UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A*
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. _____)
Filed
by
the Registrant
þ
Filed
by
a Party other than the Registrant
o
Check
the
appropriate box:
þ
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Preliminary
Proxy Statement
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o
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Confidential,
For Use of the
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Definitive
Proxy Statement
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Commission
Only (as permitted by
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Definitive
Additional Materials
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Rule
14a-6(e)(2)
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Soliciting
Material Pursuant to
§240.14a-12
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NEW
MOTION, INC.
(Name
of
Registrant as Specified in Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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o
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange
Act
Rule 0-11:
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(4)
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Proposed
maximum aggregate value of
transaction:
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o
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Fee
paid with preliminary materials:
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o
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement
number,
or the form or schedule and the date of its
filing.
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(1)
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Amount
previously paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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Important
Notice Regarding the Availability of Proxy materials for the
Shareholder
Meeting to Be Held On January 7, 2009
A
copy of the Proxy Statement, Proxy Card and Annual Report to Security Holders
on
Form 10-KSB
are
available at
www.Atrinsic.com/ir/financialreports.asp
NEW
MOTION, INC.
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TIME
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9:00
a.m. Eastern Time on January 7, 2009.
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PLACE
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450
7th Avenue, New York, NY 10123
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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 2008 Stock Incentive Plan;
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(4)
To approve the 2008 Annual Incentive Compensation Plan;
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(5)
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 December 1, 2008, 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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December
__
,
2008
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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 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 10118
(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 2008 Annual Meeting
of Stockholders and at any adjournments or postponements.
You
are
invited to attend our Annual Meeting of Stockholders on January 7, 2009,
beginning at
9:00
a.m.
Eastern
Time.
The meeting will be held at the company’s head office located at 469
7
th
Avenue,
New York, NY 10118.
It
is
anticipated that the 2007 Annual Report and this Proxy Statement and the
accompanying Proxy will be mailed to stockholders on or about
December
8, 2008.
Stockholders
Entitled to Vote.
Holders
of our common stock at the close of business on December 1, 2008 are entitled
to
receive this notice and to vote their shares at the Annual Meeting. As of
December 1, 2008, 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 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 2008 Stock Incentive Plan.
The
affirmative vote of a majority of the votes cast, in person or by
proxy,
will be required to approve our 2008 Stock Incentive
Plan.
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(iv)
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Approval
of 2008 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 2008 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
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Raymond
Musci
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Robert
Ellin
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Lawrence
Burstein
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Jerome
Chazen
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Mark
Dyne
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Jeffrey
Schwartz
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If
elected, the
foregoing
seven nominees
are
expected to serve until the 2009 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
November
1,
2008.
Name
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Age
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Position
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Burton
Katz
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36
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Chief
Executive Officer and Director
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Raymond
Musci
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47
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Chief
Operating Officer 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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65
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Director
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Jerome
Chazen
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81
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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
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42
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Director
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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. Since 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. Mr. Musci became
our interim Chief Operating Officer, upon the departure of our former Chief
Operating Officer, Susan Swenson on March 17, 2008. 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 Tag-It Pacific, 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 and, if elected,
Mr. Chazen will become the Chairman of our Board of Directors. Mr. Chazen 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 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 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 January2001, 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.
FURTHER
INFORMATION CONCERNING THE BOARD OF DIRECTORS
Meetings
.
The
Board
of Directors held numerous meetings during fiscal 2007, mainly by conference
calls
.
All
directors then serving attended 75% or more of all of the meetings of the Board
of Directors in fiscal 2007. While directors generally attend annual stockholder
meetings, the Company has not established a specific policy with respect to
members of the Board of Directors attending 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 4200 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 4200 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 4200 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. 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. 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.
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, 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.
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.
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 2009 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 2009 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 2009 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-KSB. 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 10118
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, 2007, 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 GP, LLC, Jay Wolf and Robert Ellin, who did not
timely file a Form 4 to report one transaction; Drew Larner who did not timely
file a Form 4 to report one transaction; Burton Katz who did not timely file
a
Form 4 to report one transaction; Barry Regenstein who did not timely file
a
Form 4 to report one transaction; Jerome Chazen who did not timely file a Form
4
to report one transaction; and Susan Swenson who did not timely file a Form
4 to
report one transaction.
