Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “Agreement”) is made effective as of September 9,
2014 (the “Effective Date”), by and among Mandalay Digital Group, Inc., a
Delaware corporation (the “Employer”), and William Stone (the “Executive”). In
consideration of the mutual covenants contained in this Agreement, the Employer
and the Executive agree as follows:

 

1.            Employment. The Employer agrees to employ the Executive, and the
Executive agrees to be employed by the Employer on the terms and conditions set
forth in this Agreement.

 

2.            Capacity. The Executive currently serves as President and Chief
Operating Officer of the Employer and Chief Executive Officer of the Employer’s
wholly owned subsidiary, Digital Turbine, Inc., pursuant to an offer letter
dated November 24, 2013 (the “Prior Agreement”). The Executive will continue in
his current roles until such date as he is notified by the Compensation
Committee of the Employer’s Board of Directors (the “Board of Directors”) that
the change in capacity contemplated by this Section 2 has taken effect, but in
any event such change shall take place not later than October 2, 2014 (the
“Transition Date”). Effective on the Transition Date, the Executive shall be
appointed and shall serve the Employer as its Chief Executive Officer, with the
sole title “Chief Executive Officer” of Mandalay Digital Group, Inc., and with
the corresponding duties for Employer’s entire organization and all of its
subsidiaries. Subject to the discretion of the Nominating Committee of the Board
of Directors, on the Transition Date Executive shall be appointed to serve as a
member of the Board of Directors without additional compensation, and shall
(subject to the discretion of the Nominating Commitee) be nominated for
re-election at each annual stockholder meeting for the election of directors
that occurs during the Term (as defined below), subject to stockholder approval
at each such annual meeting of stockholders. At the end of the Term, Executive
shall offer to resign from the Boards of Directors and any similar body at a
subsidiary of the Employer. As Chief Executive Officer, the Executive shall be
responsible for the general supervision, management and control of the
Employer’s and its subsidiaries’ business, subject to the direction of the Board
of Directors. The Executive shall report directly to the Board of Directors.
Executive represents he is and at all times during the Term will be legally
present and entitled to work in the United States.

 

3.            Term. Subject to the provisions of Section 6, the term of
employment pursuant to this Agreement shall commence on the Transition Date and
shall continue through the period ending two (2) years, i.e., twenty-four (24)
calendar months, following the Transition Date (the “Term”).

 

4.            Compensation and Benefits. The regular compensation and benefits
payable to the Executive under this Agreement shall be as follows:

 

(a)          Salary. For all services rendered by the Executive under this
Agreement, the Employer shall pay the Executive a salary (the “Salary”) at the
annual rate of Five Hundred Thousand Dollars ($500,000). The Executive’s Salary
shall be payable in periodic installments in accordance with the Employer’s
usual practice for its employees, but in no event less often than monthly over
the year in which the Salary is earned.

 

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(b)          Annual Bonus.

 

(i)          Effective for the period April 1, 2014 through the Transition Date,
Executive shall be entitled to be paid such cash bonus as he would have been
entitled to under Section 2(b)(i) of the Prior Agreement (and applying the same
targets that had been established by the Board of Directors to achieve such
bonus) had such agreement been in effect for all of such period (it being
understood that such bonus shall be pro-rated based on the number of days in the
aforementioned period divided by 365). This subsection entirely replaces Section
2(b)(i) of the Prior Agreement and except as implemented by this subjection, no
bonus is or will be due thereunder.

 

(ii)          Effective for the Stub Period, the Year 1 Period and the Year 2
Period (each, as defined in Schedule A), the Executive shall be eligible to be
paid an annual incentive bonus in cash in an amount of up to one hundred fifty
percent (150%) of the Executive’s Salary with respect to the applicable period
subject to satisfaction of performance-related milestones, as specified on
Schedule A.

 

(iii)          One half (1/2) of all bonus amounts due under subsection (b)(i)
and (b)(ii) of this Section 4 shall be paid within thirty (30) days of the
Employer’s fiscal year end based upon a good faith estimate of the relevant
financial measurements provided by management to the Compensation Committee
prior to completion of the annual audit and reasonably approved by such
committee (such bonus amounts being referred to as the “Preliminary Bonus”).
After paying the Preliminary Bonus for a given completed period for which a
bonus appears to be due, all remaining bonus amounts under subsection (b)(i) and
(b)(ii) of this Section 4 (i.e., net of the Preliminary Bonus), shall (x) be
paid within thirty (30) days after the revenue and EBITDA criteria are
determined for the applicable period in the manner described in Schedule A, but
not later than two and one-half (2-1/2) months following the later of the last
day of the calendar year or the last day of the Employer’s fiscal year in which
the applicable period with respect to which the bonus is determined ends, and
(y) be conditioned on Executive being employed throughout the entire applicable
period with respect to which the bonus is determined. If any part of the
Preliminary Bonus that was paid to Executive would not, applying the final
determination of bonus entitlement using Schedule A for the fiscal period in
question, have been due to Executive, then after notification to the Executive,
the Executive shall promptly repay such part of the Preliminary Bonus to the
Employer without interest.

 

(c)          Regular Benefits. The Executive shall also be entitled to
participate in any qualified retirement plans, deferred compensation plans,
stock option and incentive plans, stock purchase plans, group and executive
medical insurance plans (i.e., coverage for the Executive and family), life
insurance plans, disability income plans, retirement plans, vacation plans,
expense reimbursement plans and other benefit plans which the Employer may from
time to time have in effect for any, all or most of its senior executives
(collectively “Employer Benefit Plans”). Such participation shall be subject to
the terms of applicable plan documents, generally applicable policies of the
Employer, applicable law and the discretion of the Board of Directors, the
Compensation Committee or any administrative or other committee provided for in
or contemplated by any such plan. Nothing contained in this Agreement shall be
construed to create any obligation on the part of the Employer to establish any
such plans or to maintain the effectiveness of any such plans which may be in
effect from time to time.

