UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
(Amendment
No.
)
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the Registrant
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Filed
by a Party other than the Registrant
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appropriate box:
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Preliminary
Proxy Statement
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Confidential,
For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
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Aggregate
number of securities to which transaction applies:
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its
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Form,
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The
following letter was distributed on February 2, 2010 to the U.S.
participants in the On2 Technologies, Inc. Equity Incentive Plans.
On2
Technologies, Inc.
3
Corporate Drive, Suite 100
Clifton
Park, NY 12065
To the
participants in the On2 Technologies, Inc. (“On2”) Equity Incentive
Plans:
As you
know, On2 recently entered into an amendment to the merger agreement with
Google. The primary purpose of the amendment is to provide On2
stockholders with an additional $0.15 in cash for each share of common stock
held by them (“On2 Common Stock”). As a result, under the terms of the amended
merger agreement, each outstanding share of On2 Common Stock will now be
converted into the right to receive a combination of (a) $0.15 in cash per
share, (b) 0.0010 of a share of Google Class A Common Stock (a “Google
Share”) and (c) cash payable in lieu of any fractional Google Shares. The
terms of the amended merger agreement and a copy of the amendment are set forth
in a supplement, dated January 15, 2010, to the definitive proxy
statement/prospectus, which Google filed with the SEC on January 19,
2010.
The
following questions and answers are intended to addresses questions you may have
regarding the treatment and taxation under U.S. law of your options to purchase
shares of On2 Common Stock (“On2 Options”) and your On2 restricted stock as a
result of the proposed merger, including the terms of the amendment to the
merger agreement.
What
will happen to my On2 Options in connection with the merger?
All
outstanding On2 Options will be fully vested as of the time that the merger is
completed, which we refer to as the effective time of the merger. Any
holder of an On2 Option with a per share exercise price of less than the
“company stock price”
, which
is defined as 0.0010 multiplied by the trading price, that is outstanding as of
the effective time of the merger will have the right to receive, prior to a
reduction to reflect any applicable tax withholding and payment of the aggregate
exercise price, 0.0010 of a Google Share for each share of On2 Common Stock
subject to such On2 Option. In addition, holders of such On2 Options
will also receive (i) an amount in cash determined by multiplying $0.15 by the
number of shares of On2 Common Stock subject to such On2 Options; and (ii) an
additional amount in cash in lieu of any fractional shares. (The
“trading price”
is
defined in the amendment to the merger agreement as the volume weighted average
trading price of a Google Share based on the sales price of every Google Share
traded during the immediately preceding trading day prior to the closing of the
merger.) We refer to the 0.0010 of a Google Share, the $0.15 cash
payment and any cash paid in lieu of a fraction of a Google Share, collectively,
as the
“merger
consideration”
.
1
Any On2
Options with an exercise price less than the
“per share value”,
which is
defined as the sum of $0.15 and the company stock price, but equal to or greater
than the company stock price, will receive an amount in cash determined by
multiplying the difference between the per share value and the exercise
price of
the applicable On2 Option by the number of shares of On2 Common Stock subject to
the On2 Options; and an additional amount in cash in lieu of any fractional
shares.
2
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1
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For
example, if the trading price of a Google Share is $590, then any holder
of an On2 Option with an exercise price of less than $0.59 per share would
have the right to receive, in addition to the $0.15 cash payment, 0.0010
of a Google Share for each share of On2 Common Stock subject to such On2
Option and/or cash in lieu of any fractional shares (subject to deductions
for any applicable tax withholding and payment of exercise
price).
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2
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For
example, if the trading price of a Google Share is $590, then any holder
of an On2 Option with an exercise price that is greater than $0.59 but
less than $0.74 would receive only the $0.15 cash consideration in
exchange for their options.
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Any On2 Options with an
exercise price equal to or greater than the per share value will be
automatically cancelled in connection with the merger and the holder of such
option will receive no consideration for such cancellation. Google will not
assume any On2 Options in connection with the merger
.
3
Am
I required to exercise my On2 Options to receive Google Shares and/or
cash?