EXECUTIVE
COMPENSATION
FOR YEAR ENDED DECEMBER 31, 2007
Summary
Compensation Table
The
following table provides disclosure concerning all compensation paid for
services to us in all capacities for our fiscal year ended December 31, 2007
(i)
as to each person serving as our Chief Executive Officer during our fiscal
year
ended December 31, 2007, (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, 2007, whose
compensation exceeded $100,000 and (iii) as to two other individuals, who were
not executive officers as of our fiscal year ended December 31, 2007, but were
providing services to us at such time, 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)
Chief
Executive Officer and Director
|
|
|
2007
2006
|
|
$
$
|
305,095
87,151
|
|
$
$
|
350,000
50,000
|
|
$
$
|
216,092
32,976
|
|
$
$
|
12,405
-
|
|
$
$
|
883,591
170,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond
Musci
(3)
Chief
Operating Officer and Director
|
|
|
2007
2006
|
|
$
$
|
360,000
307,500
|
|
$
$
|
75,000
-
|
|
$
$
|
-
-
|
|
$
$
|
-
-
|
|
$
$
|
435,000
307,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allan
Legator
(4)
(former
Chief Financial Officer)
|
|
|
2007
2006
|
|
$
$
|
193,397
175,833
|
|
$
$
|
25,000
34,220
|
|
$
$
|
-
-
|
|
$
$
|
10,978
21,835
|
|
$
$
|
229,375
231,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
Walker
(5)
(former
Vice President, Marketing)
|
|
|
2007
2006
|
|
$
$
|
233,244
213,541
|
|
$
$
|
-
164,408
|
|
$
$
|
53,319
-
|
|
$
$
|
66,356
33,839
|
|
$
$
|
352,919
411,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zach
Greenberger
(6)
Chief
Technology Officer and Vice President, Operations
|
|
|
2007
2006
|
|
$
$
|
201,538
-
|
|
$
$
|
-
-
|
|
$
$
|
72,111
-
|
|
$
$
|
-
-
|
|
$
$
|
273,649
-
|
|
(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 5.0%, (b) dividend yield of 0.0%, (c) expected option
life of seven years, and (d) expected volatility of 86%. For further
information, refer to Note 11 - "Stock Based Compensation," in our
Consolidated Financial Statements, incorporated in our Annual Report
on
Form 10-KSB and filed with the SEC on March 31, 2008, and hereby
incorporated by reference.
|
(2)
|
During
2006 and 2007, Mr. Katz was subject to an employment agreement, the
terms
of which are described below. Effective February 4, 2008, Mr. Katz
is
subject to a new employment agreement, the terms of which are described
below. In August 2006, Mr. Katz was granted an option to purchase
363,184
shares of common stock at an exercise price of $2.34. In February
2007,
Mr. Katz was granted an option to purchase 81,250 shares of common
stock
at an exercise price of $6.00. Other compensation paid to Mr. Katz
consisted of payments related to an auto allowance, pursuant to the
terms
of his employment agreement described
below.
|
(3)
|
Raymond
Musci was serving as New Motion’s President as of our year ended December
31, 2007, our most recently completed fiscal year. Mr. Musci resigned
from
such position upon the closing of New Motion’s merger with Traffix, Inc.
on February 4, 2008. Mr. Musci currently serves as our Chief Operating
Officer.
|
(4)
|
Mr.
Legator was previously party to an employment agreement with us,
the terms
of which are described below. Mr. Legator’s employment agreement expired
in accordance with its terms, and Mr. Legator is no longer with the
company. Other compensation paid to Mr. Legator listed in the summary
compensation table consisted of payments related to an auto allowance,
pursuant to the terms of his employment agreement described
below.
|
(5)
|
Scott
Walker was previously party to an employment agreement with us, the
terms
of which are described below. Mr. Walker’s employment agreement expired in
accordance with its terms and Mr. Walker is no longer with the company.
In
February 2007, Mr. Walker was granted a five year option to purchase
37,500 shares of common stock at an exercise price of $6.60. Other
compensation paid to Mr. Walker listed in the summary compensation
table
consisted of payments related to an auto allowance, pursuant to the
terms
of his employment agreement described below, and commission payments
on
third party leads Mr. Walker generated for the
company.
|
(6)
|
Zach
Greenberger is subject to an employment agreement, the terms of which
are
described below. In February 2007, Mr. Greenberger was granted an
option
to purchase 50,000 shares of common stock at an exercise price of
$6.00.
|
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 2007. 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
2007, as reported in the compensation tables set forth above.
Determination
of Compensation
The
Compensation Committee of the Board of Directors is primarily 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.
Generally,
the Compensation Committee reviews and discusses the recommendations of the
Chief Executive Officer regarding the compensation of our Named Executive
Officers, evaluates the performance of our Named Executive Officers and, based
upon the Chief Executive Officer’s recommendations and such evaluation,
recommends their compensation to the independent members of the Board for
determination. The Chief Executive Officer makes recommendations to the
Compensation Committee regarding compensation for all of the Named Executive
Officers, other than for himself. For executive officers other than the Named
Executive Officers, the Chief Executive Officer generally determines
compensation levels, in most cases upon the recommendation of supervising
executives. In addition, the Compensation Committee or our full board of
directors approves all equity awards, including for the Named Executive Officers
and other officers, considering the recommendations of senior management. In
certain circumstances where recommending compensation decisions to the Board
would impair tax deductibility of executive compensation, the Compensation
Committee makes final decisions on Named Executive Officer compensation.
Although
management and any other invitees at Compensation Committee meetings may
participate in discussions and provide information that the Compensation
Committee considers (except for discussions with respect to any invitee’s own
compensation, in which an executive does not participate), invitees do not
participate in voting and decision-making.
With
respect to the Chief Executive Officer’s compensation, for fiscal year 2007 the
Compensation Committee of our Board of Directors made a recommendation to the
independent members of our Board of Directors, except with respect to those
elements of the Chief Executive Officer’s compensation that the Committee is
required to determine itself in order to preserve the deductibility of
compensation under Section 162(m) of the Internal Revenue Code. The independent
members of our Board of Directors then set the amount of the Chief Executive
Officer’s compensation, other than the elements set by the Committee, as
described in the prior sentence.
