UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A*
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
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_____________________________________________________
Important
Notice Regarding the Availability of Proxy materials for the
Shareholder
Meeting to Be Held On June __, 2009
A
copy of the Proxy Statement, Proxy Card and Annual Report to Security Holders on
Form 10-K
are
available at
www.Atrinsic.com/ir/financialreports.asp
_____________________________________________________
NEW
MOTION, INC.
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
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TIME
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9:00
a.m. Eastern Time on June __, 2009.
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PLACE
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469
7
th
Avenue, New York, NY 10018
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ITEMS
OF BUSINESS
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(1) To
elect seven members of the Board of Directors;
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(2) To
amend the Company’s Certificate of Incorporation to change the name of the
Company to Atrinsic, Inc.;
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(3) To
approve the 2009 Stock Incentive Plan;
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(4) To
approve a one-time option exchange program;
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(5) To
approve the 2010 Annual Incentive Compensation Plan;
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(6) To
transact such other business as may properly come before the Meeting and
any adjournment or postponement.
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RECORD
DATE
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You
can vote if at the close of business on April 30, 2009, you were a
stockholder of the Company.
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PROXY
VOTING
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All
stockholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the Annual
Meeting, you are urged to vote promptly by signing and returning the
enclosed Proxy card
. If your shares are
held in street name, you
must
obtain a Proxy, executed in
your favor, from the holder of record in order to be able to vote at the
Annual
Meeting.
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May
__, 2009
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Jerome
Chazen, Chairman of the
Board
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IN ORDER
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE AS PROMPTLY AS
POSSIBLE. IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOU OWN
SHARES REGISTRED IN DIFFERENT NAMES OR AT DIFFERENT ADDRESSES, EACH CARD SHOULD
BE COMPLETED AND RETURNED.
New
Motion, Inc.
469
7
th
Avenue, 10
th
Floor
New
York, NY 10018
(212)
716-1977
PROXY
STATEMENT
These
Proxy materials are delivered in connection with the solicitation by the Board
of Directors of New Motion, Inc., a Delaware corporation doing business as
Atrinsic (“New Motion”, “Atrinsic”, the “Company”, “we”, or “us”), of Proxies to
be voted at our 2009 Annual Meeting of Stockholders and at any adjournments or
postponements of such meeting.
You are
invited to attend our Annual Meeting of Stockholders on June __, 2009, beginning
at 9:00 a.m. Eastern Time. The meeting will be held at our head
office located at 469 7
th
Avenue,
New York, NY 10018.
It is
anticipated that the 2008 Annual Report and this Proxy Statement and the
accompanying Proxy will be mailed to stockholders on or about May 11,
2009.
Stockholders Entitled to
Vote.
Holders of our common stock at the close of business on
April 30, 2009 are entitled to receive this notice and to vote their shares at
the Annual Meeting. As of April 30, 2009, there were _________ shares
of common stock outstanding, our only class of voting securities.
Proxies.
Your vote
is important. If your shares are registered in your name, you are a
stockholder of record. If your shares are in the name of your broker
or bank, your shares are held in street name. We encourage you to
vote by Proxy so that your shares will be represented and voted at the meeting
even if you cannot attend. All stockholders can vote by written Proxy
card. Your submission of the enclosed Proxy card will not limit your
right to vote at the Annual Meeting if you later decide to attend in
person.
If your
shares are held in street name, you
must
obtain a Proxy, executed in your
favor, from the holder of record in order to be able to vote at the
meeting
. If you are a stockholder of record, you may revoke
your Proxy at any time before the meeting either by filing with the Secretary of
the Company, at its principal executive offices, a written notice of revocation
or a duly executed Proxy bearing a later date, or by attending the Annual
Meeting and expressing a desire to vote your shares in person. All
shares entitled to vote and represented by properly executed Proxies received
prior to the Annual Meeting, and not revoked, will be voted at the Annual
Meeting in accordance with the instructions indicated on those
Proxies. If no instructions are indicated on a properly executed
Proxy, the shares represented by that Proxy will be voted as recommended by the
Board of Directors.
Quorum.
The
presence, in person or by Proxy, of a majority of the votes entitled to be cast
by the stockholders entitled to vote at the Annual Meeting is necessary to
constitute a quorum. Abstentions and broker non-votes will be
included in the number of shares present at the Annual Meeting for determining
the presence of a quorum. Broker non-votes occur when a broker
holding customer securities in street name has not received voting instructions
from the customer on certain non-routine matters and, therefore, is barred by
the rules of the applicable securities exchange from exercising discretionary
authority to vote those securities. Brokers may vote their clients’
shares on routine matters, such as the election of directors.
Voting.
Each share
of our common stock is entitled to one vote on each matter properly brought
before the meeting. Abstentions will be counted toward the tabulation
of votes cast on proposals submitted to stockholders and will have the same
effect as negative votes. Broker non-votes on a routine proposal are not counted
or deemed present or represented for determining whether stockholders have
approved that proposal. On non-routine proposals, broker-non votes
will be counted toward the tabulation of votes cast on proposals, and will have
the same effect as negative votes.
Vote Required
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(i)
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Election of
Directors.
Our Amended and Restated Certificate of
Incorporation, as amended, does not authorize cumulative
voting. In the election of directors, the seven candidates
receiving the highest number of votes at the Annual Meeting will be
elected. If any nominee is unable or unwilling to serve as a
director at the time of the Annual Meeting, the Proxies will be voted for
such other nominee(s) as shall be designated by the current Board of
Directors to fill any vacancy. We have no reason to believe
that any nominee will be unable or unwilling to serve if elected as a
director.
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(ii)
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Amendment
to
Restated
Certificate of
Incorporation
. The affirmative vote of the holders of a
majority of our outstanding shares, in person or by proxy, will be
required to approve the proposed amendment to our Restated Certificate of
Incorporation to amend Paragraph First to change our company name to
Atrinsic, Inc.
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(iii)
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Approval of 2009
Stock Incentive
Plan.
The affirmative vote of a majority of the votes cast, in
person or by proxy, will be required to approve our 2009 Stock Incentive
Plan.
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(iv)
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Approval of Option Exchange
Program.
The affirmative vote of a majority of the votes
cast, in person or by proxy, will be required to approve our option
exchange program, pursuant to which certain executive officers of the
company will, if approved, exchange certain outstanding options of the
company for restricted stock units.
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(v)
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Approval of 20
10
Annual Incentive Compensation
Plan
. The affirmative vote of a majority of the votes
cast, in person or by proxy, will be required to approve our 2010 Annual
Incentive Compensation Plan.
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Other Matters.
At
the date this Proxy Statement went to press, we do not know of any other matter
to be raised at the Annual Meeting.
In the
event a stockholder proposal was not submitted to us prior to the date of this
Proxy Statement, the enclosed Proxy will confer authority on the
Proxy holders to vote the shares in accordance with their best judgment and
discretion if the proposal is presented at the Meeting. As of the
date hereof, no stockholder proposal has been submitted to us and management is
not aware of any other matters to be presented for action at the
Meeting. However, if any other matters properly come before the
Meeting, the Proxies solicited hereby will be voted by the Proxy holders in
accordance with the recommendations of the Board of Directors. Such
authorization includes authority to appoint a substitute nominee for any Board
of Directors’ nominee identified herein where death, illness or other
circumstance arises which prevents such nominee from serving in such position
and to vote such Proxy for such substitute nominee.
ITEM
1: ELECTION
OF DIRECTORS
Item 1 is
the election of seven (7) directors to hold office for a period of one year
or until their respective successors have been duly elected and
qualified. Our Bylaws provide that the number of directors of the
Company shall be fixed from time to time by the stockholders or the Board of
Directors. The Board of Directors has fixed the number of directors
at seven (7).
Unless
otherwise instructed, the Proxy holders will vote the Proxies received by them
for the nominees named below. If any nominee is unwilling to serve as
a director at the time of the Annual Meeting, the Proxies will be voted for such
other nominee(s) as shall be designated by the then current Board of Directors
to fill any vacancy. We have no reason to believe that any nominee
will be unable or unwilling to serve if elected as a director.
The Board
of Directors proposes the election of the following nominees as
directors:
Burton
Katz
Raymond
Musci
Robert
Ellin
Lawrence
Burstein
Jerome
Chazen
Mark
Dyne
Jeffrey
Schwartz
If
elected, the foregoing seven nominees are expected to serve until the 2010
Annual Meeting of Stockholders.
The
principal occupation and certain other information about the nominees and
certain executive officers are set forth on the following pages.
The
Board of Directors Unanimously Recommends a Vote “FOR” the Election of the
Nominees Listed Above.
CURRENT DIRECTORS/DIRECTOR
NOMINEES
The
following table sets forth the name, age and position of each of our current
directors, as well as the director nominees for election to our Board of
Directors as of April 15, 2009.
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Name
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Age
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Position
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Burton
Katz
(1)
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37
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Chief
Executive Officer and Director
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Raymond
Musci
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49
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Executive
Vice President, Corporate Development and Director
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Robert
Ellin
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42
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Director
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Lawrence
Burstein
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66
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Director
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Jerome
Chazen
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82
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Chairman
of the Board
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Mark
Dyne
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47
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Director
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Jeffrey
Schwartz
(2)
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43
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Director
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(1)
Burton Katz is the brother of Jonathan Katz, our Chief Marketing
Officer.
(2)
Jeffrey Schwartz has no relation to Traffix, Inc.’s former CEO, also named
Jeffrey Schwartz.
Directors
Burton
Katz
.
Mr. Katz is
a director nominee for election at our Annual Meeting and has served as our
Chief Executive Officer and as a director since the closing of our exchange
transaction with New Motion, Inc. (now called New Motion Mobile), on February
12, 2007. Mr. Katz has served in the same capacities with New Motion Mobile,
Inc, since September 2006. Mr. Katz has been involved in the mobile industry
since its inception. Prior to joining the company and beginning in 2001, Mr.
Katz was with Buongiorno S.p.A., where he was president of Buongiorno’s North
American operations and past executive of its U.K. operations. Mr. Katz oversaw
strategic planning and implementation of both Buongiorno’s B2B business and the
successful U.S. launch of their consumer brand. Prior to joining Buongiorno in
2001, Mr. Katz was a principal in PricewaterhouseCooper’s E-Business Division,
where he advised global telecom and media clients on pioneering new products and
developing digital distribution channels. Mr. Katz holds a masters degree in
business administration degree in marketing and interactive technologies from
the University of Southern California.
Raymond
Musci.
Mr. Musci is a director nominee for election at our Annual Meeting
and serves as our Executive Vice President, Corporate
Development. Mr. Musci has also served as a director since May 2007.
From August 2006 through February 2008, Mr. Musci served as President of New
Motion Mobile, Inc., and prior to joining our organization as an employee, Mr.
Musci was a consultant to our operations from January through August of 2006.
Mr. Musci brings over 25 years of high tech, media, entertainment and consumer
product experience to us. From 1999 to 2006, Mr. Musci was Chief Executive
Officer of Bam! Entertainment, Inc., a company he founded in 1999 that published
and distributed movie, sports and cartoon video games to a wide range of
retailers. Prior to Bam!, from 1996 to 1999, Mr. Musci was president and chief
executive officer of the U.S. subsidiary of Infograms Entertainment, Inc., now
better known as Atari, Inc. In that position, he oversaw all aspects of the
company's North American unit, was responsible for 250 employees, and grew
global revenues from $60 million to $300 million, and U.S. revenues from $80
million to $150 million. Before joining Infograms/Atari, Mr. Musci was founder,
president and chief executive officer of Ocean Of America, Inc., a publisher and
distributor of entertainment software. Founded in 1990, Mr. Musci built the
company to annual revenues of $50 million, and sold it to Infograms/Atari in
1996. Mr. Musci holds a degree in criminal justice with a minor in business
administration from Western New Mexico University. Mr. Musci is a director of
publicly traded Talon International, Inc.
Robert S.
Ellin.
Mr. Ellin is a director nominee for election at our Annual
Meeting. Mr. Ellin has served as one of our directors since October
24, 2006, and served as our Chief Executive Officer and President from October
24, 2006 to February 12, 2007. Mr. Ellin is a Managing Member of Trinad, which
is a hedge fund dedicated to investing in micro-cap public companies. Mr. Ellin
currently sits on the board of Command Security Corporation (CMMD), ProLink
Holdings Corporation (PLKH), U.S. Wireless Data, Inc. (USWI) and Mediavest, Inc
(MVSI). Prior to joining Trinad Capital LP in 2004, Mr. Ellin was the founder
and President of Atlantis Equities, Inc., a personal investment company. Founded
in 1990, Atlantis has actively managed an investment portfolio of small
capitalization public company as well as select private company investments. Mr.
Ellin frequently played an active role in Atlantis investee companies including
board representation, management selection, corporate finance and other advisory
services. Through Atlantis and related companies Mr. Ellin spearheaded
investments into ThQ, Inc. (OTC:THQI), Grand Toys (OTC: GRIN), Forward
Industries, Inc. (OTC: FORD) and completed a leveraged buyout of S&S
Industries, Inc. where he also served as President from 1996 to 1998. Prior to
founding Atlantis Equities, Mr. Ellin worked in Institutional Sales at LF
Rothschild and prior to that he was the Manager of Retail Operations at Lombard
Securities. Mr. Ellin received a Bachelor of Arts from Pace
University.
Lawrence
Burstein.
Mr. Burstein is a director nominee for election at our Annual
Meeting. Mr. Burstein became a director upon the completion of our
merger with Traffix, Inc. on February 4, 2008. Mr. Burstein has been a director
of Traffix since April 1999. Since March 1996, Mr. Burstein has been Chairman of
the Board and a principal shareholder of Unity Venture Capital Associates, Ltd.,
a private venture capital firm. For approximately ten years prior thereto, Mr.
Burstein was the President, a director and principal stockholder of Trinity
Capital Corporation, a private investment banking concern. Trinity ceased
operations upon the formation of Unity Venture Capital Associates, Ltd. in 1996.
Mr. Burstein is a director of several companies, being, respectively, THQ, Inc.,
engaged in the development and marketing of video games for Sony, Microsoft and
Nintendo; CAS Medical Systems, Inc., engaged in the manufacture and marketing of
blood pressure monitors and other disposable products, principally for the
neonatal market; I.D. Systems Inc., engaged in the design, development and
production of a wireless monitoring and tracking system which uses radio
frequency technology; Millennium India Acquisition Corp., a publicly trading
holding company; and American Telecom Systems, Inc., engaged in the development
and marketing of convergent telecommunication services.
Jerome A.
Chazen.
Mr. Chazen is a director nominee for election at our Annual
Meeting. Mr. Chazen is currently the Chairman of our Board of
Directors, and has served as one of our directors since April 2005. Mr. Chazen
is also Chairman of Chazen Capital Partners, a private investment company. Prior
to Chazen Capital Partners, Mr. Chazen was one of the four founders of Liz
Claiborne Inc., where he is also Chairman Emeritus. Mr. Chazen is also the
founder and Benefactor of the Jerome A. Chazen Institute of International
Business, the focal point of all international programs at Columbia Business
School. Mr. Chazen received his Bachelor Degree from the University of Wisconsin
and his MBA from Columbia Business School. Mr. Chazen has been a director of
Taubman Centers, Inc., since 1992.
Mark
Dyne
.
Mr. Dyne is a
director nominee for election at our Annual Meeting. Mr. Dyne has served as a
director of the company since November 11, 2008. Mr. Dyne currently
serves as the Chief Executive Officer and Chairman of Europlay Capital Advisors,
LLC, a merchant banking and advisory firm, and has served in this capacity since
2002. In this capacity, he provides corporate and advisory services. Prior to
joining Europlay, Mr. Dyne served as Chief Executive Officer of Sega Gaming
Technology Inc. (USA), a gaming company, and Chief Executive Officer of Virgin
Interactive Entertainment Ltd., a distributor of computer software programs and
video games based in London, England. Mr. Dyne was a founder and former director
of Sega Ozisoft Pty Ltd., a leading distributor of entertainment software in
both Australia and New Zealand. Mr. Dyne served as one of the first board
members and was one of the earliest investors in Skype and
Joost.com.
Jeffrey
Schwartz
.
Mr. Schwartz has
served as a director of the company since November 11, 2008 and is a director
nominee for election at our Annual Meeting. Mr. Schwartz served as
President and Chief Executive Officer of Autobytel, Inc. from December 2001 to
April 2005 where he created a leading online automotive marketing services
company, with a market capitalization exceeding $500 million, and having over
25,000 participating dealer franchises and operations in the US, Europe, and
Asia. Prior to joining Autobytel, Mr. Schwartz was President and
Chief Executive Officer and a director of Autoweb.com, Inc. from November 2000
to August 2001. He previously served as Autoweb’s Vice President, Strategic
Development from October 1999 to November 2000. From 1995 to October 1999, Mr.
Schwartz held various positions at The Walt Disney Company, including Corporate
Vice President responsible for worldwide corporate alliance business
development. In this role, Mr. Schwartz was responsible for executing the
company’s long-term strategic marketing, promotional, advertising, and licensing
relationships. From 1993 to 1995, Mr. Schwartz was a principal of California
Communications Group, advising corporate, non-profit, and governmental clients.
Mr. Schwartz received a Bachelor of Arts, Master of Arts, and Ph.D. degrees in
Political Science from the University of Southern California.
OTHER
EXECUTIVE
OFFICERS
Andrew
Zaref.
Mr. Zaref, 43, became our Chief Financial Officer on July 14,
2008. Prior to joining us, from January 2004 to July 2007, Mr. Zaref
was employed by Westwood One, Inc., a NYSE-listed publicly traded provider of
information services and programming to the radio, TV, and online industries in
the United States. At Westwood One, Mr. Zaref served as an Executive Vice
President and as Chief Financial Officer and was responsible for managing the
financial affairs of the company under a Management Agreement between Westwood
One and CBS Radio, Inc. Prior to joining Westwood One, Mr. Zaref spent
approximately three years at KPMG LLP, as a Partner servicing numerous clients
in the Information, Entertainment, Communications, and Technology industries.
Mr. Zaref is licensed in New York as a CPA and is involved in several
professional and civic organizations.
Andrew
Stollman.
Mr. Stollman, 43, became our President and a director upon the
completion of our merger with Traffix, Inc. on February 4, 2008. Mr.
Stollman resigned from his position as a director on November 11, 2008 but
remains in his current operating role with the company. Mr. Stollman
had been Traffix’s President since November, 2002, its Chief Operating Officer
from January, 2001 to November, 2002, and its Secretary and a director of the
company since January 1995. From February 2000 until January 2001, Mr. Stollman
was also Traffix’s Executive Vice President and from January 1995 until February
2000, he was its Senior Vice President. Mr. Stollman was also Traffix’s
President from September 1993 to December 1994.
Jonathan
Katz
.
Mr. Katz,
40, is Chief Marketing Officer of the company and has served in such capacity
since November of 2007, where his responsibilities include overseeing all
marketing strategies for the company. Previously, Jonathan was Vice President at
AzoogleAds, a leading performance based advertising network where he ran the
performance marketing division from 2005 to 2007. From 2001 to 2005,
Jonathan was vice president of marketing and media planning for B! USA, a
Buongiorno Vitaminic SpA company, a provider of mobile media products and
services in North America. Jonathan got his start in the mobile and Internet
arenas in 2001 as vice president of global marketing for Buongiorno Vitaminic
SpA, based in London. Prior to this, Jonathan was a Practice Director at
PricewaterhouseCoopers from 1995 to 2001. Jonathan is the brother of
Burton Katz, our Chief Executive Officer.
Zack
Greenberger.
Zach Greenberger, 31, is Chief Technology Officer
and Vice President of Operations for the company. His
responsibilities include overseeing all technical strategies for the company,
including software development, infrastructure management, and system
integrations. Previously, Mr. Greenberger was Technology Manager at Fox
Interactive Media, a division of News Corp, where he supervised ad serving
technology across a diverse portfolio of sites including MySpace, IGN, and
Rotten Tomatoes. Prior to joining FIM, Mr. Greenberger worked for six years at
Intermix Media where he served as Director of Software Development in charge of
content and marketing technology.
FURTHER INFORMATION
CONCERNING THE BOARD OF DIRECTORS
Meetings
.
The Board of Directors
held seven meetings during fiscal 2008. All directors then serving
attended 75% or more of all of the meetings of the Board of Directors and the
committees on which they served in fiscal 2008. The Company has not
established a specific policy with respect to members of the Board of Directors
attending annual stockholder meetings, however, the company encourages its
directors to attend annual stockholder meetings.
Director
Independence
. Effective with the consummation of our merger
with Traffix on February 4, 2008, our board of directors consisted of four
“independent” members, as that term is defined in Section 5605 of the
Marketplace Rules as required by the NASDAQ Stock Market: Robert B. Machinist,
Robert Ellin, Lawrence Burstein and Jerome Chazen. Our board also had three
seats held by non-independent executive directors: Burton Katz, Andrew Stollman
and Raymond Musci. On November 11, 2008, Mr. Stollman and Mr. Machinist resigned
from our Board of Directors and were replaced by Jeffrey Schwartz and Mark
Dyne. Mr. Schwartz is an “independent” member of our board, as that
term is defined in Section 5605 of the Marketplace Rules as required by the
NASDAQ Stock Market.
Gil
Klier, Barry Regenstein, and Drew Larner were also members of our Board of
Directors during the last completed fiscal year, and resigned from their
positions as directors on February 4, 2008, upon the completion of our merger
with Traffix, Inc. Each of Mr. Regenstein, Mr. Larner and Mr. Klier were
“independent” members of our board, as that term is defined in Section 5605 of
the Marketplace Rules as required by the NASDAQ Stock Market.
Our Board considered the objective
tests and the subjective tests for determining who is an “independent director”
under the NASDAQ rules. The subjective test states that an independent director
must be a person who lacks a relationship that, in the opinion of the Board,
would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. In assessing independence under the subjective
test, our Board took into account the standards in the objective tests, and
reviewed and discussed additional information provided by the directors and the
Company with regard to each director’s business and personal activities as they
may relate to New Motion and New Motion’s management. Based on all of the
foregoing, as required by NASDAQ rules, the Board made a subjective
determination as to each independent director that no relationships exists
which, in the opinion of the Board, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director.
In making
its independence determinations, the Board will consider transactions occurring
since the beginning of the third fiscal year prior to the date of its
determination between New Motion and entities associated with the independent
directors or members of their immediate family. All identified transactions that
appear to relate to New Motion and a person or entity with a known connection to
a director will be presented to the Board for consideration. In each case, the
Board will determine whether, because of the nature of the director’s
relationship with the entity and/or the amount involved, the relationship
impaired the director’s independence.
Board Committees
.
Our Board of Directors maintains an
Audit Committee, Compensation Committee and Nominating and Governance
Committee. Our Board may also establish special committees from time
to time to perform specifically delegated functions. The Board of Directors has
adopted a written charter that governs the conduct and responsibilities of each
of the Audit Committee, Compensation Committee and Nominating and Governance
Committee, copies of which may be found on our website located at
http://www.atrinsic.com.
Audit Committee
. Since our
merger with Traffix, Inc. on February 4, 2008 and up to November 11, 2008, our
audit committee was chaired by Robert B. Machinist, and seated by Lawrence
Burstein and Jerome Chazen, all of whom qualify as “independent” directors
within the meaning of the applicable rules for companies traded on The NASDAQ
Global Market (NASDAQ). On November 11, 2008, Mr. Machinist resigned
from our Board, and Jeffrey Schwartz, a new member of the Board, was appointed
to serve on the audit committee, along with Mr. Chazen and Mr.
Burstein. On March 18, 2009, Mr. Schwartz was appointed Chairperson
of the audit committee. We have determined that Mr. Chazen qualifies
as an “audit committee financial expert” within the meaning of the rules and
regulations of the SEC and that each of our other audit committee members are
able to read and understand fundamental financial statements and have
substantial business experience that results in that member's financial
sophistication. Among other responsibilities, the Committee reviews
the scope and results of quarterly audit reviews and the year-end audit with
management and the independent auditors, reviews and discusses the adequacy of
our internal controls, and recommends to the Board of Directors selection of
independent auditors for the coming year. During 2008, our audit
committee held seven meetings.
Compensation Committee
.
The Compensation
Committee of the Board of Directors is primarily responsible for determining the
annual salaries and other compensation of directors and executive officers and
administering our equity compensation plans. Since our merger with
Traffix, Inc. on February 4, 2008, our Compensation Committee has been chaired
by Lawrence Burstein, and seated by Jerome Chazen and Robert Ellin, each of whom
qualify as “independent” directors within the meaning of the applicable rules
for companies traded on NASDAQ. In connection with its deliberations,
the Committee seeks the views of the Chief Executive Officer with respect to
appropriate compensation levels of the other officers and periodically recruits
compensation experts to provide independent advice regarding market trends and
other competitive considerations. The Company engaged Ross Consulting
Group during 2008 to provide consulting services with respect to the Company’s
executive compensation policies. During 2008, our compensation committee held
one meeting, and matters relating to compensation were also discussed at full
meetings of our Board of Directors.
Nominating and Governance
Committee
. Since our merger with Traffix, Inc. on February 4, 2008, our
nominating and corporate governance committee was chaired by Jerome Chazen, and
seated by Robert Ellin and Robert B. Machinist, all of whom qualify as
“independent” directors within the meaning of the applicable rules for companies
traded NASDAQ. Upon Mr. Machinist’s resignation from our Board on
November 11, 2008, Mr. Schwartz became a member of our Nominating and Governance
Committee. The Committee reviews and makes recommendations regarding
the functioning of the Board of Directors as an entity, recommends corporate
governance principles applicable to New Motion and assists the Board of
Directors in its reviews of the performance of the Board and each of its
committees. During 2008, our nominating and governance committee held
two meetings.
The Committee also reviews those Board
members who are candidates for re-election to our Board of Directors, and makes
the determination to nominate a candidate who is a current member of the Board
of Directors for re-election for the next term. The Committee’s methods for
identifying candidates for election to the Board of Directors (other than those
proposed by our shareholders, as discussed below) include the solicitation of
ideas for possible candidates from a number of sources—members of the Board of
Directors; our executives; individuals personally known to the members of the
Board of Directors; and other research. We may also from time to time retain one
or more third-party search firms to identify suitable candidates. The Committee
members also nominate outside candidates for inclusion on the Board of
Directors.
A New Motion stockholder may nominate
one or more persons for election as a director at an annual meeting of
stockholders if the stockholder complies with the notice, information and
consent provisions contained in our Bylaws. Stockholders who desire the
Nominating and Governance Committee to consider a candidate for nomination as a
director at the 2010 annual meeting must submit advance notice of the nomination
to the Committee a reasonable time prior to the mailing date of the proxy
statement for the 2010 annual meeting. The recommendation should be addressed to
our Corporate Secretary.
A stockholder’s notice of a proposed
nomination for director to be made at an annual meeting must include the
following information:
|
|
·
|
the
name and address of the stockholder proposing to make the nomination and
of the person or persons to be
nominated;
|
|
|
·
|
a
representation that the holder is a stockholder entitled to vote his or
her shares at the annual meeting and intends to vote his or her shares in
person or by proxy for the person or persons nominated in the
notice;
|
|
|
·
|
a
description of all arrangements or understandings between the
stockholder(s) supporting the nomination and each
nominee;
|
|
|
·
|
any
other information concerning the proposed nominee(s) that we would be
required to include in the proxy statement if the Board of Directors made
the nomination; and
|
|
|
·
|
the
consent of the nominee(s) to serve as director if
elected.
|
Based on
the foregoing, the Nominating and Governance Committee recommended for
nomination, and the Board of Directors nominated, Burton Katz, Mark Dyne, Ray
Musci, Jerome Chazen, Robert Ellin, Jeffrey Schwartz and Lawrence Burstein for
election to the Board of Directors, subject to shareholder approval, for a
one-year term ending on or around the date of the 2010 Annual
Meeting.
