Wells
Fargo, mBox and Eltek and
will continue to sit on such boards so long as there is no
stated, direct conflict between those respective corporations
and the Company’s primary business activities. Executive
will use her best efforts and abilities faithfully and
diligently to promote the Company's business
interests.
1.4
Except
for travel incident to the business of the Company, Executive
shall perform her duties and obligations under this Agreement
principally from an office provided by the Company in Irvine,
California.
2.
Term of Employment .
Executive's employment pursuant to this Agreement shall commence on
the Effective Date and shall terminate on the earliest to occur of
the following (in any case, the “Term”):
2.1
the
close of business on the second (2nd) anniversary of the
Effective Date, provided, that if the Company has not given
Executive written Notice (as defined below) of its decision
not to renew the Term on or before ninety (90) days prior to
the end of the two year Term then, unless otherwise terminated
as provided below, the Term shall be automatically extended
until the earlier of (i) a date which is ninety (90) days
following the Company's delivery to Executive of written
Notice of the Company's decision not to renew this Agreement
beyond such date, and (ii) December 31, 2009;
2.2
the
death of Executive;
2.3
delivery
to Executive of written Notice of termination by the Company
if Executive suffers a “Permanent Disability,”
which for purposes of this Agreement shall mean a condition
that entitles Executive to benefits under an applicable
Company long-term disability plan or, if no such plan exists,
a physical or mental disability which, in the reasonable
judgment of the CEO or the Board, is likely to render
Executive unable to perform her duties and obligations under
this Agreement for 60 days in any 12-month
period;
2.4
delivery
to Executive of written Notice of termination by the Company
for “Cause,”
which Notice shall identify the particular details of the
conduct that the Company believes
constitutes Cause. For purposes of this Agreement,
“Cause” shall mean: (i) any act or omission
knowingly undertaken or omitted by Executive with the intent
of causing damage to the Company,
its properties, assets or business or its stockholders,
officers, directors or employees; (ii)
any fraud, misappropriation or embezzlement by Executive
resulting in a material personal profit
to Executive, in any case, involving properties, assets or
funds of the Company or any of its
subsidiaries; (iii) Executive's consistent failure to
materially perform her normal duties as described
in
Section 1.2 ,
other than any such failure resulting from Executive's
Permanent Disability;
(iv) conviction of, or pleading nolo contendere to, (A) any crime
or offense involving monies or other property of the Company; or
(B) any felony offense involving a crime of moral
turpitude;
or (v) Executive's chronic or habitual use or consumption of drugs
or alcoholic beverages,
in either case, that causes material damage to the Company, its
properties, assets or business,
provided, that
to the extent any circumstances that would otherwise constitute
Cause shall
be capable of cure, Executive shall be given notice from the CEO or
the Board of Directors and no less than thirty days to cure such
circumstances prior to any termination of her
employment
for Cause;
2.5
delivery
to Executive of written Notice of termination by the Company
“without Cause;”
2.6
delivery
to the Company of written Notice of termination by Executive
for
“Good Reason,” by
reason of: (i) the material diminution of Executive's duties, job
title or responsibilities as provided in
Section 1 above;
(ii) a relocation of Executive's principal work location to a
location that is more than 60 miles from the location set forth
in
Section 1.4 above;
or (iii) a material breach by the Company of this Agreement,
including without limitation, a material reduction in any component
of Executive's compensation or benefits as provided for herein;
or
2.7
delivery
to the Company of written Notice of Termination by Executive
without “Good Reason.”
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3.
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Compensation: Executive Benefit Plans
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3.1
The
Company shall pay to Executive a base salary (the
“
Base Salary ”)
at an annual rate of $300,000 for the period commencing on the
Effective Date and ending on the first (1st) anniversary of the
Effective Date. At the commencement of each subsequent twelve (12)
month period during the Term, the “Base Salary” shall
increase by no less than 5% (five percent) per annum from the
previous year. The Base Salary shall be payable in installments
throughout the year in the same manner and at the same times the
Company pays base salaries to similarly situated executive officers
of the Company, but in any event, no less frequently than
monthly.