In
establishing recommendations for, or determining, the compensation of the Named
Executive Officers, the Compensation Committee considers not only the
recommendations of the Chief Executive Officer, but also objective measurements
of business performance, the accomplishment of strategic and financial
objectives, the development of management talent within our company, enhancement
of shareholder value and other matters relevant to our short-term and long-term
success.
The
following is a summary of the Compensation Committee’s actions during 2007 with
respect to annual base salary, annual performance-based, or
discretionary, cash bonus awards, and long-term equity incentive
compensation awards.
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. With regard to the annual
review of base salaries for the Named Executive Officers, the Compensation
Committee considered a number of financial and non-financial factors in
reviewing individual performance, some of which are not applicable to all of
the
Named Executive Officers due to their respective roles with our company. The
financial factors considered in 2007 included the individual’s contribution to
the increase in our company’s revenues, subscriber count and their impact on the
generation of EBITDA (earnings before interest, taxes, depreciation and
amortization) coupled with growing a subscription based business. The
non-financial factors considered by the Compensation Committee in 2007 included
duties and responsibilities of the executive’s position, ability to effectively
perform and/or exceed expectations with respect to duties and responsibilities
that accompany such position, tenure in the role, subscription growth, and
general discretionary considerations as the Compensation Committee deemed
appropriate in the circumstances to motivate, retain and otherwise continue
to
extract exemplary effort from our executives.
The
Compensation Committee reviews base salaries annually and on a case by case
basis makes adjustments, in light of past individual performance as measured
by
both financial and non-financial factors, the potential for making significant
contributions in the future, all within the boundaries of governing employment
contracts, where applicable, to ensure that salary levels remain appropriate
and
competitive.
The
base
salary for Mr. Katz, our Chief Executive Officer was increased in 2007 from
an
annual base salary of $300,000 to $315,000 per year. Prior to this increase,
Mr. Katz’s annual base salary was set in accordance with the terms of his
old employment agreement entered into on August 28, 2006, which provided for
an
annual base of $300,000 with guaranteed increases of at least 5% after each
12-month period during the contract term. In fiscal 2007, the annual base
salary, or consulting fees paid to Mr. Musci, our former President and our
current Chief Operating Officer, increased $52,500 from $307,500 to $360,000
as
a result of fewer months worked in fiscal 2006 when compared to fiscal
2007. In 2007, Mr. Legator, our former Chief Financial Officer, received a
$17,600 increase in his base salary from $175,833 to $193,397 as a function
of
the terms of his employment agreement (with such annual increase becoming
effective June 1, 2007). Mr. Walker, our former Vice President, Marketing,
received a $19,700 increase in his base salary in 2007 from $213,541 to $233,244
as a function of the terms of his employment agreement (with such annual
increase becoming effective June 1, 2007). Mr. Zach Greenberger became an
employee on December 28, 2006, and as such did not receive a salary increase
in
fiscal 2007.
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 managements’ 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 2007, paid in the first quarter
of 2008, were based on specific performance criteria established by the
Compensation Committee for 2007. Annual performance-based cash bonuses for
2007
were awarded to: (i) Mr. Katz in an amount equal to $350,000, which
was granted at the discretion of the Compensation Committee in accordance with
its policies, (ii) Mr. Musci in an amount equal to $75,000, which was
granted at the discretion of the Compensation Committee in accordance with
its
policies and (iii) Mr. Legator in an amount equal to $25,000, which
was granted at the discretion of the Compensation Committee in accordance with
its policies. No other named executive officer received annual cash bonuses
in
fiscal 2007.
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 2007, 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, in 2007 the
Compensation Committee 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 2008 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, 2007
The
following table presents information regarding outstanding options held by
the
company’s named executive officers as of December 31, 2007.
|
|
|
|
Equity Incentive Plan
|
|
|
|
|
|
|
|
Number of Securities
Underlying Unexercised
Options (#) that are:
|
|
Awards:
Number of Securities Underlying
Unexercised and
|
|
Option
Exercise Price
|
|
Option
|
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Unearned Options
|
|
Range ($)
|
|
Expiration Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Burton
Katz
(1)
|
|
|
161,415
|
|
|
—
|
|
|
283,019
|
|
$
|
3.01
|
|
|
10/06/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allan
Legator
(2)
|
|
|
242,123
|
|
|
—
|
|
|
48,425
|
|
$
|
0.48
|
|
|
11/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
Walker
(3)
|
|
|
—
|
|
|
—
|
|
|
37,500
|
|
$
|
6.60
|
|
|
02/04/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zach
Greenberger
(4)
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
$
|
6.00
|
|
|
02/03/18
|
|
(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 which, among other terms, requires 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.
|
(2)
|
On
June 1, 2005, Mr. Legator was granted an option to purchase 290,548
shares
of common stock at a per share exercise price of $0.48. This option
has a
ten year term and vests as follows: 33.3% of the shares subject to
the
option vested on the first anniversary of its grant date, and the
remaining 66.7% of the shares subject to the option vest monthly
over the
next 24 months thereafter. Subsequent to December 31, 2007, Mr. Legator
exercised options to purchase 290,548 shares of common
stock.
