On2 Technologies, Inc. 21 Corporate Drive, Suite 103 Clifton Park, NY 12065 www.on2.com
 |
00
Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx
Xxxx, XX 00000
xxx.xx0.xxx
|
As
of
February 28, 2006
Xxxx
Xxxxx
Dear
Matt:
The
following constitutes the employment agreement (the "Agreement") between
you
(the "Executive") and On2 Technologies, Inc. (the "Company"), a Delaware
corporation. This letter sets forth the terms of your employment as Senior
Vice
President and General Counsel.
1. EMPLOYMENT;
ACCEPTANCE OF EMPLOYMENT; FUTURE ADVANCEMENT The Company hereby employs the
Executive during the Term (as defined below) on a full-time basis to render
exclusive services to the Company as Senior Vice President and General Counsel.
The Executive hereby accepts this employment and will render his services
as
required by the Company conscientiously, loyally, competently and to the
best of
his talents and abilities throughout the Term in accordance with the direction
and control of his designated supervisor. Upon the earlier of the departure
of
any current Executive Vice President from the Company or six (6) months from
the
date hereof, the Company shall appoint Executive to the position of Executive
Vice President and General Counsel.
2. TERM
OF
AGREEMENT. The initial term of this Agreement shall commence on the date
hereof
and terminate on February 28, 2008. This Agreement may be renewed by the
Company
upon 90 days' written notice to the Executive prior to the expiration of
the
initial term or any renewal term and acceptance of such offer of renewal
by the
Executive. The initial term, as extended by any renewal term, is referred
to
herein as the "Term".
3. EXECUTIVE'S
DUTIES.
a. The
Executive's duties include those services customarily rendered by a general
counsel of a publicly traded company of the size of the Company in the Company's
industry, with such other duties and services as may reasonably be assigned
to
him from time to time in the conduct of the business of the Company.
b. The
Executive's services shall be rendered primarily at the Company's offices
in New
York, New York and at such other locations as the Company may from time to
time
reasonably request consistent with its business needs. Travel (and related
expenses) to such other locations will be at the Company's expense. Executive
shall continue to be permitted to work from his residence 1 day per week
and
otherwise as reasonably possible (e.g., upon the absence from the New York
office of other principal executives), it being understood that occasionally
such a schedule may not be possible depending on his workload.
4. EXCLUSIVITY,
RESTRICTIVE AGREEMENTS.
a. During
his
employment, the Executive shall devote all of his business time, skill and
energies exclusively to the business of the Company.
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b. The
Executive
acknowledges that the nature of the services, position and expertise of the
Executive are such that he is capable of competing with the Company and
seriously damaging its business and its prospects to the detriment of its
stockholders and employees. In consideration of the Company's performance
of its
obligations under this Agreement, during the Term and thereafter during the
Restricted Period (as defined below) the Executive shall not (i) directly
or
indirectly enter into the employ of, or render any advice or services, whether
or not for compensation, to, any Person (as defined below) engaged in any
Competitive Business (as defined below); (ii) directly or indirectly engage
in
any Competitive Business; and (iii) directly or indirectly become interested,
whether or not for compensation, in any Competitive Business as an individual,
partner, shareholder, creditor, director, officer, principal, agent, employee,
trustee, consultant, advisor or in any other relationship or capacity or,
in the
case of any such company whose securities are traded on a national securities
exchange in the United States or otherwise or in the over-the-counter market,
acquire, directly or indirectly, an interest in excess of one percent (1%)
of
the outstanding capital stock of such company. The Company's business is
worldwide in scope; accordingly, the Executive agrees that this covenant
not to
compete shall not be subject to any geographical limit.
c. For
purposes
of this Section, any "Competitive Business" shall mean any business (including,
for the avoidance of doubt, any division, unit, subsidiary or affiliate of
any
other business whether or not such other business is a Competitive Business
unless the Executive can demonstrate upon the Company's request that his
employment by, engagement in, or his interest in, such unit, division,
subsidiary or affiliate does not and will not require him to provide services,
information, advice or relevant knowledge, skill, know-how or contacts to
the
Competitive Business during the Restricted Period) which is engaged in the
design or development of digital compression, decompression or playback
technologies in the computing, telecommunications or entertainment industries.
d. For
purposes
of this Section, "Person" shall mean any corporation, partnership, trust,
individual or any other entity.
e. For
all
purposes of this Section 4, "Restricted Period" shall be the 365 days
immediately following termination of employment whether such termination
is by
resignation or termination by the Company with or without Cause (as defined
below) or upon the expiration of the Term.