 

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(d)          Reimbursement of Business Expenses. The Employer shall reimburse
the Executive for all reasonable expenses incurred by the Executive in
performing services during the Term, in accordance with the Employer’s policies
and procedures for its senior executive officers, as in effect from time to
time, including, but not limited to, business class air travel (or, if
unavailable, first class), meals and entertainment, fuel costs for
transportation, wireless mobile communications, and personal computer equipment.

 

(e)          Stock Option Grant Adjustment; New Grant.

 

(i)          On the Effective Date, the Employer shall modify the vesting of the
stock options to purchase 200,000 shares of common stock of the Employer granted
on July 8, 2014 as follows: (x) 50,000 options shall vest on the one year
anniversary of the original grant date (i.e., July 8, 2015); (y) 150,000 options
shall vest on a monthly basis over the 3 years following such first anniversary
(at 1/36 of the remaining options per month); and (z) all unvested options
granted to Executive on July 8, 2014 shall vest immediately upon the sale of all
or substantially all of the assets of the Employer, upon the merger or
reorganization of the Employer following which the equityholders of the Employer
immediately prior to the consummation of such merger or reorganization
collectively own less than 50% of the voting power of the resulting entity, or
upon the sale of equity securities of the Employer representing 50% or more of
the voting power of the Employer or 50% or more of the economic interest in the
Employer in a single transaction or in a series of related transactions ( a
“Change of Control”). This modification shall not apply to any stock options or
other equity grants other than the July 8, 2014 option grant for 200,000 shares.
The Employer, through its Compensation Committee, will work in good faith with
the Executive for additional future share grants based upon individual and
company performance.

 

(ii)          On the Effective Date, the Employer shall grant the Executive a
new stock option to purchase 50,000 shares of common stock of the Employer at an
exercise price equal to the closing price of the Employer’s common stock on the
Nasdaq Capital Market on the Effective Date (provided, if either the Effective
Date is not a trading day or if this Agreement is entered into after 3:59 p.m.
Eastern Time on the Effective Date, then the exercise price shall be equal to
the closing price of the Employer’s common stock on the Nasdaq Capital Market on
the next trading day after the Effective Date) under a shareholder-approved
equity incentive plan, subject to the terms and conditions specified in the
Employer’s standard stock option agreement, which shall vest as follows: (x)
12,500 options shall vest on the one year anniversary of such new grant; (y)
37,500 options shall vest on a monthly basis over the 3 years following the
first anniversary of such new grant (at 1/36 of the remaining options per
month); and (z) all unvested options constititung such new grant shall vest
immediately upon a Change of Control.

 

(f)           Signing Bonus. The Executive shall be entitled to a one-time bonus
of One Hundred Thousand Dollars ($100,000) payable within five (5) days of
signing this Agreement.

 

(g)          Exclusivity of Salary and Benefits. The Executive shall not be
entitled to any payments or benefits other than those provided under this
Agreement.

 

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5.           Extent of Service. During the Executive’s employment under this
Agreement, the Executive shall, subject to the direction and supervision of the
Board of Directors, devote the Executive’s full business time, best efforts and
business judgment, skill and knowledge to the advancement of the Employer’s
interests and to the discharge of the Executive’s duties and responsibilities
under this Agreement. The Executive shall not engage in any other business
activity, except as may be approved by the Board of Directors; provided,
however, that nothing in this Agreement shall be construed as preventing the
Executive from:

 

(a)          investing the Executive’s personal assets in any non-competitive
business enterprise, company or other entity in such form or manner as shall not
require any material personal time commitment on the Executive’s part in
connection with the operations or affairs of such other enterprise, company or
other entity in which such investments are made; or

 

(b)          engaging in religious, charitable or other community or non-profit
activities that do not impair the Executive’s ability to fulfill the Executive’s
duties and responsibilities under this Agreement.

 

6.           Termination. Notwithstanding the provisions of Section 3, the
Executive’s employment under this Agreement shall terminate under the following
circumstances set forth in this Section 6. For purposes of this Agreement, the
date of the Executive’s termination (the “Termination Date”) shall mean the date
of the Executive’s “separation from service” as such term is defined under
Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”).

 

(a)          Termination by the Employer for Cause. The Executive’s employment
under this Agreement may be terminated for Cause without liability on the part
of the Employer (except only to pay those specific amounts set forth in Section
7(c)) effective immediately upon approval of the Board of Directors and written
notice to the Executive. The following shall constitute “Cause” for such
termination:

 

(i) any act committed by the Executive against the Employer or any of its
affiliates which involves fraud, willful misconduct, gross negligence or refusal
to comply with the reasonable, legal and clear written instructions given to him
by the Board through Board action that do not violate this Agreement; provided,
however, that Executive shall have a period of fifteen (15) days to cure such
conduct after written reasonably specific notice thereof, unless such conduct is
not (as in the case of fraud or willful misconduct) reasonably curable. For
purposes of the foregoing sentence, no act, or failure to act, on Executive's
part shall be considered “willful” unless the Executive acted, or failed to act,
in bad faith or without reasonable belief that his act or failure to act was in
the best interest of the Employer or any subsidiary; or

 

(ii) the conviction of the Executive of, or indictment (or procedural
equivalent, or guilty plea or plea of nolo contender) of the Executive for (A) a
felony or (B) any misdemeanor involving moral turpitude where the circumstances
reasonably would have a negative impact on the Employer, deceit, dishonesty or
fraud; provided, however, that Executive shall have a period of fifteen (15)
days to cure such conduct after written reasonably specific notice thereof,
unless such conduct (as in the case of dishonesty or fraud) is not reasonably
curable; or

 

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(iii) material breach of this Agreement; provided, however, that Executive shall
have a period of fifteen (15) days to cure such conduct after written reasonably
specific notice thereof, unless such conduct is not reasonably curable.