Code of Ethics
. Our
board of directors has adopted a Code of Ethical Conduct (the “Code of Conduct”)
which constitutes a “code of ethics” as defined by applicable SEC rules and a
“code of conduct” as defined by applicable NASDAQ rules. We require all
employees, directors and officers, including our Chief Executive Officer,
President and Chief Financial Officer, to adhere to the Code of Conduct in
addressing legal and ethical issues encountered in conducting their work. The
Code of Conduct requires that these individuals avoid conflicts of interest,
comply with all laws and other legal requirements, conduct business in an honest
and ethical manner and otherwise act with integrity and in our best interest.
The Code of Conduct contains additional provisions that apply specifically to
our Chief Financial Officer and other financial officers with respect to full
and accurate reporting. The Code of Conduct is available on our website at
www.atrinsic.com and has been filed as an exhibit to our Annual Report on Form
10-K. You may also request a copy of the Code of Conduct by writing or calling
us at:
New
Motion, Inc.
Attn:
Investor Relations
469
7
th
Ave, 10
th
Floor
New York,
NY 10018
Any
waiver of the Code of Conduct pertaining to a member of our Board or one of our
executive officers will be disclosed in a report on Form 8-K filed with the
Securities and Exchange Commission.
Section
16(A) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our directors
and executive officers and the holders of more than 10% of our common stock to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of our equity securities. Executive
officers, directors and greater-than-ten percent stockholders are required by
SEC regulations to furnish us with all Section 16(a) forms they file. Based
solely on our review of the copies of the forms received by us and written
representations from certain reporting persons that they have complied with the
relevant filing requirements, we believe that, during the year ended December
31, 2008, all of our executive officers, directors and the holders of 10% or
more of our common stock complied with all Section 16(a) filing requirements,
except for Trinad Capital Master Fund Ltd., Trinad Management, LLC, Trinad
Capital L.P., Trinad Advisors II, LLC, Jay Wolf and Robert Ellin, who did not
timely file a Form 4 to report one transaction; Lawrence Burstein, who did not
timely file a Form 4 to report one transaction; Robert Machinist, who did not
timely file a Form 4 to report one transaction; Daniel Harvey, who did not
timely file a Form 4 to report one transaction; Andrew Zaref, who did not timely
file a Form 3 to report one transaction and a Form 4 to report one transaction,
Burton Katz who did not timely file a Form 4 to report one transaction, and
Andrew Stollman who did not timely file a Form 4 to report one
transaction.
EXECUTIVE COMPENSATION FOR
YEAR ENDED DECEMBER 31, 2008
Summary
Compensation Table
The following table provides disclosure
concerning all compensation earned for services to us in all capacities for our
fiscal years ended December 31, 2008 and 2007 (i) as to each person serving as
our Chief Executive Officer during our fiscal year ended December 31, 2008, and
(ii) as to our two most highly compensated executive officers other than our
Chief Executive Officer who were serving as executive officers at the end of our
fiscal year ended December 31, 2008, whose compensation exceeded $100,000. The
people listed in the table below are referred to as our “named executive
officers”.
|
Name
and
Principal Position
|
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Option
Awards
(1)
|
|
|
All
Other
Compensation
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Burton
Katz
(2)
|
|
2008
|
|
$
|
403,657
|
|
|
$
|
21,250
|
|
|
$
|
501,334
|
|
|
$
|
21,274
|
|
|
$
|
947,515
|
|
|
Chief
Executive Officer
|
|
2007
|
|
$
|
305,095
|
|
|
$
|
350,000
|
|
|
$
|
196,802
|
|
|
$
|
12,405
|
|
|
$
|
864,302
|
|
|
and
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
Stollman
(3)
|
|
2008
|
|
$
|
385,510
|
|
|
$
|
271,250
|
|
|
$
|
295,033
|
|
|
$
|
21,534
|
|
|
$
|
973,327
|
|
|
President
|
|
2007
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond
Musci
(4)
|
|
2008
|
|
$
|
360,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
9,097
|
|
|
$
|
369,097
|
|
|
Executive
Vice President,
|
|
2007
|
|
$
|
360,000
|
|
|
$
|
75,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
435,000
|
|
|
Corporate
Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
dollar amount is the amount recognized for financial statement reporting
purposes with respect to the fiscal year in accordance with SFAS 123(R).
The fair value of options was estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions: (a)
risk free rate of 3.0% to 5.0% (b) dividend yield of 0.0%, (c) expected
option life of 5.6 to 6.5 years, and (d) expected volatility of 56% to
86%. For further information, refer to Note 11 - "Stock Based
Compensation," in our Consolidated Financial Statements, incorporated in
our Annual Report on Form 10-K and filed with the SEC on March 26,
2008.
|
|
(2)
|
Effective
February 4, 2008, Mr. Katz entered into a new employment agreement, which
is further described below. In connection with his new employment
agreement, Mr. Katz was granted options to purchase 300,000 shares of
common stock at an exercise price of $10.92. In accordance with Mr. Katz’s
employment agreement, options to purchase 363,184 shares of common stock
at an exercise price of $2.34, which were granted in August 2006,
automatically vested upon execution of Mr. Katz’s new employment
agreement. In 2008, Mr. Katz earned a cash bonus of $21,250 for
his efforts in successfully integrating Traffix and New
Motion. Other compensation paid to Mr. Katz consisted of
payments of $12,177 related to an auto allowance pursuant to the terms of
his employment agreement as well as $9,097 in health insurance
premiums.
|
|
(3)
|
In
connection with the merger of New Motion and Traffix, Inc., New Motion
entered into an employment agreement with Andrew Stollman on February 4,
2008, the terms of which are described below. In connection
with his employment agreement, Mr. Stollman was granted options to
purchase 300,000 shares of common stock at an exercise price of $10.92 and
received a sign-on bonus of $250,000 upon execution of his employment
agreement. In 2008, Mr. Stollman also earned a cash bonus of $21,250 for
his efforts in successfully integrating Traffix and New
Motion. Other compensation paid to Mr. Stollman in 2008
consisted of payments of $11,177 related to an auto allowance pursuant to
the terms of his employment agreement, life insurance premiums of $1,260,
as well as $9,097 in health insurance
premiums.
|
|
(4)
|
Mr.
Musci currently serves as our Executive Vice President, Corporate
Development and previously served as our President. Mr. Musci resigned
from his position as President upon the closing of our merger with
Traffix, Inc. on February 4, 2008. Other compensation paid to Mr. Musci
consisted of payments of $9,097 in health insurance
premiums.
|
Narrative
Disclosure to Summary Compensation Table
Introduction
In this section, we describe our
compensation objectives and policies as applied to our named executive officers
during 2008. The following discussion and analysis is intended to provide a
framework within which to understand the actual compensation awarded to, earned
or held by each named executive officer during 2008, as reported in the
compensation tables set forth above.
Determination of
Compensation
The Compensation Committee of the Board
of Directors (the “Committee”) is responsible for determining the annual
salaries and other compensation of directors and executive officers,
administering our equity compensation plans and assisting the Board of Directors
in fulfilling its oversight responsibilities with respect to management
succession and other significant human resources matters.
Among
other things, the Committee is required to determine and approve the
compensation of the chief executive officer, review and approve the compensation
of the Company’s other executive officers, review and approve any incentive
compensation plan or equity-based plan for the benefit of executive officers,
and review and approve any employment agreement, severance arrangement or
change-in-control arrangement for the benefit of executive
officers.
Throughout this proxy statement, the
individuals who served as the Company’s chief executive officer as well as the
other individuals included in the Summary Compensation Table above, are referred
to as the “named executive officers.”
Philosophy
Our
overall business compensation program seeks to align executive compensation with
the achievement of the Company’s business objectives and with individual
performance towards these objectives. It also seeks to enable the Company to
attract, retain, and reward executive officers and other key employees who
contribute to our success and to incentivize them to enhance long-term
stockholder value.
To
implement this philosophy, the total compensation program is designed to be
competitive with the programs of other companies of comparable revenue in the
integrated mobile entertainment and internet media business, and to be fair and
equitable to both the company and the executives. As part of the company’s
determination of compensation levels for Messrs. Katz and Stollman, the company
reviewed the compensation policies of the following companies: Glu
Mobile, Inc., Think Partnerships, Inc., Dada S.p.A., Miva, Inc., Buongiorno
S.p.A., Infospace, Inc. and ValueClick, Inc. In addition, in setting
compensation levels, consideration was given to each executive’s overall
responsibilities, professional qualifications, business experience, job
performance, technical expertise and career potential, and the combined value of
these factors to the company’s long-term performance and growth.
Objectives
of Executive Compensation
The main
objectives of our compensation strategy include the following:
|
|
·
|
pay
competitively within our industry to attract and retain key
employees,
|
|
|
·
|
pay
for performance to motivate and align our executives interests with that
of our stockholders; and
|
|
|
·
|
design
compensation programs with a balance between short-term and long-term
objectives, including encouraging management ownership of our common
stock.
|
The
Committee strives to meet these objectives while maintaining market competitive
pay levels and ensuring that we make efficient use of equity
awards. In furtherance of these objectives, the Committee at times
retains outside compensation experts. To this end, the Company engaged Ross
Consulting Group during 2008 to provide consulting services with respect to the
Company’s executive compensation policies.
The
Committee seeks to properly compensate executive officers for their services to
the Company and to create incentives to focus on the specific goals identified
as significant for the Company. The Committee identifies and considers a wide
range of measures for individual performance, company performance, and, as
appropriate, share price appreciation, and, with the assistance of our
compensation advisor, develops specific performance goals based on these
measures. In addition, the Committee endeavors to preserve the Company’s tax
deduction for all compensation paid, which can be accomplished primarily by
conditioning compensation on the achievement of certain performance goals, as
discussed below.
Executive
Compensation Components
The
primary components of the executive compensation program are:
|
|
·
|
annual
performance-based cash bonus;
|
|
|
·
|
long-term
equity incentive awards in the form of stock options, restricted stock
units and/or restricted stock; and
|
Annual
Base Salary
We strive
to provide our senior executives with a level of assured cash compensation in
the form of annual base salary that is competitive with companies in the digital
entertainment and entertainment content business and similar enterprises and
companies that are comparable in size and performance. We strive to
set base salaries at levels which are designed to motivate, retain and otherwise
continue to extract exemplary effort from our executives. The annual
base salaries for Messrs. Katz, our Chief Executive Officer, and Mr. Stollman,
our President, are $425,000 which were negotiated in connection with the closing
of our merger with Traffix, Inc., and reflect in part the base compensation that
Messrs. Katz and Stollman were receiving at their respective companies prior to
the merger. The annual salary of Mr. Musci is
$360,000.
When
establishing the base salaries for Mr. Katz and Mr. Stollman, the Compensation
Committee considered a number of factors including the individual’s duties and
responsibilities, their potential for making significant contributions to the
company in the future, their backgrounds in the digital entertainment and
entertainment content business and other general discretionary considerations as
the Compensation Committee deemed appropriate. Mr. Musci’s salary
results from his negotiations with the company in 2006, when he acted as a
consultant to the company. At the time, Mr. Musci was paid $30,000
per month for his services, which pay rate has not been subsequently adjusted
since he became a company employee. Our Compensation Committee has
reviewed the base salaries of our Named Executive Officers, and decided that the
base salaries of such individuals will remain unchanged in 2009.
Annual
Cash Bonuses
Annual
cash incentive bonuses create a measurable and predictable connection between
total executive compensation and our annual performance. Unlike base salaries,
annual incentive bonuses are at risk based on how well we perform and how our
executive officers contribute to that performance. The Compensation Committee
determines the extent to which the performance targets and measurement criteria
previously established for a particular year have been achieved based on
financial information provided by our Chief Financial Officer, as a result of
our audited annual financial statements, including the adjustment to such
statements for non-GAAP adjustments in arriving at non-GAAP incentive
measurements. The Compensation Committee may, in determining whether performance
targets have been met, adjust our financial results to exclude the effect of
unusual charges or items contributing income to the current year or other events
that distort results specifically attributable to management’s effectiveness for
the current year. In addition, for incentive compensation measurement
at the net income level, the Compensation Committee adjusts its calculations to
exclude the unanticipated effect on financial results of changes in the Internal
Revenue Code or other tax laws or regulations. The Compensation Committee may,
in its discretion, increase or decrease the amount of a participant’s incentive
award based upon such factors as it may determine as appropriate, and necessary
under the philosophy and objectives of their policies.
Annual
cash bonuses for the Named Executive Officers in 2008 were based on performance
criteria established by the Compensation Committee for 2008. Annual
cash bonuses for Messrs. Katz and Stollman were based on two quantitative
measures, EBITDA and revenues, and one qualitative measure, the integration of
Traffix, Inc. into New Motion. None of the quantitative measures was
achieved; however, each executive earned $21,250 for successfully integrating
the two companies. Since the company did not achieve the quantitative
measures mentioned above, the Compensation Committee elected not to provide Mr.
Musci with a cash bonus for our fiscal year ended December 31,
2008.
In 2009,
as a result of the current volatility in the marketplace, cash bonuses paid to
our Named Executive Officers, if any, will be paid at the discretion of the
Compensation Committee based on the performance of the company and the executive
during the fiscal year.
Long-Term
Equity Incentive Awards
The
Compensation Committee has designed our equity incentive awards to serve as the
primary vehicle for providing long-term incentives to our senior executives and
key employees. We also regard equity incentive awards as a key retention tool.
During 2008, equity incentive awards were available for grant under our 2005 and
2007 Plans, which are described more fully below.
As
described in the footnotes to the Summary Compensation Table, the Compensation
Committee has granted long-term equity incentive compensation awards to the
Named Executive Officers in the form of non-qualified stock option awards. The
stock options vest over a number of years in order to encourage employee
retention and focus management’s attention on sustaining financial performance
and building stockholder value over an extended term.
The
following are descriptions of our 2005 and 2007 Stock Incentive
Plans:
2005
Plan
In 2005,
New Motion Mobile, Inc., our wholly owned subsidiary, established the Stock
Incentive Plan (the “2005 Plan”), for eligible employees and other directors and
consultants. In connection with the closing of our exchange transaction with New
Motion Mobile, Inc. on February 12, 2007, we assumed all of New Motion Mobile’s
obligations under the plan. Under the 2005 Plan, officers, employees and
non-employees may be granted options to purchase our common stock at no less
than 100% of the market price at the date the option is granted. Since New
Motion Mobile’s stock was not publicly traded prior to the exchange
transaction, the market price at the date of grant was historically determined
by New Motion Mobile’s board of directors. Incentive stock options granted to
date typically vest at the rate of 33% on the first anniversary of the vesting
commencement date, and 1/24th of the remaining shares on the last day of each
month thereafter until fully vested. The options expire ten years from the date
of grant subject to cancellation upon termination of employment. Upon the
approval of the 2007 Stock Incentive Plan, our Board adopted a resolution to
prevent further grants of awards under the 2005 Plan.
2007
Plan
On
February 16, 2007, our Board of Directors approved the 2007 Stock Incentive Plan
(the “2007 Plan”). On March 15, 2007, we received, by written consent of holders
of a majority of all classes of our common and preferred stock and the consent
of the holders of a majority of our common stock and preferred stock voting
together and as a single class, approval of the 2007 Plan. Under the 2007 Plan,
officers, employees and non-employees may be granted options to purchase our
common stock at no less than 100% of the market price at the date the option is
granted. Incentive stock options granted under the 2007 Plan typically vest at
the rate of 33% on the first anniversary of the vesting commencement date, and
1/24th of the remaining shares on the last day of each month thereafter until
fully vested. The options expire ten years from the date of grant subject to
cancellation upon termination of employment. If our 2009 Stock Incentive Plan
(as described below) is approved by our stockholders, no further awards will be
granted under the 2007 Plan, except that any shares of common stock that have
been forfeited or cancelled in accordance with the terms of the applicable award
under the 2007 Plan may be subsequently again awarded in accordance with the
terms of the 2007 Plan prior to its expiration in 2017.
Outstanding
Equity Awards at December 31, 2008
The
following table presents information regarding outstanding options held by the
company’s named executive officers as of December 31, 2008.
|
|
|
Number of Securities
Underlying Unexercised
Options (#) that are:
|
|
|
Option
Exercise Price
|
|
Option
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Range ($)
|
|
Expiration Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Burton
Katz
(1)
|
|
|
363,184
|
|
|
|
—
|
|
|
$
|
2.34
|
|
09/01/2016
|
|
|
|
|
49,643
|
|
|
|
31,607
|
|
|
|
6.00
|
|
02/16/2017
|
|
|
|
|
|
|
|
|
300,000
|
|
|
|
10.92
|
|
02/04/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
Stollman
(2)
|
|
|
67,607
|
|
|
|
—
|
|
|
$
|
9.80
|
|
03/08/2010
|
|
|
|
|
30,423
|
|
|
|
|
|
|
|
4.44
|
|
04/09/
2011
|
|
|
|
|
30,423
|
|
|
|
|
|
|
|
3.70
|
|
04/09/
2011
|
|
|
|
|
30,423
|
|
|
|
|
|
|
|
3.42
|
|
04/09/
2011
|
|
|
|
|
70,987
|
|
|
|
|
|
|
|
8.43
|
|
12/01/2011
|
|
|
|
|
273,809
|
|
|
|
|
|
|
|
10.86
|
|
06/03/2014
|
|
|
|
|
|
|
|
|
300,000
|
|
|
|
10.92
|
|
02/04/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond
Musci
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
—
|
|
(1)
|
On
August 6, 2006, Mr. Katz was granted an option to purchase 363,184 shares
of common stock at a per share exercise price of $2.34. On February 16,
2007, Mr. Katz was granted an option to purchase 81,250 shares of common
stock at a per share exercise price of $6.00. Both of these options have a
ten year term and vest as follows: 33.3% of the shares subject to the
options vest on the first anniversary of their grant date, and the
remaining 66.7% of the shares subject to the option vest monthly over the
next 24 months thereafter. On February 4, 2008, Mr. Katz entered into a
new employment agreement in which he was granted an option to purchase
300,000 shares of common stock at an exercise price of $10.92 which vest
as follows: 33.3% of the shares subject to the options vest on the first
anniversary of their grant date, and the remaining 66.7% of the shares
subject to the option vest monthly over the next 24 months thereafter.
This agreement also required that the vesting for the option to purchase
363,184 shares be accelerated, so that, as of February 4, 2008, all of
these options are fully vested and exercisable. As further
described below, in the event that stockholders approve our 2009 Stock
Incentive Plan and our one-time option exchange program, the options Mr.
Katz holds to purchase 300,000 shares of our common stock will be
cancelled, and Mr. Katz will be issued restricted stock units in exchange
for such options.
|
|
(2)
|
In
connection with the merger of New Motion and Traffix, Inc., Mr. Stollman’s
option to purchase common stock of Traffix was converted to 503,672
options to purchase common stock of New Motion at an average exercise
price of $9.13, which options were fully vested at the time of the merger.
On February 4, 2008, Mr. Stollman was granted options to purchase 300,000
shares of common stock at an exercise price of $10.92 which vest as
follows: 33.3% of the shares subject to the options vest on the first
anniversary of their grant date, and the remaining 66.7% of the shares
subject to the option vest monthly over the next 24 months
thereafter. As further described below, in the event that
stockholders approve our 2009 Stock Incentive Plan and our one-time option
exchange program, the options Mr. Stollman holds to purchase 300,000
shares of our common stock will be cancelled, and Mr. Stollman will be
issued restricted stock units in exchange for such
options.
|
Other
Benefits
Retirement
Benefits
We maintain a 401(k) plan in which all
full-time employees, including our named executive officers, who are at least 21
years of age and have one year of service are eligible to
participate. We provide this plan to help our employees save some
portion of their cash compensation for retirement in a tax efficient
manner. We do not provide an option for our employees to invest in
our stock in the 401(k) plan.
Health
and Welfare Benefits
We provide health and welfare benefits
for all of our full-time employees, including our named executed
officers. The health and welfare benefits provided to our named
executive officers are further described in their respective employment
agreements, which are discussed below.
Employment
Agreements, Severance Benefits and Change in Control Provisions
Consistent
with the above compensation philosophy, we have entered into Employment
Agreements with each of Burton Katz, our Chief Executive Officer and Andrew
Stollman, our President, which include each of the primary compensation
components outlined above. We are not presently party to an employment agreement
with Mr. Musci. The following is a description of the aforementioned
employment agreements with each of Messrs. Katz and Mr. Stollman that are
currently effective.
Burton
Katz
Burton
Katz is currently a party to an Employment Agreement executed in connection with
our closing of our merger with Traffix, Inc. on February 4, 2008 (the “Merger”).
The employment agreement has a term of three years, and may be terminated by New
Motion or Mr. Katz at any time and without any reason. A summary of the material
terms of Mr. Katz’s employment agreement follows:
Title and
Salary
Mr.
Katz's title is Chief Executive Officer and he will receive a base salary of
$425,000 per annum during the term of his agreement.
Signing
Bonus
Upon the
execution of his employment agreement, all of the options to purchase equity
securities of New Motion held by Mr. Katz (other than stock options to purchase
81,250 shares of common stock of New Motion which were issued to Mr. Katz in
February 2007, and the options discussed below) automatically
vested.
Annual
Bonus
Mr. Katz
is eligible to receive an annual bonus for each calendar year during the term of
his agreement if New Motion's business operations meet or exceed certain
financial performance standards to be determined by New Motion's Compensation
Committee. For the fiscal year ending December 31, 2008, the Compensation
Committee determined the performance of Mr. Katz against two quantitative
measures, EBITDA and revenues, and one qualitative measure, the Integration of
Traffix, Inc. into New Motion. A cash bonus ranging from $0 to $637,500 could
have been earned by Mr. Katz for the fiscal year ending December 31, 2008
depending on Mr. Katz’s performance against the aforementioned performance
metrics. For our fiscal year ended December 31, 2008, none of the
quantitative measures was achieved; however, Mr. Katz earned $21,250 for
successfully integrating the merger of Traffix and New Motion.
Benefits
Mr. Katz
and his family will be provided with medical, hospitalization, dental,
disability and life insurance during the term of his agreement. New Motion will
pay all premiums and other costs associated with such policies. Mr. Katz will
also be able to participate in any other compensation plan or other perquisites
generally made available to executive officers of the company from time to
time.
Stock
Options
Upon the
closing of the Merger, Mr. Katz was granted an option to purchase 300,000 shares
of New Motion's common stock. The option is exercisable at an exercise price
equal to $10.92 and expires on February 4, 2018. Except in the event Mr. Katz is
terminated without cause and except in the event of a termination of Mr. Katz's
employment for good reason, any portion of such executive's option that remains
unvested at the time of termination will be extinguished and cancelled. Mr.
Katz’s options are also subject to accelerated vesting upon a change of
control. As further described below, in the event that stockholders
approve our 2009 Stock Incentive Plan and our one-time option exchange program,
the options Mr. Katz holds to purchase 300,000 shares of our common stock will
be cancelled, and Mr. Katz will be issued restricted stock units in exchange for
such options.
Restricted Stock
Units
Upon the
closing of the Merger, New Motion agreed to issue Mr. Katz restricted stock
units (“RSUs”) having a term of ten years covering 275,000 shares of common
stock conditioned upon the delivery by Mr. Katz to the company of a Restricted
Stock Unit Agreement. Pursuant to the terms of his employment agreement, once
issued, Mr. Katz’s RSUs were to first vest, with respect to 100,000 RSUs after
the closing of trading on the date that the average per share trading price of
our common stock during any period of 10 consecutive trading days equaled or
exceeded $15. The remaining 175,000 RSUs were to vest after the closing of
trading on the date that the average per share trading price of our common stock
during any period of 10 consecutive trading days equaled or exceeded $20. Except
in the event Mr. Katz is terminated without cause and except in the event of a
termination of Mr. Katz's employment for good reason, any portion of Mr. Katz’s
restricted stock units that remain unvested at the time of termination will be
forfeited, extinguished and cancelled. Mr. Katz’s restricted stock units are
subject to accelerated vesting upon a change of control. The Company
intends to enter into an amendment to Mr. Katz’s employment agreement to amend
the vesting provisions of Mr. Katz’s RSUs (which have yet to be issued) so that
each of the aforementioned RSUs will vest after the closing of trading on the
date that the average per share trading price of our common stock during any
period of 10 consecutive trading days equals or exceeds $7.50.
Long Term Performance Unit
Plan
New
Motion agreed to establish and maintain a long term executive compensation plan
for the benefit of each of Mr. Katz and the other executive officers of the
company. The objective of the plan is to provide for the payment of additional
compensation to Mr. Katz and the other executives of the Company based upon the
Company’s achievement of certain performance standards. Such performance
standards shall be based upon a three to five year strategic plan for the
Company. In addition, the terms of the plan shall include the nature of the
compensation to be awarded, the number of units to be awarded and vesting. The
terms of the plan are currently being established by the company's Compensation
Committee.
Vacation
.
Mr. Katz will be entitled
to four weeks of vacation per annum.
Payments
upon termination
. If Mr. Katz’s employment with us is
terminated because of death or disability or cause or if Mr. Katz voluntarily
terminates his employment with us other than for good reason, we will pay or
provide to Mr. Katz all base salary and benefits which have accrued through the
termination date. In addition, if Mr. Katz’s employment is terminated as a
result of death or disability, Mr. Katz will receive a sum equal to a prorated
portion of the annual bonus to which Mr. Katz would have been entitled if his
employment had continued until the end of the employment year in which his death
or disability occurred.
If Mr.
Katz’s employment is terminated by Mr. Katz for good reason (which includes a
material adverse change in the nature and scope of the duties, obligations,
rights or powers of Mr. Katz’s employment, including those resulting from a
change in control of the company), or by us other than for cause, we will pay to
Mr. Katz: (a) all base salary and benefits which have accrued through the
termination date, (b) a one time payment equal to the sum of (i) two times his
base salary and (ii) two times an amount equal to the average of the annual
bonus amounts received by Mr. Katz under the Employment Agreement for the 2
years prior to such termination, and (c) coverage under the employee benefit
plans described above until the earlier of the end of the second anniversary of
such termination or Mr. Katz’s eligibility to receive similar benefits from a
new employer. In addition, if Mr. Katz’s employment is terminated by Mr. Katz
for good reason, or by us other than for cause, all stock options and other
equity awards granted to Mr. Katz pursuant to the Employment Agreement (other
than options and awards that vest upon the achievement of performance
objectives) shall automatically vest, and remain exercisable for a period of one
year after such termination.
Andrew
Stollman
Andrew
Stollman is currently a party to an Employment Agreement executed in connection
with our closing of the Merger on February 4, 2008. The employment agreement has
a term of three years, and may be terminated by New Motion or Mr. Stollman any
time and without any reason. A summary of the material terms of Mr. Stollman’s
employment agreement follows:
Title and
Salary
Mr.
Stollman's title is President and he will receive a base salary of $425,000 per
annum during the term of his agreement.
Signing
Bonus
Upon the
execution of his employment agreement, Mr. Stollman received a signing bonus of
$250,000, and all options held by Mr. Stollman to purchase equity securities of
New Motion (aside from the options discussed below) automatically
vested.
Annual
Bonus
Mr.
Stollman is eligible to receive an annual bonus for each calendar year during
the term of his agreement if New Motion's business operations meet or exceed
certain financial performance standards to be determined by New Motion's
Compensation Committee. For the fiscal year ending December 31, 2008, the
Compensation Committee determined the performance of Mr. Stollman against two
quantitative measures, EBITDA and revenues, and one qualitative measure, the
Integration of Traffix, Inc. into New Motion. A cash bonus ranging from $0 to
$637,500 could have been earned by Mr. Stollman for the fiscal year ending
December 31, 2008 depending on Mr. Stollman’s performance against the
aforementioned performance metrics. For our fiscal year ended
December 31, 2008, none of the quantitative measures was achieved; however, Mr.
Stollman earned $21,250 for successfully integrating Traffix and New
Motion.
Benefits
Mr.
Stollman and his family will be provided with medical, hospitalization, dental,
disability and life insurance during the term. New Motion will pay all premiums
and other costs associated with such policies. Mr. Stollman will also be able to
participate in any other compensation plan or other perquisites generally made
available to executive officers of the company from time to time.
Stock
Options
Upon the
closing of the Merger, Mr. Stollman was granted an option to purchase 300,000
shares of New Motion's common stock. The option is exercisable at an exercise
price equal to $10.92 and expires on February 4, 2018. Except in the event Mr.