5. COMPENSATION.
a. During
the
Term the Executive shall receive base compensation at the rate of $182,500
per
year, payable semi-monthly, and pro-rated from your start date as General
Counsel of February 28, 2006. Such base salary as may be increased from time
to
time and is hereinafter referred to as "Base Salary".
b. The
Company
will reimburse the Executive for expenses related to its business actually
incurred or paid by the Executive in the performance of his duties under
this
Agreement, including without limitation home cable modem and satellite modem
bills and cell phone bills, upon presentation of accountings, expense
statements, vouchers or such other supporting information as may be required
by
the Company's policies.
c. The
Company
shall include Executive in any incentive compensation or other bonus plan
available to the most senior members of the Company’s management.
d. Executive
will receive a stock option grant in our non-qualified plan of`75,000 shares
to
be granted under the Company’s 2005 Incentive Compensation Plan. This grant will
vest in two equal installments; one-half (1/2) on date of grant; and one-half
(1/2) on February 28, 2007.
6. EXECUTIVE
BENEFITS.
a. During
the
Term, the Executive shall be entitled to participate in such group health,
retirement, profit sharing, 401(k) and other benefits programs or plans,
qualified or unqualified, including any future stock option, bonus or other
incentive program, which are or become available to other senior executives
of
the Company, subject to the policies of the Company with respect to all of
such
programs or plans. Nothing in this clause 6a. shall be construed to create
a
contractual obligation to provide the Executive with any particular form
or type
of benefit or to limit the
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discretion
of the Board of Directors or Compensation Committee or any other duly authorized
or appointed plan administrator is permitted to exercise under any such benefit
programs or plans.
b. During
the
Term the Executive shall be entitled to four weeks' paid vacation per year
of
employment to be scheduled on reasonable notice to the Company and to be
taken,
accrued and paid on the same basis as other employees of the Company.
7. TERMINATION
OF EMPLOYMENT FOR CAUSE.
a. The
Company
may terminate employment of Executive for any of the following reasons, each
of
which is defined as "Cause:"
i. commission
of
a felony, any crime of moral turpitude or any act of material fraud or
dishonesty;
ii. repeated
failure to satisfactorily perform material services required under this
Agreement in accordance with the requests of the Board of Directors;
iii. willful
misconduct or gross negligence in the performance of his duties;
iv. disregard
or
violation of the legal rights of any employees of the Company or of the
Company's written policies regarding harassment or discrimination; or
v. a
breach of
any material provisions of this Agreement (including, but not limited to,
any
breach of Sections 3 or 10).
If
the
Company terminates the employment of the Executive for Cause, or if the
Executive resigns during the Term, the Company's obligations under this
Agreement to pay further compensation shall cease forthwith, except that
the
Company will pay the Executive, within 30 days from the date of termination
of
his employment, in full and complete satisfaction of all of the Company's
obligations under this Agreement, (i) the Base Salary and, subject to submission
of all required documentation, reimbursable expenses accrued (but unpaid)
to the
date of termination and (ii) any accrued but unused vacation days paid at
the
rate of the Executive's Base Salary and during the six months after such
termination will further provide all benefits as would have been provided
had
employment continued including medical, disability and life insurance; PROVIDED,
that in the case of the death of the Executive during such six-month period,
medical insurance will be continued for the Executive's spouse and children
for
the duration of such period. Nothing contained in this Section 7.a shall
be
construed to alter the Executive's right under any stock option plan pursuant
to
which options have been issued to Executive.
b. If
the
Executive dies during the Term, such death shall be deemed termination for
Cause
and the Company's obligation to Executive's estate shall be the same as those
for termination for cause as defined in Section 7.a above.
c. If,
as a
result of the Executive's disability or incapacity during the Term due to
physical illness or condition, or mental illness during his employment with
the
Company, the Executive is unable to perform his duties hereunder for a
consecutive 6-calendar week period, or an aggregate period of 12 calendar
weeks
during any 12 months (or such longer period as may be required to comply
with
the Family Leave Act or other applicable law), the Company shall have the
right,
upon written notice to the Executive, to terminate the Executive's employment
under this Agreement. Such a termination shall be deemed termination for
Cause
as defined in Section 7.a but shall in no case become effective until the
date
at which the Company's long-term disability plan pays benefits to him.
d. Any
alleged
breach of this Agreement by either party shall not be deemed a breach until
such
time as the breaching party shall have received written notice from the
non-breaching party setting forth the alleged breach ("Alleged Breach Notice")
and the breaching party shall not have cured (if curable) the breach set
forth
in the Alleged Breach Notice in the 15 days (10 days for defaults in payments)
after receipt of such Alleged Breach Notice. If the breach set forth in the
Alleged Breach Notice is not curable and has not resulted in a substantive and
material adverse effect on the party sending the Alleged Breach Notice, the
Company and the Executive shall, at the request of the other, attempt to
meet
and discuss such alleged breach before resorting to remedies or rights under
this Agreement or otherwise.