 

(b)          Termination by the Employer Without Cause. Subject to the payment
of Termination Benefits pursuant to Section 7(b), the Executive’s employment
under this Agreement may be terminated by the Employer without Cause upon not
less than fifteen (15) days’ prior written notice to the Executive.

 

(c)          Death. The Executive’s employment with the Employer shall terminate
automatically upon his death.

 

(d)          Disability. If the Executive shall become Disabled so as to be
unable to perform the essential functions of the Executive’s then existing
position or positions under this Agreement with or without reasonable
accommodation, the Board of Directors may remove the Executive from any
responsibilities and/or reassign the Executive to another position with the
Employer for the remainder of the Term or during the period of such Disability.
Notwithstanding any such removal or reassignment, the Executive shall continue
to receive the Executive’s full Salary (less any disability pay or sick pay
benefits to which the Executive may be entitled under the Employer’s policies)
and benefits under Section 4 of this Agreement (except to the extent that the
Executive may be ineligible for one or more such benefits under applicable plan
terms) for a period of time equal to twelve (12) months payable at the same time
as such amounts would otherwise have been paid to the Executive had he continued
in his current capacity. If the Executive is unable to perform substantial
services of any kind for the Employer during this period, such period shall be
considered a paid leave of absence and the Executive shall have the contractual
right to return to employment at any time during such period. If the Executive’s
Disability continues beyond such twelve (12) month period, the Executive’s
employment may be terminated by the Employer by reason of Disability at any time
thereafter. For purposes hereof, the term “Disabled” or “Disability” shall mean
a written determination that the Executive, as certified by at least two (2)
duly licensed and qualified physicians, one (1) approved by the Board of
Directors of the Employer and one (1) physician approved by the Executive (the
“Examining Physicians”), or, in the event of the Executive’s total physical or
mental disability, the Executive’s legal representative, that the Executive
suffers from a physical or mental impairment that renders the Executive unable
to perform the Executive’s regular personal duties under this Agreement and that
such impairment can reasonably be expected to continue for a period of three (3)
consecutive months or for shorter periods aggregating ninety (90) days in any
twelve (12) month period; provided, however, that the Executive’s primary care
physician may not serve as one of the Examining Physicians without the consent
of the Employer and the Executive (or the Executive’s legal representation). The
Executive shall cooperate with any reasonable request of a physician to submit
to a physical examination for purposes of such certification. Nothing in this
Section 6(d) shall be construed to waive the Executive’s rights, if any, under
existing law including, without limitation, the Family and Medical Leave Act of
1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities Act, 42 U.S.C.
§12101 et seq.

 

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(e)          Termination by the Executive for Good Reason. Subject to the
payment of Termination Benefits pursuant to Section 7(b), the Executive’s
employment under this Agreement may be terminated by the Executive for Good
Reason. For purposes of this Agreement, “Good Reason” shall be present where
Executive gives notice to the Board of Directors of his voluntary resignation
within thirty (30) days after the occurrence of any of the following, without
Executive’s written consent: (i) breach by the Employer of the insurance or
indemnification provisions herein or in Executive’s indemnification agreement
with Employer as in effect on the date hereof or failure of the Employer to pay
or cause to be paid or delivered any amounts or options due Executive when due
under the terms and conditions hereunder, in each case subject to a fifteen (15)
day cure period by the Employer following reasonably specific written notice by
the Executive; (ii) the Executive’s not reporting directly to the Board of
Directors, subject to a thirty (30) day cure period by the Employer following
reasonably specific written notice by the Executive, unless the sole reason for
such failure to report to the Board of Directors is that a Change of Control
occurred and as a result the Executive’s reporting structure in the buyer’s
organization puts Executive at effectively the same or higher level of overall
responsibility and authority (comparing the positions in each organization) as
was the case immediately prior to such Change of Control, as reasonably
determined by the Board of Directors prior to such Change of Control; or (iii)
material diminution in Executive’s position, duties, authority or
responsibility, without Cause, subject to a thirty (30) day cure period by the
Employer following reasonably specific written notice by the Executive. If the
Executive fails to resign within sixty (60) days after the expiration of the
applicable cure period, then such event will not be a basis to resign for Good
Reason.

 

(f)           Termination by the Executive without Good Reason. The Executive
may terminate his employment under this Agreement without Good Reason upon not
less than forty five (45) days’ prior written notice to the Employer.

 

7.            Compensation Upon Termination.

 

(a)          Termination Generally. If the Executive’s employment with the
Employer is terminated for any reason during or upon expiration of the Term, the
Employer shall pay or provide to the Executive (or to his authorized
representative or estate): (i) any earned but unpaid Salary payable on the
Termination Date, (ii) accrued bonuses for a previously completed yearly
measurement period (for avoidance of doubt, no pro-rata bonus is payable under
this clause, only a bonus for a previously completed applicable measurement
period) earned but not yet paid, payable at the same time such amounts would
otherwise have been paid to the Executive, (iii) any unpaid expense
reimbursements, payable in accordance with the Employer’s reimbursement
policies, (iv) any accrued but unused vacation, payable on the Termination Date,
and (v) any vested benefits the Executive may have under any of the Employer
Benefit Plans, payable as specified in the applicable plan documents
(collectively, the “Accrued Compensation”).