Stollman is terminated without cause and except in the event of a termination of
Mr. Stollman's employment for good reason, any portion of such executive's
option that remains unvested at the time of termination will be extinguished and
cancelled. Mr. Stollman’s options are subject to accelerated vesting upon a
change of control. As further described below, in the event that
stockholders approve our 2009 Stock Incentive Plan and our one-time option
exchange program, the options Mr. Stollman holds to purchase 300,000 shares of
our common stock will be cancelled, and Mr. Stollman will be issued restricted
stock units in exchange for such options.
Restricted Stock
Units
Upon the
closing of the Merger, New Motion agreed to issue Mr. Stollman restricted stock
units (“RSUs”) having a term of ten years covering 275,000 shares of common
stock conditioned upon the delivery by Mr. Stollman to the company of a
Restricted Stock Unit Agreement. Pursuant to the terms of his employment
agreement, once issued, Mr. Stollman’s RSUs were to first vest, with respect to
100,000 RSUs after the closing of trading on the date that the average per share
trading price of our common stock during any period of 10 consecutive trading
days equaled or exceeded $15. The remaining 175,000 RSUs were to vest after the
closing of trading on the date that the average per share trading price of our
common stock during any period of 10 consecutive trading days equaled or
exceeded $20. Except in the event Mr. Stollman is terminated without cause and
except in the event of a termination of Mr. Stollman 's employment for good
reason, any portion of Mr. Stollman’s restricted stock units that remain
unvested at the time of termination will be forfeited, extinguished and
cancelled. Mr. Stollman’s restricted stock units are subject to accelerated
vesting upon a change of control. The Company intends to enter into
an amendment to Mr. Stollman’s employment agreement to amend the vesting
provisions of Mr. Stollman’s RSUs (which have yet to be issued) so that each of
the aforementioned RSUs will vest after the closing of trading on the date that
the average per share trading price of our common stock during any period of 10
consecutive trading days equals or exceeds $7.50.
Long Term Performance Unit
Plan
New
Motion agreed to establish and maintain a long term executive compensation plan
for the benefit of each of Mr. Stollman and the other executive officers of the
company. As discussed above, the terms of the plan are currently being
established by the company's Compensation Committee.
Vacation
.
Mr. Stollman will be
entitled to four weeks of vacation per annum.
Payments
upon termination
. If Mr. Stollman’s employment with us is terminated
because of death or disability or cause or if Mr. Stollman voluntarily
terminates his employment with us other than for good reason, we will pay or
provide to Mr. Stollman all base salary and benefits which have accrued through
the termination date. In addition, if Mr. Stollman’s employment is terminated as
a result of death or disability, Mr. Stollman will receive a sum equal to a
prorated portion of the annual bonus to which Mr. Stollman would have been
entitled if his employment had continued until the end of the employment years
in which his death or disability occurred.
If Mr.
Stollman’s employment is terminated by Mr. Stollman for good reason (which
includes a material adverse change in the nature and scope of the duties,
obligations, rights or powers of Mr. Stollman’s employment, including those
resulting from a change in control of the company), or by us other than for
cause, we will pay to Mr. Stollman: (a) all base salary and benefits which have
accrued through the termination date, (b) a one time payment equal to the sum of
(i) two times his base salary and (ii) two times an amount equal to the average
of the annual bonus amounts received by Mr. Stollman under the Employment
Agreement for the 2 years prior to such termination, and (c) coverage under the
employee benefit plans described above until the earlier of the end of the
second anniversary of such termination or Mr. Stollman’s eligibility to receive
similar benefits from a new employer. In addition, if Mr. Stollman’s employment
is terminated by Mr. Stollman for good reason, or by us other than for cause,
all stock options and other equity awards granted to Mr. Stollman pursuant to
the Employment Agreement (other than options and awards that vest upon the
achievement of performance objectives) shall automatically vest, and remain
exercisable for a period of one year after such termination.
Andrew
Zaref
On July
14, 2008, we entered into an employment agreement with Andrew Zaref, pursuant to
which Mr. Zaref became our new Chief Financial Officer effective July 14, 2008.
Although Mr. Zaref was not a “named executive officer” as of the end of our
fiscal year ended December 31, 2008, we are providing the terms of Mr. Zaref’s
employment with us, as Mr. Zaref is a key employee of the
company. Mr. Zaref’s employment agreement has a term of three years,
subject to earlier termination in accordance with the terms of the employment
agreement. A summary of the material terms of Mr. Zaref’s employment agreement
follows:
Title
and Salary
.
Mr.
Zaref’s title is Chief Financial Officer. Mr. Zaref will receive a base salary
of $400,000 per annum, which is subject to increase at the end of each year of
the term at the sole and complete discretion of our board of directors;
provided, however, that such increase will be in an amount no less than
5%.
Signing
Bonus
.
Upon the
execution of the Employment Agreement, Mr. Zaref received a signing bonus of
$100,000, which may be partially recouped by us in the event Mr. Zaref’s
employment is terminated for cause by us or voluntarily by Mr. Zaref prior to
the expiration of the term.
Annual
Bonus
. Mr. Zaref is eligible to receive an annual bonus in an amount not
to exceed his base salary for each calendar year during the term if our business
operations meet or exceed certain financial performance standards to be
determined by our Compensation Committee. For the fiscal year ending December
31, 2008, the Compensation Committee determined the performance of Mr. Zaref
against two quantitative measures, EBITDA and revenues. A cash bonus ranging
from $0 to $200,000 could have been earned by Mr. Zaref for the fiscal year
ending December 31, 2008 depending on Mr. Zaref’s performance against the
aforementioned performance metrics. For our fiscal year ended
December 31, 2008, none of the quantitative measures was achieved, and as a
result Mr. Zaref did not receive a cash bonus for our fiscal year ended December
31, 2008.
Benefits
.
Mr. Zaref and his family
will be provided with medical, hospitalization, dental, disability and life
insurance during the term. We will pay all premiums and other costs associated
with such policies. Mr. Zaref will also be able to participate in any other
compensation plan or other perquisites generally made available to our executive
officers from time to time.
Stock
Options
. Upon the execution of the Employment Agreement, Mr. Zaref was
granted an option to purchase 200,000 shares of our common stock. Except in the
event Mr. Zaref is terminated without cause and except in the event of a
termination of Mr. Zaref’s employment by Mr. Zaref for good reason (in which
case all options shall automatically vest and remain exercisable for a period of
one year after such termination), any portion of Mr. Zaref’s option that remains
unvested at the time of termination will be extinguished and cancelled. Mr.
Zaref’s options are subject to accelerated vesting upon a change of
control. As further described below, in the event that stockholders
approve our 2009 Stock Incentive Plan and our one-time option exchange program,
the options Mr. Zaref holds to purchase 200,000 shares of our common stock will
be cancelled, and Mr. Zaref will be issued restricted stock units in exchange
for such options.
Restricted
Stock Unit Award
. We agreed to grant to Mr. Zaref restricted stock units
having a term of ten years for 200,000 shares of common stock (the “RSUs”).
Pursuant to the terms of his employment agreement, once issued, Mr. Zaref’s RSUs
were to first vest, with respect to 100,000 RSUs after the closing of trading on
the date that the average per share trading price of our common stock during any
period of 10 consecutive trading days equaled or exceeded $15. The remaining
100,000 RSUs were to vest after the closing of trading on the date that the
average per share trading price of our common stock during any period of 10
consecutive trading days equaled or exceeded $20. Except in the event Mr. Zaref
is terminated without cause and except in the event of a termination of Mr.
Zaref's employment for good reason, any portion of Mr. Zaref’s restricted stock
units that remain unvested at the time of termination will be forfeited,
extinguished and cancelled. Mr. Zaref’s restricted stock units are subject to
accelerated vesting upon a change of control. The Company intends to
enter into an amendment to Mr. Zaref’s employment agreement to amend the vesting
provisions of Mr. Zaref’s RSUs (which have yet to be issued) so that each of the
aforementioned RSUs will vest after the closing of trading on the date that the
average per share trading price of our common stock during any period of 10
consecutive trading days equals or exceeds $7.50
Vacation
.
Mr. Zaref will be entitled
to four weeks of vacation per annum.
Payments
upon termination
. If Mr. Zaref’s employment with us is terminated because
of death or disability or cause or if Mr. Zaref voluntarily terminates his
employment with us other than for good reason, we will pay or provide to Mr.
Zaref all base salary and benefits which have accrued through the termination
date.
If Mr.
Zaref’s employment is terminated by Mr. Zaref for good reason (which includes a
material adverse change in the nature and scope of the duties, obligations,
rights or powers of Mr. Zaref’s employment, including those resulting from a
change in control of the company), or by us other than for cause, we will pay to
Mr. Zaref: (a) all base salary and benefits which have accrued through the
termination date, (b) a one time payment equal to the sum of (i) the base salary
payable to Mr. Zaref for the greater of (x) the remaining term of the Employment
Agreement or (y) twelve (12) months (the “Severance Period”), and (ii) an amount
equal to the average of the annual bonus amounts received by Mr. Zaref under the
Employment Agreement for the 2 years prior to such termination, and (c) coverage
under the employee benefit plans described above until the earlier of the end of
the Severance Period or Mr. Zaref’s eligibility to receive similar benefits from
a new employer. In addition, if Mr. Zaref’s employment is terminated by Mr.
Zaref for good reason, or by us other than for cause, all stock options and
other equity awards granted to Mr. Zaref pursuant to the Employment Agreement
(other than options and awards that vest upon the achievement of performance
objectives) shall automatically vest, and remain exercisable for a period of one
year after such termination.
Jonathan
Katz
Although
Mr. Katz was not a “named executive officer” as of the end of our fiscal year
ended December 31, 2008, we are providing the terms of Mr. Katz’s employment
with us, as Mr. Katz, as our Chief Marketing Officer, is a key employee of the
company. During 2008, Mr. Katz earned a base salary of $302,340 but
did not receive a bonus. Effective as of November 1, 2008, Mr. Katz’s
annual salary was increased from $295,000 to $350,000. On February 4,
2008, Mr. Katz was also granted 50,000 shares of restricted stock upon the
completion of our merger with Traffix, Inc. The restricted stock
vested 33.3% on the first anniversary of the grant date, and the remaining 66.6%
was to vest monthly thereafter through the third anniversary of the grant
date. Upon the determination by our Board that Mr. Katz is an
executive officer of the company, the Compensation Committee amended the vesting
schedule of Mr. Katz’s remaining 30,555 unvested shares of restricted stock, so
that on each of December 31, 2009, 2010 and 2011, 10,185 shares of restricted
stock will be eligible for vesting in accordance with quantitative and/or
qualitative measures to be determined by the Compensation Committee. The change
in the vesting provisions of Mr. Katz’s restricted stock were implemented to
conform with the vesting provisions of the restricted stock units that will be
granted to our other executive officers pursuant to our Option Exchange Program,
which is further described below.
Change
in Control Provisions
The
prospect of a change in control of the Company can cause significant distraction
and uncertainty for executive officers and, accordingly, the Committee believes
that appropriate change in control provisions in their employment agreements
and/or equity awards are important tools for aligning executives’ interests in
change in control scenarios with those of stockholders. Please see
the above summaries of each executive’s employment agreement with us for a
discussion of change of control provisions included within their respective
agreements.
Tax
and Accounting Implications
Deductibility
of Executive Compensation
Section 162(m) of the Internal Revenue
Code limits to $1 million the annual tax deduction for compensation paid to each
of the chief executive officer and any of the four highest paid other executive
officers. However, compensation that qualifies as performance-based
compensation is deductible even in excess of $1 million. The Board
considers these requirements when designing the compensation program for the
named executive officers. The Company believes that the compensation
paid to the named executive officers generally is fully deductible for federal
income tax purposes. However, in certain situations, the Compensation
Committee may approve compensation that will not meet these requirements in
order to ensure competitive levels of total compensation for its executive
officers or for other reasons.
Nonqualified
Deferred Compensation
On October 22, 2004, the American Jobs
Creation Act of 2004 was signed into law, adding section 409A to the Internal
Revenue Code, which changed the tax rules applicable to nonqualified deferred
compensation arrangements. A violation of these new rules could
result in the imposition of a 20% federal penalty tax on the affected executives
(in addition to possible state penalties as well). The Company
believes it is operating in compliance with the statutory provisions and,
through its legal counsel, monitors compliance with section
409A.
Director
Compensation For The Fiscal Year Ended December 31, 2008
During
our fiscal year ended December 31, 2008, our non-employee directors received
cash compensation for their services on our board and will be issued 10,425
restricted stock units valued at $42,500 for their services as board members in
2008 upon the approval of our 2009 Stock Incentive Plan described
below. In 2008, we paid each of our non-employee directors a cash
retainer of $22,500 for their service as board members. In addition,
the following board related compensation was paid to our non-executive board
members in 2008:
|
|
·
|
Each
non-executive member of our board of directors received a board meeting
fee of $1,500 for each in-person meeting of our board of directors, and
$500 for each telephonic meeting of our board of
directors.
|
|
|
·
|
Each
of our non-executive directors who was a member of a committee of our
board of directors received a committee meeting fee of $1,000 for each in
person committee meeting and $500 for each telephonic committee
meeting.
|
|
|
·
|
The
chairs of each of our audit and compensation committees received a cash
retainer of $5,000 and the chair of our governance committee received a
cash retainer of $2,500. Members of these committees received
cash retainers of $2,000 and $1000
respectively.
|
In
addition, we reimburse directors for travel expenses associated with attendance
at Board meetings; during our fiscal year ended December 31, 2008 such expenses
were immaterial.
The
following table sets forth information concerning director compensation earned
by non-employee directors for the 2008 fiscal year:
|
Name
|
|
Fees Earned
or
Paid in Cash
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
|
All Other
Compensation
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerome
Chazen
|
|
$
|
49,000
|
|
|
$
|
42,500
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
91,500
|
|
|
Drew
Larner
(1)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
807
|
|
|
$
|
-
|
|
|
$
|
807
|
|
|
Barry
Regenstein
(2)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Gil
Klier
(3)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
114,212
|
|
|
$
|
-
|
|
|
$
|
114,212
|
|
|
Lawrence
Burstein
|
|
$
|
46,000
|
|
|
$
|
42,500
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
88,500
|
|
|
Robert
Ellin
|
|
$
|
35,000
|
|
|
$
|
42,500
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
77,500
|
|
|
Jeffrey
Schwartz
|
|
$
|
17,125
|
|
|
$
|
42,500
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
59,625
|
|
|
Mark
Dyne
|
|
$
|
5,625
|
|
|
$
|
42,500
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
48,125
|
|
|
Robert
Machinist
(4)
|
|
$
|
56,500
|
|
|
$
|
72,500
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
129,000
|
|
|
(1)
|
On
February 16, 2007, Mr. Larner was granted an option to purchase 25,000
shares of common stock at a per share exercise price of $6.00 for services
on our board of directors. This option had a ten year term and was
scheduled to vest ratably over 12 months. Mr. Larner resigned upon the
closing of our merger with Traffix, Inc. on February 4, 2008, and in
connection with his resignation, all of Mr. Larner’s options were
accelerated and became fully exercisable. The aforementioned
options expired on February 4,
2009.
|
|
(2)
|
On
February 16, 2007, Mr. Regenstein was granted an option to purchase 25,000
shares of common stock at a per share exercise price of $6.00 for services
on our board of directors. This option had a ten year term and was
scheduled to vest ratably over 12 months. Mr. Regenstein resigned upon the
closing of our merger with Traffix, Inc. on February 4, 2008, and in
connection with his resignation, all of Mr. Regenstein’s options were
accelerated and became fully exercisable. The aforementioned
options expired on February 4,
2009.
|
|
(3)
|
On
September 25, 2007, Mr. Klier was granted an option to purchase 25,000
shares of common stock at a per share exercise price of $14.00. This
option has a ten year term and was scheduled to vest ratably over 12
months. Mr. Klier resigned upon the closing of our merger with Traffix,
Inc. on February 4, 2008, and in connection with his resignation, all of
Mr. Klier's options were accelerated and became fully vested and
exercisable. The aforementioned options expired on February 4,
2009.
|
|
(4)
|
As
the Chairman of our Board of Directors in 2008, Mr. Machinist received a
cash retainer of $20,000, and will receive an additional $30,000 in the
form of 7,500 restricted stock units upon the approval of our 2009 Stock
Incentive Plan, which is further described below. Mr. Machinist
resigned from our Board of Directors effective November 11, 2008. In
connection with Mr. Machinist’s resignation as a director, Mr. Machinist
entered into a consulting agreement with us pursuant to which he agrees to
provide consulting services to us until November 11, 2009 and will receive
$50,000 as compensation for his
services.
|
Securities
Authorized for Issuance Under Equity Compensation Plans
The
following table sets forth certain information regarding our equity compensation
plans as of December 31, 2008.
|
|
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
|
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
|
|
Number of securities
remaining available for
future issuance under
equity compensation plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders (1)
|
|
|
1,910,188
|
|
|
$
|
7.82
|
|
|
|
1,281,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
1,177,627
|
|
|
$
|
5.64
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,087,815
|
|
|
$
|
6.98
|
|
|
|
1,281,495
|
|
(1)
Includes 1,056,230 options assumed in connection with our acquisition of
Traffix, Inc.
Material
Features of Individual Equity Compensation Plans not Approved by
Stockholders
On August
3, 2006, Burton Katz was granted an option to purchase 250,000 shares of common
stock of New Motion Mobile, Inc., our wholly-owned subsidiary, at a per share
exercise price of $3.40. Subsequent to the exchange transaction in which we
acquired New Motion Mobile, Inc., this option entitles Mr. Katz to purchase
363,184 shares of our common stock at a per share exercise price of $2.34. This
option is fully vested.
In 2006,
we issued Secured Convertible Notes to Scott Walker, our former Chief Executive
Officer, and SGE, a corporation owned by Allan Legator, our former Chief
Financial Officer. These Secured Convertible Notes were repaid in full
with interest in September 2006. Pursuant to the terms of the Secured
Convertible Notes, on January 26, 2007, Scott Walker was granted a warrant to
purchase 14,382 shares of common stock at an exercise price of $3.44 per share
and SGE was granted a warrant to purchase 9,152 shares of common stock at an
exercise price of $3.44 per share. The per share fair market value of the
company’s common stock on January 26, 2007 was $3.44.
In
connection with the company’s Series A, B and D Preferred Stock financings which
occurred in late 2006 and early 2007, Sanders Morris Harris, Inc. acted as
placement agent. For its services, the company paid Sanders Morris Harris
a cash fee equal to 7.5% of the gross proceeds from the financing and five year
warrants to purchase 290,909 shares of common stock at an average exercise price
of $5.50 per share, which was equivalent to the average per share valuation of
the company for the Series A, B and D Preferred Stock
financings.
In
connection with the company’s entry into an employment agreement with Mr.
Stollman upon the closing of our merger with Traffix on February 4, 2008, Mr.
Stollman was granted an option to purchase 300,000 shares of our common stock.
The options are exercisable at an exercise price equal to $10.92 per share and
expire on February 4, 2018. Except in the event that Mr. Stollman is terminated
without cause and except in the event of a termination of Mr. Stollman’s
employment by Mr. Stollman for good reason, any portion of Mr. Stollman’s option
that remains unvested at the time of termination will be extinguished and
cancelled. With respect to Mr. Stollman’s option grant, the option vested with
respect to 100,000 shares of common stock on the first anniversary of the grant
date; thereafter, the option vested with respect to 8,341 shares of common stock
on March 31, 2009; thereafter, the option will next vest, with respect to the
remaining 191,659 shares of common stock underlying the option in 23 equal
installments of 8,333 shares each on the last day of each calendar month during
the 23 consecutive months commencing after March 31, 2009. As further
described below, in the event that stockholders approve our 2009 Stock Incentive
Plan, the options Mr. Stollman holds to purchase 300,000 shares of our common
stock will be cancelled, and Mr. Stollman will be issued 100,000 restricted
stock units in exchange for such options.
In
connection with the company’s entry into an employment agreement with Mr. Zaref
on July 14, 2008, Mr. Zaref was granted an option to purchase 200,000 shares of
our common stock. The options are exercisable at an exercise price of $4.16 per
share, and expire on July 14, 2018. Mr. Zaref’s option shall first vest, with
respect to 66,666 shares of common stock on July 14, 2009; thereafter, the
option shall next vest, with respect to 5,555 shares of common stock, on August
31, 2009 (such vesting date, the “Second Vesting Date”); thereafter, the option
shall next vest, with respect to the remaining 127,779 shares of common stock
underlying the option, in 22 equal installments of 5,555 shares and one final
installment of 5,569 shares, each on the last day of each calendar month during
the period of 23 consecutive months commencing after the Second Vesting Date;
provided that all options to acquire shares of our common stock shall
immediately and automatically vest upon a change of control. Except in the event
Mr. Zaref is terminated without cause and except in the event of a termination
of Mr. Zaref’s employment by Mr. Zaref for good reason (in which case all
options shall automatically vest and remain exercisable for a period of one year
after such termination), any portion of Mr. Zaref’s option that remains unvested
at the time of termination will be extinguished and cancelled. As
further described below, in the event that stockholders approve our 2009 Stock
Incentive Plan, the options Mr. Zaref holds to purchase 200,000 shares of our
common stock will be cancelled, and Mr. Zaref will be issued 66,666 restricted
stock units in exchange for such options.
Audit
Committee Report
The Audit
Committee of the Board of Directors, which consists of independent directors (as
that term is defined in Rule 4200(a)(15) of the National Association of
Securities Dealers’ Marketplace Rules), has furnished the following
report:
The Audit
Committee’s responsibility is to provide assistance and guidance to the Board of
Directors in fulfilling its oversight responsibilities to the Company’s
stockholders with respect to the Company’s financial reporting processes,
appointing the independent registered public accounting firm and reviewing the
services performed by the Company’s independent registered public accounting
firm. Management of the Company has the primary responsibility for the Company’s
financial statements as well as the Company’s financial reporting processes,
principles and internal controls. The independent auditors are responsible for
performing an audit of the Company’s financial statements and expressing an
opinion as to the conformity of such financial statements with generally
accepted accounting principles.
In
fulfilling its responsibilities with respect to the financial statements for
fiscal year 2008, the Audit Committee:
|
|
·
|
Reviewed
and discussed the audited financial statements for the year ended
December 31, 2008 with management and KPMG LLP
(the
“Auditors”), the Company’s independent auditors. These
discussions included a review of significant financial reporting issues,
the reasonableness of significant accounting judgments and the clarity and
disclosure in the Company’s financial
statements.
|
|
|
·
|
Reviewed
and discussed with the Auditors the matters required to be discussed by
Statement on Auditing Standards No. 61, as amended (Communication
with Audit Committees);
|
|
|
·
|
Received
from the Auditors a formal written statement describing all relationships
between the Auditors and the Company that might bear on the Auditor’s
independence as required by Independence Standards Board Standard No. 1
and has discussed with the Auditors the Auditor’s
independence;
|
|
|
·
|
Considered
whether the Auditors’ provision of non-audit services is compatible with
maintaining their independence; and
|
|
|
·
|
Discussed
with management and the Auditors the adequacy of the Company’s internal
controls.
|
Based on
the reviews and discussions referred to above, the Audit Committee recommended
to the Board of Directors, and the Board of Directors approved, that the audited
financial statements be included in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2008, for filing with the SEC.
|
Audit
Committee
|
|
Jeffrey
Schwartz, Chairman
|
|
Lawrence
Burstein
|
|
Jerome
Chazen
|
The
information in this Report of Board of Directors shall not be deemed to be
“soliciting material,” or to be “filed” with the Securities and Exchange
Commission or to be subject to Regulation 14A or 14C as promulgated by the
Securities and Exchange Commission, or to the liabilities of Section 18 of the
Exchange Act.
Independent
Public Accountants
|
|
(a)
|
New
independent registered public accounting
firm
|
The Audit
Committee of the Board of Directors appointed KPMG, LLP as the Company’s new
independent registered public accounting firm on January 30, 2009. During the
two most recent fiscal years and through January 30, 2009, the Company did not
consult with KPMG, LLP regarding any of the following:
|
|
·
|
The
application of accounting principles to a specific transaction, either
completed or proposed or the type of audit opinion that might be rendered
on the Company's consolidated financial statements, and neither a written
report nor oral advice was provided to the Company by KPMG, LLP that KPMG,
LLP concluded was an important factor considered by the Company in
reaching a decision as to an accounting, auditing or financial reporting
issue;
|
|
|
·
|
Any
matter that was the subject of a disagreement, as that term is defined in
Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item
304 of Regulation S-K; or
|
|
|
·
|
Any
matter that was a reportable event, as that item is defined in Item
304(a)(1)(v) of Regulation S-K.
|
Representatives
of KPMG, LLP are expected to be present at our Annual Meeting and will have the
opportunity to make a statement if they desire to do so. In addition, at the
Annual Meeting, KPMG, LLP is expected to be available to respond to appropriate
questions posed by our stockholders.
|
|
(b)
|
Previous
Independent Registered Public Accounting
Firms
|
McGladrey
& Pullen, LLP
We
engaged McGladrey & Pullen, LLP as our independent registered public
accounting firm as of May 7, 2008. Traffix, Inc., our wholly-owned
subsidiary which we acquired on February 4, 2008, engaged McGladrey &
Pullen, LLP to audit the financial statements of Traffix, Inc. for the year
ended November 30, 2007 and the stub-period from December 1, 2007 to January 31,
2008. As a result of the acquisition of Traffix, Inc. by New Motion,
these engagements were not performed by McGladrey and Pullen, LLP.
Our Audit
Committee approved a process to evaluate a change in our accountants. During the
process, McGladrey & Pullen, LLP resigned as our independent registered
public accounting firm on January 21, 2009. During the year ended December 31,
2008, and through January 21, 2009, there have been no disagreements with
McGladrey & Pullen, LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope and procedure, which
disagreements, if not resolved to the satisfaction of McGladrey & Pullen LLP
would have caused McGladrey and Pullen, LLP to make reference to the subject
matter of the disagreements in connection with its reports. During
our year ended December 31, 2008 and through January 21, 2009, there have been
no reportable events (as defined in Item 304(a)(I)(v) of Regulation
S-K).
The
Company furnished McGladrey & Pullen, LLP with a copy of its Report on Form
8-K dated January 21, 2009 prior to filing with the SEC. The Company also
requested that McGladrey & Pullen, LLP furnish it with a letter addressed to
the Securities and Exchange Commission stating whether or not it agrees with the
above statements. A letter from McGladrey & Pullen, LLP, addressed to the
Securities and Exchange Commission, was filed with our Current Report on Form
8-K/A filed with the SEC on January 30, 2009.
Windes and McClaughry,
LLP
Windes
and McClaughry were engaged as the Company’s registered public accounting firm
from February 12, 2007 to May 7, 2008.
(i) On
May 7, 2008, we dismissed Windes & McClaughry Accountancy Corporation as our
independent registered public accounting firm.
(ii)
The reports of Windes & McClaughry Accountancy Corporation on the Company’s
consolidated financial statements as of and for the years ended December 31,
2007 and 2006 contained no adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting
principle.
(iii)
The dismissal of Windes & McClaughry Accountancy Corporation was approved by
the Company’s Audit Committee.
(iv)
During the years ended December 31, 2007 and 2006 and through May 7, 2008, there
were no disagreements with Windes & McClaughry Accountancy Corporation on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Windes & McClaughry Accountancy Corporation, would have
caused Windes & McClaughry Accountancy Corporation to make reference to the
subject matter of the disagreements in connection with its reports.
(v)
During the years ended December 31, 2007 and 2006 and through May 7, 2008, other
than as described below there have been no reportable events (as defined in Item
304(a)(I)(v) of Regulation S-K) other than the following material
weaknesses:
(A)(1)
During the preparation, and prior to the issuance of our February 12, 2007
Current Report on Form 8-K (the “8-K Filing”), Windes & McClaughry
determined that our initial accounting for the RingtoneChannel transaction was
improper. We initially treated the transaction as a purchase acquisition and
allocated a portion of the “purchase price” to intangible assets. Upon review of
the facts and related guidance, we agreed with them that the transaction was
actually the transfer of assets between companies under common control. Before
any public filing of our financial statements, the appropriate internal
accounting treatment for this transaction was made and the as filed 8-K Filing,
which contained audited financial statements for the years ended December 31,
2004 and 2005, fully reflected the appropriate accounting for the
RingtoneChannel transaction.