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Notwithstanding
the foregoing, this Section shall not apply to, and the Executive shall have
no
right to cure, a breach by him under clauses (i) and (iv) of the definition
"Cause" contained in Section 7.a, above.
8. TERMINATION
OTHER THAN FOR CAUSE.
a. If
the
Company terminates the Executive's employment without Cause, the Company's
obligations under this Agreement shall be as follows:
i. The
Company
will continue to pay to the Executive, or in the case of death of the employee
to his successors or legal representatives or to his estate, during the 180
days
immediately following such termination of employment or expiration of the
Term,
as the case may be (such period is hereinafter referred to as the "Severance
Period"), his Base Salary on a monthly basis as would have been paid to the
employee had his employment with the Company continued;
ii. The
Company
shall pay to the Executive his proportionate share of any bonus compensation
to
which he would have received had he continued to be employed until the end
of
the relevant bonus calculation period. Such bonus compensation shall be payable
in a lump sum within 30 days of determination of Executive's bonus amount;
iii. The
Company
will continue to provide all benefits to the Executive during the Severance
Period as would have been provided had employment continued, including medical,
disability and life insurance. In the case of the death of the employee,
medical
insurance will be continued for Executive's spouse and children for the duration
of the Severance Period; and
iv. The
Company
will reimburse the Executive for all reimbursable expenses accrued (but unpaid)
to the date of termination or expiration of the Term, as the case may be;
and
within 10 business days after such termination, any accrued but unused vacation
days paid at Executive's Base Salary.
b. If
a
termination without Cause takes effect prior to the expiration of the Term,
all
of the Executive's stock options which would have vested and become exercisable
had the Executive's employment continued to the end of the Term in which
such
termination without Cause has occurred shall vest and become exercisable,
and
the Executive may exercise all options held by him which have thereby vested
and
become exercisable during the period ending on the last day on which the
Executive may exercise such options under the terms of the applicable option
plan or 90 days from the date of termination, whichever is later.
c. Notwithstanding
Section 8(b), if the Company terminates the Executive's employment without
Cause
following a business combination (including sale of assets, merger,
consolidation or other transaction that results in the stockholders of the
Company receiving liquid consideration for a majority of the holdings in
the
Company accompanied by a change in actual control of the Company), all stock
options theretofore granted to the Executive shall vest and become exercisable,
and the Executive may thereafter exercise all options held by him during
the
period ending on the last day on which the Executive may exercise such options
under the terms of the applicable option plan or 90 days from the date of
termination, whichever is later.
9. EXECUTIVE’S
TERMINATION FOR GOOD REASON.
a. If
the
Executive terminates his employment for Good Reason, the Company's obligations
to pay further compensation under Section 5 shall cease forthwith, except
that
the Company shall pay the Executive:
b. all
Base
Salary for the period of the Term that remains;
c. any
amount of any bonus that has become payable with respect to a completed Calendar
Year but has not been paid to the Executive;
d. the
Board's good faith estimate of the amount of a bonus, if any, that would
become
payable for the Calendar Year in which such termination occurs, based upon
the
goals agreed to by the Company and the Executive or established by the
Compensation Committee for such Calendar Year: and
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e. an
amount
equal to all reasonably-documented reimbursable expenses accrued (but unpaid)
to
the date of termination.
f. "Good
Reason" means the occurrence of any of the following:
(i) the
Executive
is demoted or removed from, or does not continue to hold, the positions or
offices described in Section 1(a) hereto; or
(ii) the
assignment to the Executive without his consent of any duties inconsistent
in
any material respect with his position or with his authority, duties or
responsibilities as chief executive officer, or any other action by the Company
which results in a diminution in position, authority, duties or responsibilities
from the position, authority, duties or responsibilities of a general counsel
of
a company similar in size, capital structure and business to the Company,
excluding for this purpose an isolated, insubstantial and inadvertent action
not
taken in bad faith;
(iii) the
Company
fails to pay or provide when due (or reduces) the Base Salary or benefits
to
which the Executive is entitled hereunder, which failure is not cured (or
which
reduction is not corrected) within 15 days after the receipt by the Company
from
the Executive of his written notice referring to this provision and describing
such failure (or reduction).
g. "Calendar
Year" means the twelve months ending December 31 in which any part of the
Term
falls.