|
(3)
|
On
March 8, 2007, Mr. Walker was granted an option to purchase 37,500
shares
of the common stock at a per share exercise price of $6.60. This
option
had a five year term and vested as follows: 33.3% of the shares subject
to
the option vested on the first anniversary of its grant date, and
the
remaining 66.7% of the shares subject to the option vest monthly
over the
next 24 months thereafter.
|
(4)
|
On
June 1, 2007, Mr. Greenberger was granted an option to purchase 50,000
shares of common stock at a per share exercise price of $6.00. This
option
has a ten year term and vests as follows: 33.3% of the shares subject
to
the option vest on the first anniversary of its grant date, and the
remaining 66.7% of the shares subject to the option vest monthly
over the
next 24 months thereafter.
|
Employment
Agreements
The
following section describes employment agreements which we were party to in
2007
with our Named Executive Officers. Mr. Katz is now party to a new employment
agreement with us, which is described below, and the employment agreements
of
Mr. Legator and Mr. Walker expired in accordance with their terms. Mr.
Greenberg’s employment agreement is still in effect. The employment agreements
are being described to give the reader further understanding of our compensation
paid to our Named Executive Officers during our fiscal year ended December
31,
2007.
Burton
Katz
Burton
Katz was party to an Employment Agreement dated August 28, 2006 with New Motion
Mobile, Inc., our wholly owned subsidiary, which agreement was terminated.
Mr.
Katz's Employment Agreement had a term of three years which term could be
extended through December 31, 2009. Mr. Katz's Employment Agreement provided
for
an annual base salary of $300,000 with a guaranteed increase of at least 5%
after each 12-month period during the term, and also provided for an advance
of
$30,000 for relocation expenses which amount (or a portion thereof) had to
be
repaid by Mr. Katz in the event that Mr. Katz did not remain employed with
the
Company through the entire initial term of the Employment Agreement. Mr. Katz's
Employment Agreement also provided that Mr. Katz would be eligible for a bonus
of up to 30% (but no less than $50,000) of the amount set aside by New Motion
Mobile, based on its earnings before interest and taxes, for payment to
executives. Mr. Katz was also entitled to receive an allowance of $1,000 per
month for costs associated with the lease or purchase, maintenance and insurance
of an automobile, and an additional allowance of $300 per month for costs
associated with the use of cellular equipment and mobile communication service
or subscription fees. Upon the termination of Mr. Katz' employment with New
Motion Mobile for good reason or without cause, Mr. Katz was entitled to receive
the base salary that would have been paid to Mr. Katz from the date of
termination of his service through the expiration of his Employment Agreement,
continued healthcare coverage for the same period, and a pro-rated portion
of
any bonus that would have been earned by Mr. Katz during the fiscal year in
which his employment terminated. Mr. Katz agreed not to solicit New Motion
Mobile's customers, suppliers, employees or licensors for a period terminating
on the earlier of two years after the termination of Mr. Katz employment with
New Motion Mobile or June 30, 2011.
Allan
Legator
Allan
Legator was party to an Employment Agreement dated October 1, 2005 with New
Motion Mobile which we assumed upon the closing of our exchange transaction
with
New Motion Mobile. Mr. Legator's Employment Agreement expired on June 1, 2008.
Mr. Legator's Employment Agreement provided that Mr. Legator was eligible to
receive an annual bonus of up to $120,000 based on an accrual of 1% of each
calendar month's net profits as determined in accordance with generally accepted
accounting principles. Mr. Legator was also entitled to reimbursement for costs
associated with the lease or purchase, maintenance and insurance of an
automobile in an amount of up to $800 per month, and reimbursement of an
additional amount of up to $300 per month for costs associated with the use
of
cellular equipment and mobile communication service or subscription fees. Upon
the termination of Mr. Legator's employment with us without cause, Mr. Legator
was entitled to receive the base salary and the bonus that would have been
paid
to Mr. Legator from the date of termination of his service through the
expiration of the initial term of his Employment Agreement. After the expiration
of his Employment Agreement, upon the termination of Mr. Legator's employment
with us without cause, Mr. Legator is entitled to receive one month's pay at
Mr.
Legator's then current base salary.
Scott
Walker
Scott
Walker was party to an Employment Agreement dated March 8, 2007 with us which
expired on June 1, 2008. Mr. Walker's Employment Agreement provided that Mr.
Walker would be eligible to participate in our Management Incentive Program,
pursuant to which we would set aside in a fund each fiscal year for payment
to
Mr. Walker and other members of management an amount based upon our EBIT for
such fiscal year. The portion of the fund payable to Mr. Walker would be
determined in the sole discretion of the Board. Pursuant to the agreement,
Mr.
Walker also received an option to purchase 37,500 shares of our common stock
at
an exercise price per share of $6.60, however, all options to purchase our
equity securities which were previously granted to Mr. Walker were cancelled
pursuant to the terms of the Employment Agreement. The Employment Agreement
also
entitled Mr. Walker to reimbursement for costs associated with the lease or
purchase, maintenance and insurance of an automobile in an amount of up to
$1,200 per month, and reimbursement of an additional amount of up to $300 per
month for costs associated with use of cellular equipment and mobile
communication service or subscription fees. Upon the termination of Mr. Walker's
employment with us without cause, Mr. Walker was entitled to receive the base
salary and the bonus that would have been paid to Mr. Walker from the date
of
termination of his service through the expiration of the initial term of his
Employment Agreement. After the expiration of his Employment Agreement, upon
the
termination of Mr. Walker's employment with us without cause, Mr. Walker was
entitled to receive one month's pay at Mr. Walker's then current base salary.