 

(b)          Termination by the Employer Without Cause or by the Executive for
Good Reason. In the event of termination of the Executive’s employment with the
Employer pursuant to Section 6(b) or 6(e) above prior to the expiration of the
Term, and subject to the Executive’s execution and delivery of a release of any
and all legal claims in a form satisfactory to the Employer, and expiration of
any revocation period without the release being revoked, within forty-five (45)
days following the Termination Date (the “Release Period”), the Employer shall
provide to the Executive, in addition to the Accrued Compensation, the following
termination benefits (“Termination Benefits”):

 

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(i)          continuation of the Executive’s Salary at the rate and in
accordance with the Employer’s payroll practices then in effect pursuant to
Section 4(a); and

 

(ii)          continuation of any executive health and group health plan
benefits to the extent authorized by and consistent with 29 U.S.C. § 1161 et
seq. (commonly known as “COBRA”), subject to payment of premiums by the Employer
to the extent that the Employer was covering such premiums as of the Termination
Date (if permitted by law without violation of applicable discrimination rules,
or, if not, the equivalent after-tax value payable as additional severance at
the same time such premiums are otherwise payable); and

 

(iii)          a pro-rata annual bonus through the Termination Date, as
reasonably determined by the Compensation Committee applying the applicable
standards in Schedule A and paid at the same time as a bonus would otherwise be
payable under Section 4(b); and

 

(iv)          acceleration of vesting of the options amended and/or granted
under this Agreement on a pro-rata basis as if the vesting schedule had been
monthly rather than annual, advanced to the next month.

 

The Termination Benefits set forth in subsections 7(b)(i) and (ii) and above
shall continue effective for the remainder of the Term (the “Termination
Benefits Period”); provided, however, that in the event that the Executive
commences any employment during the Termination Benefits Period, the benefits
provided under Section 7(b)(ii) shall cease effective as of the date Executive
qualifies for group health plan benefits in his new employment. The Employer’s
liability for Salary continuation pursuant to Section 7(b)(i) shall not be
reduced by the amount of any severance pay paid to the Executive pursuant to any
severance pay plan or stay bonus plan of the Employer. Notwithstanding the
foregoing, nothing in this Section 7(b) shall be construed to affect the
Executive’s right to receive COBRA continuation entirely at the Executive’s own
cost to the extent that the Executive may continue to be entitled to COBRA
continuation after Employer-paid premiums cease. The Executive shall be
obligated to give prompt notice of the date of commencement of any employment
during the Termination Benefits Period and shall respond promptly to any
reasonable inquiries concerning any employment in which the Executive engages
during the Termination Benefits Period.

 

The Employer acknowledges and agrees that under certain circumstances involving
the termination of the Executive’s employment and/or a Change of Control
transaction involving the Employer, the Executive shall be entitled to
accelerated vesting on his options to purchase shares of capital stock of the
Employer, all to the extent provided in that certain Stock Option Agreements
referred to in Section 4(e) hereof.

 

Any Termination Benefits (subject to Executive’s timely execution, delivery and
nonrevocation of the required release) that otherwise would become due any
payable prior to the end of the Release Period (including Salary continuation
payments and COBRA premium payments otherwise due during the Release Period)
shall be paid on Employer’s first regular payroll date following the end of the
Release Period.

 

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(c)          Termination by Reason of Cause, Death, Disability, Voluntary
Termination by the Executive or Expiration of Term. If the Executive’s
employment is terminated for any reason other than (i) by the Employer without
Cause under Section 6(b) or (ii) by the Executive for Good Reason under Section
6(e), including by reason of the Employer’s election not to extend the Term, the
Employer shall have no further obligation to the Executive other than payment of
his Accrued Compensation.

 

8.           Confidential Information, Nonsolicitation and Cooperation.

 

(a)          Confidential Information. As used in this Agreement, “Confidential
Information” means proprietary information of the Employer which is of value to
the Employer in the course of conducting its business and the disclosure of
which could result in a competitive or other disadvantage to the Employer.
Confidential Information includes, without limitation, financial information,
reports, and forecasts; inventions, improvements and other intellectual
property; trade secrets; know-how; designs, processes or formulae; software;
market or sales information or plans; customer lists; and business plans,
prospects and opportunities (such as possible acquisitions or dispositions of
businesses or facilities) which have been discussed or considered by the
management of the Employer. Confidential Information includes information
developed by the Executive in the course of the Executive’s employment by the
Employer, as well as other information to which the Executive may have access in
connection with the Executive’s employment. Confidential Information also
includes the confidential information of others with which the Employer has a
business relationship. Notwithstanding the foregoing, Confidential Information
does not include (i) information in the public domain, unless due to breach of
the Executive’s duties under Section 8(b), or (ii) information obtained in good
faith by the Executive from a third party who was lawfully in possession of such
information and not subject to an obligation of confidentiality owed to the
Employer.

 

(b)          Duty of Confidentiality. The Executive understands and agrees that
the Executive’s employment creates a relationship of confidence and trust
between the Executive and the Employer with respect to all Confidential
Information. At all times, both during the Executive’s employment with the
Employer and after termination, the Executive will keep in confidence and trust
all such Confidential Information, and will not use or disclose any such
Confidential Information without the written consent of the Employer, except (i)
as may be necessary in the ordinary course of performing the Executive’s duties
to the Employer or (ii) as may be required in response to a valid order by a
court or other governmental body or as otherwise required by law (provided that
if the Executive is so required to disclose the Confidential Information, the
Executive shall (i) immediately notify the Employer of such required disclosure
sufficiently in advance of the intended disclosure to permit the Employer to
seek a protective order or take other appropriate action, (ii) cooperate in any
effort by the Employer to obtain a protective order or other reasonable
assurance that confidential treatment will be afforded the Confidential
Information).

 

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(c)          Documents, Records, etc. All documents, records, data, apparatus,
equipment and other physical property, whether or not pertaining to Confidential
Information, which are furnished to the Executive by the Employer or are
produced by the Executive in connection with the Executive’s employment will be
and remain the sole property of the Employer. The Executive will return to the
Employer all such materials and property as and when requested by the Employer.
In any event, the Executive will return all such materials and property
immediately upon termination of the Executive’s employment for any reason. The
Executive will not retain with the Executive any such material or property or
any copies thereof after such termination.