In order
to ameliorate this transactional accounting treatment issue, we hired additional
internal accounting and finance personnel to give us the resources to anticipate
and identify unique transactions that may require additional analysis and
evaluation concerning their accounting treatment. We also engaged a consultative
public accounting firm to provide guidance and feedback regarding accounting
treatment for our current and future activities.
(2) Also
during the preparation and prior to the issuance of our 8-K Filing, Windes &
McClaughry discovered that in calculating the Black-Scholes value of options
issued under our 2007 Stock Incentive Plan, we had mistakenly used the
calculated put value, not the call value, to calculate compensation expense
under SFAS 123(R). After alerting us to this issue, we removed the put value
calculation from our internal documentation. Before any public filing of our
financial statements, the appropriate compensation expense was recorded and the
as filed 8-K Filing, which contained audited financial statements for the years
ended December 31, 2004 and 2005, fully reflected the appropriate compensation
expense under SFAS 123(R).
In order
to mitigate the possibility that a similar error could be made in the future, we
updated our internal documentation and hired additional internal accounting and
finance personnel to give us the resources to strengthen our internal controls.
We also engaged a consultative public accounting firm to provide additional
resources.
(3) Also
during the preparation and prior to the issuance of our 8-K Filing, Windes &
McClaughry advised us that our disclosures and controls were not effective,
resulting in a number of errors and omissions in draft versions of the 8-K
Filing that we provided to Windes & McClaughry over the course of the
preparation of the 8-K Filing.
In order
to improve and expand our public disclosure, we hired additional internal
accounting and finance personnel, including an SEC reporting consultant, to give
us the resources to ensure that our disclosures and controls are
accurate.
(4) During
the course of management’s evaluation of the effectiveness of our disclosure
controls and procedures, for the year ended December 31, 2007, a material
weakness in internal controls was identified and concerned the treatment of
events subsequent to the year ended December 31, 2007. Upon the departure of our
Chief Operating Officer, Sue Swenson, which was announced on March 18, 2008,
Windes & McClaughry requested that we evaluate whether the compensation
expense associated with Sue Swenson’s August 20, 2007 restricted stock grant
should be included in our financial statements for the year ended December 31,
2007. Initially we had determined that we would recognize the
cancellation of her restricted stock in the period in which she announced her
departure. After evaluating the facts and reviewing SFAS 123(R), we determined
that the cancellation of the restricted stock, and associated reversal of stock
compensation expense, should be reflected in 2007. Also associated with our
treatment of subsequent event information, Windes & McClaughry discovered
that an accrual recorded at December 31, 2007 was settled on February 28, 2008
for an amount less than what was expected and, as such, the accrual on our
balance sheet should be adjusted to reflect what was ultimately paid. We
evaluated their finding and researched the issue, and determined that the amount
that was ultimately paid is what should have been reflected in our financial
accounts as of December 31, 2007. We therefore adjusted our December 31, 2007
accrual to reflect the settlement amount.
In order
to correct such weakness in internal controls surrounding the recognition of
subsequent event activity in our financial statements, we implemented procedures
to provide an additional layer of supervisory review of subsequent event
transactions. We also intend to hire additional accounting personnel to enable
greater oversight and analysis of such events.
(5) For
the year ended December 31, 2007, the second material weakness in internal
controls concerns our consolidation process. Prior to finalization of our 2007
financial results, Windes & McClaughry informed us of a potential error in
accounting for an intercompany transaction. Upon review of the transaction, we
determined that it was appropriate to eliminate the intercompany
expense.
In order
to prevent such issues from occurring in the future, we implemented a
comprehensive set of consolidation protocols to improve our controls and
procedures over financial reporting, are working to automate the consolidation
process within our accounting system and have also begun to simplify the
structure and activities within our consolidated entities.
The
Company furnished Windes & McClaughry Accountancy Corporation with a copy of
its Report on Form 8-K prior to filing with the SEC. The Company also requested
that Windes & McClaughry Accountancy Corporation furnish it with a letter
addressed to the Securities and Exchange Commission stating whether or not it
agrees with the above statements. A copy of the letter furnished by Windes &
McClaughry Accountancy Corporation in response to that request dated May 13,
2008 is filed as Exhibit 16.1 to the Company’s current Report on Form 8-K filed
with the SEC on May 13, 2008.
Fees
Paid to Independent Accountants
Effective
February 12, 2007 and until their dismissal described above on May 7, 2008,
Windes & McClaughry acted as the Company’s principal independent accounting
firm. During such time, all audit work was performed by the full time employees
of Windes & McClaughry. Effective May 7, 2008 and until their
resignation on January 21, 2009, McGladrey & Pullen, LLP acted as the
Company’s principal independent accounting firm. The Company’s audit
committee approved in advance, all services performed by each of Windes &
McClaughry and McGladrey & Pullen, LLP. The Company’s audit committee has
considered whether the provision of non-audit services is compatible with
maintaining the principal accountant's independence, and has approved such
services.
The
following table sets forth fees billed to us by our auditors, KPMG, LLP during
fiscal year ending December 31, 2008, and Windes & McClaughry during fiscal
year ending December 31, 2007 for: services rendered for the audit of our annual
financial statements and the review of our quarterly financial statements,
services by our auditors that are reasonably related to the performance of the
audit or review of our financial statements and that are not reported as Audit
Fees, services rendered in connection with tax compliance, tax advice and tax
planning, and all other fees for services rendered.
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
Audit
Fees
|
|
$
|
285,000
|
|
|
$
|
280,000
|
|
|
Audit-related
fees
|
|
|
-
|
|
|
|
-
|
|
|
Tax
fees
|
|
|
-
|
|
|
|
-
|
|
|
All
other fees
|
|
|
-
|
|
|
$
|
103,000
|
|
|
Total
|
|
$
|
285,000
|
|
|
$
|
383,000
|
|
Audit
fees in 2007 include $82,000 of fees billed by Windes & McClaughry for
accounting services related to the review of our quarterly financial
statements.
All other
fees in 2007 include fees billed by Windes & McClaughry for services related
to our registration statement on Form SB-2 and Proxy /Registration Statement of
Form S-4.
The
Company’s audit committee was directly responsible for interviewing and
retaining our independent accountants, considering the accounting firms’
independence and effectiveness, and pre-approving the engagement fees and other
compensation to be paid to, and the services to be conducted by, the independent
accountants. The audit committee pre-approved 100% of the services described
above.
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Review
and Approval of Related Party Transactions
We have
adopted a policy that requires Board approval of transactions with related
persons as defined by SEC regulations, including any sales or purchase
transaction, asset exchange transaction, operating agreement, or advance or
receivable transaction that could put our assets or operating performance at
risk. All of our directors and executive officers are required at all times, but
not less than annually, to disclose all relationships they have with companies
or individuals that have conducted business with, or had an interest in, the
Company. Our executive officers monitor our operations giving consideration to
the disclosed relationships and refer potential transactions to the Board of
Directors for approval. The Board of Directors considers a related party
transaction for its potential economic benefit to the Company, to ensure the
transaction is “arms length” and in accordance with our policies and that it is
properly disclosed in our reports to stockholders.
Related
Party Transactions
Other
than the employment arrangements described above in “Executive Compensation”,
since January 1, 2007, there has not been, nor is there currently proposed, any
transaction or series of similar transactions to which we were or will be a
party:
|
|
·
|
in
which the amount involved exceeds the lesser of $120,000 or 1% of the
average of our total assets at year-end for the last two completed fiscal
years; and
|
|
|
·
|
in
which any director, nominee for director, executive officer, shareholder
who beneficially owns 5% or more of our common stock or any member of
their immediate family had or will have a direct or indirect material
interest.
|
Mr. Dyne
is a director nominee for election at our Annual Meeting. Mr. Dyne has served as
a director of the company since November 11, 2008. Mr. Dyne currently
serves as the Chief Executive Officer and Chairman of Europlay Capital Advisors,
LLC, a merchant banking and advisory firm. Europlay Capital Advisors
acted as our non-exclusive financial advisor in connection with our merger with
Traffix, Inc., a Delaware corporation, which closed on February 4,
2008. Europlay Capital Advisors received a fee of $150,000 for its
financial advisory and investment banking services which it provided to us
during the course of the transaction. As a result of the merger,
Traffix, Inc. became our wholly-owned subsidiary.
On
February 28, 2007, New Motion entered into a Securities Purchase Agreement with
various accredited investors as listed on the signature pages thereto pursuant
to which New Motion agreed to sell to the investors in a private offering
approximately 8,333 shares of its Series D Stock for an aggregate purchase price
of approximately $10.0 million. Trinad has an economic interest in Destar LLC,
one of the Series D Investors who purchased 188.88 shares of Series D Stock for
an aggregate purchase price of $226,651. Trinad has no power to vote or dispose
of such shares and, accordingly, disclaims beneficial ownership of the shares
held by Destar LLC.
On February 16, 2007, New Motion
granted Jerome Chazen an option to purchase 50,000 shares of common stock at an
exercise price of $6.00. On the same date, New Motion granted each of Drew
Larner and Barry Regenstein an option to purchase 25,000 shares of common stock
at an exercise price of $6.00. Also on February 16, 2007, New Motion granted
Burton Katz an option to purchase 81,250 shares of common stock at an exercise
price of $6.00.
On February 12, 2007, New Motion
consummated the transactions contemplated under the Series B Purchase Agreement
with the Series B investors. Trinad has an economic interest in Destar LLC, one
of the Series B investors who purchased 376.315 shares of Series B Preferred
Stock with an aggregate purchase price of $3,763,150. Trinad has no power to
vote or dispose of such shares and, accordingly, disclaims beneficial ownership
of the shares held by Destar LLC.
On January 24, 2007, New Motion entered
into a Series A Convertible Preferred Stock Purchase Agreement with Trinad
Capital Master Fund, Ltd., New Motion’s then controlling shareholder, pursuant
to which New Motion agreed to sell to Trinad in a private offering one share of
its Series A Convertible Preferred Stock, par value $0.10 per share, for an
aggregate purchase price of $3.5 million.
In addition, pursuant to a Registration
Rights Agreement with Trinad, dated as of January 24, 2007, New Motion granted
Trinad certain registration rights with respect to all of the shares of common
stock owned by Trinad, including the common stock underlying the Series A
Preferred Stock sold in the private placement.
On October 24, 2006, MPLC and certain
of its stockholders entered into a common stock Purchase Agreement with Trinad,
pursuant to which MPLC agreed to redeem 23,448,870 shares of common stock (on a
pre-reverse stock split basis) from the stockholders and sell an aggregate of
69,750,000 shares of our common stock (on a pre-reverse stock split basis),
representing 93% of our issued and outstanding shares of common stock on the
closing date, to Trinad in a private placement transaction for aggregate gross
proceeds to us of $750,000, $547,720 of which was used for the redemption
described below, and $202,280 was used to repay all loans to New Motion from
Isaac Kier, a former director and the former president, treasurer and secretary
of New Motion.
Trinad Management, LLC (as the manager
of Trinad Capital Master Fund, Ltd. and Trinad Capital LP), Robert S. Ellin and
Jay A. Wolf (as a Managing Member and Managing Director, respectively, of Trinad
Advisors GP, LLC and Trinad Management, LLC) may be deemed to be the beneficial
owners of the stock held by Trinad Capital Master Fund, Ltd. Trinad Capital LP
(as the owner of 96.5% of the shares of Trinad Capital Master Fund, Ltd.) and
Trinad Advisors GP, LLC (as the general partner of Trinad Capital LP), each may
be deemed to be the beneficial owner of 96.5% of the shares of common stock of
New Motion, Inc. held by Trinad Capital Master Fund, Ltd. Each of Trinad Capital
LP, Trinad Management, LLC and Trinad Advisors GP, LLC disclaim beneficial
ownership of the shares of common stock directly beneficially owned by Trinad
Capital Master Fund, Ltd. Each of Robert S. Ellin and Jay A. Wolf disclaim
beneficial ownership of the shares of common stock directly beneficially owned
by Trinad Capital Master Fund, Ltd., except to the extent of their pecuniary
interest therein. Robert S. Ellin and Jay A. Wolf have shared power to direct
the vote and shared power to direct the disposition of these shares of common
stock.
Mr. Ellin was the former Chief
Executive Officer of MPLC, Inc. (now New Motion, Inc.) and resigned from these
positions on February 12, 2007 upon the closing of the exchange transaction. Mr.
Ellin’s address is c/o Trinad Management LLC, 2121 Avenue of the Stars, Suite
1650, Los Angeles, CA 90067.
Jay A. Wolf also holds 16,666 shares of
common stock as an individual. Mr. Wolf was the former Chief Financial Officer,
Chief Operating Officer and Secretary of MPLC, Inc. (now New Motion, Inc.) and
resigned from these positions on February 12, 2007 upon the closing of the
exchange transaction.
Simultaneously with the sale of shares
of common stock to Trinad, New Motion redeemed 23,448,870 shares of common stock
(on a pre-reverse stock split basis) from certain stockholders of New Motion for
a purchase price of $547,720. In addition, following closing, Mr. Kier or First
Americas Management LLC (“First Americas”), an affiliate of Mr. Kier, was no
longer obligated to provide office space or services to New
Motion.
New Motion had Secured Convertible
Promissory Notes outstanding in the principal amounts of $15,000, $100,000 and
$50,000 which were issued to Scott Walker, its then Chief Executive Officer and
President, on June 10, 2005, August 2, 2005, and August 24, 2005, respectively.
In addition, it had Secured Convertible Notes in the principal amounts of
$35,000, $50,000 and $20,000 which were issued to SGE, a corporation owned by
Allan Legator, its then Chief Financial Officer and Secretary, on June 10, 2005,
August 2, 2005, and August 24, 2005, respectively. The notes were convertible
into securities issued in the next financing resulting in gross proceeds of at
least $500,000 (“Qualified Financing”) at 80% of per share price in Qualified
Financing. Pursuant to the terms of the Secured Convertible Notes, each of Scott
Walker and SGE were granted a right to receive a warrant to purchase that number
of shares in a Qualified Financing equal to 30% of the shares purchasable by the
principal amount of the Convertible Notes held by each of Walker and SGE
issuable upon consummation of Qualified Financing.
On January 26, 2007, New Motion agreed
with each of Scott Walker and SGE that the warrants would entitle Scott Walker
to purchase 14,384 shares of New Motion’s common stock at an exercise price of
$3.44 per share and SGE to purchase 9,153 shares of New Motion Mobile's common
stock at an exercise price of $3.44 per share. All notes referenced above were
paid in full with interest according to the terms of the notes by September
2006.
Transactions
with Promoters and Control Persons
Prior to February 12, 2007, MPLC (now
called New Motion, Inc.) existed as a “shell company” with nominal assets whose
sole business was to identify, evaluate and investigate various companies to
acquire or with which to merge. On February 12, 2007, we consummated an exchange
transaction in which we acquired all of the outstanding ownership interests of
New Motion, Inc. (now called New Motion Mobile, Inc.), a Delaware corporation
from its stockholders in exchange for an aggregate of 500,000 shares of our
Series C Preferred Stock. At the closing of the exchange transaction, New Motion
Mobile became our wholly owned subsidiary. The exchange transaction was
accounted for as a reverse merger (recapitalization) with New Motion Mobile
deemed to be the accounting acquirer, and MPLC the legal acquirer.
Please see the description of the
transactions which occurred on October 24, 2006 between MPLC and certain of its
stockholders set forth above.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The
following table presents information regarding the beneficial ownership of New
Motion’s common stock as of April 15, 2009. The number of shares in the table
represents the number of shares of common stock owned by:
|
|
·
|
each
of our executive officers;
|
|
|
·
|
all
of our directors and executive officers as a group;
and
|
|
|
·
|
each
shareholder known to us to be the beneficial owner of more than 5% of our
common stock.
|
Beneficial
ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities. Unless otherwise
indicated below, to New Motion’s knowledge, the persons and entities named in
the table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable. Shares
of New Motion’s common stock subject to options and warrants that are currently
exercisable or exercisable within 60 days of April 15, 2009 are deemed to be
outstanding and to be beneficially owned by the person holding the options
and/or warrants for the purpose of computing the percentage ownership of that
person but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person.
The
information presented in this table is based on 20,360,962 shares of our common
stock outstanding on April 15, 2009, which excludes 2,741,318 shares held in
treasury. Unless otherwise indicated, the address of each of the executive
officers and directors and 5% or more shareholders named below is c/o New
Motion, Inc., d/b/a/ Atrinsic, 469 7
th
Avenue,
10
th
Floor, New York, NY 10018. Unless noted, the number of shares presented in the
table are shares of common stock.
|
Name
of Beneficial Owner
|
|
Number of Shares
Beneficially
Owned
|
|
|
Percentage of
Shares
Outstanding
|
|
|
|
|
|
|
|
|
|
|
Executive
Officers and Directors:
|
|
|
|
|
|
|
|
Mark
Dyne
|
|
|
-
|
|
|
|
-
|
|
|
Robert
Ellin (1)
|
|
|
2,338,170
|
|
|
|
11.5
|
%
|
|
Andrew
Stollman (2)
|
|
|
1,083,328
|
|
|
|
5.3
|
%
|
|
Raymond
Musci
|
|
|
435,821
|
|
|
|
2.1
|
%
|
|
Burton
Katz (3)
|
|
|
559,711
|
|
|
|
2.7
|
%
|
|
Lawrence
Burstein (4)
|
|
|
98,866
|
|
|
|
*
|
|
|
Jerome
Chazen (5)
|
|
|
50,793
|
|
|
|
*
|
|
|
Andrew
Zaref
|
|
|
-
|
|
|
|
-
|
|
|
Jeffrey
Schwartz
|
|
|
-
|
|
|
|
-
|
|
|
Jonathan
Katz (6)
|
|
|
50,000
|
|
|
|
*
|
|
|
Zack
Greenberger (7)
|
|
|
38,889
|
|
|
|
*
|
|
|
All
Executive Officers and Directors as a Group (11 persons)
(8)
|
|
|
4,655,578
|
|
|
|
22.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
5%
Shareholders:
|
|
|
|
|
|
|
|
|
|
Jeffrey
Akres (9)
|
|
|
2,773,900
|
|
|
|
13.6
|
%
|
|
MPLC
Holdings, LLC (9)
|
|
|
2,738,359
|
|
|
|
13.4
|
%
|
|
Jay
A. Wolf (1)
|
|
|
2,354,836
|
|
|
|
11.6
|
%
|
|
Trinad
Capital Master Fund, Ltd. (1)
|
|
|
2,338,170
|
|
|
|
11.5
|
%
|
|
Destar,
LLC (10)
|
|
|
1,237,116
|
|
|
|
6.1
|
%
|
|
Leon
G. Cooperman (11)
|
|
|
1,246,700
|
|
|
|
6.1
|
%
|
___________________________
|
*
|
Less
than 1% of our outstanding shares
|
|
(1)
|
Trinad
Management, LLC (as the manager of Trinad Capital Master Fund, Ltd. and
Trinad Capital LP), Robert S. Ellin and Jay A. Wolf (as a Managing Member
and Managing Director, respectively, of Trinad Advisors GP, LLC and Trinad
Management, LLC) may be deemed to be the beneficial owners of the stock
held by Trinad Capital Master Fund, Ltd. Trinad Capital LP (as the owner
of 96.5% of the shares of Trinad Capital Master Fund, Ltd.) and Trinad
Advisors GP, LLC (as the general partner of Trinad Capital LP), each may
be deemed to be the beneficial owner of 96.5% of the share of common stock
of New Motion, Inc. held by Trinad Capital Master Fund, Ltd. Each of
Trinad Capital LP, Trinad Management, LLC and Trinad Advisors GP, LLC
disclaim beneficial ownership of the shares of common stock directly
beneficially owned by Trinad Capital Master Fund, Ltd. Each of Robert S.
Ellin and Jay A. Wolf disclaim beneficial ownership of the shares of
common stock directly beneficially owned by Trinad Capital Master Fund,
Ltd., except to the extent of their pecuniary interest therein. Robert S.
Ellin and Jay A. Wolf have shared power to direct the vote and shared
power to direct the disposition of these shares of common stock. The
address of Trinad Management is 2121 Avenue of the Stars, Suite 2550, Los
Angeles, CA 90067.
|
Jay A.
Wolf also holds 16,666 shares of common stock as an individual. Mr. Wolf was the
former Chief Financial Officer, Chief Operating Officer and Secretary of MPLC,
Inc. (now New Motion, Inc.) and resigned from these positions on February 12,
2007 upon the closing of the exchange transaction with New Motion
Mobile.
|
(2)
|
Includes
637,004 shares of Common Stock issuable upon the exercise of options held
by Mr. Stollman.
|
|
(3)
|
Includes
559,711 shares of Common Stock issuable upon the exercise of options held
by Mr. Katz.
|
|
(4)
|
Includes
10,141 shares of Common Stock and 88,725 shares of Common Stock issuable
upon the exercise of options held by Mr.
Burstein.
|
|
(5)
|
Includes
793 shares of Common Stock and 50,000 shares of Common Stock issuable upon
the exercise of options held by Mr.
Chazen.
|
|
(6)
|
Includes
19,445 shares of Common Stock and 30,555 shares of Restricted Common Stock
held by Mr. Katz.
|
|
(7)
|
Includes
38,889 shares of Common Stock issuable upon the exercise of options held
by Mr. Greenberger.
|
|
(8)
|
Includes
3,250,694 shares of Common Stock, 30,555 shares of Restricted Common Stock
and 1,374,329 shares of Common Stock issuable upon the exercise of options
held by our executive officers and directors. See footnotes (1) through
(7) above.
|
|
(9)
|
In
addition to exercising voting and dispositive power over the shares owned
by MPLC Holdings, LLC, Jeffrey Akres individually owns 35,541 shares of
common stock. Jeffrey Akres disclaims beneficial ownership of the shares
of common stock directly beneficially owned by MPLC Holdings, LLC except
to the extent of his pecuniary interests therein. The address of MPLC
Holdings, LLC is 15260 Ventura Boulevard, 20
th
Floor, Sherman Oaks, CA 91403.
|
|
(10)
|
David
E. Smith exercises voting and dispositive power over these shares. While
Trinad Management, LLC has an economic interest in Destar, LLC, it has no
power to vote or dispose of the shares held by Destar, LLC and,
accordingly, disclaims beneficial ownership of the shares held by Destar,
LLC except to the extent of its pecuniary interest therein. The address of
Destar, LLC is 2450 Colorado Avenue, Suite 100, East Tower, Santa Monica,
CA 90404.
|
|
(11)
|
Consists
of 46,700 shares owned by Mr. Cooperman and 1,200,000 shares held by
Watchung Road Associates. Mr. Cooperman is the general partner
of Watchung Road Associates, a limited partnership organized under the
laws of the State of New Jersey, and in such capacity has the sole power
to vote and dispose of the shares held by Watchung Road
Associates. The address of the principal business office of Mr.
Cooperman is 88 Pine Street, Wall Street Plaza, 31
st
Floor, New York, NY 10005. The address of the principal
business office of Watchung Road Associates is 820 Morris Turnpike, Short
Hills NJ 07078.
|
ITEM
2: PROPOSAL
TO AMEND CERTIFICATE OF INCORPORATION
The Board
of Directors has approved an amendment to our Restated Certificate of
Incorporation (the “Restated Certificate”) which amends Paragraph First of our
Restated Certificate to change our corporate name from New Motion, Inc. to
Atrinsic, Inc. Stockholders are now being asked to approve the
amendment to our Restated Certificate. The text of the amendment to
our Restated Certificate is attached to this proxy statement as Appendix
A.
The Board of Directors has authorized
the change in the Company's name to Atrinsic, Inc. In the judgment of the Board
of Directors, the change of the Company's name is desirable to rebrand the
business operations of the Company after its acquisition of Traffix,
Inc.
Vote
Required and Recommendation
The
affirmative vote of the holders of a majority of our outstanding shares, in
person or by proxy, will be required to approve the proposed amendment to our
Restated Certificate of Incorporation to amend Paragraph
First. Because brokers are not permitted to vote on this proposal in
the absence of voting instructions from beneficial owners, broker non-votes will
have the effect of negative votes. Abstentions also will have the
effect of negative votes.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE PROPOSED
AMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION.
ITEM
3: PROPOSAL
TO ADOPT THE 2009 STOCK INCENTIVE PLAN
Proposal
3 is the adoption of the New Motion, Inc. 2009 Stock Incentive Plan (the “2009
Plan”), which authorizes the issuance of up to 2,750,000 shares of our common
stock pursuant to equity awards granted under the plan. The proposal
to adopt the 2009 Plan requires the affirmative vote of a majority of the shares
of common stock present or represented and entitled to vote at the Annual
Meeting with respect to such proposal. A copy of the 2009 Plan in the form
proposed is attached to this proxy statement as Appendix B.
The Board of Directors believes that
the continued growth of New Motion depends, in large part, upon its ability to
attract and motivate key employees and directors, and that equity incentive
awards are an important means of attracting, retaining and motivating talented
employees and directors. Previously, New Motion and its stockholders had
approved the 2007 Stock Incentive Plan (the “2007 Plan”), which had authorized a
total of 1,400,000 shares for issuance to eligible participants. As of April 15,
2009, only 558,800 shares remained eligible for grant under the 2007
Plan. Accordingly, the Board of Directors adopted the 2009 Stock
Incentive Plan, subject to shareholder approval, to ensure that we may continue
to attract key employees and directors who are expected to contribute to our
success. If the 2009 Plan is not approved by shareholders, it will not be
implemented in the form proposed.
The 2009 Plan provides that, effective
upon its approval by our stockholders, no further awards will be granted under
the 2007 Plan, except that any shares of common stock that have been forfeited
or cancelled in accordance with the terms of the applicable award under the 2007
Plan may be subsequently again awarded in accordance with the terms of the 2007
Plan prior to its expiration in 2017. Up to 2,750,000 stock options, stock
appreciation rights, shares of restricted stock, restricted stock units, stock
appreciation rights or other awards can be granted under the 2009
Plan.
The table below sets forth certain
information regarding the outstanding grants under our 2007 Plan and shares
remaining available for grant thereunder as of April 15, 2009. These grants
consist of stock options and restricted stock awards, which are the only awards
made under our 2007 Plan. For information regarding outstanding shares under our
equity compensation plans as of December 31, 2008, see “Securities Authorized
for Issuance Under Equity Compensation Plans” above.
|
|
|
April 15, 2009,
|
|
|
|
|
|
|
|
|
Shares
available under 2007 Plan
|
|
|
558,800
|
|
|
|
|
|
|
|
|
Shares
underlying awards granted and outstanding:
|
|
|
841,200
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,400,000
|
|
|
|
|
|
|
|
|
Stock
options (unexercised)
|
|
|
768,700
|
|
|
|
|
|
|
|
|
Weighted
average exercise price for outstanding options
|
|
$
|
8.29
|
|
|
|
|
|
|
|
Weighted
average remaining term for outstanding options
|
|
8.6
years
|
|
Summary
of the 2009 Stock Incentive Plan
The
following summary briefly describes the principal features of the 2009 Plan, and
is qualified in its entirety by reference to the full text of the 2009
Plan.
|
Plan
Term:
|
|
April
28, 2009 to April 28, 2019
|
|
|
|
|
|
Eligible
Participants:
|
|
All
of our full-time and part-time employees, where legally eligible to
participate, our non-employee directors, and individuals providing
services to New Motion and our subsidiaries.
|
|
|
|
|
|
Shares
Authorized:
|
|
2,750,000
shares over the term of the plan, subject to adjustment to reflect stock
splits and similar events.
|
|
|
|
|
|
Award
Types (available to all participants):
|
|
(1)
Stock options
(2)
Restricted stock
(3)
Restricted Stock Units
(4)
Stock Appreciation Rights (SARs)
(5)
Other Stock-Based Awards
|
|
|
|
|
|
Award
Terms:
|
|
Stock
options, restricted stock units and SARs will have a term of no longer
than ten years.
|
|
|
|
|
|
162(m)
Share Limits:
|
|
Section
162(m) of the tax code requires among other things that the maximum number
of shares awarded to an individual must be approved by stockholders in
order for the awards granted under the plan to be eligible for treatment
as performance-based compensation that will not be subject to the $1
million limitation on tax deductibility for compensation paid to specified
senior executives. Accordingly, the 2009 Stock Incentive Plan limits
awards granted to an individual participant in any calendar year to no
more than 500,000 shares.
|
|
|
|
|
|
Vesting:
|
|
Determined
by the Administrator within the following limits (subject to exceptions
for death, disability, or retirement):
(1)
Restricted stock or restricted stock units cannot vest in less than pro
rata installments over three years, unless vesting is based on the
achievement of performance criteria, in which case vesting is based on
performance over a period of not less than one year. A total of 500,000
shares may be used for stock awards having no minimum vesting
period.
