Mr. Matthew Frost c/o 3 Corporate Drive Suite 100
Exhibit
10.1
 |
0
Xxxxxxxxx Xxxxx Xxxxx 000
Xxxxxxx
Xxxx, XX 00000
xxx.xx0.xxx
|
Mr.
Xxxxxxx Xxxxx
c/o
0
Xxxxxxxxx Xxxxx
Xxxxx
000
Xxxxxxx
Xxxx, XX 00000
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 Chief
Operating Officer (“COO”) and shall be effective as of the last date on which
any party hereto executes this Agreement (“Effective Date”).
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 COO. 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
the Chief Executive Officer and/or the Chairman of the Board of Directors.
2.
TERM
OF AGREEMENT. The initial term of this Agreement shall commence on the Effective
Date and terminate three (3) years hence. On or after the two hundred seventieth
(270th)
day
before the end of the initial Term, but prior to the sixtieth (60th)
day
before the end of the initial Term, Executive may provide notice to Company
of
his offer to renew the Agreement for an additional three (3) year term, and
Company shall be deemed to have accepted the offer unless, within fifteen (15)
days of notice, Company provides Executive with notice that Company has
determined not to renew the Agreement. The initial term, as extended by any
renewal term, is referred to herein as the "Term".
3.
EXECUTIVE'S DUTIES.
a.
The
Executive's responsibilities as COO will include managing the day-to-day
operations of the Company, including product development, sales, services,
legal
and administration. The Executive will report directly to the Company’s CEO. The
Executive shall also perform such other duties and services as may reasonably
be
assigned to him from time to time by the CEO, consistent with his position
as
COO, in the conduct of the business of the Company.
b.
The
Executive's services shall be rendered at the Company's offices in Xxxxxxx
Park,
New York and at the Executive’s residence within 150 miles of such office, and
from time to time at such other locations as the Company may reasonably request
consistent with its business needs. Travel to such locations, including travel
to the Xxxxxxx Park office, will be at the Company's expense. Executive shall
use reasonable efforts to work in the Xxxxxxx Park office no less often than
one
(1) day per week, with the understanding that the Executive’s workload may
occasionally make such a schedule impracticable.
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.
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
engaged in the design or development of digital compression, decompression
or
playback technologies in the computing, telecommunications or entertainment
industries. For the avoidance of doubt, any division, unit, subsidiary or
affiliate of any other business will be deemed a Competitive Business unless
the
Executive can demonstrate upon the Company's request that his employment by,
engagement in, or 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 a Competitive Business during
the Restricted Period.
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 period
commencing on the date of this agreement and extending through the expiration
of
the Term or through the 365th
day
immediately following termination of employment by resignation or termination
by
the Company, with or without Cause (as defined below).
5.
COMPENSATION.
a.
During
the Term the Executive shall be entitled to receive base compensation (“Base
Salary”) at the initial rate of $250,000 per year, payable semi-monthly, and as
that rate may be increased from time to time over the Term. For his service
between June 13, 2008 and the Effective Date, the Executive shall be compensated
retroactively for the difference between his On2 salary then in effect and
the
initial Base Salary rate of $250,000 annually.
b.
The
Company shall reimburse the Executive for expenses related to the Company’s
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
reasonably be required by the Company's policies.
c.
The
Company shall include the Executive at the highest level in any stock option,
bonus, or other incentive compensation plan now or in the future made available
to the most senior members of the Company’s management, including, but not
limited to, the CEO.
d. Executive
shall receive a stock option grant convertible into 300,000 shares of the
Company’s common stock, to be granted under the Company’s 2005 Incentive
Compensation Plan. This grant will vest in three equal installments: one-third
(1/3) on the date of the grant, one-third on June 13, 2009, and one-third on
June 13, 2010. Executive shall also receive a restricted stock grant of 250,000
shares of the Company’s common stock, which grant will vest in two equal
installments: one-half (1/2) on June 13, 2009, and one-half on June 13, 2010.
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, 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 6.a. shall be construed
to create a contractual obligation to provide the Executive with any particular
form or type of benefit or to limit the discretion 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 senior executives of the
Company.
7.
TERMINATION OF EMPLOYMENT FOR DEATH, DISABILITY, OR BY THE COMPANY 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;
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| iii. willful misconduct or gross negligence in the performance of his duties; |
| iv. intentional 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 4 or 10). |
b.
If the
Company terminates the employment of the Executive for Cause, or if the
Executive resigns during the Term other than for Good Reason, the Company's
obligations under this Agreement to pay further compensation shall cease
forthwith, except that the Company will pay to the Executive, within 30 days
after 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 earned to the date of termination and, subject to Executive’s
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. In addition, during the
six months after such termination, the Company will provide all benefits that
would have been provided had Executive’s 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.b shall be construed to alter the
Executive's rights under any stock option plan pursuant to which options have
been or may be issued to Executive.
c.
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
after termination for Cause as defined in Section 7.a above.
d.
If, as
a result of the Executive's disability or incapacity during the Term due to
any
mental or physical illness or condition, the Executive is unable substantially
to perform his duties hereunder for a consecutive 12-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 on which the Company's
long-term disability plan pays benefits to the Executive.
e.
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. 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 OF EMPLOYMENT BY THE COMPANY 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:
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i.