10. NONDISCLOSURE.
a. Except
as
required in order to perform his obligations under this Agreement, the Executive
shall not, without the express prior written consent of the Company, directly
or
indirectly, disclose or divulge to any other person or entity any of the
Company's Confidential Information or Trade Secrets at any time (during or
after
the Executive's employment) during which such data or information continues
to
constitute Confidential Information or a Trade Secret. Except as required
to be
disclosed to his attorney, accountant or financial advisor, the Executive
shall
not disclose or divulge to any other person (particularly to any other employee)
any terms of the Executive's compensation under this Agreement. Upon any
termination or expiration of his employment, the Executive will promptly
deliver
to the Company all data, lists, information, memoranda, documents and all
other
property belonging to the Company or containing Confidential Information
or
Trade Secrets of the Company.
b. As
used in
this Agreement:
i. "Confidential
Information" of the Company shall mean any valuable, competitively sensitive
data and information related to the Company's business other than Trade Secrets
that are not generally known by or readily available to the Company's
competitors, including, among other things, that which relates to services
performed by the Executive for the Company, or was created or obtained by
the
Executive while performing services for the Company or by virtue of the
Executive's relationship with the Company; and
ii. "Trade
Secrets" shall mean information or data of the Company, including but not
limited to technical or non-technical data, compilations, programs, devices,
methods, techniques, processes, financial data and financial plans, that:
(a)
derive economic value, actual or potential, from not being generally known
to,
and not being readily ascertainable by proper means by, other persons who
can
obtain economic value from their disclosure or use; and (b) are the subject
of
efforts that are reasonable under the circumstances to maintain their secrecy.
To the extent that the foregoing definition is inconsistent with a definition
of
"trade secret" mandated under applicable law, the latter definition shall
govern
for purposes of interpreting the Executive's obligations under this Agreement.
iii. The
obligations set forth in this Section shall not be applicable to any information
which: (i) the Company has authorized the Executive in writing to publicly
disclose, copy or use, but only to the extent of such
authorization;
(ii) is
generally
known or becomes part of the public domain through no fault of the Executive;
(iii) is disclosed to the Company by third parties without restrictions on
disclosure; or (iv) is required to be disclosed in the context of any
administrative or judicial proceedings; PROVIDED that, if the Executive is
requested or becomes legally compelled
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to
disclose any Confidential Information or Trade Secrets, the Executive will
provide the Company with prompt written notice so that the Company may seek
a
protective order or other appropriate remedy and/or waive compliance with
the
provisions of this Section and the Executive will cooperate with the Company
in
any effort the Company undertakes to obtain a protective order or other remedy.
If such a protective order or other remedy is not obtained or the Company
waives
compliance with this Section, the Executive will furnish only that portion
of
the Confidential Information and Trade Secrets that is legally required and
will
exercise all reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded the Confidential Information to be disclosed.
The
Company hereby agrees to indemnify and hold harmless Executive from all costs
and expenses, including attorneys' fees, he incurs in carrying out his
obligations under the proviso provisions of this subsection 10.b.iii and
further
agrees upon the written request of Executive to advance to Executive the
anticipated cost of complying with his obligations under such proviso
provisions.
11. REPRESENTATIONS
AND
WARRANTIES. The Executive hereby represents and warrants that (a) he has
the
right to enter into this Agreement with the Company and to grant the rights
contained in this Agreement, and (b) the provisions of this Agreement do
not
violate any other contracts or agreements that the Executive has entered
into
with any other individual or entity.
12. SERVICES
OF
THE EXECUTIVE. In the course of his employment under this Agreement, the
Executive will have access to Trade Secrets, the disclosure or unauthorized
use
of which, the Company seeks to protect and the Executive has agreed to protect.
As a result of benefits accruing to the Executive from his access to such
Trade
Secrets, and of the improvement in his knowledge, and proficiency arising
therefrom, the Executive acknowledges that (a) his services are and will
remain
special and extraordinary, and have and will have a peculiar value, the loss
of
which cannot be reasonably or adequately compensated in damages in any action
at
law; (b) he is willing to comply with the restrictions contained in Sections
4.b
and 4.c; (c) the restrictions contained in those Sections will not impair
his
ability to earn a living in any businesses other than those businesses from
which he is prohibited during the time of such restriction; and (d) a material
breach of his obligations under Sections 4.b, 4.c or 11 will cause the Company
irreparable injury and damage. It is, therefore, agreed that the Company,
in
addition to any other remedies, shall be entitled to injunctive and other
equitable relief to enforce its rights under, and to prevent a breach of,
Sections 4.b, 4.c and 10 of this Agreement by the Executive.