(2)
Performance vesting criteria, if any, will be established at the grant
date.
|
|
Not
Permitted:
|
|
The
Plan does not permit any of the following:
(1)
Granting stock options or SARs at a price below the market value of New
Motion stock on the date of grant.
(2)
Repricing or reducing the exercise price of a stock option or SAR without
stockholder approval.
(3)
Reload grants, or the granting of options conditional upon delivery of
shares to satisfy the exercise price and/or tax withholding obligation
under another employee stock option.
(4)
Adding shares back to the number available for issuance when a SAR is net
settled, when shares are retained or delivered to us to pay the exercise
price and/or tax obligations associated with an award, or when we
repurchase shares on the open market using the proceeds from payment of
the exercise price in connection with the exercise of an outstanding stock
option.
|
Administration
. The 2009 Plan
will be administered by the Board of Directors, or the Board may delegate
authority for administering the 2009 Plan to a committee of the Board, which
would be the Compensation Committee. If the Board delegates authority to the
Compensation Committee, the 2009 Plan restricts membership on the Compensation
Committee to directors that meet the definitions of “non-employee directors” (as
defined in the rules adopted by the Securities and Exchange Commission under
Section 16 of the Securities Exchange Act of 1934), and “outside directors” (as
defined in the regulations adopted by the Internal Revenue Service under Section
162 (m) of the Internal Revenue Code of 1986, as amended). The Board or
committee administering the 2009 Plan is referred to in this proposal as the
“Administrator.” We will bear the expenses for administering the 2009
Plan.
The Administrator will select the
employees who receive awards, determine the number of shares covered thereby,
and, subject to the terms and limitations expressly set forth in the 2009 Plan,
establish the terms, conditions, and other provisions of the grants. The
Administrator may interpret the 2009 Plan and establish, amend, and rescind any
rules related to the 2009 Plan. The Administrator may delegate to an
administrator of one or more directors the ability to grant awards and take
other actions with respect to participants who are executive officers, and the
Administrator may delegate to an administrator of one or more officers the
ability to grant awards and take other actions with respect to participants who
are not executive officers within limits and a budget pre-approved by the
Administrator. The Administrator also may delegate administrative or ministerial
functions under the 2009 Plan to an officer or officers.
Types of Awards
. The 2009
Plan provides for the granting of stock options, including stock options
intended to qualify as incentive stock options within the meaning of Section 422
of the Internal Revenue Code, stock appreciation rights, restricted stock,
restricted stock units, and other stock-based awards not comprised of any of the
foregoing that is denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, our common stock or factors
that may influence the value of our common stock. Other stock-based awards may
include convertible or exchangeable debt securities, other rights convertible or
exchangeable into common stock, purchase rights for common stock, awards with
value and payment contingent upon performance of New Motion or a business unit
or any other factors designated by the Administrator, and awards valued by
reference to the book value of our common stock or the value of securities of or
the performance of specified New Motion subsidiaries or other business units any
or all of which may be made contingent upon the achievement of performance
criteria. Subject to plan limits, the Administrator has the discretionary
authority to determine the amount of awards to Participants. The use of
performance-based requirements, if any, will be considered in the context of our
total compensation program.
Eligibility
. All employees,
non-employee directors and individuals providing services to New Motion and our
subsidiaries will be eligible to participate in the 2009 Plan. In addition,
awards may be granted to prospective employees, consultants, and directors who
are also employees in connection with written offers of employment or
engagement. While any eligible person under the 2009 Plan may be granted
non-statutory stock options or restricted stock purchase awards, only employees
may be granted incentive stock options. As of April 15, 2009, there were
approximately 173 employees and four non-employee directors that would be
potentially eligible to participate in the 2009 Plan.
Shares Subject to Plan
.
Subject to adjustment upon certain corporate transactions or events, up to a
maximum of 2,750,000 shares of common stock (the “Fungible Pool Limit”) may be
subject to equity awards under the 2009 Plan. Shares that are forfeited or
cancelled shall not be considered to have been delivered under the 2009 Plan,
but shares held back in satisfaction of the exercise price or tax withholding
requirements from shares that would otherwise have been delivered pursuant to an
award will be considered to have been delivered under the 2009 Plan. The
Administrator will administer the appropriate methodology for calculating the
number of shares of common stock issued pursuant to the 2009 Plan in accordance
with the foregoing.
Vesting and Exercise of Stock
Options and SARs
. The exercise price of stock options granted under the
2009 Plan may not be less than the fair market value of our common stock on the
date of grant, and such value is determined in good faith by the Administrator
in a manner consistent with the requirements of Section 409A of the Internal
Revenue Code. The option term may not be longer than 10 years. The Administrator
will determine when each stock option becomes exercisable, including the
establishment of performance vesting criteria, if any. We may require the
participant to satisfy tax-withholding requirements before issuing common stock
under the 2009 Plan. Similar terms and limitations apply to SARs under the 2009
Plan.
Vesting of Restricted Stock and
Restricted Stock Units
. The Administrator may make the grant, issuance,
retention, and/or vesting of restricted stock and restricted stock units
contingent upon continued employment with New Motion, the passage of time, or
such performance criteria and the level of achievement against such criteria as
it deems appropriate. Except in the case of death, disability, or retirement of
the participant, vesting of restricted stock and restricted stock units that is
contingent upon the achievement of performance objectives must be based on
performance over a period of not less than one year, and awards that are
contingent upon continued employment or the passage of time cannot vest in less
than pro rata installments over three years from the date of grant. Up to
500,000 shares may be available for use as stock awards having no minimum
vesting period.
Dividends
. Unless otherwise
provided by the Administrator, no adjustment may be made in shares issuable
under awards due to cash dividends that may be paid or other rights that may be
issued to the holders of shares before their issuance under any award. The
Administrator will specify whether dividends or dividend equivalent amounts are
to be paid to any participant with respect to the shares subject to any award
that have not vested or been issued, or that are subject to any restrictions or
conditions on the record date for dividends. As of December 31, 2008, no
dividend equivalents had ever been issued.
Eligibility under Section 162(m) of
the Tax Code
. Awards may, but need not, include performance criteria that
satisfy Section 162(m) of the Internal Revenue Code. To the extent that awards
are intended to qualify as “performance-based compensation” under Section 162(m)
of the tax code, the performance criteria will be based on stock price
appreciation (in the case of options or SARs) or on one or more of the other
factors set forth in the 2009 Plan (which may be adjusted as provided in the
plan), applied either individually, alternatively, or in any combination, to
either the company as a whole or to a business unit or subsidiary, either
individually, alternatively, or in any combination, and measured either annually
or cumulatively over a period of years, on an absolute basis, or relative to a
pre-established target, to previous years’ results, or to a designated
comparison group, in each case as specified by the Administrator in the award.
To the extent that an award under the 2009 Plan is designated as a “performance
award,” but is not intended to qualify as performance-based compensation under
Section 162(m) of the tax code, the performance criteria can include the
achievement of strategic objectives as determined by the Administrator. The
number of shares of common stock, stock options, or other benefits granted,
issued, retainable, and/or vested under an award due to satisfaction of
performance criteria may be reduced by the Administrator based on any further
considerations that the Administrator may determine in its sole
discretion.
Transferability
. Awards
granted under the 2009 Plan are transferable only by will or the laws of descent
and distribution, or to the extent otherwise determined by the Administrator.
The Administrator has sole discretion to permit the transfer of an
award.
Amendments Requiring Stockholder
Approval
. The Board may terminate, amend, or suspend the 2009 Stock
Incentive Plan, provided that no action is taken by the Board (except those
described in “Adjustments”) without stockholder approval to:
|
|
·
|
increase
the number of shares that may be issued under the 2009
Plan;
|
|
|
·
|
permit
granting of stock options at less than the fair market
value;
|
|
|
·
|
permit
the repricing of outstanding stock
options;
|
|
|
·
|
amend
the maximum shares set forth that may be granted pursuant to awards in the
aggregate or to any participant
individually;
|
|
|
·
|
extend
the term of the 2009 Plan;
|
|
|
·
|
change
the class of persons eligible to participate in the 2009 Plan;
or
|
|
|
·
|
otherwise
implement any amendment required to be approved by stockholders under
NASDAQ rules.
|
Adjustments
. In the event of
a stock dividend, recapitalization, stock split, combination of shares,
extraordinary dividend of cash or assets, reorganization, or exchange of our
common stock, or any similar equity restructuring transaction (as that term is
used in SFAS No. 123(R)) affecting our common stock, the Administrator will
equitably adjust the number and kind of shares available for grant under the
2009 Plan, and subject to the various limitations set forth in the 2009 Plan,
the number and kind of shares subject to outstanding awards under the 2009 Plan,
and the exercise or settlement price of outstanding stock options and of other
awards.
The impact of a merger or other
reorganization of New Motion on outstanding stock options, SARs, restricted
stock, and restricted stock units granted under the 2009 Plan will be specified
in the agreement related to the merger or reorganization, subject to the
limitations and restrictions set forth in the 2009 Plan. Such agreement may
provide for, among other things, assumption of outstanding awards, accelerated
vesting, or accelerated expiration of outstanding awards, or settlement of
outstanding awards in cash.
U.S.
Tax Consequences
The following is a general discussion
of the principal United States federal income tax consequences of “incentive
stock options” within the meaning of Section 422 of the Code, “non statutory
stock options” and restricted stock and restricted stock unit awards, based upon
the United States Internal Revenue Code, and the Treasury Regulations
promulgated thereunder, all of which are subject to modification at any time.
The 2009 Plan does not constitute a qualified retirement plan under Section
401(a) of the Internal Revenue Code (which generally covers trusts forming part
of a stock bonus, pension or profit sharing plan funded by employer and/or
employee contributions which are designed to provide retirement benefits to
participants under certain circumstances) and is not subject to the Employee
Retirement Income Security Act of 1974 (the pension reform law which regulates
most types of privately funded pension, profit sharing and other employee
benefit plans).
Stock option grants under the 2009 Plan
may be intended to qualify as incentive stock options under Section 422 of the
tax code or may be non-qualified stock options governed by Section 83 of the tax
code. Generally, no federal income tax is payable by a participant upon the
grant of a stock option, and a deduction is not taken by the company. Under
current tax laws, if a participant exercises a non-qualified stock option, he or
she will have taxable income equal to the difference between the market price of
the common stock on the exercise date and the stock option grant price. We will
be entitled to a corresponding deduction on our income tax return. A participant
will not have any taxable income upon exercising an incentive stock option
(except that the alternative minimum tax may apply), and we will not receive a
deduction when an incentive stock option is exercised. The treatment for a
participant of a disposition of shares acquired through the exercise of an
option depends on how long the shares were held and on whether the shares were
acquired by exercising an incentive stock option or a non-qualified stock
option. We may be entitled to a deduction in the case of a disposition of shares
acquired under an incentive stock option before the applicable holding periods
have been satisfied.
Restricted stock also is governed by
Section 83 of the tax code. Generally, no taxes are due when the award is
initially made, but the award becomes taxable when it is no longer subject to a
“substantial risk of forfeiture” (it becomes vested or transferable). Income tax
is paid on the value of the stock or units at ordinary rates when the
restrictions lapse, and then usually at capital gain rates when the shares are
sold (long-term capital gain rates if the shares are held for more than a
year).
The American Jobs Creation Act of 2004
added Section 409A to the tax code, generally effective January 1,
2005. Section 409A covers most programs that defer the receipt of
compensation to a succeeding year. It provides rules for elections to defer (if
any) and for timing of payouts. There are significant penalties placed on the
individual employee for failure to comply with Section 409A. However, it does
not affect our ability to deduct deferred compensation.
Section 409A applies to restricted
stock units, performance units, and performance shares. Grants under such plans
will continue to be taxed at vesting but will be subject to new limits on plan
terms governing when vesting may occur. If grants under such plans do not allow
employees to elect further deferral on vesting or on distribution, under the
proposed regulations no negative impact should attach to the
grants.
Section 409A does not apply to
incentive stock options, non-qualified stock options (that are not issued at a
discount), and restricted stock, provided that there is no deferral of income
beyond the vesting date. Section 409A also does not cover SARs and stock options
if they are issued by a public company on its traded stock, the exercise price
is not less than the fair market value of the underlying stock on the date of
grant, the rights with respect to SARs are settled in such stock, and there are
not any features that defer the recognition of income beyond the exercise
date.
As described above, awards granted
under the 2009 Plan may qualify as “performance-based compensation” under
Section 162(m) of the tax code. To qualify, options and other awards must be
granted under the 2009 Plan by a Committee of the Board consisting solely of two
or more “outside directors” (as defined under Section 162 regulations) and
satisfy the 2009 Plan’s limit on the total number of shares that may be awarded
to any one participant during any calendar year. In addition, for awards other
than options and stock-settled SARs to qualify, the grant, issuance, vesting, or
retention of the award must be contingent upon satisfying one or more of the
performance criteria set forth in the 2009 Plan, as established and certified by
a Committee consisting solely of two or more “outside directors.”
Effect
of Section 16(b) of the Securities Exchange Act of 1934
The acquisition and disposition of
common stock by officers, directors and more than 10% shareholders (referred to
as insiders) pursuant to awards granted to them under the 2009 Plan may be
subject to Section 16(b) of the Securities Exchange Act of 1934. Pursuant to
Section 16(b), a purchase of common stock by an insider within six months before
or after a sale of common stock by the insider could result in recovery by us of
all or a portion of any amount by which the sale proceeds exceed the purchase
price. Insiders are required to file reports of changes in beneficial ownership
under Section 16(a) of the Securities Exchange Act of 1934 upon acquisitions and
dispositions of shares. Rule 16b-3 provides an exemption from Section 16(b)
liability for certain transactions pursuant to certain employee benefit plans.
The 2009 Plan is designed to comply with Rule 16b-3.
New
Plan Benefits
Because awards under the 2009 Plan are
discretionary, benefits or amounts that will hereinafter be received by or
allocated to our chief executive officer, the named executive officers, all
current executive officers as a group, the non-executive directors as a group,
and all employees who are not executive officers, are not presently
determinable. Other than as described below, no awards, including
awards contingent upon obtaining stockholder approval of the 2009 Plan, have
been made under the 2009 Plan. As discussed above, we intend to grant
each of Burton Katz and Andrew Stollman 275,000 restricted stock units, and
Andrew Zaref 200,000 restricted stock units under the 2009 Plan pursuant to the
terms of their employment agreements, which restricted stock units shall each
vest after the closing of trading on the date that the average per share trading
price of our common stock during any period of 10 consecutive trading days
equals or exceeds $7.50. In addition, upon approval by stockholders
of our Option Exchange Program (described below), Messrs. Katz, Stollman, Zaref,
and Greenberger, will enter into an option cancellation and restricted stock
unit issuance agreement with the company. Pursuant to these
agreements, Messrs. Katz, Stollman, Zaref and Greenberg will agree to cancel
stock options to purchase 300,000, 300,000, 200,000 and 50,000 shares of the
company’s common stock, respectively, in exchange for an award of 100,000,
100,000, 66,667 and 16,667 restricted stock units, respectively, which will be
granted under our 2009 Plan and vest in accordance with quantitative and/or
qualitative performance measures to be established from time to time by our
Compensation Committee. In addition, as discussed under the heading
“Director Compensation for
the Fiscal Year Ended December 31, 2008
”, we intend to grant our
non-employee directors an aggregate of 70,050 restricted stock units for their
services on our Board in 2008.
Equity
Compensation Plan Information
For information regarding equity
compensation plans (including individual compensation arrangements) under which
our equity securities are authorized for issuance as of December 31, 2008, see
“Securities Authorized for Issuance Under Equity Compensation Plans”
above.
Required
Vote
The approval of the 2009 Stock
Incentive Plan will require the affirmative vote of a majority of the shares of
common stock present or represented and entitled to vote at the Annual Meeting
with respect to such proposal. Because brokers are not permitted to vote on this
proposal in the absence of voting instructions from beneficial owners, broker
non-votes will not be counted or deemed present or represented for determining
whether stockholders have approved this proposal. Abstentions will have the
effect of negative votes. The Board of Directors is of the opinion that the 2009
Plan is in the best interests of New Motion and its stockholders and recommends
a vote for the approval of the 2009 Plan. All proxies will be voted to approve
the 2009 Plan unless a contrary vote is indicated on the enclosed proxy
card.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ADOPTION OF THE 2009
STOCK INCENTIVE PLAN.
ITEM
4:
PROPOSAL TO ADOPT ONE-TIME OPTION EXCHANGE PROGRAM
Proposal
4 is the adoption of a one-time stock option exchange program pursuant to which
certain out-of-the-money stock options previously issued to each of Burton Katz,
our Chief Executive Officer, Andrew Stollman, our President, Andrew Zaref, our
Chief Financial Officer, and Zack Greenberger, our Chief Technology Officer and
Vice President, Operations (collectively, the “Optionees”), will be exchanged
for restricted stock units (the “Option Exchange Program”). Due in
large part to market corrections and general economic circumstances external to
our business and financial condition, our stock price has fallen over the past
two years, which has caused certain option awards previously issued to the
Optionees to be out-of-the-money, meaning that the exercise price of the stock
option is greater than the market price of our common stock. We
believe that, as a result of these options being out-of-the-money, the options
fail to provide appropriate performance incentives to the Optionees, who we
consider to be among the primary drivers to achieve our strategic, operational
and financial goals.
1
We are
proposing the Option Exchange Program to remedy this situation. We
also believe that the grant of restricted stock units in exchange for the
cancellation of options will avoid additional dilution of our equity and is more
cost-effective than simply issuing incremental equity awards or paying
additional cash compensation to the aforementioned individuals.
If the
Option Exchange Program is approved by our stockholders (and provided further
that our 2009 Stock Incentive Plan is approved by our stockholders), each of
Messrs. Katz, Stollman, Zaref, and Greenberger will promptly enter into an
option cancellation and restricted stock unit issuance agreement with the
company. Pursuant to these agreements, Messrs. Katz, Stollman, Zaref
and Greenberger will forfeit stock options to purchase 300,000, 300,000, 200,000
and 50,000 shares of the company’s common stock, respectively, in exchange for
awards of 100,000, 100,000, 66,667 and 16,667 restricted stock units (“RSUs”),
respectively, which will be granted pursuant to our 2009 Stock Incentive
Plan. The RSUs will be subject to performance-based vesting
provisions, which are further described below.
Under the
listing rules of the Nasdaq Global Market, stockholder approval is required in
order for us to implement the Option Exchange Program. If we do not
obtain stockholder approval of this proposal, we will not be able to implement
the Option Exchange Program. The proposal to adopt the Option
Exchange Program requires the affirmative vote of a majority of the shares of
common stock present or represented and entitled to vote at the Annual Meeting
with respect to such proposal.
Reasons
for the Option Exchange Program
New Motion has granted options to
Messrs. Katz, Stollman, Zaref and Greenberger consistent with the view that
long-term compensation should align the interest of management with the
interests of stockholders. While the compensation packages of our
management team vary, we believe equity compensation is one of the key
components as it encourages management to work toward our success and provides a
means by which management benefits from increasing the value of our common
stock. We also believe that equity compensation plays a vital role in
the retention and recruiting of our management team.
1
Pursuant to the terms of their
respective employment agreements, Mr. Katz, Mr. Stollman and Mr. Zaref are to
receive 275,000, 275,000 and 200,000 RSUs respectively upon the approval of the
2009 Plan. Once issued, the RSUs were to first vest for each
individual, with respect to 100,000 RSUs after the closing of trading on the
date that the average per share trading price of our common stock during any
period of 10 consecutive trading days equaled or exceeded $15. The remaining
175,000 RSUs for each of Mr. Katz and Mr. Stollman and 100,000 RSUs for Mr.
Zaref were to vest after the closing of trading on the date that the average per
share trading price of our common stock during any period of 10 consecutive
trading days equaled or exceeded $20. Due to the fall in our stock
price, the RSUs are significantly out of the money, and we believe fail to
provide appropriate performance incentives to each of Messrs. Katz, Stollman and
Zaref, for the same reasons as the out-of-the money options discussed in this
section. Consequently, as earlier discussed, we also intend to enter into an
amendment to each of Mr. Katz’s, Mr. Stollman’s and Mr. Zaref’s employment
agreements with us to amend the vesting provisions of their RSUs (which have yet
to be issued) so that each of the RSUs will vest after the closing of trading on
the date that the average per share trading price of our common stock during any
period of 10 consecutive trading days equals or exceeds $7.50.
As further described below, the
Optionees now hold stock options with exercise prices higher than the current
market price of our common stock. For example, on April 15, 2009, the
closing price of our common stock on the Nasdaq Global Market was $1.18, and the
weighted average exercise price of the options subject to the Option Exchange
Program was $9.04. Our management, as is common in emerging growth
companies, view equity as a material component of their overall
compensation. For each of the Optionees, their options to purchase
common stock of the company which are subject to the Option Exchange Program are
underwater. As a result, an important component of our compensation
program is perceived by our Compensation Committee as having little
value.
On April
28, 2009, our Compensation Committee authorized, subject to stockholder
approval, the Option Exchange Program, pursuant to which the Optionees will
exchange outstanding stock options that are underwater for a lesser number of
performance based RSUs to be granted under our 2009 Stock Incentive
Plan. The Compensation Committee believes that it is desirable and in
the best interests of stockholders to adopt the Option Exchange Program to
motivate our management to achieve our strategic, operational and financial
goals and thereby align the interests of management with the interests of our
stockholders, and reduce the risk of key personnel departing for opportunities
that they deem to be more lucrative.
History
of our Stock Price
On February 12, 2007, we completed an
exchange transaction pursuant to which New Motion Mobile, Inc. became our
wholly-owned subsidiary. In connection with the exchange, we raised
gross proceeds of approximately $20 million in equity financing through the sale
of our Series A Preferred Stock, Series B Preferred Stock and Series D Preferred
Stock. Prior to the exchange, we were a thinly traded shell company
trading on the Over the Counter Bulletin Board under the symbol
“MPNC.OB”. At the time of the exchange transaction, our stock price
was $21 (taking into account a 1-300 reverse stock split which became effective
as of May 2, 2007), which stock price was not related to our current operating
business. In the first quarter of 2007, an average of 60 shares of
our common stock traded daily on the OTCBB.
On February 4, 2008, we completed a
merger with Traffix, Inc., a Delaware corporation. Pursuant to the
merger, Traffix became our wholly owned subsidiary. Following the
consummation of our merger with Traffix, Traffix stockholders owned
approximately 45% of our capital stock, on a fully-diluted
basis. Also upon the closing of our transaction with Traffix, we
commenced trading on The NASDAQ Global Market under the symbol
“NWMO.” The closing price of our common stock was $8.33 on February
4, 2008. On February 4, each of Mr. Stollman and Mr. Katz were issued
options to purchase 300,000 shares of our common stock at an exercise price of
$10.92 per share, which exercise price was determined based on the average
closing price of our common stock reported for the ten days immediately
preceding the option grants.
Following our merger with Traffix, we
experienced significantly higher average daily trading volumes, with average
daily trading volumes of 44,166, 82,617, 39,769 and 42,630 during the first,
second, third and fourth quarters of 2008, respectively. In the first
quarter of 2009, our average daily trading volume was 44,029
shares. Unfortunately, following our merger with Traffix, our stock
price has steadily declined in large part due to market corrections and general
economic circumstances external to our business and financial
condition. For instance, our stock price has declined to its current
value despite our revenues increasing to $113,884,000 for the year ended
December 31, 2008 as compared to $36,982,000 for the year ended December 31,
2007, and despite a net loss of $1.0 million (excluding a non-cash charge for
the impairment of goodwill of $114.8 million which occurred in the fourth
quarter of 2008) compared to a net loss of $4.1 million for the comparable
period in 2007. The decline in our stock price over the past two
years is shown in the chart below:
The
Option Exchange Program and Consideration of Alternatives
We have designed the terms of the
Option Exchange Program to balance the interests of our stockholders with the
objective of increasing the retentive and motivational value of equity awards
for the Optionees. We considered a number of alternatives before concluding that
the Option Exchange Program is the most effective vehicle to retain and
incentivize our management. The alternatives included:
Adjust cash compensation through
payment of bonuses.
We considered paying management increased
bonus payments to compensate for the value of previously granted stock options
that are now underwater. However, such bonus payments would consume cash and
provide a much shorter term retention incentive than equity compensation. We
believe such a bonus payment structure would not be consistent with rewarding
performance and the achievement of measurable objectives, and therefore, is not
in the best interest of our stockholders.
Grant additional equity
compensation.
We considered granting management supplemental
stock option grants at current market prices and/or RSUs to restore the value of
previously granted stock options that are now underwater. However, such
supplemental equity grants would result in potential dilution to our current
stockholders.
Implement an option exchange
program.
We concluded the Option Exchange Program will
effectively retain and motivate our management, and has the following added
benefits for our stockholders:
·
Improved retention will enhance
long-term stockholder value.
Because the majority of our
outstanding options granted to management are underwater, an important component
of our compensation program is perceived by our Compensation Committee as having
little motivational value. We believe that we need to offer new ways to motivate
and retain management in order to enhance long-term stockholder
value. We believe that the grant of RSUs to management that vest
based on performance based metrics that are established based on current market
conditions offer a meaningful incentive for the Optionees to remain with New
Motion. The newly issued RSUs will also provide an ongoing performance incentive
for management to work toward achieving our strategic, operational and financial
goals because the value of these awards will increase if our stock price
increases.
·
The proposed exchange of options for
RSUs is intended to be favorable to our stockholders.
The
exchange ratio (the number of outstanding stock options that an Optionee will
surrender for cancellation in exchange for RSUs) of 3 for 1 was determined to
provide an appropriate exchange of value based on a variety of factors
considered by our Compensation Committee, including the exercise price of stock
options that will be tendered for exchange pursuant to the Option Exchange
Program, the performance based vesting of the RSUs that will be granted and the
market price of our common stock.
·
The overall number of shares subject
to equity awards will be reduced.
The number of RSUs that will
be issued under the replacement awards is 283,334. In contrast, the
Optionees will forfeit options to purchase 850,000 shares of our common stock if
the Option Exchange Program is approved by our stockholders. Consequently, the
Option Exchange Program will reduce our overhang, which reduces the potential
dilution to our stockholders in the future.
·
New vesting requirements for the
RSUs are expected to encourage employee retention.
The new
RSUs will vest annually based on performance metrics established by the
compensation committee over three years as described below. We expect these new
awards to encourage management to remain with us over the vesting period to
receive value from these awards.
Description
of RSUs
The RSUs to be issued under the Option
Exchange Program represent the right to receive shares of common stock on
specified future dates when the RSUs vest in accordance with the vesting
schedule set forth below. There is no exercise price or purchase
price for these shares of stock. A participant in the Option Exchange
Program will forfeit any RSUs received that remain unvested at the time his
employment with us terminates for any reason.