No, you
are not required to exercise your On2 Options to receive Google Shares and/or
cash in connection with the merger. If you hold On2 Options with an
exercise price of less than the per share value, those options will
automatically be converted into the right to receive the merger consideration at
the effective time of the merger. However, if the On2 Options you hold are
incentive stock options, your exercise of such options before the effective time
of the merger may have the indirect result of avoiding withholding and FICA
taxes on any gain on your exercise. (See below
“How will I be taxed on the Google
Shares and/or cash I receive for my On2 Options?”)
How
will I be taxed on the Google Shares and/or cash I receive for my On2
Options?
You are
advised to consult your own tax advisor regarding the tax treatment of your On2
Options. As a general matter, however, you will be taxed on the per
share value multiplied by the aggregate number of shares of On2 Common Stock
underlying your On2 Options less the sum of the aggregate exercise price of your
On2 Options. This amount will be taxed as ordinary compensation
income and will be subject to withholding of U.S. federal, state and local
income taxes and FICA taxes. In calculating the number of Google
Shares or amount of cash payment you will receive for any fractional shares, On2
will deduct the amount of any income or withholding tax required under
applicable law so that the number of Google Shares or cash payment you receive
will already reflect this payment of taxes.
If,
however, your On2 Option is an incentive stock option that is (1) currently
vested; (2) will vest by its terms prior to the effective time of the
merger; or (3) will vest in connection with the terms of the merger
immediately prior to the effective time of the merger,
and you exercise the
option immediately prior to the effective time of the merger
, the
exercise of the On2 Option and the subsequent exchange of the On2 Common Stock
received upon exercise of the On2 Option for Google Shares in the merger should
not be taxable (except to the extent of cash received) provided that you do
not dispose of the Google Shares for the later of (i) one year after the On2
Option exercise or (ii) two years after the On2 Option was
granted. (Note, however, that the spread between the exercise
price and the value of the Google Shares you receive is included in Alternative
Minimum Taxable (or AMT) income.) If you dispose of your Google
Shares after satisfying these holding period requirements, your entire gain will
be taxed at the more favorable capital gain rates. Any cash payment you
receive will be taxable as ordinary income, but will not be subject to
withholding of U.S. federal, state and local income taxes or FICA
taxes. The foregoing tax treatment described for incentive stock
options is also subject to the requirement that no more than $100,000 of your
incentive stock options will become exercisable for the first time in a year,
whether they were accelerated in connection with the merger or would otherwise
have vested during the
year
pursuant to their terms. To the extent that your incentive stock options
exceed the limit, they will be treated as nonqualified stock options subject to
taxation as ordinary compensation income.
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3
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For
example, if the trading price of a Google Share is $590, then any On2
Option with an exercise price that is $0.74 or greater would be cancelled
and the holder of such option will receive no consideration for such
cancellation.
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If you
decide to exercise your On2 Option immediately before the effective time of the
merger, you may do so by delivering a notice of exercise to On2 in advance of
the effective time of the merger indicating that you are exercising your option
as of immediately before (but conditioned upon) consummation of the
merger.
If you
choose to engage in a cashless exercise of incentive stock options, gain
with regard to the portion of the shares subject to the option that were
withheld to pay the option exercise price will be taxable and reported to you on
your W-2. In both cases, any gain on exercise of an incentive stock option
prior to the effective time of the merger will not be subject to withholding or
FICA tax.
What
will happen to my On2 restricted stock in connection with the
merger?
All
outstanding shares of On2 restricted stock will be fully vested as of the
effective time of the merger, and each holder of On2 restricted stock
outstanding as of the effective time of the merger will be entitled to (i) $0.15
in cash per share of On2 Common Stock plus (ii) 0.0010 of a Google Share
and/or cash in lieu of any fractional shares, less any applicable withholding
(which will reduce the number of Google Shares to be issued).
How
will I be taxed on the Google Shares and/or cash I receive for my On2 restricted
stock?
You are
advised to consult your own tax advisor regarding the tax treatment of your On2
restricted stock. As a general matter, however, you will be taxed on the
per share value multiplied by the aggregate number of shares of On2 restricted
stock you hold (unless you have made a Section 83(b) election with respect to
such shares). This amount will be taxable as ordinary
compensation income and will be subject to withholding of U.S. federal,
state and local income taxes and FICA taxes. In calculating the
number of Google Shares or amount of cash payment you will receive, On2 will
deduct the amount of any income or withholding tax required under applicable law
so that the number of Google Shares or cash payment you receive will already
reflect this payment of taxes.