The Company will continue to pay to the Executive, or in the case
of death
of the Executive after such termination without Cause to his successors
or
legal representatives or to his estate, during the 365 days immediately
following such termination of employment (such period is hereinafter
referred to as the "Severance Period"), his Base Salary on a monthly
basis
as would have been paid to the Executive had his employment with
the
Company continued; provided, however, that to the extent any payment
under
this Paragraph 8.a.i. fails to satisfy the requirements set forth
in
Treasury Regulation Section 1.409A-1(b)(9)(iii), the amount shall
not be
paid to the Executive before the date that is six (6) months after
the
date of the Executive’s separation from service, or if earlier, date of
death.
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ii.
The Company shall pay to the Executive his proportionate share of
any
bonus compensation to which he would have been entitled 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, but in any event no later
than
March 15th following the taxable year to which such bonus applies,
except
as permitted under Section 409A of the Internal Revenue Code (the
“Code”);
it is intended that the payment contemplated by this Paragraph 8.a.ii.
comply with the short-term deferral exception to Section 409A of
the
Internal Revenue Code under Treasury Regulation Section 1.409A-1(b)(4)
and, to the extent applicable, with Treasury Regulation
Section
1.409A-2(b)(7).
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iii.
The Company will continue to provide all benefits to the Executive
during
the Severance Period that would have been provided had Executive’s
employment continued, including medical, disability and life insurance.
In
the case of the death of the Executive, medical insurance will be
continued for Executive's spouse and children for the duration of
the
Severance Period; and
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iv.
The Company will promptly, subject to the Executive’s submission of
reasonably required documentation, reimburse the Executive for all
reimbursable expenses accrued (but unpaid) to the date of termination;
and
within 10 business days after such termination, any accrued but unused
vacation days paid at Executive's Base Salary.
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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 occurred shall immediately 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
any
such options under the terms of the applicable option plan or 90 days from
the
date of termination, whichever is later. Additionally, if a termination without
Cause takes effect prior to the expiration of the Term, all of the Executive's
restricted stock which would have vested had the Executive's employment
continued to the end of the Term in which such termination without Cause has
occurred shall immediately vest.
9.
TERMINATION OF EMPLOYMENT BY EXECUTIVE FOR GOOD REASON.
a. If
the
Executive terminates his employment for Good Reason, the Company's obligations
to pay further compensation to the Executive shall be the same as its
obligations after a termination by the Company other than for Cause, as set
forth in Section 8 above.
b. "Good
Reason" means the occurrence of any of the following:
| i. a material diminution in the Executive’s base compensation, authority, duties, or responsibilities; |
|
ii.
a material diminution in the authority, duties, or responsibilities
of the
person or committee to whom the Executive is required to report;
|
| iii. a material change in the geographic location at which the Executive must perform the services; or |
| iv. any other action or inaction that constitutes a material breach by the Company of this Agreement; |
For
the
condition claimed by the Executive to constitute Good Reason, the Executive
must
give written notice to the Company of the existence of the condition within
30
days of the initial existence of the condition, and the Company must fail to
remedy the condition within 15 days after the receipt by the Company of the
Executive’s notice. The parties acknowledge and agree that, in addition to his
current responsibilities as COO, Executive is as of the date hereof serving
at
the pleasure of the Board of Directors as the Company’s Interim Chief Executive
Officer (“Interim CEO”). Executive agrees that the cessation of such Interim CEO
service (whether due to the hiring of a non-Interim Chief Executive Officer
or
for any other reason) coupled with a continuation of Executive’s
responsibilities as COO as contemplated herein shall not constitute a diminution
of Executive’s authority, duties or responsibilities hereunder or a breach of
this Agreement by the Company.
c. "Calendar
Year" means the twelve months ending December 31 in which any part of the Term
falls.
10.
CHANGE IN CONTROL
a.
If the
Company completes a business combination (including sale of assets, merger,
consolidation or other transaction) that results in (1) the stockholders of
the
Company receiving liquid consideration for a majority of the holdings in the
Company and (2) a change in actual control of the Company, then, regardless
of
whether the Executive’s employment hereunder is expected to continue after such
transaction, (i) 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 any such options under the terms of the applicable option
plan, or the day before such transaction closes, whichever is later; and (ii)
all restricted stock theretofore granted to the Executive shall vest.
11.
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. 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 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.
12.
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.
13.
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.
14.
ASSIGNABILITY ETC. This Agreement shall be nondelegable and nonassignable by
the
Executive, and shall inure to the benefit of the heirs and assigns of 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.
15.
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 telefax, with notice
confirmed, to the Executive’s home address then on file with the Company, and to
the Company at:
0
Xxxxxxxxx Xx.
Xxx.
000
Xxxxxxx
Xxxx, XX 00000
Attn:
CEO
With
a
copy to the Chairman of the Compensation Committee at his or her address of
record or in care of the Company at the above address.
The
addresses for notice may be changed by notice given to the other party pursuant
to this Section.
16.
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 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, 9, 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 email or facsimile shall
be
deemed an original executed counterpart.
If
the
foregoing accurately reflects your understanding, please countersign and return
one counterpart of this Agreement to the Company.
Sincerely
yours,
|
By:
|
/s/
J. Xxxxx Xxxxxxxx
|
|
Name:
|
J.
Xxxxx Xxxxxxxx
|
|
Title:
|
Chairman
of the
|
|
Board
of Directors
|
|
|
Date:
|
October
16, 2008
|
/s/
Xxxxxxx X.
Xxxxx
Xxxxxxx
X. Xxxxx
Date:
October 17, 2008
