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Item 1.01
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Entry
into a Material Definitive
Agreement.
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Agreement
and Plan of Merger
On August
4, 2009, On2 Technologies, Inc., a Delaware corporation (the “
Company
”), entered into an
Agreement and Plan of Merger (the “
Merger Agreement
”) by and
among the Company, Google Inc., a Delaware corporation (“
Google
”), and Oxide Inc., a
Delaware corporation and a wholly owned subsidiary of Google (“
Merger
Sub
”). Pursuant to the terms of the Merger Agreement, Merger
Sub will be merged with and into the Company, and as a result the Company will
continue as the surviving corporation and a wholly owned subsidiary of Google
(the “
Merger
”). The
directors and officers of Merger Sub immediately prior to the Merger shall be
the directors and officers of the surviving corporation after the
Merger.
Pursuant
to the Merger Agreement, at the effective time of the Merger, each issued and
outstanding share of common stock of the Company will be canceled and
extinguished and will be automatically converted into that number of shares of
Google’s Class A Common Stock, par value $0.001 per share (“
Google Common Stock
”), equal
to the exchange ratio set forth in the Merger Agreement, which shall equal $0.60
divided by the volume weighted average trading price of a share of Google Common
Stock on the Nasdaq Global Select Market for the 20 trading day period ending on
the second trading day prior to the date of the Company’s stockholders meeting
to consider and approve the Merger Agreement.
The
Merger Agreement, which has been approved by the Company’s board of directors,
contains (a) representations and warranties of the Company and Google,
including, among others, with respect to corporate organization, capitalization,
corporate authority, third party and governmental consents and approvals,
reports and regulatory matters, financial statements, and compliance with law;
(b) covenants of the Company to conduct its business in the ordinary course
and not to take certain actions until the Merger is completed; and
(c) covenants of Google and the Company to use their reasonable best
efforts to complete the transaction, including making any required
filings. The Company has also agreed not to (i) solicit
proposals relating to alternative transactions or (ii) subject to certain
exceptions, enter into discussions concerning, or provide confidential
information in connection with, any proposals for alternative
transactions.
Consummation
of the Merger is subject to conditions to closing, including (a) approval of the
Merger Agreement by the Company’s stockholders; (b) expiration or termination of
the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended; (c) effectiveness of a Registration Statement on Form S-4 in
connection with the issuance of Google Common Stock in connection with the
Merger; (d) delivery of customary opinions from counsel to the Company and to
Google that the Merger will qualify as a tax-free reorganization for U.S.
federal income tax purposes; (e) the absence of certain legal impediments to the
consummation of the Merger; (f) no more than one of three specified
employees of the Company having rescinded or terminated their offers of
employment from Google; and (g) subject to certain exceptions, the accuracy
of the representations and warranties and compliance with the covenants by each
party.
The
Merger Agreement also contains customary termination provisions, including
permitted termination of the Merger Agreement (a) by Google if the
Company’s board of directors recommends a competing proposal or withdraws its
recommendation of the Merger; (b) by either party if the Company’s
stockholders do not approve the Merger Agreement; (c) by either party if a
governmental entity enjoins the Merger; (d) by either party if the other
materially breaches its representations, warranties or covenants contained in
the Merger Agreement; or (e) by either party if the Merger has not closed
by March 31, 2010.
In
certain circumstances in connection with the Merger Agreement, including if the
Company’s board of directors changes or withdraws its recommendation of the
Merger, the Company must pay to Google a termination fee of
$2,000,000.
The
foregoing description of the Merger Agreement is only a summary, does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, a copy of which is filed as Exhibit 2.1 hereto and is
incorporated herein by reference. The representations, warranties and covenants
contained in the Merger Agreement were made only for purposes of the Merger
Agreement and were made as of specified dates, were solely for the benefit of
the parties to the Merger Agreement, and are qualified by information in
confidential disclosure schedules that the Company exchanged with Google in
connection with the execution of the Merger Agreement. The representations and
warranties may have been made for the purposes of allocating contractual risk
between the parties to the Merger Agreement instead of establishing these
matters as facts, and may be subject to standards of materiality applicable to
the contracting parties that differ from those applicable to investors.
Investors should not rely on the representations, warranties and covenants or
any descriptions thereof as characterizations of the actual state of facts or
condition of Google, the Company or Merger Sub or any of their respective
subsidiaries or affiliates. Moreover, information concerning the subject matter
of the representations and warranties may change after the date of the Merger
Agreement, which subsequent information may or may not be fully reflected in the
Company’s public disclosures. The Merger Agreement should not be read
alone, but should instead be read in conjunction with the other information
regarding the companies and the Merger that will be contained in, or
incorporated by reference into, the proxy statement/prospectus that the parties
will be filing in connection with the Merger, as well as in the Forms 10-K,
Forms 10-Q and other documents that each of Google and the Company file with the
Securities and Exchange Commission.
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Item 5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain
Officers.