Zach
Greenberger
Zach
Greenberger is party to an Employment Agreement dated December 28, 2006 with
New
Motion Mobile which we assumed upon the closing of our exchange transaction
with
New Motion Mobile. Mr. Greenberger's Employment Agreement terminates on December
28, 2008. For the term of Mr. Greenberger’s Employment Agreement his base salary
will remain at $200,000. Mr. Greenberger’s Employment Agreement also provides
that Mr. Greenberger will be eligible to receive an annual bonus of up to
$45,000 based on certain measurements tied into “on-target marketing.” In fiscal
2007, no such bonus was paid. Mr. Greenberger is also entitled to reimbursement
for costs up to $200 per month for costs associated with the use of cellular
equipment and mobile communication service fees. Upon the termination of Mr.
Greenberger's employment with us without cause, Mr. Greenberger was entitled
to
receive two times his target bonus if the termination occurred in the first
year
of the term; if the termination occurs in the second year of the term, Mr.
Greenberger will receive the higher of his target annual bonus or annual bonus
earned the previous year; in both cases all unvested stock options will
accelerate.
Director
Compensation
For The Fiscal Year Ended December 31, 2007
During
our fiscal year ended December 31, 2007, our non-employee directors did not
receive any cash compensation for their services on our board. We do not pay
management directors for board service in addition to their regular employee
compensation. During 2007, we compensated our non-employee directors with stock
options. In addition, we reimburse directors for travel expenses associated
with
attendance at Board meetings; during our fiscal year ended December 31, 2007
such expenses were immaterial.
Name
|
|
Fees Earned
or
Paid in Cash
|
|
Stock
Awards
|
|
Option
Awards
|
|
All Other
Compensation
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerome
Chazen
(1)
|
|
$
|
-
|
|
$
|
-
|
|
$
|
216,332
|
|
$
|
-
|
|
$
|
216,332
|
|
Drew
Larner
(2)
|
|
$
|
-
|
|
$
|
-
|
|
$
|
108,166
|
|
$
|
-
|
|
$
|
108,166
|
|
Barry
Regenstein
(3)
|
|
$
|
-
|
|
$
|
-
|
|
$
|
108,166
|
|
$
|
-
|
|
$
|
108,166
|
|
Gil
Klier
(4)
|
|
$
|
-
|
|
$
|
-
|
|
$
|
88,009
|
|
$
|
-
|
|
$
|
88,009
|
|
Isaac
Kier
(5)
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
(1)
|
On
February 16, 2007, Mr. Chazen was granted an option to purchase 50,000
shares of common stock at a per share exercise price of $6.00. This
option
has a ten year term and vested ratably over 12
months.
|
(2)
|
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. This
option
has a ten year term and was scheduled to vest ratably over 12 months.
Subsequent to year end, Mr. Larner's options were accelerated so,
that as
of February 4, 2008, all of these options are fully vested and
exercisable. Mr. Larner resigned upon the closing of our merger with
Traffix, Inc.
|
(3)
|
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. This
option
has a ten year term and was scheduled to vest ratably over 12 months.
Subsequent to year end, Mr. Regenstein's options were accelerated
so, that
as of February 4, 2008, all of these options are fully vested and
exercisable. Mr. Regenstein resigned upon the closing of our merger
with
Traffix, Inc.
|
(4)
|
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. Subsequent to year end, Mr. Klier's options were accelerated
so,
that as of February 4, 2008, all of these options are fully vested
and
exercisable. Mr. Klier resigned upon the closing of our merger with
Traffix, Inc.
|
(5)
|
Mr.
Kier resigned as a director on January 24, 2007. Mr. Kier received
no
compensation for his services as a
director.
|
Securities
Authorized for Issuance Under Equity Compensation Plans
The
following table sets forth certain information regarding our equity compensation
plans as of December 31, 2007.
|
|
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
|
|
|
1,145,677
|
|
$
|
2.94
|
|
|
254,323
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
677,627
|
|
$
|
3.73
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,823,304
|
|
$
|
3.24
|
|
|
254,323
|
|
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
363,185 shares of our common stock at a per share exercise price of $2.34.
This
option vests as follows: 33.3% of the shares subject to the option vested on
August 1, 2007 and the remaining 66.7% of the shares subject to the option
vest
monthly over the next 24 months thereafter.
In
2006,
we issued Secured Convertible Notes to Scott Walker and SGE, a corporation
owned
by Allan Legator, the Company’s 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,
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.