 

(d)          Nonsolicitation. During the Term and for one (1) year thereafter,
the Executive (i) will refrain from directly or indirectly employing, attempting
to employ, recruiting or otherwise soliciting, inducing or influencing any
person to leave employment with the Employer (other than subordinate employees
whose employment was terminated in the course of the Executive’s employment with
the Employer); and (ii) will refrain from soliciting or encouraging any customer
or supplier to terminate or otherwise modify adversely its business relationship
with the Employer. The Executive understands that the restrictions set forth in
this Section 8(d) are intended to protect the Employer’s interest in its
Confidential Information and established employee, customer and supplier
relationships and goodwill, and agrees that such restrictions are reasonable and
appropriate for this purpose.

 

(e)          Third-Party Agreements and Rights. The Executive hereby confirms
that the Executive is not bound by the terms of any agreement with any previous
employer or other party which restricts in any way the Executive’s use or
disclosure of information or the Executive’s engagement in any business. The
Executive represents to the Employer that the Executive’s execution of this
Agreement, the Executive’s employment with the Employer and the performance of
the Executive’s proposed duties for the Employer will not violate any
obligations the Executive may have to any such previous employer or other party.
In the Executive’s work for the Employer, the Executive will not disclose or
make use of any information in violation of any agreements with or rights of any
such previous employer or other party, and the Executive will not bring to the
premises of the Employer any copies or other tangible embodiments of non-public
information belonging to or obtained from any such previous employment or other
party.

 

(f)           Litigation and Regulatory Cooperation. During and after the
Executive’s employment, the Executive shall cooperate reasonably with requests
from the Employer, or the Employer’s legal counsel, in the defense or
prosecution of any claims or actions now in existence or which may be brought in
the future against or on behalf of the Employer which relate to events or
occurrences that transpired while the Executive was employed by the Employer.
The Executive’s cooperation in connection with such claims or actions shall
include, but not be limited to, being available to meet with counsel to prepare
for discovery or trial and to act as a witness on behalf of the Employer at
mutually convenient times. During and after the Executive’s employment, the
Executive also shall cooperate fully with the Employer in connection with any
investigation or review of any federal, state or local regulatory authority as
any such investigation or review relates to events or occurrences that
transpired while the Executive was employed by the Employer. The Employer shall
reimburse the Executive for any reasonable out-of-pocket expenses incurred in
connection with the Executive’s performance of obligations pursuant to this
Section 8(f), and if the Executive spends more than ten (10) hours in any
calendar month in performance of these obligations, the Employer shall pay the
Executive $500 per hour for each part of an hour over ten (10) hours in such
calendar month.

 

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(g)          Intellectual Property. Except as provided under Section 2870 of the
California Labor Code (a copy of which is attached as Schedule B), the Employer
shall be the sole owner of all the products and proceeds of Executive’s services
hereunder and under the Prior Agreement, including, without limitation, all
materials, ideas, concepts, formats, suggestions, developments, and other
intellectual properties that Executive may acquire, obtain, develop or create in
connection with his services hereunder and during the Term and under the Prior
Agreement, free and clear of any claims by Executive (or anyone claiming under
Executive) of any kind or character whatsoever (other than Executive’s rights
and benefits hereunder). Executive shall, at the request of the Employer,
execute such assignments, certificates or other instruments as the Employer may
from time to time deem necessary or desirable to evidence, establish, maintain,
perfect, protect, enforce or defend the Employer’s right, title and interest in
and to any such products and proceeds of Executive’s services hereunder.

 

(h)          Injunction. The Executive agrees that it would be difficult to
measure any damages caused to the Employer which might result from any breach by
the Executive of the promises set forth in this Section 8, and that in any event
money damages may be an inadequate remedy for any such breach. Accordingly,
subject to Section 9 of this Agreement, the Executive agrees that if the
Executive breaches, or proposes to breach, any portion of this Agreement, the
Employer shall be entitled, in addition to all other remedies that it may have,
to an injunction or other appropriate equitable relief to restrain any such
breach without showing or proving any actual damage to the Employer and without
the need to post a bond or other security.

 

9.           Arbitration of Disputes. Executive (hereinafter in this Section 9
“you”) agrees that to the fullest extent permitted by law, any and all
controversies, claims, or disputes between you and the Employer (or between you
and any present or former employee, officer, director, agent, or benefit plan of
the Employer in their capacity as such or otherwise) arising out of, relating
to, or resulting from your employment with the Employer or the termination of
your employment with the Employer will be resolved by final and binding
arbitration. Claims subject to arbitration include, without limitation, any
claims under Title VII of the Civil Rights Act of 1964, the Americans with
Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the
Older Workers Benefit Protection Act, the Family and Medical Leave Act, the Fair
Labor Standards Act, the Employee Retirement Income Security Act, the Health
Insurance Portability and Accountability Act of 1996, the Federal Occupational
Safety and Health Act, the California Fair Employment and Housing Act, the
California Family Rights Act, the California Labor Code, and any other statutory
or common-law claims. However, claims for unemployment benefits, workers’
compensation claims, and claims under the National Labor Relations Act will not
be subject to arbitration. In addition, either party may seek provisional
remedies pursuant to California Code of Civil Procedure § 1281.8(b). There will
be no right or authority for any claim subject to arbitration to be heard or
arbitrated on a class or collective basis, as a private attorney general, or in
a representative capacity on behalf of any other person or entity.