The RSUs
to be issued to each of the Optionees will be subject to a new vesting schedule
which provides that the replacement RSUs will be unvested on the date of the
exchange and will vest over three years, with one-third of the RSUs eligible for
vesting on each of December 31, 2009, December 31, 2010, and December 31,
2011. Any RSUs that do not vest on the date that they are eligible
for vesting will be forfeited. The following table provides
additional information relating to the vesting schedule of the RSUs, and the
number of options to be exchange by each Optionee for such RSUs:
|
Name of
Optionee
|
|
Number of
Options to be
Cancelled
|
|
Number of
RSUs to be
Issued
|
|
Number of RSUs
Subject to Vesting
Each Year
|
|
Description of Annual Vesting Schedule
|
|
Burton
Katz
|
|
300,000
options
having an exercise price of $10.92 per share.
|
|
100,000
|
|
33,333
|
|
On
each of December 31, 2009, 2010 and 2011, 30,000 RSUs will be eligible for
vesting in accordance quantitative measures and 3,333 RSUs will be
eligible for vesting in accordance with other quantitative and/or
qualitative measures, which measures will be determined from time to time
by the Compensation Committee.
|
|
Andrew
Stollman
|
|
300,000
options
having an exercise price of $10.92 per share
|
|
100,000
|
|
33,333
|
|
On
each of December 31, 2009, 2010 and 2011, 30,000 RSUs will be eligible for
vesting in accordance quantitative measures and 3,333 RSUs will be
eligible for vesting in accordance with other quantitative and/or
qualitative measures, which measures will be determined from time to time
by the Compensation Committee.
|
|
Andrew
Zaref
|
|
200,000
options
having an exercise price of $4.16 per share
|
|
66,667
|
|
22,222
|
|
On
each of December 31, 2009, 2010 and 2011, 20,000 RSUs will be eligible for
vesting in accordance with quantitative measures and 2,222 RSUs will be
eligible for vesting in accordance with other quantitative and/or
qualitative measures, which measures will be determined from time to time
by the Compensation Committee.
|
|
Zack
Greenberger
|
|
50,000
options
having an exercise price of $6.00 per share
|
|
16,667
|
|
5,555
|
|
On
each of December 31, 2009, 2010 and 2011, 5,000 RSUs will be eligible for
vesting in accordance with quantitative measures and 555 RSUs will be
eligible for vesting in accordance with other quantitative and/or
qualitative measures, which measures will be determined from time to time
by the Compensation
Committee.
|
Effect
on Stockholders
As a
result of the Option Exchange Program, we will achieve a net reduction in our
overhang shares of 566,666 shares, which represents approximately 2.7% of our
issued and outstanding common stock (excluding shares held in
treasury). This reduction benefits stockholders, as the potential for
dilution of their economic interest in the company is reduced.
Implementation
of Option Exchange Program and New Plan Benefits
The Option Exchange Program will occur
promptly following stockholder approval. Following stockholder
approval, each of Messrs. Katz, Stollman, Zaref and Greenberger have agreed to
enter into an option cancellation and restricted stock unit issuance agreement
with the company pursuant to which they will forfeit stock options to purchase
300,000, 300,000, 200,000 and 50,000 shares of the company’s common stock,
respectively, in exchange for awards of 100,000, 100,000, 66,667 and 16,667
RSUs, respectively, which will be granted pursuant to our 2009 Stock Incentive
Plan. The new RSUs will be subject to vesting over a period of three
years, as more fully described above.
The following table discloses the
benefits that will be received by or allocated to each of the following under
the Option Exchange Program:
|
Name and Position
|
|
Dollar Value ($)
|
|
|
Number of RSUs
|
|
|
Burton
Katz, CEO
|
|
Unknown
(1)
|
|
|
|
100,000
|
|
|
Andrew
Stollman, President
|
|
Unknown
(1)
|
|
|
|
100,000
|
|
|
Ray
Musci, Executive Vice President, Corporate Development
|
|
|
—
|
|
|
|
—
|
|
|
Executive
Group
(2)
|
|
Unknown
(1)
|
|
|
|
283,334
|
|
|
Non-Executive
Director Group
|
|
|
—
|
|
|
|
—
|
|
|
Non-Executive
Officer Employee Group
|
|
|
—
|
|
|
|
—
|
|
(1) The
dollar value of the RSUs depends on the market price on the date of grant of the
RSUs, which is not currently known.
(2)
includes the RSUs to be issued to each of Messrs. Katz, Stollman, Zaref and
Greenberger.
Return
of Options Surrendered
The options to be surrendered by Burton
Katz and Zack Greenberger were each originally granted pursuant to our 2007
Stock Incentive Plan. As discussed above, the 2009 Plan provides
that, effective upon its approval by our stockholders, no further awards will be
granted under the 2007 Plan, except that any shares of common stock that have
been forfeited or cancelled, including those issued to Mr. Katz and Mr.
Greenberger, in accordance with the terms of the applicable award under the 2007
Plan may be subsequently again awarded in accordance with the terms of the 2007
Plan prior to its expiration in 2017. The options to be surrendered
by each of Andrew Stollman and Andrew Zaref were not granted pursuant to an
equity compensation plan approved by our stockholders, and will not be available
to the company for reissuance.
Potential
Modification to Terms of Option Exchange Program
Although we do not currently anticipate
any changes to the terms of the Option Exchange Program, changes in the terms of
the Option Exchange Program may be required for tax, regulatory and/or
accounting purposes. The Compensation Committee will retain the
discretion to make any such necessary or desirable changes to the terms of the
Option Exchange Program. The Compensation Committee also retains the
right to terminate or postpone the Option Exchange Program at any time prior to
its implementation.
U.S.
Federal Income Tax Consequences
We believe that the Option Exchange
Program will be treated as a non-taxable exchange for U.S. federal income tax
purposes. Therefore, we believe that the Optionees should not realize
any income for U.S. federal income tax purposes upon the grant of the
replacement RSUs. Upon the settlement of a restricted stock unit
award, participants will recognize ordinary income in the year of receipt in an
amount equal to the fair market value of any shares received. Such ordinary
income generally is subject to withholding of income and employment taxes. Upon
the sale of any shares received, any gain or loss, based on the difference
between the sale price and the fair market value on the date of settlement, will
be taxed as capital gain or loss. The company should be entitled to a deduction
for federal income tax purposes equal to the amount of ordinary income
recognized by the participant on the determination date, except to the extent
such deduction is limited by applicable provisions of the Internal Revenue
Code.
Accounting
Treatment
Under
Financial Accounting Standards Board's Statement of Financial Accounting
Standard No. 123 (revised 2004), "Share-Based Payment" ("SFAS
No. 123R"), to the extent the fair value of each award of RSUs granted to
an Optionee as measured on the date of grant exceeds the fair value of the stock
options surrendered as measured immediately prior to their cancellation, such
excess is considered additional compensation. This excess, in
addition to any remaining unrecognized expense for the stock options surrendered
in exchange for the new stock options, will be recognized by New Motion as an
expense for compensation. The incremental expense will be recognized ratably
over the vesting period of the new RSUs in accordance with the requirements of
SFAS No. 123R. In the event that any of the new RSUs are forfeited prior to
their settlement due to termination of employment, the incremental expense for
the forfeited RSUs will be reversed and will not be recognized.
Required
Vote
The approval of the Option Exchange
Program will require the affirmative vote of a majority of the shares of common
stock present or represented and entitled to vote at the Annual Meeting with
respect to such proposal. Because brokers are not permitted to vote on this
proposal in the absence of voting instructions from beneficial owners, broker
non-votes will not be counted or deemed present or represented for determining
whether stockholders have approved this proposal. Abstentions will have the
effect of negative votes. The Board of Directors is of the opinion
that the Option Exchange Program is in the best interests of New Motion and its
stockholders and recommends a vote for the approval of the Option Exchange
Program. All proxies will be voted to approve the Option Exchange Program unless
a contrary vote is indicated on the enclosed proxy card.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ADOPTION OF THE
OPTION EXCHANGE PROGRAM.
ITEM
5:
PROPOSAL TO ADOPT THE 2010 ANNUAL INCENTIVE COMPENSATION
PLAN
Proposal 5 is the adoption of the New
Motion, Inc. 2010 Annual Incentive Compensation Plan (the “Compensation
Plan”). The purpose of the Compensation Plan is to advance the
interests of Company by rewarding selected senior executives of the Company for
their significant contributions to the growth, profitability and success of the
Company from year to year. The proposal to adopt the Compensation
Plan requires the affirmative vote of a majority of the shares of common stock
present or represented and entitled to vote at the Annual Meeting with respect
to such proposal. A copy of the Compensation Plan in the form
proposed is attached to this proxy statement as Appendix C.
The Board of Directors believes that
the continued growth of New Motion depends, in large part, upon its ability to
attract and motivate key executives, and that an executive compensation plan is
an important means of attracting, retaining and motivating such
individuals. Accordingly, on April 28, 2009, the Compensation
Committee of our Board of Directors adopted the 2010 Annual Incentive
Compensation Plan, subject to shareholder approval, to ensure that we may
continue to attract key executives who are expected to contribute to our
success. If the Compensation Plan is not approved by shareholders, it will not
be implemented in the form proposed.
Summary
of the 2010 Annual Incentive Compensation Plan
The
following summary briefly describes the principal features of the Compensation
Plan, and is qualified in its entirety by reference to the full text of the
Compensation Plan.
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Plan
Term:
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January
1, 2010 to December 31, 2015
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Eligible
Participants:
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Only
executives or other key employees of the Company who, in the Compensation
Committee’s judgment, have contributed, or have the capacity to
contribute, in a substantial measure to the successful performance of the
Company for a given fiscal year, shall be eligible to participate in the
Compensation Plan for that period. The Compensation Committee,
in its sole discretion, shall select the participants.
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Cash
Award (available to all participants):
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Participants
in the Compensation Plan will be eligible to receive a cash reward based
on the attainment of performance based goals. A participant’s
maximum incentive opportunity payable in cash for any calendar year may
not exceed the greater of (a) 200 percent of his/her base salary as of the
first day of such year or other performance period (not to exceed
$2,000,000 per annum) or (b) 1 percent of the Company’s earnings before
income taxes, as reported in the Company’s audited consolidated financial
statements, but before taking into account (a) any losses from
discontinued operations, (b) extraordinary gains and losses and (c) the
cumulative effective of accounting
changes.
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Performanced
Based Goals:
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Awards
to the Chief Executive Officer and any other participant determined to be
a “covered employee” (within the meaning of Section 162(m) of the Code)
who is expected to receive aggregate compensation from the Company in
excess of $1,000,000 will be based on nondiscretionary and objective
financial or other performance measures established by the Compensation
Committee, based solely on one or more of the following business criteria
as established by the Compensation Committee: (a) net income,
earnings per share, pre-tax income, EBITDA (earnings before interest,
taxes, depreciation and amortization), operating income, operating cash
flow, return on invested capital, number of subscribers,
customer/subscriber satisfaction, growth of revenue or net sales, or
credit quality (or any of the foregoing, adjusted to exclude or include
specified items as the Compensation Committee determines is appropriate to
measure performance); and/or (b) objective individual performance, taking
into account individual goals and objectives.
For
any participant who is not a “covered employee”, awards will be based on
one or more of the following criteria as established by the Compensation
Committee: (i) any one or a combination of quantitative criteria listed
above, (ii) qualitative criteria measuring individual performance, taking
into account individual goals and objectives, or (iii) a combination of
the quantitative and qualitative criteria referred to the preceding two
clauses.
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Award
Determination:
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As
soon as practicable following verification by the Company’s independent
public accountants of financial results for any performance period and
receipt of information regarding the actual performance of participants
against their respective performance goals for the period, the
Compensation Committee will certify the extent to which each participant
achieved his or her performance goals for the period. Awards
for any performance period will be paid in a cash lump sum as soon as
practicable following such determination.
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162(m)
limitations:
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The
Company intends that compensation payable under the Compensation Plan will
constitute “qualified performance-based compensation” under Section 162(m)
of the Internal Revenue Code of 1986, as amended. The
Compensation Plan shall be administered and construed in a manner
consistent with such intent.
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Administration
. The
Compensation Plan will be administered by the Compensation Committee, which will
consist of at least two or more individuals who qualify as “outside directors”
within the meaning of Section 162(m) of the Code and as “independent directors”
under corporate governance rules of the NASD applicable to listed
securities. A majority of the Compensation Committee shall constitute
a quorum. Committee decisions and determinations shall be made by a
majority of its members present in person or by telephone at a meeting at which
a quorum is present. The Compensation Committee shall have full
authority, subject to the provisions of the Compensation Plan, to (i) select
participants and determine the extent and terms of their participation; (ii)
adopt, amend and rescind such rules and regulations as, in its opinion, may be
advisable in the administration of the Compensation Plan; (iii) construe and
interpret the Compensation Plan, the rules and regulations adopted under the
Compensation Plan and any notice or award given to a participant; and (iv) make
all other determinations that it deems necessary or advisable in the
administration of the Compensation Plan.
For any Performance Period, the
Compensation Committee will (i) designate the executives of the Company who
shall participate in the plan, (ii) establish performance goals for each
participant and certify the extent of their achievement and (iii) determine each
participant’s award.
Participation
. Only
executives or other key employees of the Company who, in the Compensation
Committee’s judgment, have contributed, or have the capacity to contribute, in a
substantial measure to the successful performance of the Company for a given
performance period, shall be eligible to participate in the Compensation Plan
for that period. The Committee, in its sole discretion, will select
the participants. In selecting participants for any performance
period, the Compensation Committee will take into account such factors as the
individual’s position, experience, knowledge, responsibilities, advancement
potential and past and anticipated contribution to Company
performance.
Performance
Goals
. The Compensation Committee will establish performance
goals for each participant for each performance period.
The performance goals established by
the Compensation Committee for any performance period may differ among
participants in the Compensation Plan. The performance goals of any
participant who is a “covered employee” will be based on any one or a
combination of the criteria listed in the table above. The
performance goals of any participant who is not a “covered employee” will be
based on any (i) any one or a combination of quantitative criteria listed in the
table above, (ii) qualitative criteria measuring individual performance, taking
into account individual goals and objectives, or (iii) a combination of the
quantitative and qualitative criteria referred to the preceding two
clauses.
In establishing performance goals for
any performance period, the Compensation Committee will determine in its
discretion, but subject to the applicable provisions of the Compensation Plan,
the categories and criteria to be used in measuring each participant’s
performance and the percentage allocation for each of the categories and for
each of the criteria, the sum of which allocations, respectively, shall equal
100 percent. The Compensation Committee will also determine for each
participant for the performance period (i) a threshold level of performance, as
against the applicable categories and criteria, below which no award will be
payable, (ii) a participant’s target annual bonus opportunity, which shall be a
dollar amount equal to a percentage of his/her base salary as of the first day
of the performance period, as determined by the Compensation Committee (the
“Target Allocation”), and (iii) a maximum incentive opportunity. A
participant’s maximum incentive opportunity for any calendar year may not exceed
the greater of (a) 200 percent of his/her base salary as of the first day of
such year or other performance period (not to exceed $2,000,000 per annum) or
(b) 1 percent of the Company’s earnings before income taxes, as reported in the
Company’s audited consolidated financial statements, but before taking into
account (a) any losses from discontinued operations, (b) extraordinary gains and
losses and (c) the cumulative effective of accounting changes.
Determination of
Awards.
As soon as practicable following verification by the
Company’s independent public accountants of financial results for any
performance period and receipt of information regarding the actual performance
of participants against their respective performance goals for the period, the
Compensation Committee will certify the extent to which each participant
achieved his or her performance goals for the period. The
Compensation Committee will then determine each participant’s award for the
performance period by multiplying his/her Target Allocation for the period by
the percentage representing the extent of achievement of his/her performance
goals for the period. Notwithstanding the foregoing, the Compensation
Committee may, in its discretion, reduce or eliminate a participant’s Target
Allocation for any performance period based on such objective or subjective
criteria as it deems appropriate to take into account circumstances that could
not have been anticipated when it established the participant’s performance
goals for the period. In no event may the Compensation Committee
increase the amount payable under the Compensation Plan to a participant who is
a “covered employee”. The amount of the award, as finally determined by the
Compensation Committee, will constitute the participant’s award for the
period.
Payment of
Awards
. Except as otherwise provided in the Compensation Plan,
a participant’s award for any performance period will be paid in a cash lump sum
as soon as practicable following the Compensation Committee’s determination of
the amount of the award. However, from time to time, the Compensation
Committee, in its discretion, may offer participants the opportunity to defer
receipt of all or a portion of the award for the performance
period. Any deferral of all or a portion of a participant’s award
will comply with Section 409A of the Code. Deferred amounts are not
forfeitable and will be paid after termination of employment with the
Company. They constitute unfunded general obligations of the
Company. Deferred amounts will be credited with an interest
equivalent amount until the time of final payment at a rate determined by the
Compensation Committee from time to time.
Any payment otherwise required to be
made to a participant who is a “specified employee” of the Company within the
meaning of Section 409A of the Code, pursuant to the Compensation Plan as a
result of such participant’s separation of service with the Company will be
delayed for a period of six months following such separation of service or such
other period of time as may be required to comply with Section 409A of the
Code. On the earliest date following such separation of service on
which any such payment could be made in compliance with Section 409A of the
Code, any payment or payments that were delayed pursuant to the immediately
preceding sentence will be paid to the participant in a lump sum.
Termination of
Employment
. Except as otherwise provided in a participant’s
employment agreement, if any, if a participant’s employment with the Company
terminates prior to the date for payment of an award (“Award Payment Date”) by
reason of retirement on or after attainment of age 65 (or at such earlier age as
is provided in a participant’s employment agreement), disability, termination
without cause, termination for good reason, death or for any other reason
specifically approved in advance by the Compensation Committee, the Compensation
Committee will determine the participant’s award as if he/she were employed on
the Award Payment Date and the participant will be entitled to receive the
prorated portion of the award (not exceeding 100%), based on service from the
beginning of the performance period to the date of termination of his/her
employment. Except as otherwise provided in a participant’s
employment agreement, if any, if a participant’s employment with the Company
terminates prior to the Award Payment Date for an award for any performance
period, for any reason other than as provided above, he/she shall forfeit any
right to receive an award for such performance period.
Termination and Amendment of the
Plan
. The Company reserves the right, by action of the Board,
to terminate the Compensation Plan at any time; provided that no termination of
the Compensation Plan will adversely affect the right of any participant to
receive an award to which he/she would otherwise have been entitled but for the
termination of the Compensation Plan. Subject to such earlier
termination, the Compensation Plan will have a term of five years commencing
January 1, 2010.
Subject to any restrictions under
Section 162(m) of the Code, the Compensation Committee may amend the
Compensation Plan at any time, provided that no amendment that would require the
consent of the Company’s stockholders pursuant to the Code or the Exchange Act,
or any other applicable law, rule or regulation, shall be effective without such
consent. No amendment that adversely affects a participant’s rights
to, or interest in, an award granted prior to the date of the amendment will be
effective unless the participant shall have agreed to it in
writing.
Transfer.
A
participant may not alienate, assign, pledge, encumber, transfer, sell or
otherwise dispose of any rights or benefits awarded under the Compensation Plan
prior to the actual receipt of such award; and any attempt to alienate, assign,
pledge, sell, transfer or assign prior to such receipt, or any levy attachment,
execution or similar process upon any such rights or benefits will be null and
void.
Miscellaneous
. The
Compensation Plan will be governed in accordance with Delaware
law. If any provision of the Compensation Plan, or any specific
action of the Compensation Committee, would cause one or more awards for
“covered employees” not to constitute “qualified performance-based compensation”
under Section 162(m) of the Code, that provision shall be construed so as to
prevent such result or, to the extent not practicable, shall be severed from and
deemed not to be part of the Compensation Plan, but the other provisions of the
Compensation Plan shall remain in full force and effect. The Company
shall deduct from any award or payment it makes under the Compensation Plan to a
participant or beneficiary any taxes or other amounts required by law to be
withheld.
Required
Vote
The approval of the 2010 Annual
Incentive Compensation Plan will require the affirmative vote of a majority of
the shares of common stock present or represented and entitled to vote at the
Annual Meeting with respect to such proposal. Because brokers are not permitted
to vote on this proposal in the absence of voting instructions from beneficial
owners, broker non-votes will not be counted or deemed present or represented
for determining whether stockholders have approved this proposal. Abstentions
will have the effect of negative votes. The Board of Directors is of
the opinion that the Compensation Plan is in the best interests of New Motion
and its stockholders and recommends a vote for the approval of the Compensation
Plan. All proxies will be voted to approve the Compensation Plan unless a
contrary vote is indicated on the enclosed proxy card.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ADOPTION OF THE 2010
ANNUAL INCENTIVE COMPENSATION PLAN.
OTHER
PROPOSALS
We are
not aware of any other business to be presented to the meeting and we do not
intend to bring any other matters before the meeting. However, if any other
matters properly come before the meeting, the persons named in the accompanying
proxy are empowered, in the absence of contrary instructions, to vote according
to their best judgment.
20
10
STOCKHOLDER
PROPOSALS
Any
stockholder who intends to present a proposal at the 2010 Annual Meeting of
Stockholders for inclusion in the Company’s Proxy Statement and Proxy form
relating to such Annual Meeting must submit such proposal to the Company at its
principal executive offices by January 1, 2010. In addition, in the
event a stockholder proposal is not received by the Company by April 14, 2010,
the Proxy to be solicited by the Board of Directors for the 2010 Annual Meeting
will confer discretionary authority on the holders of the Proxy to vote the
shares if the proposal is presented at the 2010 Annual Meeting without any
discussion of the proposal in the Proxy Statement for such meeting.
SEC rules
and regulations provide that if the date of the Company’s 2010 Annual Meeting is
advanced or delayed more than 30 days from the date of the 2009 Annual Meeting,
stockholder proposals intended to be included in the proxy materials for the
2010 Annual Meeting must be received by the Company within a reasonable time
before the Company begins to print and mail the proxy materials for the 2010
Annual Meeting. Upon determination by the Company that the date of
the 2010 Annual Meeting will be advanced or delayed by more than 30 days from
the date of the 2009 Annual Meeting, the Company will disclose such change in
the earliest possible Quarterly Report on Form 10-Q.
Stockholder
Communications.
Holders of the Company’s securities can send
communications to the Board of Directors via email to
board@atrinsic.com
or
by telephoning the Secretary at the Company’s principal executive offices, who
will then relay the communications to the Board of Directors.
SOLICITATION OF
PROXIES
It is
expected that the solicitation of Proxies will be by mail. The cost
of solicitation by management will be borne by the Company. The
Company will reimburse brokerage firms and other persons representing beneficial
owners of shares for their reasonable disbursements in forwarding solicitation
material to such beneficial owners. Proxies may also be solicited by
certain of our directors and officers, without additional compensation,
personally or by mail, telephone, telegram or otherwise.
ANNUAL REPORT ON FORM
10-K
THE
COMPANY’S ANNUAL REPORT ON FORM 10-K, AS AMENDED, WHICH HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 2008, WILL BE
MADE AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO NEW
MOTION, INC., 469 7
th
Avenue,
New York, NY 10018.
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ON
BEHALF OF THE BOARD OF DIRECTORS
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May
__, 2009
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Burton
Katz
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Chief
Executive Officer
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APPENDIX
“A”
CERTIFICATE
OF AMENDMENT
TO
THE
RESTATED
CERTIFICATE OF INCORPORATION
OF
NEW
MOTION, INC.
The undersigned, Andrew Zaref, Chief
Financial Officer of New Motion, Inc. (the “Corporation”), a corporation
organized and existing by virtue of the General Corporation Law (the “GCL”) of
the State of Delaware, does hereby certify pursuant to Section 103 of the GCL as
to the following:
1. The name of the Corporation is New
Motion, Inc. The original name of the Corporation is Millbrook
Acquisition Corp., and the original Certificate of Incorporation was filed with
the Secretary of State of the State of Delaware on February 3,
1994.
2. The terms and provisions of this
Certificate of Amendment (i) have been approved by the Board of Directors of the
Corporation in a resolution setting forth and declaring advisable the amendment
contained herein and (ii) have been duly approved by the required number of
shares of outstanding stock of the Corporation, in each case pursuant to and in
accordance with Section 242 of the General Corporation Law of the State of
Delaware.
3. Paragraph First of the Corporation's
Restated Certificate of Incorporation is hereby amended and restated as
follows:
“First: The name of this Corporation is
Atrinsic, Inc. (the “Corporation”).”
IN WITNESS WHEREOF, the undersigned has
executed this Certificate of Amendment of Restated Certificate of Incorporation
as of the ___th day of ___, 2009.
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Andrew Zaref, Chief Financial Officer
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APPENDIX
“B”
NEW
MOTION, INC.
2009
STOCK INCENTIVE PLAN
1.
Purposes of the Plan
.
The purposes of the New Motion, Inc. 2009 Stock Incentive Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to persons who are selected to
be participants in the Plan, and to promote the success of the Company’s
business. This Plan permits the grant of Non-qualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted
Stock Units, and Other Stock-Based Awards, each of which shall be subject to
such conditions based upon continued employment with or service to the Company
or its Subsidiaries, passage of time or satisfaction of performance criteria as
shall be specified pursuant to the Plan.
2.
Definitions
. In
addition to the terms defined elsewhere in this Plan, as used herein, the
following terms shall have the following meanings:
(a) “
Administrator
” means the Board
or any of its Committees as shall be administering the Plan, in accordance with
Section 4 of the Plan.
(b) “
Award
” means a Stock Option,
Stock Appreciation Right, Restricted Stock or Restricted Stock Unit, or Other
Stock-Based Award granted to a Participant pursuant to the Plan, as such terms
are defined in Section 7(a) herein.
(c) “
Board
” means the Board of
Directors of the Company.
(d) “
Code
” means the Internal
Revenue Code of 1986, and the regulations promulgated thereunder, as such is
amended from time to time, and any reference to a section of the Code shall
include any successor provision of the Code.
(e) “
Committee
” means a committee
appointed by the Board from among its members to administer the Plan in
accordance with Section 4.
(f)
“
Common
Stock
” means the common stock, $0.01 par value, of the
Company.
(g) “
Company
” means New Motion,
Inc.
(h) “
Consultant
” means any person,
including an advisor, engaged by the Company or a Subsidiary to render services
and who is compensated for such services; provided such services are not in
connection with the offer or sale of securities in a capital-raising transaction
and do not directly or indirectly promote or maintain a market for the Company’s
securities; and provided further that the term “Consultant” shall not include
Directors who are paid only a director’s fee by the Company or who are not
otherwise compensated by the Company for their services as
Directors.
(i)
“
Director
”
means a member of the Board.
(j)
“
Employee
” means any person,
including Officers and Directors, employed by the Company or any Subsidiary of
the Company. Neither service as a Director nor payment of a
director’s fee by the Company shall be sufficient to constitute “employment” by
the Company.
(k) “
Exchange Act
” means the
Securities Exchange Act of 1934, as amended.
(l)
“
Officer
” means a person who is
an officer of the Company within the meaning of Section 16 of the Exchange Act
and the rules and regulations promulgated thereunder.
(m) “
Participant
” means any
Employee, Director or Consultant selected by the Administrator to receive
Awards.
(n)
“
Plan
” means this
2009 Stock Incentive Plan, as amended from time to time.
(o) “
Preexisting
Plan
” means the New Motion,
Inc. 2007 Stock Incentive Plan, as amended to date.
(p) “
Rule 16b-3
” means Rule 16b-3
of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion
is being exercised with respect to the Plan.
(q) “
Section 162(m)
” means Section
162(m) of the Code and the regulations thereunder, as amended.
(r)
“
Share
” means a share of
the Common Stock, as adjusted in accordance with Section 10 of the
Plan.
(s) “
Subsidiary
” means any
corporation or entity in which the Company owns or controls, directly or
indirectly, fifty percent (50%) or more of the voting power or economic
interests of such corporation or entity.
3.
Shares Subject to the
Plan
.
(a)
Aggregate
Limits
. Subject to the provisions of Section 10 of the Plan,
the maximum aggregate number of Shares which may be issued pursuant to Awards
granted under the Plan is two million seven hundred fifty thousand
(2,750,000) Shares (the “Fungible Pool Limit”). The Shares subject to
the Plan may be either Shares reacquired by the Company, including Shares
purchased in the open market, or authorized but unissued Shares. Any
Shares subject to an Award which for any reason expires or terminates
unexercised or is not earned in full shall be added back to the Fungible Pool
Limit and may again be made subject to an Award under the Plan. The
following Shares shall not be added back to the Fungible Pool Limit and shall
not again be made available for issuance as Awards under the Plan: (i) Shares
not issued or delivered as a result of the net settlement of an outstanding
Stock Appreciation Right, (ii) Shares used to pay the exercise price or
withholding taxes related to an outstanding Award, or (iii) Shares repurchased
on the open market with the exercise price proceeds received by the Company upon
the exercise of an Award.