EXECUTIVE
COMPENSATION FOR FISCAL YEAR 2008
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. In setting compensation
levels, consideration is 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 shares and have
predictable expense recognition. 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
|
Consistent
with the above compensation philosophy, we have entered into Employment
Agreements with each of Burton Katz, our Chief Executive Officer, Andrew
Stollman, our President, and Andrew Zaref, our Chief Financial Officer, which
include each of the primary compensation components outlined above. The
following is a description of the aforementioned employment agreements with
each
of Mssrs. Katz, Stollman and Zaref that are effective in 2008:
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 will determine the performance of Mr. Katz against two quantitative
measures, EBITDA and net sales, and one qualitative measure, the Integration
of
Traffix, Inc. into New Motion. A cash bonus ranging from $0 to $637,500 may
be
earned by Mr. Katz for the fiscal year ending December 31, 2008 depending on
Mr.
Katz’s performance against the aforementioned performance metrics.
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.
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. Mr. Katz’s RSUs shall 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
equals or exceeds $15. The remaining 175,000 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 $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.
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, 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 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 will determine the performance of Mr. Stollman against
two quantitative measures, EBITDA and net sales, and one qualitative measure,
the Integration of Traffix, Inc. into New Motion. A cash bonus ranging from
$0
to $637,500 may be earned by Mr. Stollman for the fiscal year ending December
31, 2008 depending on Mr. Stollman’s performance against the aforementioned
performance metrics.
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.
Restricted
Stock Units
Upon
the
closing of the Merger, New Motion agreed to issue Mr. Stollman restricted stock
units 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. Mr. Stollman’s RSUs shall 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 equals or exceeds $15. The remaining 175,000 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
$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.
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, 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 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.
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 will determine the performance of Mr. Zaref against
two
quantitative measures, EBITDA and net sales. A cash bonus ranging from $0 to
$200,000 may be earned by Mr. Zaref for the fiscal year ending December 31,
2008
depending on Mr. Zaref’s performance against the aforementioned performance
metrics.
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.
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”). Mr. Zaref’s RSUs shall 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 equals or exceeds $15. The remaining 100,000 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 $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.
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, 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 shall automatically vest,
and
remain exercisable for a period of one year after such termination.
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
role
of the Audit Committee is to oversee the Company’s financial reporting processes
on behalf of the Board of Directors. 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 2007, the Audit Committee:
|
·
|
Reviewed
and discussed the audited financial statements for the year ended
December 31, 2007 with management and Windes & McClaughry
Accountancy Corporation
(the
“Auditors”), the Company’s independent auditors at the
time;
|
|
·
|
Reviewed
and discussed with the Auditors the matters required to be discussed
by
Statement on Auditing Standards No. 61 (Communication with Audit
Committees);
|
|
·
|
Received
written disclosures and the letter from the Auditors regarding its
independence as required by Independence Standards Board Standard
No. 1. The Audit Committee discussed with the Auditors their
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-KSB
for the year ended December 31, 2007, for filing with the SEC.
Audit
Committee
|
Robert Machinist, Chairman
|
Larry 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.
Change
in Auditors
(a)
Previous
Independent Registered Public Accounting Firm
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.
(b)
New
independent registered public accounting firm
We
engaged McGladrey & Pullen, LLP as our new 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. During
the
two most recent fiscal years and through May 7, 2008, New Motion has not
consulted with McGladrey & Pullen, 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 McGladrey &
Pullen, LLP that McGladrey & Pullen, 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.
|
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. The Company’s audit committee approved in advance,
all services performed by Windes & McClaughry. 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. Prior to February 12, 2007, the principal auditors of the Company
were
Carlin, Charron & Rosen, LLP.
The
following table sets forth fees billed to us by our auditors during the last
two
fiscal years 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, 2006
|
|
December 31, 2007
|
|
Audit Fees
|
|
$
|
181,315
|
|
$
|
280,000
|
|
Audit-related
fees
|
|
|
-
|
|
|
-
|
|
Tax
fees
|
|
$
|
4,000
|
|
$
|
126,000
|
|
All
other fees
|
|
|
-
|
|
$
|
103,000
|
|
Audit
fees include $82,000 of fees billed by Windes & McClaughry for accounting
services related to the review of our quarterly financial statements.
All
other
fees 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.
Tax
fees
billed in 2006 and 2007, for $4,000 and $126,000, respectively, were for tax
return preparation and financial statement tax disclosure for New Motion and
was
performed by Deloitte and Touche, LLP.
The
Company’s audit committee was directly responsible for interviewing and
retaining the independent accountant, considering the accounting firm’s
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
accountant. 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, 2006, 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 assets at year-end for the last three completed fiscal
years; and
|
|
·
|
in
which any 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 the 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 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.
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.
Raymond
Musci was party to a Contractor Agreement with New Motion Mobile dated January
11, 2006. Under the terms of the Contractor Agreement, Mr. Musci was entitled
to
receive a fee of $30,000 per month for services rendered under the Contractor
Agreement. Mr. Musci received a fee of $307,500 under the terms of the
Contractor Agreement during fiscal 2006. Mr. Musci is now an at-will employee
of
New Motion.