 

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You agree that any arbitration will be administered by JAMS (or other mutually
agreeable alternative dispute resolution service) in accordance with its
Employment Arbitration Rules & Procedures and subject to JAMS Policy on
Employment Arbitration Minimum Standards of Procedural Fairness (the “JAMS
Rules”), a copy of which Rules can be found at www.jamsadr.com or obtained from
Human Resources. A neutral arbitrator with experience in arbitrating employment
disputes will be chosen by mutual agreement of the parties; however, if the
parties are unable to agree upon an arbitrator within a reasonable period of
time, then a neutral arbitrator will be appointed in accordance with the
arbitrator nomination and selection procedure set forth in the JAMS Rules. The
arbitrator will have exclusive authority to resolve any dispute relating to the
interpretation, applicability, enforceability or formation of this agreement to
arbitrate. The arbitrator may not consolidate more than one person’s claim, and
may not otherwise preside over any form of a representative, collective or class
proceeding. The parties will be permitted to conduct discovery as provided by
California Code of Civil Procedure § 1283.05. The arbitrator will prepare a
written decision containing the essential findings and conclusions on which the
award is based, and will apply the same substantive law with the same statutes
of limitation that would apply if the claims were brought in a court of law. The
arbitrator’s decision must be issued no later than thirty (30) days after a
dispositive motion is heard and/or an arbitration hearing has been completed.
The arbitrator’s decision will be final and binding upon the parties and will be
enforceable in any court having jurisdiction thereof. The arbitrator will have
the authority to decide any motions brought by any party to the arbitration,
including motions for summary judgment and/or adjudication and motions to
dismiss and demurrers, prior to any arbitration hearing. The arbitrator will
have the authority to award any remedies, including attorneys’ fees and costs,
available under applicable law.

 

All arbitration hearings under this arbitration agreement will be conducted in
Los Angeles, California, unless otherwise agreed by the parties. The arbitration
provisions of this agreement will be governed by the Federal Arbitration Act. In
all other respects, this arbitration agreement will be construed in accordance
with the laws of the State of California, without reference to conflicts of law
principles.

 

You will be required to pay an arbitration fee to initiate any arbitration equal
to what you would be charged as a court filing fee for a first appearance. Where
you are asserting a claim under a state or federal statute prohibiting
discrimination in employment, a public policy claim arising under a statute, or
where as otherwise required by applicable law to achieve the enforceability of
this Agreement, the Employer will pay the costs and fees charged by the
arbitrator and JAMS (or other mutually selected alternative dispute resolution
service) to the extent such costs would not otherwise be incurred in a court
proceeding. In all other circumstances, you and the Employer agree to split
equally the fees and administrative costs charged by the arbitrator and the
alternative dispute resolution service being utilized. Each party will bear its
own costs and attorneys’ fees, unless a party prevails on a statutory claim and
the statute provides that the prevailing party is entitled to payment of its
attorneys’ fees. In that case, the arbitrator may award reasonable attorneys’
fees and costs to the prevailing party as provided by law.

 

Either you or the Employer may bring an action in court to compel arbitration
under this arbitration agreement and to enforce an arbitration award or for a
provisional remedy pursuant to California Code of Civil Procedure §1281.8(b).
Nothing in this agreement should be construed to prevent either party's ability
to seek a provisional remedy, including a preliminary injunction, as permitted
by JAMS Employment Arbitration Rules (including but not limited to Rule 34) or
California Code of Civil Procedure Section 1281.8. Otherwise, neither party will
initiate or prosecute any lawsuit or claim in any way related to any arbitrable
claim including, without limitation, any claim as to the making, existence,
validity, or enforceability of this arbitration agreement.

 

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If one or more of the provisions in this arbitration agreement are deemed
unenforceable, such provision, or provisions, will be enforced to the greatest
extent permitted by law and the remaining provisions will continue in full force
and effect. The parties’ obligations under this arbitration agreement will
survive the termination of your employment relationship with the Employer.

 

YOU UNDERSTAND AND AGREE THAT THIS ARBITRATION AGREEMENT CONSTITUTES A WAIVER OF
THE RIGHT TO A TRIAL BY JURY OF ANY CLAIMS OR CONTROVERSIES COVERED BY THIS
ARBITRATION AGREEMENT. YOU AGREE THAT NONE OF THOSE CLAIMS OR CONTROVERSIES WILL
BE RESOLVED BY A JURY TRIAL. YOU FURTHER ACKNOWLEDGE THAT YOU HAVE BEEN GIVEN
THE OPPORTUNITY TO DISCUSS THIS ARBITRATION AGREEMENT WITH YOUR LEGAL COUNSEL
AND HAVE AVAILED YOURSELF OF THAT OPPORTUNITY TO THE EXTENT YOU WISH TO DO SO.

 

10.          Integration. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements between the parties with respect to any related subject matter,
including the Prior Agreement, which the parties agree expires without liability
on the Effective Date hereof and Executive confirms that all amounts due to him
or which may become due to him thereunder, or under any other bonus or
compensatory plan (cash or otherwise) in Executive’s favor with the Employer or
its subisidaries, or claims in connection with any tax liability associated with
prior equity grants, have either been fully satisfied or are deemed satisfied by
virtue of entering this Agreement; provided, however, that this Agreement does
not affect any rights Executive has under the restricted stock agreement entered
into between him and the Employer as referenced in the Prior Agreement or the
restricted stock agreement entered into between him and the Employer with
respect to the July 8, 2014 option grant, all of which rights remain in effect
in accordance with their existing terms, except as expressly modified hereby.

 

11.          Assignment; Successors and Assigns, etc. Neither the Employer nor
the Executive may make any assignment of this Agreement or any interest herein,
by operation of law or otherwise, without the prior written consent of the other
party; but the Employer may assign its rights under this Agreement without the
consent of the Executive, in the event that the Employer shall effect a
reorganization, consolidate with or merge into any other corporation,
partnership, organization or other entity, or transfer all or substantially all
of its properties or assets to any other corporation, partnership, organization
or other entity, in which event the Employer will obtain a written confirmation
of the assumption of the Employer’s obligation hereunder for the benefit of the
Executive. This Agreement shall inure to the benefit of and be binding upon the
Employer and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns.