(b) Reserved.
(c)
Code Limits
. The
aggregate number of Shares subject to Awards granted under this Plan during any
calendar year to any one Participant shall not exceed
500,000. Notwithstanding anything to the contrary in this Plan, the
foregoing limitations shall be subject to adjustment under Section 10, but only
to the extent that such adjustment will not affect the status of any Award
intended to qualify as “performance-based compensation” under Section 162(m) of
the Code. The aggregate number of Shares issued pursuant to ISOs
granted under the Plan shall not exceed two million seven hundred fifty thousand
(2,750,000) Shares, which limitation shall be subject to adjustment under
Section 10 only to the extent that such adjustment is consistent with
adjustments permitted of a plan authorizing ISOs under Section 422 of the
Code.
4.
Administration of the
Plan
.
(a)
Procedure
.
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(i)
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Multiple
Administrative Bodies
. If permitted by Rule 16b-3, the Plan may be
administered by different bodies with respect to Directors, Officers who
are not Directors, and Employees who are neither Directors nor
Officers.
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(ii)
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Administration with
Respect to Directors and Officers Subject to Section
16(b)
. With respect to Awards granted to Directors or to
Employees who are also Officers or Directors subject to Section 16(b) of
the Exchange Act, the Plan shall be administered by (A) the Board, if the
Board may administer the Plan in compliance with the requirements for
grants under the Plan to be exempt acquisitions under Rule 16b-3, or (B) a
committee designated by the Board to administer the Plan, which committee
shall consist of “Non-Employee Directors” within the meaning of Rule
16b-3. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to
time the Board may increase the size of the Committee and appoint
additional members, remove members (with or without cause) and substitute
new members, fill vacancies (however caused), and remove all members of
the Committee and thereafter directly administer the Plan, all to the
extent permitted by the requirements for grants under the Plan to be
exempt acquisitions under Rule
16b-3.
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(iii)
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Administration with
Respect to Covered Employees Subject to Section 162(m) of the
Code
. With respect to Awards granted to Employees who
are also “covered employees” within the meaning of Section 162(m) of the
Code and the regulations thereunder, as amended, the Plan shall be
administered by a committee designated by the Board to administer the
Plan, which committee shall be constituted to satisfy the requirements
applicable to Awards intended to qualify as “performance-based
compensation” under Section 162(m). Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by
the Board. From time to time the Board may increase the size of the
Committee and appoint additional members, remove members (with or without
cause) and substitute new members, fill vacancies (however caused), and
remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by the rules applicable to Awards
intended to qualify as “performance-based compensation” under Section
162(m).
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(iv)
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Administration with
Respect to Other Persons
. With respect to Awards granted
to Employees or Consultants who are neither Directors nor Officers of the
Company, the Plan shall be administered by (A) the Board or (B) a
committee designated by the Board, which committee shall be constituted to
satisfy the legal requirements relating to the administration of stock
option plans under state corporate and securities laws and the
Code. Once appointed, such Committee shall serve in its
designated capacity until otherwise directed by the Board. The Board may
increase the size of the Committee and appoint additional members, remove
members (with or without cause) and substitute new members, fill vacancies
(however caused), and remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted by applicable
laws.
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(b)
Powers of the
Administrator
. Subject to the express provisions and
limitations set forth in this Plan, and in the case of a Committee, subject to
the specific duties delegated by the Board to such Committee, the Administrator
shall be authorized and empowered to do all things necessary or desirable, in
its sole discretion, in connection with the administration of this Plan,
including, without limitation, the following:
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(i)
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to
prescribe, amend and rescind rules and regulations relating to this Plan
and to define terms not otherwise defined
herein;
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(ii)
|
to
determine which persons are eligible to be Participants, to which of such
persons, if any, Awards shall be granted hereunder and the timing of any
such Awards, and to grant Awards;
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(iii)
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to
grant Awards to Participants and determine the terms and conditions
thereof, including the number of Shares subject to Awards and the exercise
or purchase price of such Shares and the circumstances under which Awards
become exercisable or vested or are forfeited or expire, which terms may
but need not be conditioned upon the passage of time, continued
employment, the satisfaction of performance criteria, the occurrence of
certain events, or other factors;
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(iv)
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to
establish or verify the extent of satisfaction of any performance goals or
other conditions applicable to the grant, issuance, exercisability,
vesting and/or ability to retain any
Award;
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(v)
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to
prescribe and amend the terms of the agreements or other documents
evidencing Awards made under this Plan (which need not be
identical);
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(vi)
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to
determine whether, and the extent to which, adjustments are required
pursuant to Section 10;
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(vii)
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to
interpret and construe this Plan, any rules and regulations under this
Plan and the terms and conditions of any Award granted hereunder, and to
make exceptions to any such provisions in good faith and for the benefit
of the Corporation; and
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(viii)
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to
make all other determinations deemed necessary or advisable for the
administration of this Plan.
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(c)
Delegation and
Administration
. The Administrator may delegate to one or more
separate committees (any such committee a “Subcommittee”) composed of one or
more directors of the Company (who may but need not be members of any Committee
comprising the Administrator) the ability to grant Awards and take the other
actions described in Section 4(b) with respect to Participants who are not
Officers, and such actions shall be treated for all purposes as if taken by the
Administrator. The Administrator may delegate to a Subcommittee of
one or more officers of the Company the ability to grant Awards and take the
other actions described in Section 4(b) with respect to Participants (other than
any such officers themselves) who are not directors or Officers, provided,
however, that the resolution so authorizing such officer(s) shall specify the
total number of rights or options such Subcommittee may so award, and such
actions shall be treated for all purposes as if taken by the
Administrator. Any action by any such Subcommittee within the scope
of such delegation shall be deemed for all purposes to have been taken by the
Administrator, and references in this Plan to the Administrator shall include
any such Subcommittee. The Administrator may delegate the
administration of the Plan to an officer or officers of the Company, and such
administrator(s) may have the authority to execute and distribute agreements or
other documents evidencing or relating to Awards granted by the Administrator
under this Plan, to maintain records relating to the grant, vesting, exercise,
forfeiture or expiration of Awards, to process or oversee the issuance of Shares
upon the exercise, vesting and/or settlement of an Award, to interpret the terms
of Awards and to take such other actions as the Administrator may
specify. Any action by any such administrator within the scope of its
delegation shall be deemed for all purposes to have been taken by the
Administrator and references in this Plan to the Administrator shall include any
such administrator, provided that the actions and interpretations of any such
administrator shall be subject to review and approval, disapproval or
modification by the Administrator.
(d)
Effect of Change in Status
.
The Committee shall have the discretion to determine the effect upon an Award
and upon an individual’s status as an employee under the Plan (including whether
a Participant shall be deemed to have experienced a termination of employment or
other change in status) and upon the vesting, expiration or forfeiture of an
Award in the case of (i) any individual who is employed by an entity that ceases
to be a Subsidiary of the Corporation, (ii) any leave of absence approved by the
Corporation or a Subsidiary, (iii) any transfer between locations of employment
with the Corporation or a Subsidiary or between the Corporation and any
Subsidiary or between any Subsidiaries, (iv) any change in the Participant’s
status from an employee to a consultant or member of the Board of Directors, or
vice versa, and (v) at the request of the Corporation or a Subsidiary, any
employee who becomes employed by any partnership, joint venture, corporation or
other entity not meeting the requirements of a Subsidiary.
(e)
Determinations of the
Administrator
. All decisions, determinations and
interpretations by the Administrator regarding this Plan shall be final and
binding on all Participants or other persons claiming rights under the Plan or
any Award. The Administrator shall consider such factors as it deems relevant to
making such decisions, determinations and interpretations including, without
limitation, the recommendations or advice of any director, officer or employee
of the Company and such attorneys, consultants and accountants as it may
select. A Participant or other holder of an Award may contest a
decision or action by the Administrator with respect to such person or Award
only on the grounds that such decision or action was arbitrary or capricious or
was unlawful, and any review of such decision or action shall be limited to
determining whether the Administrator’s decision or action was arbitrary or
capricious or was unlawful.
5.
Eligibility
. Awards
may be granted to any person who is a Participant under this Plan; provided that
ISOs may be granted only to Employees. If otherwise eligible, a
Participant who has been granted an Award may be granted additional
Awards.
6.
Term of
the Plan
. The Plan was approved by the Board on April 28, 2009
and became effective, subject to shareholder approval, on the same
date. The Plan shall remain available for the grant of Awards until
April 28, 2019, or such earlier date as the Board may determine. The
expiration of the Administrator’s authority to grant Awards under the Plan will
not affect the operation of the terms of the Plan or the Company’s and
Participants’ rights and obligations with respect to Awards granted on or prior
to the expiration date of the Plan.
7.
Plan
Awards
.
(a)
Award Types
. The
Administrator, on behalf of the Company, is authorized under this Plan to grant,
award and enter into the following arrangements or benefits under the Plan
provided that their terms and conditions are not inconsistent with the
provisions of the Plan: Stock Options, Stock Appreciation Rights, Restricted
Stock, Restricted Stock Units, and Other Stock-Based Awards. Such
arrangements and benefits are sometimes referred to herein as
“Awards.” The Administrator, in its discretion, may determine that
any Award granted
hereunder
shall be a
performance Award the grant, issuance, retention, vesting and/or settlement of
which is subject to satisfaction of one or more of the Qualifying Performance
Criteria specified in Section 8(e).
(i)
Stock
Options
. A “Stock Option” is a right to purchase a number of
Shares at such exercise price, at such times, and on such other terms and
conditions as are specified in or
determined
pursuant
to the document(s) evidencing the Award (the “Option Agreement”). The
Committee may grant Stock Options intended to be eligible to qualify as
incentive stock options (“ISOs”) pursuant to Section 422 of the Code and Stock
Options that are not intended to qualify as ISOs (“Non-qualified Stock
Options”), as it, in its sole discretion, shall determine.
(ii)
Stock Appreciation
Rights
. A “Stock Appreciation Right” or “SAR” is a right to
receive, in cash or stock (as determined by the Administrator), value with
respect to a specific number of
Shares
equal to or
otherwise based on the excess of (i) the market value of a Share at the time of
exercise over (ii) the exercise price of the right, subject to such terms and
conditions as are expressed in the document(s) evidencing the Award (the “SAR
Agreement”).
(iii)
Restricted
Stock
. A “Restricted Stock” Award is an award of Shares, the
grant, issuance, retention and/or vesting of which is subject to such conditions
as are expressed in the document(s) evidencing the Award (the “Restricted Stock
Agreement”).
(iv)
Restricted Stock
Unit
. A “Restricted Stock Unit” Award is an award of a right
to receive, in cash or stock (as determined by the Administrator) the market
value of one Share, the grant, issuance, retention and/or vesting of which is
subject to such conditions as are expressed in the document(s) evidencing the
Award (the “Restricted Stock Unit Agreement”).
(v)
Other Stock-Based
Awards
. An “Other Stock-Based Award” is an award other than
those described in subsections (i) – (iv) above, that is denominated or payable
in, valued in whole or in part by reference to, or otherwise based on, or
related to, Common Stock or factors that may influence the value of Common
Stock, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Common Stock, purchase
rights for Common Stock, Awards with value and payment contingent upon
performance of the Company or business units thereof or any other factors
designated by the Administrator, and Awards valued by reference to the book
value of Common Stock or the value of securities of or the performance of
specified Subsidiaries or other business units. The Administrator
shall determine the terms and conditions of such Awards, which shall be
expressed in the document(s) evidencing the Award (the “Other Stock-Based Award
Agreement”).
(b)
Grants of Awards
. An
Award may consist of one of the foregoing arrangements or benefits or two or
more of them in tandem or in the alternative.
8.
Terms of Awards
.
(a)
Grant, Terms and Conditions of Stock Options
and SARs. The Administrator may grant Stock Options or SARs at any
time and from time to time prior to the expiration of the Plan to eligible
Participants selected by the Administrator. No Participant shall have
any rights as a stockholder with respect to any Shares subject to Stock Options
or SARs hereunder until said Shares have been issued. Each Stock
Option or SAR shall be evidenced only by such agreements, notices and/or terms
or conditions documented in such form (including by electronic communications)
as may be approved by the Administrator. Each Stock Option grant will
expressly identify the Stock Option as an ISO or as a Non-qualified Stock
Option. In the absence of a designation, a Stock Option shall be
treated as a Non-qualified Stock Option. Stock Options or SARs
granted pursuant to the Plan need not be identical but each must contain or be
subject to the following terms and conditions:
(i)
Price
. The
purchase price (also referred to as the exercise price) under each Stock Option
or SAR granted hereunder shall be established by the
Administrator. The purchase price per Share shall not be less than
100% of the market value of a Share on the date of grant. For
purposes of the Plan, “market value” shall mean the fair market value of the
Company’s common stock determined in good faith by the Administrator in a manner
consistent with the requirements of Section 409A of the Code. The
exercise price of a Stock Option shall be paid in cash or in such other form if
and to the extent permitted by the Administrator, including without limitation
by delivery of already owned Shares, withholding (either actually or by
attestation) of Shares otherwise issuable under such Stock Option and/or by
payment under a broker-assisted sale and remittance program acceptable to the
Administrator.
(ii)
No Repricing
. Other
than in connection with a change in the Company’s capitalization (as described
in Section 10 of the Plan), the exercise price of a Stock Option or SAR may not
be reduced without stockholder approval.
(iii)
No Reload
Grants
. Stock Options shall not be granted under the Plan in
consideration for and shall not be conditioned upon the delivery of Shares to
the Company in payment of the exercise price and/or tax withholding obligation
under any other Employee Stock Option.
(iv)
Duration,
Exercise and Termination of Stock Options and SARs
. Each Stock
Option or SAR shall be exercisable at such time and in such installments during
the period prior to the expiration of the Stock Option or SAR as determined by
the Administrator. The Administrator shall have the right to make the
timing of the ability to exercise any Stock Option or SAR subject to continued
employment, the passage of time and/or such performance requirements as deemed
appropriate by the Administrator. At any time after the grant of a
Stock Option, the Administrator may reduce or eliminate any restrictions on the
Participant’s right to exercise all or part of the Stock Option. Each
Stock Option or SAR must expire within a period of not more than ten (10) years
from the grant date. The Option Agreement or SAR Agreement may
provide for expiration prior to the end of the stated term of the Award in the
event of the termination of employment or service of the Participant to whom it
was granted.
(v)
Conditions and
Restrictions Upon Securities Subject to Stock Options or
SA
Rs. Subject to the express provisions of the Plan, the
Administrator may provide that the Shares issued upon exercise of a Stock Option
or SAR shall be subject to such further conditions or agreements as the
Administrator in its discretion may specify prior to the exercise of such Stock
Option or SAR, including, without limitation, conditions on vesting or
transferability, forfeiture or repurchase provisions. The obligation
to make payments with respect to SARs may be satisfied through cash payments or
the delivery of Shares, or a combination thereof as the Administrator shall
determine. The Administrator may establish rules for the deferred
delivery of Common Stock upon exercise of a Stock Option or SAR with the
deferral evidenced by use of Restricted Stock Units equal in number to the
number of Shares whose delivery is so deferred.
(vi)
Other Terms and
Conditions
. Stock Options and SARs may also contain such other
provisions, which shall not be inconsistent with any of the foregoing terms, as
the Administrator shall deem appropriate.
(vii)
ISOs
. Stock
Options intending to qualify as ISOs may only be granted to employees of the
Company within the meaning of the Code, as determined by the
Administrator. An ISO granted to an Employee who, at the time the ISO
is granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any “parent corporation” as
defined in Section 424(e) of the Code or Subsidiary, must have an exercise price
that is not less than 110% of the market value of the Shares subject to the ISO,
determined as of the date of grant. To the extent that the Option
Agreement specifies that a Stock Option is intended to be treated as an ISO, the
Stock Option is intended to qualify to the greatest extent possible as an
“incentive stock option” within the meaning of Section 422 of the Code, and
shall be so construed; provided, however, that any such designation shall not be
interpreted as a representation, guarantee or other undertaking on the part of
the Company that the Stock Option is or will be determined to qualify as an
ISO. If and to the extent that any Shares are issued under a portion
of any Stock Option that exceeds the $100,000 limitation of Section 422 of the
Code, such Shares shall not be treated as issued under an ISO notwithstanding
any designation otherwise. Certain decisions, amendments,
interpretations and actions by the Administrator and certain actions by a
Participant may cause a Stock Option to cease to qualify for the tax treatment
applicable to ISOs pursuant to the Code and by accepting a Stock Option the
Participant agrees in advance to such disqualifying action.
(b)
Grant, Terms and Conditions
of Restricted Stock and Restricted Stock Units
. The Administrator may
grant Restricted Stock or Restricted Stock Units at any time and from time to
time prior to the expiration of the Plan to eligible Participants selected by
the Administrator. A Participant shall have rights as a stockholder
with respect to any Shares subject to a Restricted Stock Award hereunder only to
the extent specified in this Plan or the Restricted Stock Agreement evidencing
such Award. Awards of Restricted Stock or Restricted Stock Units
shall be evidenced only by such agreements, notices and/or terms or conditions
documented in such form (including by electronic communications) as may be
approved by the Administrator. Awards of Restricted Stock or
Restricted Stock Units granted pursuant to the Plan need not be identical but
each must contain or be subject to the following terms and
conditions:
(i)
Terms and
Conditions
. Each Restricted Stock Agreement and each
Restricted Stock Unit Agreement shall contain provisions regarding (a) the
number of Shares subject to such Award or a formula for determining such, (b)
the purchase price of the Shares, if any, and the means of payment for the
Shares, (c) the performance criteria, if any, and level of achievement versus
these criteria that shall determine the number of Shares granted, issued,
retainable and/or vested, (d) such terms and conditions on the grant, issuance,
vesting and/or forfeiture of the Shares as may be determined from time to time
by the Administrator, (e) restrictions on the transferability of the Shares and
(f) such further terms and conditions as may be determined from time to time by
the Administrator, in each case not inconsistent with this Plan.
(ii)
Sale Price
. Subject
to the requirements of applicable law, the Administrator shall determine the
price, if any, at which Shares of Restricted Stock or Restricted Stock Units
shall be sold or awarded to a Participant, which may vary from time to time and
among Participants and which may be below the market value of such Shares at the
date of grant or issuance.
(iii)
Share
Vesting
. The grant, issuance, retention and/or vesting of
Shares under Restricted Stock or Restricted Stock Unit Awards shall be at such
time and in such installments as determined by the Administrator or under
criteria established by the Administrator. The Administrator shall have the
right to make the timing of the grant and/or the issuance, ability to retain
and/or vesting of Shares under Restricted Stock or Restricted Stock Unit Awards
subject to continued employment, passage of time and/or such performance
criteria and level of achievement versus these criteria as deemed appropriate by
the Administrator, which criteria may be based on financial performance and/or
personal performance evaluations. Up to 500,000 Shares shall be
available for issuance to Participants as Restricted Stock or Restricted Stock
Unit Awards having no minimum vesting period. No condition that is
based on performance criteria and level of achievement versus such criteria
shall be based on performance over a period of less than one (1) year, and no
condition that is based upon continued employment or the passage of time shall
provide for vesting in full of a Restricted Stock or Restricted Stock Unit Award
in less than pro rata installments over three years from the date the Award is
made, other than with respect to such Awards that are issued upon exercise or
settlement of Stock Options or SARs or upon the death, disability or retirement
of the Participant, in each case as specified in the agreement evidencing such
Award. Notwithstanding anything to the contrary herein, the
performance criteria for any Restricted Stock or Restricted Stock Unit that is
intended to satisfy the requirements for “performance-based compensation” under
Section 162(m) of the Code shall be a measure based on one or more Qualifying
Performance Criteria selected by the Administrator and specified at the time the
Restricted Stock or Restricted Stock Unit Award is granted.
(iv)
Termination of
Employment
. The Restricted Stock or Restricted Stock Unit
Agreement may provide for the forfeiture or cancellation of the Restricted Stock
or Restricted Stock Unit Award, in whole or in part, in the event of the
termination of employment or service of the Participant to whom it was
granted.
(v)
Restricted Stock
Units
. Except to the extent this Plan or the Administrator
specifies otherwise, Restricted Stock Units represent an unfunded and unsecured
obligation of the Company and do not confer any of the rights of a stockholder
until Shares are issued thereunder. Settlement of Restricted Stock
Units upon expiration of the deferral or vesting period shall be made in Shares
or otherwise as determined by the Administrator. Dividends or
dividend equivalent rights shall be payable in cash or in additional shares with
respect to Restricted Stock Units only to the extent specifically provided for
by the Administrator. Until a Restricted Stock Unit is settled, the number of
Shares represented by a Restricted Stock Unit shall be subject to adjustment
pursuant to Section 10. Any Restricted Stock Units that are settled
after the Participant’s death shall be distributed to the Participant’s
designated beneficiary(ies) or, if none was designated, the Participant’s
estate.
(c)
Suspension or Termination of
Awards
. If at any time (including with respect to Stock
Options or SARs after a notice of exercise has been delivered) the
Administrator, including any Subcommittee or administrator authorized pursuant
to Section 4(c) (any such person, an “Authorized Officer”), reasonably believes
that a Participant has committed an act of misconduct as described in this
Section, the Authorized Officer may suspend the Participant’s right to exercise
any Stock Option or SAR or suspend the vesting of Shares under the Participant’s
Restricted Stock or Restricted Stock Unit Awards, as the case may be, pending a
determination of whether an act of misconduct has been committed. If the
Administrator or an Authorized Officer determines a Participant has committed an
act of embezzlement, fraud, dishonesty, nonpayment of any obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of Company rules
resulting in loss, damage or injury to the Company, or if a Participant makes an
unauthorized disclosure of any Company trade secret or confidential information,
engages in any conduct constituting unfair competition, induces any customer to
breach a contract with the Company or induces any principal for whom the Company
acts as agent to terminate such agency relationship, neither the Participant nor
his or her estate shall be entitled to exercise any Stock Option or SAR
whatsoever and the Participant’s Restricted Stock or Restricted Stock Unit
Agreement shall be forfeited and cancelled. Any determination by the
Administrator or an Authorized Officer with respect to the foregoing shall be
final, conclusive and binding on all interested parties. For any
Participant who is an Officer, the determination of the Administrator or of the
Authorized Officer shall be subject to the approval of the Board.
(d)
Transferability
. Unless
the agreement or other document evidencing an Award (or an amendment thereto
authorized by the Administrator) expressly states that the Award is transferable
as provided hereunder, no Award granted under this Plan, nor any interest in
such Award, may be sold, assigned, conveyed, gifted, pledged, hypothecated or
otherwise transferred in any manner, other than by will or the laws of descent
and distribution. The Administrator may grant an Award or amend an
outstanding Award to provide that the Award is transferable or assignable (a) in
the case of a transfer without the payment of any consideration, to any “family
member” as such term is defined in Section 1(a)(5) of the General Instructions
to Form S-8 under the Securities Act of 1933, as such may be amended from time
to time, and (b) in any transfer described in clause (ii) of Section 1(a)(5) of
the General Instructions to Form S-8 under the 1933 Act as amended from time to
time, provided that following any such transfer or assignment the Award will
remain subject to substantially the same terms applicable to the Award while
held by the Participant to whom it was granted, as modified as the Administrator
shall determine appropriate, and as a condition to such transfer the transferee
shall execute an agreement agreeing to be bound by such terms; provided,
further, that an ISO may be transferred or assigned only to the extent
consistent with Section 422 of the Code. Any purported assignment,
transfer or encumbrance that does not qualify under this Section 8(d) shall be
void and unenforceable against the Company.
(e)
Qualifying Performance
Criteria
. For purposes of this Plan, the term “Qualifying
Performance Criteria” shall mean any one or more of the following performance
criteria, either individually, alternatively or in any combination, applied to
either the Company as a whole or to a business unit or Subsidiary, either
individually, alternatively or in any combination, and measured either annually
or cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years’ results or to a designated comparison
group, in each case as specified by the Administrator in the Award: (a) cash
flow, (b) earnings per share, (c) earnings before interest, taxes and
amortization, (d) return on equity, (e) total stockholder return, (f) share
price performance, (g) return on capital, (h) return on assets or net assets,
(i) revenue, (j) income or net income, (k) operating income or net operating
income, (l) operating profit or net operating profit, (m) operating margin or
profit margin, (n) return on operating revenue, (o) return on invested capital,
(p) market segment share, (q) product release schedules, (r) new product
innovation, (s) product cost reduction through advanced technology, (t) brand
recognition/acceptance, (u) product ship targets, (v) customer satisfaction, (w)
strategic initiatives, or (x) acquisitions. The Administrator may
appropriately adjust any evaluation of performance under a Qualifying
Performance Criteria to exclude any of the following events that occurs during a
performance period: (i) asset write-downs, (ii) litigation or claim judgments or
settlements, (iii) the effect of changes in or provisions under tax law,
accounting principles or other such laws or provisions affecting reported
results, (iv) accruals for reorganization and restructuring programs, and (v)
any extraordinary non-recurring items as described in Accounting Principles
Board Opinion No. 30 and/or in management’s discussion and analysis of financial
condition and results of operations appearing in the Company’s annual report to
stockholders for the applicable year. Notwithstanding satisfaction of any
completion of any Qualifying Performance Criteria, to the extent specified at
the time of grant of an Award, the number of Shares, Stock Options, SARs,
Restricted Stock Units or other benefits granted, issued, retainable and/or
vested under an Award on account of satisfaction of such Qualifying Performance
Criteria may be reduced by the Administrator on the basis of such further
considerations as the Administrator in its sole discretion shall
determine.
(f)
Dividends
. Unless
otherwise provided by the Administrator, no adjustment shall be made in Shares
issuable under Awards on account of cash dividends that may be paid or other
rights that may be issued to the holders of Shares prior to their issuance under
any Award. The Administrator shall specify whether dividends or dividend
equivalent amounts shall be paid to any Participant with respect to the Shares
subject to any Award that have not vested or been issued or that are subject to
any restrictions or conditions on the record date for dividends.
(g)
Documents Evidencing
Awards
. The Administrator shall, subject to applicable law,
determine the date an Award is deemed to be granted. The
Administrator or, except to the extent prohibited under applicable law, its
delegate(s) may establish the terms of agreements or other documents evidencing
Awards under this Plan and may, but need not, require as a condition to any such
agreement’s or document’s effectiveness that such agreement or document be
executed by the Participant, including by electronic signature or other
electronic indication of acceptance, and that such Participant agree to such
further terms and conditions as specified in such agreement or
document. The grant of an Award under this Plan shall not confer any
rights upon the Participant holding such Award other than such terms, and
subject to such conditions, as are specified in this Plan as being applicable to
such type of Award (or to all Awards) or as are expressly set forth in the
agreement or other document evidencing such Award.
(h)
Additional Restrictions on
Awards
. Either at the time an Award is granted or by
subsequent action, the Administrator may, but need not, impose such
restrictions, conditions or limitations as it determines appropriate as to the
timing and manner of any resales by a Participant or other subsequent transfers
by a Participant of any Shares issued under an Award, including without
limitation (a) restrictions under an insider trading policy, (b) restrictions
designed to delay and/or coordinate the timing and manner of sales by the
Participant or Participants, and (c) restrictions as to the use of a specified
brokerage firm for receipt, resales or other transfers of such
Shares.
(i)
Subsidiary
Awards
. In the case of a grant of an Award to any Participant
employed by a Subsidiary, such grant may, if the Administrator so directs, be
implemented by the Company issuing any subject Shares to the Subsidiary, for
such lawful consideration as the Administrator may determine, upon the condition
or understanding that the Subsidiary will transfer the Shares to the Participant
in accordance with the terms of the Award specified by the Administrator
pursuant to the provisions of the Plan. Notwithstanding any other
provision hereof, such Award may be issued by and in the name of the Subsidiary
and shall be deemed granted on such date as the Administrator shall
determine.
9.