3.2
Commencing
with fiscal year 2007 and for each fiscal year during
the Term
thereafter during which Executive is performing services to
the Company, the Company shall
maintain a Management Incentive Program, pursuant to which the
Company will set aside in
a fund a discretionary amount to be determined by the
Company’s Board of Directors based upon of the Company's
EBIT for such fiscal year (the
“MIP Fund” ).
Executive
and such other members of management as determined by the Board of
Directors shall be paid a bonus (the
“EBIT Bonus” ).
Executive's EBIT Bonus target for the fiscal years ending December
31, 2007 and December 31, 2008 will be no less than 15 (fifteen)
percent of the MIP Fund. As a percentage of the MIP Fund, this
target will increase at no less than 5% per year so long as
Executive remains employed with the Company. For purposes hereof,
“EBIT” shall mean earnings before interest and taxes,
calculated based on the Company's audited consolidated financial
statements for the applicable fiscal year prepared in accordance
with generally accepted accounting principles in the United States.
Executive's EBIT Bonus for fiscal year 2007 will be pro rated for
the number of days Executive is employed hereunder in fiscal 2007.
The EBIT Bonus, if any, shall be payable in cash or cash equivalent
by April 15 of the year immediately following the fiscal year for
which such EBIT Bonus is calculated.
3.3
During
the Term, Executive shall be entitled each year to vacation
for a minimum
of three calendar weeks (pro-rated for any partial year of
service during the Term), plus
such additional period or periods as the Board may approve in
the exercise of its reasonable discretion, during which
time her
compensation
shall be paid in full. To the extent that Executive
does
not use any such vacation during any year, up to two calendar
weeks of such unused vacation
shall be carried over from year to year; provided,
however ,
that
in no event shall Executive's
total accrued but unused vacation at any time exceed five
weeks.
3.4
As
an inducement to Executive to accept this Agreement and serve
as Chief Operating Officer of the Company, upon approval by
the Company’s Board of Directors, Executive will be
granted 75,000 shares of Restricted Common Stock of the
Company (the “Common Stock”) (the
“Inducement Grant”). The Inducement Grant shall be
granted pursuant to Company’s 2007 Stock Incentive Plan.
Company and Executive hereby agree to determine a mutually
agreeable vesting schedule for such Inducement Grant within 90
days from the Effective Date of this Agreement. Consistent
with
Section 5.1(iii) below,
the Stock Purchase Agreement covering the Inducement Grant (the
“Stock Purchase Agreement”) will provide for the full
acceleration of all applicable vesting requirements upon (i) a
change of control of the Company, as to be defined in the Stock
Purchase Agreement and (ii) upon a termination of Executive’s
employment Without Cause, for Good Reason, or due to
Executive’s death or Permanent Disability.
3.5
During
the Term, the Company shall pay to Executive, in increments
payable at the times that the Company pays the Base Salary to
Executive, an allowance of $700 per month for costs associated
with the lease or purchase, maintenance and insurance of an
automobile, and an additional allowance of $300 per month for
costs associated with use of cellular equipment and mobile
communication service or subscriptions or fees.
3.6
During
the Term, Executive shall be entitled to reimbursement from
the Company for the reasonable costs and expenses which she
incurs in connection with the performance of her duties and
obligations under this Agreement, substantiated in a manner
consistent with the Company's practices and policies as
adopted or approved from time to time by the Board for
executive officers. For the avoidance of doubt,
“business class” travel shall constitute
reasonable costs and expenses on any flight greater than six
(6) hours in duration.
3.7
The
Company may deduct from any compensation payable to Executive
the minimum amounts sufficient to cover applicable federal,
state and/or local income and employment tax
withholding.
4.
Other Benefits .
During the Term, Executive shall be eligible to participate in all
operative employee compensation, fringe benefit and perquisite, and
other benefit and welfare plans or arrangements of the Company then
in effect from time to time and in which similarly situated
executive officers of the Company generally are entitled to
participate, including without limitation, to the extent then in
effect, incentive, group life, medical, dental, prescription,
disability and other insurance plans, all on terms at least as
favorable as those offered to similarly situated executives of the
Company. The Company will provide Executive, Director and Officer
Liability coverage of no less than two million dollars as set forth
in
Section 13.5 below.
5.
Termination of Employment .
Subject to the provisions of this
Section 5 ,
either the Company or Executive may terminate Executive's
employment at any time for any reason or no reason. The following
provisions shall control any such termination of Executive's
employment.