Transactions
with Promoters and Control Per
sons
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 November 1, 2008. 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 November 1, 2008 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 22,482,908 shares of our common
stock outstanding on November 1, 2008. 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 10118. 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)
|
|
|
2,313,170
|
|
|
10.3
|
%
|
Andrew
Stollman (2)
|
|
|
946,757
|
|
|
4.1
|
%
|
Raymond
Musci
|
|
|
435,821
|
|
|
1.9
|
%
|
Burton
Katz (3)
|
|
|
412,827
|
|
|
1.8
|
%
|
Lawrence
Burstein (4)
|
|
|
98,866
|
|
|
*
|
|
Jerome
Chazen (5)
|
|
|
50,793
|
|
|
*
|
|
Andrew
Zaref
|
|
|
-
|
|
|
-
|
|
Jeffrey
Schwartz
|
|
|
-
|
|
|
-
|
|
All
Executive Officers and Directors as a Group (9 persons) (6)
|
|
|
4,258,234
|
|
|
18.1
|
%
|
|
|
|
|
|
|
|
|
5%
Shareholders:
|
|
|
|
|
|
|
|
Jeffrey
Akres (7)
|
|
|
2,773,900
|
|
|
12.3
|
%
|
MPLC
Holdings, LLC (7)
|
|
|
2,738,359
|
|
|
12.2
|
%
|
Name
of Beneficial Owner
|
|
Number of Shares
Beneficially
Owned
|
|
Percentage of
Shares
Outstanding
|
|
Jay A. Wolf (1)
|
|
|
2,329,836
|
|
|
10.4
|
%
|
Trinad
Capital Master Fund, Ltd. (1)
|
|
|
2,313,170
|
|
|
10.3
|
%
|
Scott
Walker (8)
|
|
|
1,625,215
|
|
|
7.2
|
%
|
Destar,
LLC (9)
|
|
|
1,237,116
|
|
|
5.5
|
%
|
*
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, which are being
registered for re-sale on this prospectus. 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
503,672 shares of Common Stock issuable upon the exercise of options
held
by Mr. Stollman.
|
(3)
|
Includes
412,827 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
3,203,010 shares of Common Stock and 1,055,224 shares of Common Stock
issuable upon the exercise of options held by our executive officers
and
directors. See footnotes (1) through (5) above.
|
(7)
|
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.
|
(8)
|
Includes
1,590,000 shares of Common Stock, 14,382 shares of Common Stock that
may
be acquired upon the exercise of outstanding warrants at an exercise
price
of $3.44, and 20,828 shares of Common Stock issuable upon the exercise
of
options held by Mr. Walker. Subsequent to November 1, 2008, Scott
Walker
sold 791,954 shares in a private
sale
|
(9)
|
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.
|
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 2008 STOCK INCENTIVE PLAN
Proposal
3 is the adoption of the New Motion, Inc. 2008 Stock Incentive Plan (the “2008
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 2008 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 2008 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 November 1, 2008, only 246,300 shares remained eligible
for
grant under the 2007 Plan. Accordingly, the Board of Directors adopted the
2008
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 2008 Plan is not approved by shareholders, it will not
be
implemented in the form proposed.
The
2008
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 2008 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 November
1,
2008. These grants consists 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, 2007,
see “Securities Authorized for Issuance Under Equity Compensation Plans” above.
|
|
November 1,
2008
|
|
Shares available
under 2007 Plan
|
|
|
246,300
|
|
|
|
|
|
|
Shares
underlying awards granted and outstanding:
|
|
|
1,153,700
|
|
|
|
|
|
|
Stock
options (unexercised)
|
|
|
768,700
|
|
|
|
|
|
|
Total
|
|
|
1,400,000
|
|
|
|
|
|
|
Weighted
average exercise price for outstanding options
|
|
$
|
8.21
|
|
|
|
|
|
|
Weighted
average remaining term for outstanding options
|
|
|
8.7
years
|
|
Summary
of the 2008 Stock Incentive Plan
The
following summary briefly describes the principal features of the 2008 Plan,
and
is qualified in its entirety by reference to the full text of the 2008 Plan.
Plan
Term:
|
|
August
12, 2008 to August 12, 2018
|
|
|
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 2008 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
2008 Plan will be administered by the Board of Directors, or the Board may
delegate authority for administering the 2008 Plan to a committee of the Board,
which would be the Compensation Committee. If the Board delegates authority
to
the Compensation Committee, the 2008 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 2008 Plan is referred to
in
this proposal as the “Administrator.” We will bear the expenses for
administering the 2008 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 2008 Plan, establish the terms, conditions, and other
provisions of the grants. The Administrator may interpret the 2008 Plan and
establish, amend, and rescind any rules related to the 2008 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 2008 Plan to an officer or
officers.
Types
of Awards
.
The
2008 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 2008 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 2008 Plan may be granted
non-statutory stock options or restricted stock purchase awards, only employees
may be granted incentive stock options. As of November 1, 2008, there were
approximately 207 employees and four non-employee directors that would be
potentially eligible to participate in the 2008 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 2008 Plan. Shares that are forfeited or cancelled shall
not be considered to have been delivered under the 2008 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 2008 Plan. The Administrator will
administer the appropriate methodology for calculating the number of shares
of
common stock issued pursuant to the 2008 Plan in accordance with the foregoing.
Vesting
and Exercise of Stock Options and SARs
.