13. ASSIGNABILITY
ETC. This Agreement shall be nondelegable and nonassignable by the Executive,
and shall inure to the benefit of heir and assigns the Executive. This Agreement
shall be binding upon and inure to the benefit of the Company and any entity
succeeding to all or substantially all of the business assets of the Company
by
merger, consolidation, purchase of assets or otherwise.
14. NOTICES.
Any
notice pertaining to this Agreement shall be in writing and shall be served
by
delivering said notice (i) by hand, (ii) by overnight mail by a internationally
recognized carrier, (iii) by sending it by certified mail, postage prepaid,
return receipt requested, or (iv) by confirmed telefax, with notice confirmed,
to the Executive at the address first stated above or his office at the Company,
and to the Company at:
00
Xxxxxxxxx Xx.
Xxx.
000
Xxxxxxx
Xxxx, XX 00000
Attn:
CEO
The
addresses for notice may be changed by notice given to the other party pursuant
to this Section.
15. MISCELLANEOUS.
a. This
Agreement shall be governed by and construed under the laws and decisions
of the
State of New York applicable without regard to the principles of conflicts
of
laws. The parties to this Agreement agree that the state or federal courts
in
the State of New York shall have personal jurisdiction over them with respect
to, and shall be the exclusive forum for the resolution of, any matter or
controversy arising from or with respect to this Agreement. Service of a
summons
and complaint concerning any such matter or controversy may, in addition
to any
other lawful means, be effected by sending a copy of such summons and complaint
by certified mail to the party to be served as
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specified
in Section 14 of this Agreement or at such other address as the party to
be
served shall have provided in writing to the other from time to time in
accordance with Section 14.
b. To
the extent
permitted by law, the Executive and the Company irrevocably waive trial by
jury
and any objection which he or it may now or hereafter have to the venue of
any
suit, action or proceeding arising out of or relating to this Agreement brought
in the City of New York, and to the extent permitted by law, the Executive
and
the Company hereby further irrevocably waive any claim that any such suit,
action or proceeding brought in the City of New York has been brought in
an
inconvenient forum.
c. This
Agreement contains the entire understanding of the parties to this Agreement
with respect to the subject matter of this Agreement and supersedes all previous
written and oral agreements between the parties with respect to the subject
matter set forth in this Agreement.
d. This
Agreement may not be modified or amended except by a writing signed by the
parties to this Agreement.
e. Any
provision
of this Agreement that is deemed invalid, illegal or unenforceable in any
jurisdiction shall, as to that jurisdiction and subject to this Section,
be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions of this Agreement in
such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction. If the covenant should
be
deemed invalid, illegal or unenforceable because its scope is considered
excessive, such covenant shall be modified so that the scope of the covenant
is
reduced only to the minimum extent necessary to render the modified covenant
valid, legal and enforceable.
f. The
following
provisions of this Agreement shall survive in accordance with their terms,
the
expiration or termination of this Agreement for any reason: Sections 4, 7,
8,
10, 11, 12 and 15.
g. A
waiver by
either party of any Section, term or condition of this Agreement in any instance
shall not be deemed or construed to be a waiver of such Section, term or
condition for the future or of any subsequent breach thereof, and any such
waiver must be in writing, signed by the party to be charged. All rights
and
remedies contained in this Agreement are cumulative, and none of them shall
be
construed so as to limit any other right or remedy of either party.
h. This
Agreement may be executed in counterparts, all of which shall constitute
one and
the same agreement.
i. The
headings
and titles to the Sections of this Agreement are inserted for convenience
only
and shall not be deemed a part of or affect the construction or interpretation
of any provisions of this Agreement.
j. All
references to Sections shall be to sections and schedules of this Agreement.
k. All
references using male pronouns shall be deemed to include female pronouns.
l. This
Agreement maybe signed in multiple counterparts, each of which shall be deemed
an original. Any executed counterpart returned by facsimile shall be deemed
an
original executed counterpart.
-7-
If
the
foregoing accurately reflects the Executive's understanding, please countersign
and return one counterpart of this Agreement to the Company.
Sincerely
yours,
By:
/s/
Xxx
Xxxxx
Name:
Xxxxx Xxxxx
Title:
CEO
/s/
Xxxx
Xxxxx
Xxxxxxx
X. Xxxxx
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