If you
have previously made a valid Section 83(b) election with respect to such shares,
you will not be taxed on the exchange of On2 Common Stock for Google Shares,
except with respect to the $0.15 cash received per share of restricted stock and
cash received in lieu of a fractional share. Any cash you receive
will result in a recognition of gain or loss equal to the difference, if any,
between your basis allocable to the underlying share and the amount of cash
received.
About
On2 Technologies, Inc.
On2 (NYSE
Amex: ONT) creates advanced video compression technologies that power the video
in today’s leading desktop and mobile applications and devices. On2 customers
include Adobe, Skype, Nokia, Infineon, Sun Microsystems, Mediatek, Sony,
Brightcove, and Move Networks. On2 is headquartered in Clifton Park, NY USA. For
more information, visit www.on2.com or www.on2.cn.
Additional
Information and Where to Find It
Google
filed a Registration Statement with the SEC in connection with the proposed
merger, which includes a Proxy Statement of On2 and also constitutes a
Prospectus of Google. The definitive proxy statement/prospectus, dated November
3, 2009, was mailed to holders of On2 Common Stock identified as of October 20,
2009, which was the notice record date for the December 18, 2009 special
meeting, and as of December 3, 2009, which was the voting record date for the
December 18, 2009 special meeting. In addition, Google has filed a prospectus
supplement, dated January 15, 2010, to the definitive proxy
statement/prospectus, which has been mailed to all holders of On2 Common Stock
as of January 15, 2010, the new record date for the reconvened special
meeting. The Registration Statement, the definitive proxy
statement/prospectus and the prospectus supplement contain important information
about Google, On2, the proposed merger and related matters. Investors and
security holders are urged to read the Registration Statement, as amended, the
definitive proxy statement/prospectus, and the prospectus supplement carefully.
Investors and security holders also may obtain free copies of the Registration
Statement, as amended, the definitive proxy statement/prospectus, the prospectus
supplement and other documents filed with the SEC by Google and On2
through the web site maintained by the SEC at www.sec.gov and by contacting
Google Investor Relations at +1-650-253-7663 or On2 Investor Relations at
+1-518-881-4299. In addition, investors and security holders can obtain free
copies of the documents filed with the SEC on Google’s website at
investor.google.com and on On2’s website at www.on2.com.
Forward-Looking
Statements
Information
set forth in this communication contains forward-looking statements, which
involve a number of risks and uncertainties. All statements included in this
communication, other than statements of historical fact, that address
activities, events or developments that On2 expects, believes or anticipates
will or may occur in the future are forward-looking statements. These statements
represent On2’s reasonable judgment on the future based on various factors and
using numerous assumptions and are subject to known and unknown risks,
uncertainties and other factors that could cause actual outcomes and/or On2’s
financial position to differ materially from those contemplated by the
statements. You can identify these statements by the fact that they do not
relate strictly to historical or current facts. They use words such as
“believe,” “expect,” “will,” “anticipate,” “should,” “plans” and other words of
similar meaning. On2 cautions readers that any forward-looking information is
not a guarantee of future performance and that actual results could differ
materially from those contained in the forward-looking information. Investors
should not rely on forward-looking statements because they are subject to a
variety of risks and uncertainties and other factors that could cause actual
results to differ materially from On2’s expectations. Risks and uncertainties
include, among others: the extent to which On2 will continue to incur operating
losses in the future; the risk that the conditions to merger set forth in the
agreement and plan of merger will not be satisfied and the transaction will not
be consummated; uncertainties as to the timing of the merger; uncertainties as
to whether holders of On2 Common Stock will approve the merger proposal at the
reconvened On2 special meeting or at any adjournments thereof; changes in On2’s
business during the period between now and the effective time of the merger that
could cause a condition to closing not to be satisfied; as well as other factors
detailed in On2’s and Google’s filings with the SEC, including the definitive
proxy statement/prospectus, the prospectus supplement thereto and subsequent SEC
filings.
Additional
information concerning risk factors is contained from time to time in On2’s SEC
filings. On2 expressly disclaims any obligation to update the information
contained in this communication. The foregoing risks and uncertainties included
herein are not exhaustive.
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