 

12.          Enforceability. If any portion or provision of this Agreement
(including, without limitation, any portion or provision of any section of this
Agreement) shall to any extent be declared illegal or unenforceable by a court
of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as to
which it is so declared illegal or unenforceable, shall not be affected thereby,
and each portion and provision of this Agreement shall be valid and enforceable
to the fullest extent permitted by law.

 

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13.          Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.

 

14.          Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt requested, to the
Executive at the Executive’s last residential address the Executive has filed in
writing with the Employer or, in the case of the Employer, at its main offices,
attention of the Chairman of the Board, and shall be effective on the date of
delivery in person or by courier or three (3) days after the date mailed.

 

15.          Third Party Beneficiary; Amendment. The Executive and the Employer
acknowledge and agree that no third party shall have any rights or benefits
under this Agreement. This Agreement may be amended or modified only by a
written instrument signed by the Executive and the Employer.

 

16.          Governing Law. This contract has been entered into in the State of
California and shall be construed under and be governed in all respects by the
laws of the State of California, without giving effect to the conflict of laws
principles of such state.

 

17.          Counterparts. This Agreement may be executed in any number of
original, facsimile or other electronic counterparts, each of which when so
executed and delivered shall be taken to be an original; but such counterparts
shall together constitute one and the same document.

 

18.          No Prior Agreements. The Executive hereby represents and warrants
to the Employer that the execution of this Agreement by the Executive, the
Executive’s employment by the Employer, and the performance of the Executive’s
duties hereunder will not violate or constitute a breach of any agreement,
including any non-competition agreement, invention or confidentiality agreement,
with a former employer, client or any other person or entity. Further, the
Executive agrees to indemnify the Employer for any loss, including, but not
limited to, reasonable attorneys’ fees and expenses, that the Employer may incur
based upon or arising out of the Executive’s breach of this Section.

 

19.          Indemnification. That certain Indemnification Agreement between
Employer and Executive, dated December 18, 2013, remains in full force and
effect.

 

20.          Directors’ and Officers’ Insurance. As soon as reasonably
practicable following the Effective Date, the Employer shall use commercially
reasonable efforts to obtain (if it does not already have) directors’ and
officers’ insurance from a reputable insurance company with such coverage
amounts and policy terms as is customary for public companies with market
valuations similar to the Employer, as determined by the Employer in its sole
discretion.

 

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21.          Withholding Obligations. The Employer, or any other entity making a
payment, may withhold and make such deductions from any amounts payable under
this Agreement such federal, state and local taxes as may be required to be
withheld or deducted from time to time pursuant to any applicable law,
governmental regulation and/or order.

 

22.          Section 954 of the Dodd Frank Act. This Agreement and all other
Compensation of Executive are intended to comply with the “clawback obligations”
of Section 954 of the Dodd Frank Act (including the related regulations,
“Section 954”). If the Employer’s financial statements must be restated, to the
extent and only to the extent required by Section 954 (if applicable), the
Employer shall be entitled to recover from Executive, and Executive agrees to
promptly repay, any incentive-based compensation which would not have been
earned under the restated financial statements.

 

23.          Section 409A Compliance. Unless otherwise expressly provided, any
payment of compensation by the Employer to the Executive, whether pursuant to
this Agreement or otherwise, shall be made no later than the fifteenth (15th)
day of the third (3rd) month (i.e., 2½ months) after the later of the end of the
calendar year or the Employer’s fiscal year in which the Executive’s right to
such payment vests (i.e., is not subject to a “substantial risk of forfeiture”
for purposes of Section 409A). Each payment and each installment of any bonus or
severance payments provided for under this Agreement shall be treated as a
separate payment for purposes of application of Section 409A. To the extent any
amounts payable by the Employer to the Executive constitute “nonqualified
deferred compensation” (within the meaning of Section 409A) such payments are
intended to comply with the requirements of Section 409A, and shall be
interpreted in accordance therewith. Neither party individually or in
combination may accelerate, offset or assign any such deferred payment, except
in compliance with Section 409A. No amount shall be paid prior to the earliest
date on which it is permitted to be paid under Section 409A and the Executive
shall have no discretion with respect to the timing of payments except as
permitted under Section 409A. In the event that the Executive is determined to
be a “key employee” (as defined and determined under Section 409A) of the
Employer at a time when its stock is deemed to be publicly traded on an
established securities market, payments determined to be “nonqualified deferred
compensation” payable upon separation from service shall be made no earlier than
(a) the first (1st) day of the seventh (7th) complete calendar month following
such termination of employment, or (b) the Executive’s death, consistent with
the provisions of Section 409A. Any payment delayed by reason of the prior
sentence shall be paid out in a single lump sum at the end of such required
delay period in order to catch up to the original payment schedule. All expense
reimbursement or in-kind benefits subject to Section 409A provided under this
Agreement or, unless otherwise specified in writing, under any Employer program
or policy, shall be subject to the following rules: (i) the amount of expenses
eligible for reimbursement or in-kind benefits provided during one calendar year
may not affect the benefits provided during any other year; (ii) reimbursements
shall be paid no later than the end of the calendar year following the year in
which the Executive incurs such expenses, and the Executive shall take all
actions necessary to claim all such reimbursements on a timely basis to permit
the Employer to make all such reimbursement payments prior to the end of said
period, and (iii) the right to reimbursement or in-kind benefits shall not be
subject to liquidation or exchange for another benefit. The Executive shall be
responsible for the payment of all taxes applicable to payments or benefits
received from the Employer. It is the intent of the Employer that the provisions
of this Agreement and all other plans and programs sponsored by the Employer be
interpreted to comply in all respects with Section 409A; provided, however, the
Employer shall have no liability to the Executive, or any successor or
beneficiary thereof, in the event taxes, penalties or excise taxes may
ultimately be determined to be applicable to any payment or benefit received by
the Executive or any successor or beneficiary thereof.