5.1
Termination Without Cause, for Good Reason, or due to Executive's
death or Permanent Disability .
The Company may terminate Executive's employment without Cause at
any time upon 15 days' prior written Notice to Executive, and
Executive may terminate her employment with Good Reason at any time
upon 15 days' prior written Notice to the Company, in each case,
subject to any applicable cure periods (in the case of a
termination without Cause or for Good Reason, the date specified in
any such Notice in accordance with this
Section 5.1 shall
constitute the “
Date of Termination ”).
For purposes of clarity, the Company's delivery of Notice in
accordance with Section 2(a) of its decision not to renew the Term
shall not constitute termination without Cause, and shall be
governed by
Section 5.5 below.
Executive's employment shall also terminate upon the occurrence of
Executive's death or Permanent Disability (in the case of a
termination due to Executive's death or Permanent Disability, the
date of the death or the date specified in a Notice from the
Company indicating termination due to Permanent Disability shall
constitute the “
Date of Termination ”).
If Executive's employment is terminated pursuant to this
Section 5.1 ,
the Company shall promptly, or in the case of obligations described
in clause (e) below, as such obligations become due to Executive,
pay or provide to Executive (or her estate), (a) Executive's earned
but unpaid Base Salary accrued through such Date of Termination,
(b) accrued but unpaid vacation time through such Date of
Termination, (c) any EBIT Bonus required to be paid to Executive
pursuant to this Agreement for any fiscal year of the Company
ending prior to the Date of Termination, to the extent payable, but
not previously paid, (d) reimbursement of any business expenses
incurred by Executive prior to the Date of Termination that are
reimbursable under
Section 3.6 above,
and (e) any vested benefits and other amounts due to Executive
under any plan, program, policy of, or other agreement with, the
Company (together, the “
Accrued Obligations ”).
In addition, Executive (or her estate) shall be entitled to the
following payments and benefits (the “
Severance ”)
from the Company:
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(i)
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payment,
at the time and in the manner specified in
Section 5.2 below,
of an aggregate amount equal to Executive's Base Salary
(at
the rate then in effect, but disregarding any reduction of
Base Salary
in violation of this Agreement) that would have been
payable
to the Executive had she remained employed by the
Company
for the period (such period, or the period described in the
next
sentence, as applicable, the
“Severance Period” )
commencing
on the Date of Termination and ending on the second anniversary of
the Effective Date or, if later, the date which is three (3) months
following delivery by the Company of Notice of its decision not to
extend the Term (as contemplated by
Section 2(a) ,
which Notice, if not previously given, shall be deemed to be given
on the Date of Termination for any reason other than death
or Permanent
Disability). If termination occurs due to death or
Permanent
Disability, then such amount shall be equal to the Base
Salary
that would have been payable to the Executive had she
remained
employed by the Company through the second
anniversary
of the Effective Date. The Severance payable to the Executive
pursuant to this paragraph (i) is hereinafter referred to as
the
“Base Salary Severance” ;
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(ii)
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payment,
at the time specified in
Section 5.2 below,
of a pro rated portion of the EBIT Bonus for the fiscal year in
which the Date of Termination occurs, where such pro rated portion
is equal to: (a) the amount contributed to the MIP Fund, if any,
for the period (the “
EBIT Period ”)
from January 1 of the applicable fiscal year through the last day
of the fiscal quarter in which such Date of Termination occurs,
multiplied by (b) the ratio determined by dividing the number of
days Executive was employed during the EBIT Period by the total
number of days in the EBIT Period, multiplied by (c) Executive's
percentage of the MIP Fund;
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(iii)
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as
of the Date of Termination, the Inducement Grant will fully vest;
and
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(iv)
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continued
healthcare coverage for Executive (if living) and her dependents
for the Severance Period, to the extent each such individual
received healthcare coverage immediately prior to such termination
of employment, at the same cost to Executive and her dependants as
such coverage cost immediately prior to such termination of
employment (subject to premium increases affecting participants in
such plans generally), provided that if the Board determines, in
its sole discretion, that it is necessary or advisable for
Executive to elect continuation of healthcare coverage under
Section 4980B of the Code and the regulations hereunder in order
for the Company to provide such coverage under
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