Withholding
Taxes
. To the extent required by applicable federal, state,
local or foreign law, the Administrator may and/or a Participant shall make
arrangements satisfactory to the Company for the satisfaction of any withholding
tax obligations that arise with respect to any Stock Option, SAR, Restricted
Stock or Restricted Stock Unit Award, or any sale of Shares. The
Company shall not be required to issue Shares or to recognize the disposition of
such Shares until such obligations are satisfied. To the extent
permitted or required by the Administrator, these obligations may or shall be
satisfied by having the Company withhold a portion of the Shares of stock that
otherwise would be issued to a Participant under such Award or by tendering
Shares previously acquired by the Participant.
10.
Adjustments of and Changes in the
Common Stock
.
(a) The
existence of outstanding Awards shall not affect in any way the right or power
of the Company or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, exchanges, or other changes in the Company’s
capital structure or its business, or any merger or consolidation of the Company
or any issuance of Shares or other securities or subscription rights thereto, or
any issuance of bonds, debentures, preferred or prior preference stock ahead of
or affecting the Shares or other securities of the Company or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or
otherwise. Further, except as expressly provided herein or by the
Administrator, (i) the issuance by the Company of shares of stock or any class
of securities convertible into shares of stock of any class, for cash, property,
labor or services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, (ii) the payment of a dividend
in property other than Shares, or (iii) the occurrence of any similar
transaction, and in any case whether or not for fair value, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number of
Shares subject to Stock Options or other Awards theretofore granted or the
purchase price per Share, unless the Administrator shall determine, in its sole
discretion, that an adjustment is necessary or appropriate.
(b) If
the outstanding Shares or other securities of the Company, or both, for which
the Award is then exercisable or as to which the Award is to be settled shall at
any time be changed or exchanged by declaration of a stock dividend, stock
split, combination of shares, extraordinary dividend of cash and/or assets,
recapitalization, reorganization or any similar equity restructuring transaction
(as that term is used in Statement of Financial Accounting Standards No. 123
(revised) affecting the Shares or other securities of the Company, the
Administrator shall adjust the number and kind of Shares or other securities
that are subject to this Plan and to the limits under Section 3 and that are
subject to any Awards theretofore granted, and the exercise or settlement prices
of such Awards, so as to maintain the proportionate number of Shares or other
securities subject to such Awards without changing the aggregate exercise or
settlement price, if any.
(c) No
right to purchase fractional Shares shall result from any adjustment in Stock
Options or SARs pursuant to this Section 10. In case of any such
adjustment, the Shares subject to the Stock Option or SAR shall be rounded down
to the nearest whole share.
(d) Any
other provision hereof to the contrary notwithstanding (except Section 10(a)),
in the event the Company is a party to a merger or other reorganization,
outstanding Awards shall be subject to the agreement of merger or
reorganization. Such agreement may provide, without limitation, for
the assumption of outstanding Awards by the surviving corporation or its parent,
for their continuation by the Company (if the Company is a surviving
corporation), for accelerated vesting and accelerated expiration, or for
settlement in cash.
11.
Amendment and Termination of the
Plan
. The Board may amend, alter or discontinue the Plan and
the Administrator may to the extent permitted by the Plan amend any agreement or
other document evidencing an Award made under this Plan; provided, however, that
the Company shall submit for stockholder approval any amendment (other than an
amendment pursuant to the adjustment provisions of Section 10) required to be
submitted for stockholder approval by NASDAQ or that otherwise
would:
(a) Increase
the maximum number of Shares for which Awards may be granted under this
Plan;
(b) Reduce
the price at which Stock Options may be granted below the price provided for in
Section 9(a);
(c) Reduce
the option price of outstanding Stock Options;
(d) Extend
the term of this Plan;
(e) Change
the class of persons eligible to be Participants; or
(f)
Increase the limits in Section 3.
In addition, no such amendment or
alteration shall be made which would impair the rights of any Participant,
without such Participant’s consent, under any Award theretofore granted;
provided that no such consent shall be required with respect to any amendment or
alteration if the Administrator determines in its sole discretion that such
amendment or alteration either (i) is required or advisable in order for the
Company, the Plan or the Award to satisfy or conform to any law or regulation or
to meet the requirements of any accounting standard, or (ii) is not reasonably
likely to significantly diminish the benefits provided under such Award, or that
any such diminishment has been adequately compensated.
12.
Compliance with Applicable
Law
. This Plan, the grant and exercise of Awards hereunder,
and the obligation of the Company to sell, issue or deliver Shares under such
Awards, shall be subject to all applicable federal, state and local laws, rules
and regulations and to such approvals by any governmental or regulatory agency
as may be required. The Company shall not be required to register in
a Participant’s name or deliver any Shares prior to the completion of any
registration or qualification of such Shares under any federal, state or local
law or any ruling or regulation of any government body which the Administrator
shall determine to be necessary or advisable. To the extent the
Company is unable to or the Administrator deems it infeasible to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary or advisable for the lawful
issuance and sale of any Shares hereunder, the Company shall be relieved of any
liability with respect to the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained. No Stock
Option shall be exercisable and no Shares shall be issued and/or transferable
under any other Award unless a registration statement with respect to the Shares
underlying such Stock Option is effective and current or the Company has
determined that such registration is unnecessary.
13.
Liability of
Company
. The Company shall not be liable to a Participant or
other persons as to: (a) the non-issuance or sale of Shares as to which the
Company has been unable to obtain from any regulatory body having jurisdiction
the authority deemed by the Company’s counsel to be necessary to the lawful
issuance and sale of any Shares hereunder; and (b) any tax consequence expected,
but not realized, by any Participant or other person due to the receipt,
exercise or settlement of any Stock Option or other Award granted
hereunder.
14.
Non-Exclusivity of
Plan
. Neither the adoption of this Plan by the Board nor the
submission of this Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board or the
Administrator to adopt such other incentive arrangements as either may deem
desirable, including, without limitation, the granting of Stock Options, Stock
Appreciation Rights, Restricted Stock or Restricted Stock Units otherwise than
under this Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.
15.
Unfunded
Plan
. Insofar as it provides for Awards, the Plan shall be
unfunded. Although bookkeeping accounts may be established with respect to
Participants who are granted Awards under this Plan, any such accounts will be
used merely as a bookkeeping convenience. The Company shall not be required to
segregate any assets which may at any time be represented by Awards, nor shall
this Plan be construed as providing for such segregation, nor shall the Company
or the Administrator be deemed to be a trustee of stock or cash to be awarded
under the Plan.
16.
Listing or Qualification of Common
Stock
. If the Administrator determines in its discretion that
the listing or qualification of the Shares available for issuance under the Plan
on any securities exchange or quotation or trading system or under any
applicable law or governmental regulation is necessary as a condition to the
issuance of such Shares, a Stock Option or SAR may not be exercised in whole or
in part and a Restricted Stock or Restricted Stock Unit Award shall not vest or
be settled unless such listing, qualification, consent or approval has been
unconditionally obtained.
17.
Reservation of Shares
. The
Company, during the term of this Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
18.
Governing Law
. The Plan shall
be governed by, and construed in accordance with the laws of the State of
Delaware (without giving effect to conflicts of law principles).
19.
Awards Under Preexisting
Plan
. Upon approval of the Plan by stockholders of the
Company, no further awards shall be granted under the Preexisting Plan;
provided, however, that any shares of Common Stock that have been forfeited or
cancelled in accordance with the terms of the applicable award under the
Preexisting Plan may be subsequently again awarded in accordance with the terms
of such Preexisting Plan.
20.
Section 409A of the
Code
. To the extent applicable, the Plan is intended to comply
with Section 409A of the Code. Unless the Administrator determines
otherwise, the Administrator shall interpret and administer the Plan in
accordance with Section 409A. The Administrator shall have the
authority unilaterally to accelerate or delay a payment to which the holder of
any Award may be entitled to the extent necessary or desirable to comply with,
or avoid adverse consequences under, Section 409A.
APPENDIX
“C”
NEW
MOTION, INC.
2010
ANNUAL INCENTIVE COMPENSATION PLAN
ARTICLE
I
PURPOSE
The purpose of the Annual Incentive
Compensation Plan (the “Plan”) is to advance the interests of New Motion, Inc.
(the “Company”) by rewarding selected senior executives of the Company for their
significant contributions to the growth, profitability and success of the
Company from year to year.
The Company intends that compensation
payable under the Plan will constitute “qualified performance-based
compensation” under Section 162(m) of the Internal Revenue Code of 1986, as
amended. The Plan shall be administered and construed in a manner
consistent with such intent.
Subject
to approval by the Company’s stockholders, the Plan shall be effective as of
January 1, 2010.
ARTICLE
II
DEFINITIONS
2.1
Award:
The amount
due a Participant under the Plan for a Performance Period, as determined by the
Committee.
2.2
Board:
The Board of
Directors of the Company.
2.3
Business Unit:
A
division or line of business of the Company.
2.4
Code:
The Internal
Revenue Code of 1986, as amended; references to particular provisions of the
Code shall include any amendments thereto or successor provisions and any rules
and regulations promulgated thereunder.
2.5
Committee:
The
Compensation Committee of the Board, which shall be comprised of at least two or
more individuals who qualify as “outside directors” within the meaning of
Section 162(m) of the Code and as “independent directors” under corporate
governance rules of the NASD applicable to listed securities.
2.6
Company:
New
Motion, Inc., a Delaware corporation, or any successor thereto and each
Subsidiary.
2.7
Covered
Employee:
The Chief Executive Officer of the Company and any
other Participant determined by the Committee to be a “covered employee” (within
the meaning of Section 162(m) of the Code) who is expected to receive aggregate
compensation from the Company in excess of $1,000,000.
2.8
Disability:
Disability,
as defined in a Participant’s employment agreement with the Company, if any or,
absent an agreement, the Participant’s inability to perform his or her material
duties by reason of illness, physical or mental disability or other incapacity,
as evidenced by a written statement of a physician licensed to practice in any
state in the United States mutually agreed upon by the Company and the
Participant, which disability or other incapacity continues for a period in
excess of 180 days in any 12-month period.
2.9
Exchange Act:
The
Securities Exchange Act of 1934, as amended, and any rules and regulations
promulgated thereunder.
2.10
Participant:
For
any Performance Period, an executive or other key employee of the Company
designated by the Committee to participate in the Plan.
2.11
Performance Goal:
2.11.1
For any Participant who is a Covered Employee, a nondiscretionary and objective
financial or other performance measure established in writing by the Committee,
based solely on one or more of the following business criteria as established by
the Committee: (a) net income, earnings per share, pre-tax income,
EBITDA (earnings before interest, taxes, depreciation and amortization),
operating income, operating cash flow, return on invested capital, number of
subscribers, customer/subscriber satisfaction, growth of revenue or net sales,
or credit quality (or any of the foregoing, adjusted to exclude or include
specified items as the Committee determines is appropriate to measure
performance); and/or (b) objective individual performance, taking into account
individual goals and objectives. With respect to any such Participant
who is employed in a Business Unit, the criteria specified in clause (a) above
may be based on results of the Business Unit or on a combination of those
results and results for the Company.
2.11.2
For any Participant who is not a Covered Employee, (i) any one or a combination
of quantitative criteria (including, without limitation, the quantitative
criteria specified in clause (a) of subsection 2.11.1), (ii) qualitative
criteria measuring individual performance, taking into account individual goals
and objectives, or (iii) a combination of the quantitative and qualitative
criteria referred to the preceding two clauses. With respect to any
such Participant who is employed in a Business Unit, the quantitative and
qualitative criteria may be based on results for the Business Unit or on a
combination of those results and results for the Company.
2.12
Performance
Period:
The fiscal year of the Company, which is the calendar
year, or any other period designated by the Committee with respect to which an
Award may be made.
2.13
Plan:
The New
Motion, Inc. 2010 Annual Incentive Compensation Plan, as herein set forth and as
it may be amended from time to time.
2.14
Subsidiary:
Any
corporation that is a direct or indirect subsidiary of the Company, the earnings
of which are consolidated with the earnings of the Company for financial
reporting purposes.
2.15
Target
Allocation:
A Participant’s target annual bonus opportunity,
which shall be a dollar amount equal to a percentage of his/her base salary as
of the first day of the Performance Period, as determined by the
Committee.
2.16
Termination for Good
Reason:
Termination of a Participant’s employment by the
Company for “Good Reason,” as defined in the Participant’s employment agreement,
if any. Except as otherwise provided by the Committee, a Participant
shall not be entitled to payment of an Award under Section 8.1 pursuant to a
Termination for Good Reason unless such Participant is a party to an employment
agreement with the Company that contains a “Good Reason,” constructive discharge
or similar termination provision, and his or her employment has terminated as a
consequence of any such provision.
2.17
Termination Without
Cause:
Termination of a Participant’s employment by the
Company without “Cause”: as defined in the Participant’s employment agreement
with the Company, if any, or, absent an agreement defining “Cause,” termination
of the Participant’s employment by the Company for any reason other than (i)
failure to perform substantially his or her duties with the Company (other than
such failure resulting from Disability or retirement), (ii) engagement in
conduct materially and demonstrably injurious to the Company that is not cured
within 30 days after notice, (iii) violation of non-competition or
non-solicitation prohibitions or of confidentiality requirements imposed on the
participant under common law or under the terms of any agreement with the
Company, or (iv) fraud, embezzlement or conviction of any crime, other than a
traffic offense not involving a felony.
ARTICLE
III
ADMINISTRATION
3.1 The Plan shall be administered by
the Committee. A majority of the Committee shall constitute a
quorum. Committee decisions and determinations shall be made by a
majority of its members present in person or by telephone at a meeting at which
a quorum is present. To the maximum extent permitted by law, the
actions of the Committee with respect to the Plan shall be final and binding on
all affected Participants. Any decision or determination reduced to
writing and signed by all of the members of the Committee shall be fully
effective as if it had been made by a vote at a meeting duly called and
held. The Committee shall keep minutes of its meetings, written
records of its determinations to the extent required by Code Section 162(m) and
shall make such rules and regulations for the conduct of its business and make
such other written determinations as it shall deem advisable.
3.2 The Committee shall have full
authority, subject to the provisions of the Plan, to (i) select Participants and
determine the extent and terms of their participation; (ii) adopt, amend and
rescind such rules and regulations as, in its opinion, may be advisable in the
administration of the Plan; (iii) construe and interpret the Plan, the rules and
regulations adopted thereunder and any notice or Award given to a Participant;
and (iv) make all other determinations that it deems necessary or advisable in
the administration of the Plan.
3.3 The Committee may employ attorneys,
consultants, accountants or other persons, and the Committee, the Company and
its officers and directors may rely on the advice, opinions or valuations of any
such persons. No member of the Committee shall be personally liable
for any action, determination or interpretation taken or made in good faith by
the Committee with respect to the Plan or any Award hereunder, and all members
of the Committee shall be fully indemnified and protected by the Company in
respect of any such action, determination or interpretation.
3.4 For any Performance Period, the
Committee shall (i) designate the executives of the Company who shall
participate in the Plan, (ii) establish Performance Goals for each Participant
and certify the extent of their achievement and (iii) determine each
Participant’s Award.
ARTICLE
IV
PARTICIPATION
4.1 Only executives or other key
employees of the Company who, in the Committee’s judgment, have contributed, or
have the capacity to contribute, in a substantial measure to the successful
performance of the Company for a given Performance Period, shall be eligible to
participate in the Plan for that Period. The Committee, in its sole
discretion, shall select the Participants.
4.2 In selecting Participants for any
Performance Period, the Committee shall take into account such factors as the
individual’s position, experience, knowledge, responsibilities, advancement
potential and past and anticipated contribution to Company
performance.
ARTICLE
V
PERFORMANCE
GOALS
5.1 Within 90 days after the beginning
of a Performance Period that is a full calendar year (or, if the Period is
shorter, before 25% of the Period has elapsed), the Committee shall establish
Performance Goals for each Participant for such Performance Period.
5.2 Performance Goals established by
the Committee for any Performance Period may differ among
Participants. The Performance Goals of any Participant who is a
Covered Employee shall be based on any one or a combination of the criteria set
forth in Section 2.11.1. The Performance Goals of any Participant who
is not a Covered Employee shall be based on any one or a combination of the
criteria set forth in Section 2.11.2.
5.3 In establishing Performance Goals
for any Performance Period, the Committee shall determine in its discretion, but
subject to the applicable provisions of Sections 5.2 and 2.11, the categories
and criteria to be used in measuring each Participant’s performance and the
percentage allocation for each of the categories and for each of the criteria,
the sum of which allocations, respectively, shall equal 100
percent. The Committee shall also determine for each Participant for
the Performance Period (i) a threshold level of performance, as against the
applicable categories and criteria, below which no Award will be payable, (ii) a
Target Allocation, and (iii) a maximum incentive opportunity. A
Participant’s maximum incentive opportunity for any calendar year may not exceed
the greater of (a) 200 percent of his/her base salary as of the first day of
such year or other Performance Period (not to exceed $2,000,000 per annum) or
(b) 1 percent of the Company’s earnings before income taxes, as reported in the
Company’s audited consolidated financial statements, but before taking into
account (a) any losses from discontinued operations, (b) extraordinary gains and
losses and (c) the cumulative effective of accounting changes.
ARTICLE
VI
DETERMINATION
OF AWARDS
6.1 When the Committee has determined
the performance categories and criteria that establish a Participant’s
Performance Goals for any Performance Period, a Target Allocation, and a maximum
and minimum incentive opportunity, as described in Section 5.3, it shall
communicate this information in writing to the Participant.
6.2 As soon as practicable following
verification by the Company’s independent public accountants of financial
results for any Performance Period and receipt of information regarding the
actual performance of Participants against their respective Performance Goals
for the Period, the Committee shall certify the extent to which each Participant
achieved his or her Performance Goals for the Period.
6.3 Based on the information certified
in accordance with Section 6.2, the Committee shall determine each Participant’s
Award for the Performance Period by Multiplying his/her Target Allocation for
the Period by the percentage representing the extent of achievement of his/her
Performance Goals for the Period.
6.4 Notwithstanding the provisions of
Section 6.3, the Committee may, in its discretion, reduce or eliminate a
Participant’s Target Allocation for any Performance Period based on such
objective or subjective criteria as it deems appropriate to take into account
circumstances that could not have been anticipated when it established the
Participant’s Performance Goals for the Period. The amount as finally
determined by the Committee shall constitute the Participant’s Award for the
Period.
6.5 In no event may the Committee
increase the amount payable under the Plan to a Participant who is a Covered
Employee.
ARTICLE
VII
PAYMENT
OF AWARDS
7.1 Except as provided in Section 7.2,
a Participant’s Award for any Performance Period shall be paid in a cash lump
sum as soon as practicable following the Committee’s determination of the amount
in accordance with Article VI.
7.2 From time to time, the Committee,
in its discretion (under uniform rules applicable to all Participants), may
offer Participants the opportunity to defer receipt of all or a portion of the
Award for the Performance Period.
7.2.1 Any
election to defer shall be made prior to the beginning of the Performance
Period; provided that, for the first year in which an executive of the Company
first becomes eligible to participate in the Plan, such election to defer must
be made by this Participant not later than 30 days following the date he/she is
selected by the Committee to participate in the Plan. Deferrals shall
be in increments of 20 percent of the Participant’s base salary for the
Period. Any deferral of all or a portion of a Participant’s Award
shall comply with Section 409A of the Code.
7.2.2
Deferred amounts are not forfeitable and shall be paid after termination of
employment with the Company. They constitute unfunded general
obligations of the Company.
7.2.3
Deferred amounts shall be credited with an interest equivalent amount until the
time of final payment at a rate determined by the Committee from time to
time. The amount deferred for any Performance Period plus all
interest equivalents thereon shall be paid in a single sum or in up to 15
installments, as specified by the Participant when making a deferral
election.
7.2.4 Any
payment otherwise required to be made to a Participant who is a “specified
employee” of the Company within the meaning of Section 409A of the Code,
pursuant to this Section 7.2 as a result of such Participant’s separation of
service with the Company shall be delayed for a period of six months following
such separation of service or such other period of time as may be required to
comply with Section 409A of the Code. On the earliest date following
such separation of service on which any such payment could be made in compliance
with Section 409A of the Code, any payment or payments that were delayed
pursuant to the immediately preceding sentence shall be paid to the Participant
in a lump sum.
7.3 Each Participant shall designate,
in a manner prescribed by the Committee, a beneficiary to receive payments due
under the Plan in the event of his/her death. If a Participant dies
prior to the date of payment of his/her Award for any Performance Period or
prior to receipt of all amounts, if any, that were deferred, and if no properly
designated beneficiary survives the Participant, the Award or any other amount
due shall be paid to his/her estate or personal representative.
ARTICLE
VIII
TERMINATION
OF EMPLOYMENT
8.1 Except as otherwise provided in a
Participant’s employment agreement, if any, if a Participant’s employment with
the Company terminates prior to the date for payment of an Award (“Award Payment
Date”) by reason of retirement on or after attainment of age 65 (or at such
earlier age as is provided in a Participant’s employment agreement), Disability,
Termination Without Cause, Termination for Good Reason, death or for any other
reason specifically approved in advance by the Committee, the Committee shall
determine the Participant’s Award as if he/she were employed on the Award
Payment Date and the Participant shall be entitled to receive the prorated
portion of the Award (not exceeding 100%), based on service from the beginning
of the Performance Period to the date of termination of his/her
employment.
8.2 Except as otherwise provided in a
Participant’s employment agreement, if any, if a Participant’s employment with
the Company terminates prior to the Award Payment Date for an Award for any
Performance Period, for any reason other than as provided in Section 8.1, he/she
shall forfeit any right to receive an Award for such Performance
Period.
ARTICLE
IX
TERMINATION
AND AMENDMENT OF THE PLAN
9.1 The Company reserves the right, by
action of the Board, to terminate the Plan at any time; provided that no
termination of the Plan shall adversely affect the right of any Participant to
receive an Award to which he/she would otherwise have been entitled but for the
termination of the Plan. Subject to such earlier termination, the
Plan shall have a term of five years from its effective date.
9.2 Subject to any restrictions under
Section 162(m) of the Code, the Committee may amend the Plan at any time,
provided that no amendment that would require the consent of the Company’s
stockholders pursuant to the Code or the Exchange Act, or any other applicable
law, rule or regulation, shall be effective without such consent. No
amendment that adversely affects a Participant’s rights to, or interest in, an
Award granted prior to the date of the amendment shall be effective unless the
Participant shall have agreed to it in writing.
ARTICLE
X
GENERAL
PROVISIONS
10.1
Nothing in the Plan shall confer upon any employee a right to continue in the
employment of the Company or affect any right of the Company to terminate a
Participant’s employment.
10.2 The
Plan is not a contract between the Company and any Participant or other
employee, and participation in the Plan during one Performance Period shall not
guarantee participation during any subsequent Performance Period.
10.3 A Participant may not alienate,
assign, pledge, encumber, transfer, sell or otherwise dispose of any rights or
benefits awarded hereunder prior to the actual receipt thereof; and any attempt
to alienate, assign, pledge, sell, transfer or assign prior to such receipt, or
any levy attachment, execution or similar process upon any such rights or
benefits shall be null and void.
10.4 The Plan shall be unfunded, and no
provision shall be made at any time to segregate assets of the Company for
payment of any amounts hereunder. No Participant, beneficiary or
other person shall have any interest in any particular assets of the Company by
reason of the right to receive incentive compensation under the
Plan. Participants and beneficiaries shall have only the rights of a
general unsecured creditor of the Company.
10.5 The Plan shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to principles of conflict of laws.
10.6 If any provision of the Plan, or
any specific action of the Committee, would cause one or more Awards for Covered
Employees not to constitute “qualified performance-based compensation” under
Section 162(m) of the Code, that provision shall be construed so as to prevent
such result or, to the extent not practicable, shall be severed from and deemed
not to be part of the Plan, but the other provisions of the Plan shall remain in
full force and effect.
10.7 The Company shall deduct from any
Award or payment it makes under the Plan to a Participant or beneficiary any
taxes or other amounts required by law to be withheld.
10.8 Nothing in the Plan shall prevent
the Board or the Committee from adopting other or additional compensation
arrangements, subject to stockholder approval as may be necessary, and such
arrangements may be either generally applicable or applicable only in specific
cases.
10.9 Participants shall not be required
to make any payment or provide any consideration for Awards other than the
rendering of services.
10.10 All notices or other
communications required or given hereunder shall be in writing, delivered
personally or by overnight courier, (i) if to the Company, at the address at the
time of the corporate headquarters of the Company, Attention: Legal
Affairs and (ii) if to the Participant, at his/her address last appearing on the
books of the Company.
NEW
MOTION, INC.
PROXY FOR
ANNUAL MEETING OF STOCKHOLDERS
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, a stockholder of NEW
MOTION, INC., a Delaware corporation (the “Company”), hereby nominates,
constitutes and appoints Burton Katz or Raymond Musci, or either one of them, as
proxy of the undersigned, each with full power of substitution, to attend, vote
and act for the undersigned at the Annual Meeting of Stockholders of the
Company, to be held on June ___, 2009, and any postponements or adjournments
thereof, and in connection therewith, to vote and represent all of the shares of
the Company which the undersigned would be entitled to vote with the same effect
as if the undersigned were present, as follows:
A VOTE
FOR ALL PROPOSALS IS RECOMMENDED BY THE BOARD OF DIRECTORS:
Proposal
1. To elect the Board of Directors’ seven nominees as
directors:
|
Burton
Katz
|
Raymond
Musci
|
Lawrence
Burstein
|
Mark Dyne
|
Jerome
Chazen
|
Robert
Ellin
|
Jeffrey
Schwartz
|
¨
FOR ALL NOMINEES LISTED
ABOVE (except as marked to the contrary below)
¨
WITHHELD for all
nominees listed above
(INSTRUCTION:
To withhold authority to vote for any individual nominee, write that nominee’s
name in the space below:)
_______________________________________________________________________________
The
undersigned hereby confer(s) upon the proxies and each of them discretionary
authority with respect to the election of directors in the event that any of the
above nominees is unable or unwilling to serve.
Proposal
2. To approve an amendment to the Company’s Restated
Certificate of Incorporation to change the company’s name to Atrinsic,
Inc.:
¨
FOR
¨
AGAINST
¨
ABSTAIN
Proposal
3. To approve
the Company’s 2009 Stock Incentive
Plan
:
¨
FOR
¨
AGAINST
¨
ABSTAIN
Proposal
4. To approve
the Company’s Option Exchange
Program
:
¨
FOR
¨
AGAINST
¨
ABSTAIN
Proposal
5. To approve
the Company’s 2010 Annual Incentive
Compensation Plan
:
¨
FOR
¨
AGAINST
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ABSTAIN
The undersigned hereby revokes any
other proxy to vote at the Annual Meeting, and hereby ratifies and confirms all
that said attorneys and proxies, and each of them, may lawfully do by virtue
hereof. With respect to matters not known at the time of the
solicitation hereof, said proxies are authorized to vote in accordance with
their best judgment.
THIS
PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH ABOVE OR, TO
THE EXTENT NO CONTRARY DIRECTION IS INDICATED, WILL BE TREATED AS A GRANT OF
AUTHORITY TO VOTE FOR ALL PROPOSALS. IF ANY OTHER BUSINESS IS PRESENTED AT THE
ANNUAL MEETING, THIS PROXY CONFERS AUTHORITY TO AND SHALL BE VOTED IN ACCORDANCE
WITH THE RECOMMENDATIONS OF THE PROXIES.
The undersigned acknowledges receipt of
a copy of the Notice of Annual Meeting and accompanying Proxy Statement
dated May __, 2009, relating to the Annual Meeting.
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Dated:___________________________
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Signature:_____________________________
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Signature:_____________________________
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Signature(s)
of Stockholder(s)
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(See
Instructions Below)
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The
Signature(s) hereon should correspond exactly with the name(s) of the
Stockholder(s) appearing on the Share Certificate. If stock is held
jointly, all joint owners should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as
such. If signer is a corporation, please sign the full corporation
name, and give title of signing officer.
¨
Please indicate by
checking this box if you anticipate attending the Annual Meeting.
PLEASE
MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE
OR FAX DIRECTLY TO AMERICAN STOCK TRANSFER & TRUST COMPANY AT
718.921.8331.
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