 

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IN WITNESS WHEREOF, this Agreement has been executed by the Employer and by the
Executive as of the Effective Date.

 

  EMPLOYER       Mandalay Digital Group, Inc., a Delaware corp.       By: /s/
Jeffrey Karish   Its: Director and Chairman of the Compensation Committee of the
Board of Directors       EXECUTIVE       /s/William Stone   Name: William Stone

 

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Schedule A

 

While he is employed as Chief Executive Officer, or in any other officer
position after the Transition Date, the Executive shall be entitled to be paid
an annual incentive bonus in cash in an amount of up to one hundred and fifty
percent (150%) of the Executive’s Salary for the applicable measurement period
(the “Bonus Opportunity”), subject to satisfaction of performance-related
milestones as set forth below:

 

a.Definitions:

 

i.Stub Period: The period from the Transition Date through March 31, 2015 (for
the avoidance of doubt, any bonus shall be paid on a pro rata basis).

 

ii.Year 1 Period: April 1, 2015 through March 31, 2016

 

iii.Year 2 Period: April 1, 2016 through remainder of the Term, including any
extensions thereof

 

iv.Adjusted EBITDA: Adjusted EBITDA is as defined in the Employer’s 2015
“guidance EBITDA” as presented by management and approved by the Audit Committee
on May 1, 2014.

 

v.Stub-Year Revenue and Adjusted EBITDA Targets: Means the Employer’s existing
internal revenue and Adjusted EBITDA targets for the fiscal year ending March
31, 2015, as most recently approved by the Board prior to the date hereof, each
multiplied by a fraction, the numerator of which is the number of days in the
Stub Year and the denominator of which is 365. If the Employer completes an
acquisition or disposition during the Stub Year, then the Stub-Year Revenue and
Adjusted EBITDA Targets shall be adjusted by the Compensation Committee, only
after good faith discussion and consultation with the Executive, to take into
account the expected effects of such transaction on the Employer’s revenue and
Adjusted EBITDA.

 

vi.Year 1/Year 2 Targets: Means such annual revenue and Public Earnings Measure
(as defined below) targets for Year 1 and Year 2, as applicable, established by
the Compensation Committee only after good faith discussion and consultation
with the Executive; provided, if at the time of determination of the targets for
Year 2 the remaining term is less than 12 months, then the Year 2 target shall
be appropriately pro-rated. The applicable targets for Year 1 and Year 2 shall
be determined not later than 30 days before the start of each such year. If the
Employer completes an acquisition or disposition during Year 1 or Year 2, then
the Year 1/Year 2 Targets shall be adjusted by the Compensation Committee, only
after good faith discussion and consultation with the Executive, to take into
account the expected effects of such transaction on the Employer’s revenue and
Public Earnings Measure. “Public Earnings Measure” means the non-GAAP measure of
consolidated Employer earnings, such as EBITDA or an adjusted EBITDA measure,
that the Compensation Committee determines (after good faith discussion,
consultation with, and notification to, the Executive) to be the most important
earnings measure used by the Employer in its public earnings release issued most
recently prior to the date by which the Year 1/Year 2 Targets are to be
determined, as applicable.

 

b.Bonus Criteria:

 

For the Stub-Period, Executive shall receive 50% of Salary earned with respect
to the Stub Period as a bonus if the Stub Year Revenue and Adjusted EBITDA
Targets have been achieved; plus an additional 50% of Salary earned with respect
to the Stub Period as a bonus if actual revenue and Adjusted EBITDA for the Stub
Year are at least 200% of Stub Year Revenue and Adjusted EBITDA Targets; plus an
additional 50% of Salary earned with respect to the Stub Period as a bonus in
the sole discretion of the Compensation Committee based on extraordinary
financial and business performance of the Employer during the applicable period
(beyond the level required to achieve 100% of Salary in the Stub Period).

 

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For the Year 1 and Year 2 Periods, Executive shall receive 50% of Salary earned
with respect to Year 1 and/or Year 2, as applicable, as a bonus if the Year
1/Year 2 Targets have been achieved; plus an additional 50% of Salary earned
with respect to Year 1 or Year 2, as applicable, as a bonus if actual annual
revenue and the Public Earnings Measure for Year 1 or Year 2 as applicable are
at least 200% of the applicable Year 1/Year 2 Targets; plus an additional 50% of
Salary earned with respect to Year 1 or Year 2, as applicable, as a bonus in the
sole discretion of the Compensation Committee based on extraordinary financial
and business performance of the Employer during the applicable period (beyond
the level required to achieve 100% of Salary in Year 1 or Year 2, as
applicable).

 

Achievement of targets shall be determined promptly after the Employer’s annual
financial statements for the fiscal year for the applicable period have been
publicly issued and certified by the Employer’s auditors. Any interpretative
issues in reconciling Adjusted EBITDA or a Public Earnings Measure to audited
numbers shall (a) be resolved as much as possible based on the Employer’s
publicly filed reconciliations of the same and (b) as to any other questions
shall be determined in the reasonable discretion of the Compensation Committee
after good faith discussion with Executive.

 

Bonus targets that have not been achieved to the level required by this Schedule
A shall not entitle Executive to a pro-rated bonus unless the Compensation
Committee in its sole discretion determines that a pro-rated bonus is
appropriate.

 

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Schedule B

 

CALIFORNIA LABOR CODE SECTION 2870

INVENTION ON OWN TIME-EXEMPTION FROM AGREEMENT

 

“(a)          Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:

 

(1)          Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actually or demonstrably anticipated
research or development of the employer; or

 

(2)          Result from any work performed by the employee for the employer.

 

(b)          To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.”

 

18