The
exercise price of stock options granted under the 2008 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 2008 Plan. Similar terms
and
limitations apply to SARs under the 2008 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,
2007, 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 2008
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 2008 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 2008 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 2008 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 2008
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 2008 Plan;
|
|
·
|
change
the class of persons eligible to participate in the 2008 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
2008 Plan, and subject to the various limitations set forth in the 2008 Plan,
the number and kind of shares subject to outstanding awards under the 2008
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
2008 Plan will be specified in the agreement related to the merger or
reorganization, subject to the limitations and restrictions set forth in the
2008 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 2008 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 2008 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 2008 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 2008 Plan by a
Committee of the Board consisting solely of two or more “outside directors” (as
defined under Section 162 regulations) and satisfy the 2008 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 2008 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 2008 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 2008 Plan is designed to comply with Rule
16b-3.
New
Plan Benefits
Because
awards under the 2008 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. No awards, including awards contingent
upon obtaining stockholder approval of the 2008 Plan, have been made under
the
2008 Plan. However, 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 2008 Plan.
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, 2007, see “Securities Authorized for Issuance Under
Equity Compensation Plans” above.
Required
Vote
The
approval of the 2008 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. The Board of Directors
is of the opinion that the 2008 Plan is in the best interests of New Motion
and
its stockholders and recommends a vote for the approval of the 2008 Plan. All
proxies will be voted to approve the 2008 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 2008
STOCK INCENTIVE PLAN.
ITEM
4:
PROPOSAL
TO ADOPT THE 2008 ANNUAL INCENTIVE COMPENSATION PLAN
Proposal
4 is the adoption of the New Motion, Inc. 2008 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 2008 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 August 12, 2008, the Board of
Directors adopted the 2008 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 2008 Plan is not approved
by shareholders, it will not be implemented in the form proposed.
Summary
of the 2008 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.
Plan
Term:
|
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January
1, 2008 to December 31, 2013
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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.
|
Performanced
Based Goals:
|
|
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:
|
|
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.
|
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. Notwithstanding the foregoing, for the fiscal year
ending December 31, 2008, the Compensation Committee will determine the
performance of each participant against two quantitative measures, EBITDA and
net sales, and, at the discretion of the Compensation Committee, one qualitative
measure, the Integration of Traffix, Inc. into New Motion, based on results
for
the period January 1, 2008 to December 31, 2008.
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, 2008.
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 2008 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. 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 2008
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.
2009
STOCKHOLDER PROPOSALS
Any
stockholder who intends to present a proposal at the 2009 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 September 10, 2009. In addition, in the event
a
stockholder proposal is not received by the Company by December 24, 2009, the
Proxy to be solicited by the Board of Directors for the 2009 Annual Meeting
will
confer discretionary authority on the holders of the Proxy to vote the shares
if
the proposal is presented at the 2009 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 2009 Annual Meeting is
advanced or delayed more than 30 days from the date of the 2008 Annual Meeting,
stockholder proposals intended to be included in the proxy materials for the
2009 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 2009
Annual Meeting. Upon determination by the Company that the date of the 2009
Annual Meeting will be advanced or delayed by more than 30 days from the date
of
the 2008 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-KSB
THE
COMPANY’S ANNUAL REPORT ON FORM 10-KSB, AS AMENDED, WHICH HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 2007,
WILL BE MADE AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST
TO
NEW MOTION, INC., 42 CORPORATE PARK, SUITE 250, IRVINE, CALIFORNIA 92606, ATTN:
ANDREW ZAREF.
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ON
BEHALF OF THE BOARD OF DIRECTORS
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December
__, 2008
|
Burton
Katz
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Chief
Executive Officer
|
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.
2008
STOCK INCENTIVE PLAN
1.
Purposes
of the Plan
.
The
purposes of the New Motion, Inc. 2008 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 2008 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
.
|
(i)
|
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)
|
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)
|
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).
|
|
(iv)
|
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.
|
(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:
|
(i)
|
to
prescribe, amend and rescind rules and regulations relating to this
Plan
and to define terms not otherwise defined herein;
|
|
(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;
|
|
(iii)
|
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;
|
|
(iv)
|
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;
|
|
(v)
|
to
prescribe and amend the terms of the agreements or other documents
evidencing Awards made under this Plan (which need not be identical);
|
|
(vi)
|
to
determine whether, and the extent to which, adjustments are required
pursuant to Section 10;
|
|
(vii)
|
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)
|
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 August 12, 2008 and became effective, subject
to shareholder approval, on the same date. The Plan shall remain available
for
the grant of Awards until August 12, 2018 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.
2008
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, 2008.
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. 2008 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. Notwithstanding the foregoing, for the year
2008,
the Committee shall determine performance of each Participant against two
quantitative measures, EBITDA and net sales, and, at the discretion of the
Committee, one qualitative measure, the Integration of Traffix into New Motion,
based on results for the period January 1, 2008 to December 31,
2008.
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 January 7, 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 2008 Stock Incentive Plan
:
¨
FOR
|
|
¨
AGAINST
|
|
¨
ABSTAIN
|
Proposal
4. To approve
the
Company’s 2008 Annual Incentive Compensation Plan
:
¨
FOR
|
|
¨
AGAINST
|
|
¨
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 December__
,
2008,
relating to the Annual Meeting.
Dated:
|
|
|
|
Signature:
|
|
|
|
Signature:
|
|
Signature(s)
of Stockholder(s)
|
(See
Instructions Below)
|
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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