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Employee
Retention and Severance Plan
On August
4, 2009, the Compensation Committee of the Company’s board of directors (the
“
Compensation
Committee
”) adopted the On2 Technologies, Inc. Retention and Severance
Plan (the “
Retention
Plan
”) in connection with the proposed Merger. The Retention Plan is
designed to provide incentives for certain covered employees to assure that the
Company will have the continued dedication and objectivity of such employees
pending the completion of the Merger and to provide severance to all other
employees of the Company who would not otherwise receive severance payments if
they do not continue as employees of Google after completion of the
Merger.
Under the
Retention Plan, certain eligible employees designated by the Company’s board of
directors or the Compensation Committee shall receive a retention bonus payment
consisting of a percentage of their annual salary. The percentage
applicable to each eligible employee shall be determined by the Company’s board
of directors or the Compensation Committee
.
The
retention bonus payment shall be paid in a lump sum within 30 days following the
closing date of the Merger. The estimated aggregate amounts that any
of the Company’s named executive officers would be eligible to receive as
retention bonus payments under the Retention Plan, are $250,000, $172,500 and
$80,000, payable to Messrs. Frost, Reusing and Boomer,
respectively.
The
Retention Plan also provides for severance benefits for all employees of the
Company or its subsidiaries (other than employees of On2 Technologies Finland
Oy) not otherwise covered by existing severance agreements (“
Participants
”). These
severance benefits will be paid to any Participant:
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·
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who
is terminated or who is advised in writing that such employee will not be
receiving an offer of employment, in each case for any reason on or before
the 60th date after the closing of the Merger (except for cause, as
defined in the Retention Plan);
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·
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who
does not receive an offer of employment within 60 days after the closing
date of the Merger and whose employment is terminated (by the employee,
Google or the Company); or
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·
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who
declines an offer of employment made within 60 days after the closing date
of the Merger and whose employment is then terminated (by the employee,
Google or the Company) within 45 days after such Participant’s receipt of
the offer of employment.
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Participants
who meet the conditions set forth above shall receive a severance payment equal
to three months of annual salary, to be paid in a lump sum within 30 days after
signing a separation agreement and release if the Participant is under 40 years
old, or within 38 days after signing a separation agreement and release if the
Participant is 40 years old or older. Participants terminated before
the completion of the 60-day period after the closing of the Merger shall also
be paid their base salary and continuation of standard Company benefits as if
they had been employed during such 60-day period. No Participant may
receive both severance under the Retention Plan as well as severance under
alternative severance agreements or arrangements with the Company, but shall
only receive the severance payments under whichever arrangement offers the
employee the greatest amount of pay. The estimated aggregate amount
that any of the Company’s named executive officers would be eligible to receive
as severance payments under the Plan is $40,000, payable to Wayne
Boomer.
The
foregoing description of the Retention Plan does not purport to be complete and
is qualified in its entirety by reference to the Retention Plan, which is filed
as Exhibit 10.1 hereto and is incorporated herein by reference.
On August
5, 2009, the Company and Google issued a joint press release announcing the
execution of the Merger Agreement. A copy of the press release is
attached hereto as Exhibit 99.1.
Additional
Information and Where to Find It
Google
plans to file with the Securities and Exchange Commission (the “
SEC
”) a Registration Statement
on Form S-4 in connection with the transaction, which will include a Proxy
Statement of the Company that also constitutes a Prospectus of
Google. The Company will mail the Proxy Statement/Prospectus to its
stockholders in connection with the transaction. The Registration
Statement and the Proxy Statement/Prospectus will contain important information
about Google, the Company, the transaction and related matters. Investors and
security holders are urged to read the Registration Statement and the Proxy
Statement/Prospectus carefully when they are available. Investors and
security holders will be able to obtain free copies of the Registration
Statement and the Proxy Statement/Prospectus and other documents filed with the
SEC by Google and the Company through the web site maintained by the SEC at
www.sec.gov and by contacting Google Investor Relations at 650-253-7663 or the
Company’s Investor Relations at 617-956-6728. In addition, investors
and security holders will be able to obtain free copies of the documents filed
with the SEC on Google’s website at www.google.com and on the Company’s website
at www.on2.com.
Participants
in the Solicitation
Google,
the Company and their respective directors and executive officers may be deemed
to be participants in the solicitation of proxies in respect of the proposed
transaction. Information regarding Google’s executive officers and
directors is included in Google’s definitive proxy statement, which was filed
with the SEC on March 24, 2009, and information regarding the Company’s
executive officers and directors is included in the Company’s definitive proxy
statement, which was filed with the SEC on April 7, 2009. The Proxy
Statement/Prospectus for the proposed transaction will provide more information
about participants in the solicitation of proxies from the Company’s
stockholders, which participants may have interests different from the Company’s
stockholders generally. You can obtain free copies of these documents
from Google or the Company using the contact information above.
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Item 9.01
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Financial
Statements and Exhibits.
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(d)
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Exhibits
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The
following exhibits are filed herewith:
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2.1
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Agreement
and Plan of Merger by and among On2 Technologies, Inc., Google Inc. and
Oxide Inc., dated August 4, 2009
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10.1
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On2
Technologies, Inc. Retention and Severance Plan, dated August 4,
2009
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99.1
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Joint
Press Release issued by On2 Technologies, Inc. and Google Inc., dated
August 5, 2009
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